Responsibility for debt lies with consumers
This past week the Senate Banking Committee released a financial report that detailed what happened prior to the market failure of last year. Experts are studying the recession, and what happened immediately before it, to make sense of what happened and how to avoid it in the future. In the report is a section focused on how to protect people with a Consumer Financial Protection Bureau. The bureau’s main goal would be to formulate and enforce rules on how everyday financial products would be managed. That includes everything from bank accounts and credit cards to mortgages and other unsecured loans.
The Consumer Financial Protection Bureau
Experts who believe in the virtues of the Consumer Financial Protection Bureau are excited to finally realize an organization that is directed towards protecting the consumer. They believe that one of the main contributors to the recession was predatory mortgages and deceptive lending practices. The bureau will push towards bringing a transparency to all loan products and unity among them so consumers can truly comparison shop. Part of the goal is to empower people to make wise decisions with their money and limit their own risk accordingly.
Detractors voice their opinions
As with any new idea, there are detractors who believe the bureau isn’t seeing the big picture. The crux of finding a solution to a problem is to understand why it happened in the first place. Experts say that there were two reasons why homeowners fell into problems:
- The homeowner took on debt that they reasonably should have never taken on, or
- The homeowner was doing well but got caught up in other external issues like layoffs, firings and market declines in general.
Without holding consumers responsible for their actions, it is difficult to change things around. Opponents of the new bureau’s purpose believe that accountability—both individual and as a society—need to be fostered to make any viable changes and improvements in the market.
Tips on how to take responsibility for finances
Consumers need to take responsibility for their past mistakes. Experts agree that reflecting on the past and making good decisions in the future is what is going to turn their situations around quicker. One of the biggest suggestions for consumers is to live within their means when it comes to their monthly budgets. According to a survey done by FINRA Investor Education Foundation, about half of Americans today have trouble keeping up with their monthly bills. Part of the problem is that they overspend and continuously stretch their limited income.
Another tip for consumers is to never carry a revolving balance on credit cards. The FINRA study showed that 51% of Americans have a balance they carry from one month to the next. About 29% are still only making the minimum payment on their cards and 23% have taken on a late fee more than twice in the last six months. This is one of the most costly mistakes consumers can make. Over time, taking on late fees and high interest charges can eat away at savings, paychecks, and investments.
Looking positively to the future
When it comes to managing financially in the future, consumers need to be aware of steps they need to take to protect themselves. Though there is a new Consumer Financial Protection Bureau coming into the mix, the responsibility of personal finances lies squarely with the individual. Wise decisions and careful planning are the only true things that will eliminate problems and create financially sound consumers in the future.