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Consumers Exposed To Potentially Harmful Financial Products From Fragmented Regulation, Study Argues

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Consumers are exposed to potentially harmful financial products from the nation’s fragmented regulatory system, warns a new report from the Pew Charitable Trusts.

“Innovation can spur growth and competition in financial markets and provide new and better options for customers. But without careful, balanced regulation, it can also present serious risks to consumers,” the report contends.

Harm comes especially because new entrepreneurs bringing financial innovation to the marketplace are frequently uncertain about how consumer protections and other rules apply to new products and services, says the study.

The authors charge most measures by financial overseers to provide regulatory relief to emerging companies have yet to demonstrably encourage creation of consumer-friendly products.

In an attack on a major bank regulator, the Office of the Comptroller of the Currency, the authors claim OCC’s plan to provide a national charter to nonbank firms may increase consumer harm by exempting the new companies to some state regulations and usury laws.

“Firms might be able to use the OCC charter to offer services that would otherwise be subject to strict state oversight under more lenient federal standards, potentially placing consumers in jeopardy,” the study cautions.

Highlighting potential problems from the financial regulatory fragmentation, the report notes there are eight federal and 50 state overseers with varying policies and strategies.

Acknowledging financial innovations such as bill payment, fraud screening, and personal finance tools can help people make smarter decisions, the study says there can be significant consumer protection challenges such as on consumer-authorized data sharing.

The authors criticized the Consumer Financial Protection Bureau’s nonbinding principles issued last year on data sharing for falling short of regulation or supervisory enforcement.

Financial innovation has been a mixed bag historically, the authors say.

On the up side they point to the creation of ATM machines in the 1960s.

On the down side, they gave the advent of novel forms of mortgage-backed securities helped cause the 2008 Recession.

To see the full report, click on:https://bit.ly/2M5Dg2z

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