Archive for October, 2009
Consumer Financial Protection Agency An Afterthought?
There’s a government agency and/or committee for just about every interest that you can imagine. There’s even an advisory committee for stamps…yes stamps, but it’s probably safe to say that many of them were created out of necessity. We may be required to submit to another controlling force known as the Consumer Financial Protection Agency, adding to the hundreds of existing entities. Now that most of the major damage has already been done to the economy by big banks and mortgage lenders, it seems to be more of an afterthought than a mitigative move. If this committee can provide non-police-like mitigation to prevent catastrophe’s similar to the housing market crash and subsequent multi-industry downfall versus being responsible for the elimination of tens of thousands of more jobs then I welcome it. The feeling is, however, that this agency will attack the short-term lending industry which had absolutely nothing to do with the economic collapse. The traditional financial institution will be praised and reaffirmed while alternative financial institutions will be dogged and made illegitimate. This includes payday lenders, title lenders, installment lenders, and pawn shops. While supporters of the above may have a handful of reasons for allowing such to happen, there are endless reasons not to – beginning with the availability of credit options and ending with the damage it would cause to local governments and employment rates.
I Know Why The Blinkered Activist Sings
Okay, so maybe I’m being a little cynical but it’s certainly warranted given the current fiscal climate. Individuals have the right to express their own thoughts, beliefs and passions but where do we draw the line when they insist on imposing those thoughts, beliefs and passions on everyone? Why do I have to believe that banning a product or service is best for the economy just because someone tells me that it is? When I am completely against a product or service then guess what-I don’t use it…and I may even suggest that others steer clear. I don’t, however, insist that the product/service be completely eliminated. It apparently works for some people given the fact that there’s a market for it. Which leads to another question. Will consumer advocates always find something to be concerned about or is there a state of minimum satisfaction that they’re seeking regarding their need to tell others what’s good for them?
There are a number of products, services and companies that in the past and present that have been targeted because of the perception of a minority. Our lawmakers, including the Congressional Oversight Panel have failed us terribly in recent years, causing an economic avalanche. An application of a 36% Annual Percentage Yield on two-week payday loans would only exacerbate existing conditions as we look forward to the loss of tens of thousands of more jobs, including those in state positions that regulate the industry. Although this would be a great victory for consumer advocates as well as traditional banking institutions, I wonder how long it will be before we are completely stripped of our free will. We are constantly being told by our own government that as individuals we don’t have the capacity to decide what is right for us, so if anything is “questionable” it should be eliminated altogether.
The Secret Is Out
Ask any banking manager or representative why their institution pays amounts from largest to smallest and they’ll tell you that it’s because they assume that the larger amounts are the most important and that you’d want them paid first in case there are insufficient funds in your account. Well, if that’s the case then why don’t you have a choice? If you’ve realized that you’ve made a mistake balancing your checkbook or discovered that you’re going to be just a couple of dollars short after all of your transactions clear, you can’t call your bank and ask them to pay items in the order in which they are presented or from smallest to largest in order to avoid multiple overdrafts. In many cases, if banks were to pay items in the order in which they’re received or from smallest to largest there would be far fewer associated overdraft fees. Yes, in many cases I’d probably prefer to have my outstanding checks covered by the bank if there was an error in my balancing. However, if it’s a case where a mistake in balancing causes me to overdraw my account by debit card I’d rather the transaction be rejected than to be charged $38 for the initial overdraft and $38 for each subsequent overdraft-causing a domino effect on fees.
FDIC reports show that banking customers paid $23.7 billion in overdraft fees just in 2008 but “consumer advocates” still spend much of their energy debating about the ethics of short-term lending. The elimination of short-term lending would most definitely lead to an even greater increase in such fees. At least short-term loan fees are contractual, flat fees unless carried over past the original due date. I’m not against overdraft fees nor am I against banks charging the amounts that they do. My concern is the method in which they pay overdrafts in order to capitalize on and snowball what starts as one single overdraft.