"Few things are 100% predictable, but here's one: suggest better
oversight of financial products, and an industry-led chorus will
reflexively chant this will (cue scary music) raise costs and stymie
lending. What's also predictable? They won't have data to back it up.
Take the CARD Act of 2009, which reined in confusing and often unfair
credit card pricing. Opponents claim the law made credit cards more
expensive, because offers for new cards now carry higher interest
rates than they did before the law took effect. But Federal Reserve
data show the rates cardholders actually pay has dropped--no surprise
since the CARD Act outlawed a slew of misleading and deceptive charges
hidden in those pre-2009 offers.
Many consumer lending laws have made loan pricing clearer too -- a fact
naysayers fail to mention. Imagine how many people would have walked
away from getting a subprime mortgage if the broker had told them,
"The rate on this loan is 2% higher than you qualify for, because I
make more money that way," or "It may look like your monthly payment
goes down with this loan, but that's because we didn't include taxes
and insurance. It really will go up." Clearer pricing lets consumers
make informed choices. Free-market advocates should want that, yes?
The argument that financial oversight reduces lending doesn't wash
either. Even as new rules from the 2010 Dodd-Frank Act are being
implemented, the FDIC just reported that banks posted their biggest
quarterly increase in lending in four years. And credit card
revenue -- and profit -- is up.
To top it off, the level of consumer satisfaction with credit cards
and mortgages has increased for the first time in years. Lower and
clearer prices. More lending. Higher customer satisfaction and
lender profits. Maybe the Greek chorus opposing consumer safeguards
needs another tune?"
The Center for Responsible Lending (CRL) is a non-partisan research and policy group working to ensure the U.S. financial system promotes and protects home ownership and family wealth. CRL is one of 15 recipients of a 2012 MacArthur Award for Creative and Effective Institutions, in recognition of CRL's work fighting predatory lending. More at responsiblelending.org or @CRLONLINE.