Consumer Protection or Consumer Burden?

by Amanda Griffin-Johnson If you’ve been experiencing changes to the terms of your bank accounts or credit cards, then you can thank (or blame) new financial regulations. While the new regulations have been touted as “consumer protection,” the unintended consequences of the legislation have made some consumers worse off. Theodore Frank of the Manhattan Institute...

by Amanda Griffin-Johnson

If you’ve been experiencing changes to the terms of your bank accounts or credit cards, then you can thank (or blame) new financial regulations. While the new regulations have been touted as “consumer protection,” the unintended consequences of the legislation have made some consumers worse off. Theodore Frank of the Manhattan Institute describes some of the fallout from the new financial regulations:

Is your bank telling you it will no longer offer you free checking? Has the interest rate jumped on your credit card? You may be a victim of “consumer protection” — just like me, and just like the US economy.

The Obama-era Congress has been radically remaking the laws on relations between banks and their customers, culminating in the Dodd-Frank “financial reform” law. But what lawmakers did in the name of protecting consumers has made most of us worse off.

But because these businesses operate in a competitive free-market system, these fees never translated into pure profit. Instead, credit cards and banks used much of the money to cover other customer services. The fees underwrote things like free checking, rewards programs, free ATMs and other perks — all of which, after all, cost banks money to provide.

When new laws and regulations limit the circumstances when banks can charge fees, they have to make their money in other ways. My bank used to offer me free no-minimum-balance checking — but now wants to charge me $15 a month for the privilege.

To avoid the fee, I have to take thousands of dollars I would have invested in the stock market or spent on vacations and hold it in a minimum balance. The “consumer protection” has made me — and millions like me — worse off.

You can read the full article here.