Where’s Trump Going on Consumer Financial Protection?
— February 1, 2017
By Ingo Walter
Not such a bad thing, with plenty of financial products and competitors from all kinds financial firms to choose from. But with time financial products have become more complex and less transparent, and a there is bewildering range of options being pitched. Often financial salespeople are under heavy pressure to cross-sell, leading to unneeded new accounts or up-sold services, sometimes attached to an array of embedded and sometimes undisclosed fees. Certain products, such as some kinds of variable annuities, can be almost impossible for consumers and even salespeople to value and identify the associated risks.
And it’s not too late to remember the mortgage “affordability” resets, embedded options and prepayment penalties offered to eager households back in the glory days of the mortgage boom a decade ago. The financial crisis soon placed many of these issues in sharp relief in the US housing market’s mortgage-origination “fee machine,” and through financial contagion its contribution to global systemic risk.
Read more on the blog Banks and Markets.
Roy C. Smith is the Kenneth G. Langone Professor of Entrepreneurship and Finance and a Professor of Management Practice. Ingo Walter is the Seymour Milstein Professor of Finance, Corporate Governance and Ethics.