Love it or hate it, deregulation is a major priority for the current political administration. And while regulatory battles may seem like concerns for policymakers on Capitol Hill, they have real, whack-you-in-the-wallet implications for consumers, too.
The impact of deregulation is especially relevant when it comes to the financial services industry, where regulatory rollbacks may give lenders, credit card companies and other financial institutions the freedom to engage in business practices some consider predatory or abusive.
“Deregulation may spur the economy, but in doing so, it emboldens corporations and companies to look out for themselves,” says Kathryn Hauer, author of “Financial Advice for Blue Collar America.” “It’s going to become more important for individuals to make sure they’re not getting scammed or tricked
Recent regulatory reductions for financial services include the delay of the fiduciary rule, which requires financial advisors to act in your best interest when giving retirement and 401(k) advice, and rolling back the implementation of certain regulations for payday lenders and companies offering prepaid credit cards. Conservative politicians have also made moves to weaken the Dodd-Frank Act – the Wall Street regulations signed into law after the financial crisis in 2008.
Even the Consumer Financial Protection Bureau, a watchdog group tasked with representing the rights of financial consumers, has changed its mission statement, under its new leadership, to include the goal of “addressing outdated, unnecessary, or unduly burdensome regulations.” While that’s good news for financial companies, it may concern consumers, who worry that businesses will be less inclined to offer appropriate, safe financial products to their customers.
That’s a valid concern, says Lauren Willis, professor at Loyola Law School in Los Angeles. “People cannot realistically protect themselves from every scam,” she says in an email. “That is one very important reason we need the CFPB to pursue and stop deception and abuse in financial services.”
So what does deregulation mean for your finances? It’s complicated, experts say. In general, those who favor deregulation stress that it allows consumers to make their own financial choices without the impact of federal or state intervention, and it can put downward pressure on the prices of services and goods. If there are bad deals out there, they argue, consumers will stay away, and those companies will change their practices or go out of business.
But to make good financial decisions and steer clear of predatory money products, experts say, consumers need a certain level of financial literacy.