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When Frankly Asked Questions About Banking Regulations?
"How will the government's new financial services consumer protection act to help protect me?" This is a question that a lot of boomers, as well as Gen X and Y, are asking these days. The Boomers have had quite a few issues with the banks and mortgage companies over the years, including the scandals with mortgage brokers in the '80s. As you may know, the government's financial literacy campaign is geared towards getting the general public to understand how important it is to have sound financial decisions throughout their lives. Hence, the desire to find out how the government's banking programme can help them.
There are two major aspects to the first in this piece: how the government's regulations will benefit younger generations and how the regulatory framework will impact the current crop of baby boomers who are approaching retirement. Let's briefly look at each of these. First, on the personal front, financial literacy is something that the Boomers want to see done right. After all, they grew up during the 'golden age' when banks were extremely regulated, lending restrictions were nonexistent, and interest rates were low. These days, things are markedly different. The Boomers are concerned about making sure that young people get into a good college or university, are provided with the tools they need for financial success, and that they do not end up with bad credit after graduating. Hence, they want to make sure that the government's impending regulations on NUS loans are enforced correctly. They are also keen to make sure that young people get adequate life experiences before taking on the big bucks. Second, on the business front, the government wants to ensure that its banking programme helps stimulate economic growth. While this might not sound terribly relevant to today's boomers, it clearly was during the great depression. As unemployment rates skyrocketed, consumers simply couldn't keep up with the rising costs of living. In response, the government injected a massive $1.7 billion stimulus package, which is credited with keeping the economy in a healthy position. The money pumped into the economy helped spur economic activity and created more jobs. More importantly, it spurred better regulation of financial service providers, making it easier for consumers to deal with shady and poorly performing financial service providers. How does all this work? A financial service provider is basically a bank that offers financial products like loans, credit cards, savings accounts, and so on. It also handles transactions for its customers, which means it has to follow certain guidelines, such as being registered with the OFSA, with a regulated size and margin, and with a transparent record of its activities. Its clients have a right to dispute any alleged fraud, and have their money returned if this happens. So a financial service provider has to be regulated, it has to have a record of its activities, and it must have a seat at the table in a meaningful way.
But what about boomers? Many financial companies and lenders are more attuned to the needs of boomers and senior citizens than they are with young people. Many senior citizens are paying high interest rates, having variable interest rates, or limited access to credit. So these banks, as a result, are catering to them more than they are to the young. This is a problem, because the boomers are supposedly bringing an unmatched vitality and ingenuity to financial markets. Frankly asked questions by Sen. Warren Buffett (R MA) during an interview on Fox News Sunday highlighted the difficulties in dealing with boomers. He spoke of his own grandparents growing up during the Great Depression, but was careful not to paint the entire banking industry in a bad light. "I think there's room in the economy for all of the banks," he said. But then again, when asking questions, he was careful not to appear biased against any specific bank. So it seems that Frankly Asked Questions is not a term that is used exclusively by senior citizens. It is also used by most every day American consumer, and many financial service providers as well. The fact that it is used by almost every smart person you know probably means that there is room in the economy for this term to be reigned in and used more productively. After all, isn't that the purpose of financial regulation anyway? Regulation ensures that people can get better services, and help businesses to serve their customers better.
