Archive for December, 2009
Underbanked,Undertelecommunicated,Undergrocered, How About Yourself?
I’ve recently been labeled by our government as “underbanked” and although I know why, it makes very little sense to me. Not because I don’t have a checking or savings account-not because I don’t have direct deposit- not because I don’t use or transact on my accounts on a regular basis- but because I’ve bought a cashiers check this year from an institution other than my bank. Simply because it was much cheaper to do it elsewhere than at my bank. I thought that made me somewhat savvy since the cashiers check was something that I had to purchase. That really confuses me because I’ve maintained a bank account every day of my life for the past 16 years and yet I’m “underbanked” based on an illogical definition created by the FDIC. I am going to assume that I am also undertelecommunicated because I frequently choose to send e-mails rather than call someone or undergrocered because I choose to eat fast food every so often. These labels are superficial and just as absurd as “underbanked,” a term used to describe anyone who has used an institution other than a traditional banking institution in order to take care of financial business. And it also seems as though the prefix “under” is perhaps meant to be derogatory as it suggests being beneath, below or less than those who are banked.
Unfortunately, it has come to a point where steps are being taken to re-legitimize banks by making non-bank financial institutions illegitimate . However, the demand for short-term loans and alternative financial services will not disappear.
Let’s Spend Millions More
There has been much debate on the necessity of the proposed Consumer Financial Protection Agency and how it will ultimately effect the economy. Of course there have been pros and cons brought up by both advocates and opposition. One subject that seems to keep getting overlooked during discussions is the costs associated with enacting the Consumer Financial Protection Agency. The primary question that comes to mind for me is-how much will the American people end up paying for the creation of this agency and is it an expense that we can afford to take on? According to a Congressional Budget Office Report, enacting H.R. 3126 would increase direct spending by $646 million dollars over the next 9 years while decreasing revenues by $490 million. That’s a total budget deficit of more than $1.1 billion dollars and $126 million per year to handle concerns that the House Financial Services and Senate Banking Committees in addition to the FDIC, NCUA and several other federal agencies should be taking care of and monitoring. Are there matters of inefficiency or competency within the federal financial sector that should be addressed ?
Also, according to the report, “The bill would require the CFPA to charge fees to offset the expenses of carrying out its exercise of the government’s sovereign authority, CBO believes that those amounts should appear in the budget as revenues.” In addition, business taxes, including fees paid to the Consumer Financial Protection Agency would reduce the tax base of income and payroll taxes, resulting in reductions in income and payroll tax revenues. What are your thoughts? http://www.cbo.gov/ftpdocs/108xx/doc10830/hr3126.pdf.
Can You Define “Protection?”
There are just as many definitions for protection as there are opinions about payday loans and the short-term lending industry. What is protection and is it relative? Well, according to the Merriam-Webster Dictionary there are at least 6 ways to define protection but the one that caught my attention is: “supervision or support of one that is smaller and weaker.” So, my initial thought is “yes,” protection is relative because what I believe that I need protection from may be completely different from what you need protection from. My next thought was- why are consumers considered small and weak? We ARE the consumers! If the CFPA is eager to enforce the full disclosure of all financial contracts and associated risks, then-the payday loan industry as an industry would probably rejoice seeing as though best practices already include such conditions. As consumers, we may need guidance, but not protection. You may recall the USDA’s attempt to protect us and our health by creating the food pyramid? The creation of the food pyramid in addition to the promotion of carbohydrates instead of fat was followed by epidemics of cancer, diabetes, heart disease and obesity. Therefore, leaving choices as personal as diet and financial options in the hands of our government just seems a bit absurd to me. I can name hundreds of instances throughout the history of our country in which the government was not only wrong but grossly negligent. However, for the sake of taste, I won’t go there.
It’s no secret that some Congressional leaders have been extremely biased and in my opinion are incapable of assessing the needs of the people. There is a noticeable disconnect between the average consumer and our Congressional leaders. Consumers want rights and government wants to tweak those rights. Too often, their ability to make sound decisions for the people are interrupted by their personal beliefs. What does protection mean to you and what are your thoughts on the CFPA?