The financial crisis hit the entire world threatening the conservatively stable economies and having negative effects on both the developed and developing nations. Some of consequences still continue to haunt the world today in the wake of the Euro Debt crisis and the financial meltdown in the American economy. These occurrences have triggered a re-examination of the market system with the liberal enterprise system in the United States of America incurring some blame. In reaction to that, the American Congress in 2010 passed the Dodd Frank Wall Street Reform and Consumer Protection Act. The Act among others things introduced tough economic and ethical expectations on the business community and specifically to the financial institutions. It is this Act that established the Consumer Financial Protection Bureua, CFPB. Its main mandate derived from the statute is to oversee on the behalf of the citizenry (consumers) the financial market in terms of products and services availed to the consumers. In exercise of this mandate, the CFPB operates under the statutory provisions of the Dodd Frank Wall Street Reform and Consumer Protection Act. In other words, the body suffices for purposes of ensuring that the public and or consumer interests are protected in the face of competitive markets that have recently tempted financial institutions in pursuit of profits to sacrifice ethics and public interests.
In that regard, it is instructive that the scope and functions of the body is determined by the operating statute already mentioned. In overall, the CFPB suffices for the execution of the following functions. Through the execution of the federal consumer financial laws the body formulates and implements rules that actualize the financial laws. It restricts and regulates exploitative, deceptive and unfair industrial and individual practises in the market by providers to the consumers. It addresses any consumer complaints in relation to the financial services. Carries out research on consumer behaviour and conducts awareness campaigns and financial education to the consumers. Monitors and evaluates the financial risks portended to the consumers and makes them (consumers) aware of the risks. Prevents financial market discrimination and biases by ensuring the relevant laws are adhered to the letter. It is, therefore, instructive on that basis that the body purposely exists for the protection of consumer needs and interests. It main functions resonate around research, education, awareness and advocacy. The body similarly conducts comparisons and contrasts of the available market products. In that scope it reduces consumer ignorance and sees to it that unfair gains through deceit, ignorance and exploitation are eliminated. In other words, the body suffices for the institutionalization of moral ethics and social principles in the operations of financial institutions in providing products and services to the consumers.
Currently, the American consumer debt is on a slight decline. While every effort is being undertaken to reduce the debt level, it is essential to appreciate that the consumer debt is mainly attributable to the following three areas; mortgage, student and credit card debtors. It is essential from a policy perspective for market regulation to be pursued in attempts to reign in on the household debt levels. In that context, it is this paper’s contention that a policy needs to be developed so as to curtail the high credit card debts. This paper hence proposes an introduction of a policy that would among other things tighten the conditions that qualify one to use the credit card debts. American consumers have since lost their prudence and austerity abilities. In a world that is highly competitive, American consumer debts would continue to soar as other nations endeavour to reduce their spending levels at the household level.
The policy ought to assume a legal and economic character. For most, it is important to introduce credit limits that would be commensurate with the economic abilities and disposable income of the consumers. While the body is charged with regulation of the financial service providers, it equally needs to develop policy that enable American consumers to practise austerity and financial prudence. Reducing the debt limits allowable to an individual would probably be one of the best austerity measures.
In addition, in line with reducing the credit limits, it is important for the policy to tailor credit debt use only for necessities. While the American market must retain its free enterprise system where the factors of production, demand and supply factors are let to interact in the market freely, it is more of an austerity measure to use the policy to incentivise American consumers towards spending in the right ways and against unnecessary spending. In that scope, it would be prudent to tailor the policy for American consumers to incur higher interests on credit debts incurred on non-necessities as opposed to debt incurred on necessities. This will not only influence the spenders character and approach to use of credit debt, but will equally enable the creation of a culture of awareness on financial austerity and prudence. This will equip the body with the missing aspect of reigning on consumer financial behaviour. With the stakes high in the current financial markets, it is unfair to merely impose ethical and social policies and principles on financial service providers without necessarily imposing some policies on the consumers. The regulation of the use of credit debt will effectively provide leadership and direction in this missing aspect. In the long run, the American economy would be bolstered if and when American consumer culture is limited to austerity measures that advocate for useful and primary spending. The culture of a consumer economy needs to be reduced through direct and indirect methods. The economic recovery must assume an inclusive approach that does not merely limit the spending of government on the premise that government is the largest consumer. It in the same measure must reign on the individual consumer spending which in a cumulative sense would occasion a reduction in the overall national debt levels.
In conclusion, it should be noted that what Congress envisaged through the Frank Dodd Wall Street Reform and Consumer Protection Act has a progressive character. For the American consumers to have the knowledge, awareness and skills to navigate the financial services and products, several stakeholders need to participate inclusively. In addition, it would be essential for the consumers to themselves practise financial prudence and austerity if they are to save the American economy and precipitate an economic growth. In the long run, American must practise more of production that consumption if the debt levels are to reduce both at the individual and national level. The Consumer Financial Protection Bureau, therefore, has its work cut out for it. With the help of stakeholder, it will realize its objectives progressively.
Works Cited
Brux, Jacqueline Murray. Economic Issues and Policy. New York: Cengage Learning, 2010.
Consumer Financial Protection Bureau . Consumer Financial Protection Bureau Strategic Plan FY 2013- FY 2017. 23 February 2013. 15 May 2013. <http://www.consumerfinance.gov/strategic-plan/>.
Consumer Financial Protection Bureau. About Us. 3 May 2013. 15 May 2013. <http://www.consumerfinance.gov/the-bureau/>.
Mankiw, Gregory N. Principles of Economics. New York: Cengage Learning, 2011.
Rourke, John T. You Decide! 2012: Current Debates in American Politics. New York: Prentice Hall, 2011.
