Nader: Of Course We Need A Consumer Protection Agency For Financial Products

Ralph Nader bangs the drum for a new agency to protect consumers from Wall Street. 

The key issue here, of course, is where to draw the line between a “fraudulent” product and a “stupid” or “bad” product.  There was obviously fraud along the edges, but the vast majority of the damage in the mortgage market was done by people taking on loans they didn’t understand or couldn’t afford.  It’s not clear how a consumer protection agency will prevent that from happening again.

Aaron Task, TechTicker: It’s a source of anger for a lot of American consumers: While banks pocketed taxpayer bailout money, the financial institutions have been making a killing on banking fees.

Americans paid $23.7 billion in bank overdraft fees in 2008 — up a whopping 35% from two years ago, according to the centre for Responsible Lending, citing data collected from the FDIC.

Ralph Nader, longtime consumer advocate and former U.S. presidential candidate, says this is just one example where the American consumer is under attack. Nader thus fully supports a consumer financial protection agency, devoted to creating “prudent standards” for banking fees, mortgages and credit cards. A bill to create the new national agency faces its first congressional vote this week.

“It’s basically putting a federal cop on fraudulent mortgage, consumer credit cards and other shenanigans that the financial industry has been getting away with, and demonstrating that fraud and crime pays — as long as it comes from corporate misbehavior,” Nader says.

The consumer advocate supports bailout monitor Elizabeth Warren to head the proposed consumer financial protection agency, noting existing bank regulators “failed colossally” to prevent fraud and abuse during the housing boom. “The Federal Reserve is the worst agency to do that, they don’t know how to spell ‘consumer protection,'” he quips.

Sure, all that sounds good on paper, but critics of the agency warn of regulatory overkill. As to the idea individuals failed in their responsibility to understand what they were signing up for, Nader responds with typical flair: “You’re talking like the U.S. Chamber of Commerce,” he said. Indeed, the Chamber of Commerce has been leading the lobbying efforts against the proposed agency.


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