FOR centuries liberals have argued that people should be trusted to make their own decisions. Regulators increasingly want to protect them from themselves. In the wake of the financial crisis, the administration of Barack Obama established a new agency, the Consumer Financial Protection Bureau. The CFPB has so far focused on regulating mortgages, for example by making their terms more digestible. But it is now weighing stricter curbs in other markets: new rules on payday loans are expected in the first quarter.
Other new rules are on the horizon, too. The Department of Labor is proposing a “fiduciary rule” for financial advisers who help Americans to invest their pension pots. Currently, many advisers earn juicy commissions by recommending costly products. A study by the White House suggested such “conflicted” investment advice costs consumers roughly one percentage point in returns a year, and that clients are largely unaware of the costs. The new regulations would require that advisers always act in the best interest of clients. Republicans tried, and failed, to kill the proposal in budget negotiations late last year, and the...Continue reading
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