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FINANCIAL CONSUMER ASSOCIATIONS:
SO CONSUMERS CAN BAND TOGETHER
The nation's financial industry--banks, insurance companies and securities firms--often has consumers over a barrel. Financial industry titans, lax regulators and pro-industry legislators regularly work together to advance business interests. Unfortunately, consumers and taxpayers are rarely as organized or well represented in Congress, state legislatures, before regulatory agencies or in the courts.
Consequently, consumers end up paying excessive fees and higher interest rates. Surprisingly, as fees go up, the quality of service often declines. Moreover, taxpayers are often asked to shoulder the costs for financial and regulatory mistakes with their tax dollars
Sadly, the situation is growing worse, not better, for consumers. Industry shenanigans and consumer rip-offs will increase as deregulatory efforts in the U. S. Congress wipe out disclosures of key financial information and shred the handful of existing consumer protections. Congress is besieged by financial industry lobbyists who are pressing lawmakers to destroy consumer, community and taxpayer protections.
As banks expand across the nation in multibillion dollar mergers and complex webs of interstate branches, the concerns of consumers become more distant to the wheelers and dealers in the corporate board rooms. Pricing strategies have already caused fees to skyrocket and spreads between deposit and loan rates to reach historical highs. Rather than showing concern for consumer and community needs, many of the banking corporations are diverting their resources into more volatile and risky financial products. The bank's response to consumer complaints too often is, "If you don't like our policies, bank somewhere else."
Consumer financial decisions are also becoming overwhelmingly complex. What type of deposit account is best? Should investments be made in uninsured bank products? How should retirement funds be managed?
Given the powerful influence of the financial industry over both the legislative and regulatory processes, it is likely that consumers will continue to be short-changed by financial institutions unless Financial Consumer Associations (FCAs)--which are independent advocacy and watchdog organizations--are created.
More than ever, there is a critical need for consumers to be heard and to have a real voice and a significant role in the legislative and regulatory decision-making process on financial issues.
Creating FCAs is one of those rare measures that can attract support from people of diverse political persuasions. Progressives see FCAs as a way to provide consumers with the advocacy tools they lack. Conservatives appreciate the volunteerism associated with FCAs: (1) as independent bodies, FCAs don't add to the size of government; (2) with membership on a voluntary basis, they don't mandate involvement or contributions from uninterested individuals; and (3) most importantly, direct consumer funding means FCAs don't require tax dollars -an especially important feature in this time of tight government budgets.
Consumers would have a major impact on financial issues by banding together in FCAs. FCAs would serve as watchdogs for consumers at every level from the day-to-day activities of financial institutions to the deliberations of state and federal legislatures and regulatory agencies.
Financial Consumer Associations would be state-chartered, nonprofit, nonpartisan organizations. FCAs would be supported by membership dues and would receive no tax money. The members would elect a board of directors which could hire researchers, organizers, accountants and lawyers.
Financial Consumer Associations would:
FCAs are modeled on the Citizen Utility Board (CUB) concept, a product of the consumer movement spurred by Ralph Nader and other consumer activists in the late 1960s and 1970s. CUBs are organized advocacy groups that give consumers a voice in the regulatory proceedings which control monopoly utilities. The CUB's effectiveness in saving utility consumers from unwarranted rate increases and in educating the public about energy conservation has been impressive.
The Illinois CUB alone helped consumers save over $3 billion in eight years and participated in a major settlement of six cases against Commonwealth Edison, resulting in 12-month savings of $272 for the average single-family residential consumer and $1,750 for the typical small business. This landmark settlement produced one of the largest electric-rate refunds in history.
People can learn about FCAs from notices placed in mailings from government agencies and financial institutions. The right to enclose a notice of an FCA's existence and an invitation to join the organization is crucial to the development of a diverse and substantial membership. For example, the San Diego CUB, known as Utility Consumers Action Network, received 50,000 memberships from its first two utility bill enclosures within six months of its establishment in a region of only 850,000 families. The Illinois CUB reached a membership of 50,000 in its first nine months and within another year had 160,000 members.
You can start right now. Contact your neighbors and friends and the members of organizations to which you belong. Tell them about the need for consumers to have a voice --an effective voice--on financial issues that affect all of us. Write to the Consumer Finance Project at the address below for more information. Contact your local newspapers, radio and television stations and ask them to announce the plans for the formation of an FCA. Write op-eds and letters to the editor of your local newspapers. Use the Internet to spread the word about FCAS. Contact all the consumer and community organizations in your area and ask that they spread the word about FCAs at their meetings and in their newsletters.
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