Instead of fighting about consumer protections verses
consumer demand, we should collectively aspire to create world-class financial
freedom in America. It is good for people, it is good for business, and
it’s darn patriotic.
The White House and many others are fighting to create
consumer protections against credit default swaps, Foreclosure Gate, shifting
credit card terms and many other “financial innovations” with grim consequences
on many responsible people.
Important protections for millions of mainstream Americans. Problem is
that some of these rules have unintended consequences that aren’t good for the
people meant to be protected and which stifle “good” financial innovation, an
essential force for a better future.
Wall Street, in turn, predictably claims their hands are
being tied, and that increased regulation won’t eliminate demand: If you eliminate payday lending, there
will still be millions who need access to short-term credit, $40 billion worth. “No one is making anyone take out a payday loan,” they rightly claim. Problem is that a lot of the consumer
financial products being bought and sold today are, in fact, hard to
understand, and can have an adverse impact on individuals, communities and even
the GDP, in the case of subprime mortgage.
This is a futile battle of wills: consumer protection vs
choice. Both camps grudgingly
concede there is a need for the other, but both camps over-reach.
In a country which values freedom above all else, we need a
paradigm shift from either-or to both-and built around the premise of financial
freedom. Personal financial freedom is the
ability to use our money to realize our goals. This starts with food and shelter and ends with personal
fulfillment. The consumer finance
industry–and its regulators–should focus on its ability to create financial
freedom. This freedom must include the right
to innovate, but also the obligation to raise the tide.
More practically this means maximizing long-term consumer
value in payments, in credit, in savings and investment tools. Repeated use of a financial product should
not just generate greater profits, but be additive to a users’ station in life.