Consumer Protection: How much Do we Really Need, and Would More of it Prevent Bankruptcy?

This week, the Obama administration rolled out its plan to create a national Consumer Financial Protection Agency, following closely on the heels of the recently enacted Credit Card Act of 2009.

Apparently, there's a sense that consumers, having been left alone with the wolves for long enough, need a lot more government sponsored help to safely make their way through today's financial landscape.

It sounds like a really good idea: finally, someone to look out for the 'little guy'. But wait, something seems just a little "off-. Many people have been operating under the impression that at least one entity charged with protecting them, as consumers, against unscrupulous opportunists and scam artists has already had a place for years amongst the many layers of local, state, or federal government. If this weren't the case, then why does the moniker "Consumer Protection Agency- sound so... well, familiar?

It might be because the Bureau of Consumer Protection, or "BCP-, which resides under the umbrella of the Federal Trade Commission, is something most of us are familiar with, or, at least, have heard of. In addition, many states have their own consumer regulatory entities which may give certain protections to residents of their particular states.

According to its section of the FTC's website, the BCP is engaged in a myriad of activities calculated to protect consumers. These include: conducting investigations, litigating against companies and people who violate the law, developing rules to protect consumers, educating consumers, collecting complaints about consumer fraud and identity theft, enforcing the nation's truth-in-advertising laws, enforcing all FTC federal court injunctions and administrative orders, investigating breaches of data security; preventing identity theft and helping consumers whose identities have been stolen; and implementing laws and regulations for the credit reporting industry, including the Fair Credit Reporting Act.

Moreover, several entities are currently charged with some form of consumer protection role in the financial arena. These include bank regulatory agencies, the Federal Reserve, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision, which have been responsible for writing and enforcing consumer protection rules for credit cards and mortgages.
To the layman, it would appear, based on the number and assortment of groups watching over them, that consumers in this country are treated in a similar manner of most young adolescents: overprotected.

With all this 'protection' going on, how did consumers get left twisting in the wind when excessively risky mortgage loans brought down our entire economic system? In general, this happened because all of the entities that had consumer-oriented obligations just abandoned these duties to the consumer, in favor of as championing their banks' dubious practices instead.

Proponents of the Administration's plan contend that it will replace layers of contradictory, expensive, and sometimes flat-out useless regulations, in favor of a streamlined group that can focus on regulating financial services products without the complication of having contradictory interests.

Opponents assert that Consumers engage in such a varied and increasingly complex array of financial transactions that it is not feasible to circumscribe and regulate all possible actions in every possible scenario. People will find themselves in the dire financial situations that necessitate filing for bankruptcy protection regardless of how much regulation is imposed on the market. Instead, they say, policymakers need to give consumers enough financial knowledge so that they will be capable of effective financial decision-making.

In short, regulation and oversight of businesses that prey upon consumers is necessary, but is isn't all that is needed, and it certainly won't end the need for personal bankruptcy. Rather than limiting the products available in the marketplace through overzealous regulation, the plan should focus on financial education ensuring that consumers are adequately equipped to confront and understand all of the financial choices available to them. And such education, will go a long way help the average American maintain good financial health.

Speak with a bankruptcy attorney today to find out more about your options under federal bankruptcy law. In North Carolina, contact the Law Offices of John T. Orcutt, with offices in Raleigh, Wilson, Durham and Fayetteville.