From our president

This monthly letter to subscribers from Consumers Union President Jim Guest highlights the critical consumer issues behind our current reports. See archived letters.

Welcome, watchdog

At a party recently, a social psychologist who has consulted for 25 years to the financial industry mentioned financial regulation. "I don't think it can ever save us from stupidity," he said. "There will always be the next catastrophe, so the value of regulations may be that on future occasions we'll be able to intervene sooner and mitigate the potential costs."

Stronger oversight of the financial industry can rein in abusive practices that cost consumers hard-earned money and taxpayers billions. Fortunately, that oversight starts in July.

Fair treatment of consumers has somehow become a partisan issue, which strikes me as absurd. Every one of us, whatever our politics, benefits from rules that require the institutions that lend to us or hold our money to be open, honest, and fair. Make a profit, but not by confusing or deceiving us.

A watchful eye

Consumers cannot possibly be good marshals of their own money without a clear picture of the full costs and benefits of financial products. We need regulation because an unregulated industry has failed to be straight with customers.

There's more to do, but we've seen some progress. Some of the worst credit-card practices have been stopped, so cardholders have adequate time to pay and banks are limited in raising interest rates on money already borrowed. Banks can no longer automatically sign up consumers for expensive debit overdraft programs unless the consumer agrees.

Financial reform was swept into place in large part by consumer outrage at the sleights-of-hand that characterized too many credit and banking products. New rules will make those products inherently safer.

As part of financial reform, a crucial new agency, the Consumer Financial Protection Bureau, was created by Congress to be the voice for consumers and their watchdog over an increasingly complex industry. Whatever our political beliefs, we're not better off when we, or our neighbors, suffer from deceptive or shaky financial products. A well-funded, effective CFPB is the first, best safeguard.

Jim Guest
President