I refinanced my home mortgage a few months ago to take advantage of the low interest rates. For me, refinancing was no big deal. I have a business education so I know the basics, my wife is very sharp in business matters, and we’re both big fans of fixed interest mortgages. Most important, we have friends that are mortgage brokers, lawyers, financial planners, so we often deal with people that have more important incentives than money for these things. The other day, something occurred that made me realize how risky refinancing and most other financial deals are to a lot of people.
My Tuesday mail included a direct mail piece marked “urgent” regarding my new mortgage. I know that these mailings are almost always crap, and the mortgage broker had warned us that we would be inundated with these shady offers as soon as our loan went through. Still, it took me a moment to accept that this letter was junk. I even opened it first, then ran it through the shredder. Usually I just shred the junk mail unopened (yes, I know, the plastic in the envelope window is bad for the shredder but time is tight and opportunities are many).
This non-incident made me think. Here I am, an educated business person, plenty of experience including a fair amount of time working with (legitimate) direct mail offers, and plenty of professional guidance available with just a phone call. To have been taken for even a moment caused me to wonder what people without the advantages I have do when they see a similar letter. I bet most people run it through the shredder just the way I did. Still, these offers must work or they wouldn’t be out there. There’s money to be made and that means that the dishonest will find their way around any regulations the Feds put in place; even those created by President Obama.
These kinds of offers, though legal, are laced with fine print and as such, take advantage of the unwary. These deals get people hooked on credit cards and into bad loans and even snare the wealthy (see Bernard Madoff). These deals helped to bring about our current financial difficulties.
In response to financial deals loaded with fine print, President Obama proposed the Consumer Financial Protection Agency to deal with credit cards and home loans. This new regulatory body may help protect some consumers. It may not. It will cost money and it will cause some consumers to feel secure in their dependence on a fallible regulatory organization (see, economic crisis, 2008-2009).
I have written about this before and need to say it again; our nation needs to develop a culture of Self-reliant, independent, accomplished people and NOT a culture of reliance on government. This concept is similar to parents that send their child for karate lessons to deal with a neighborhood bully; the kid learns life skills bigger than simply blocking a punch. Self-reliance, independence, and a desire for accomplishment are skills and traits that will protect consumers by enabling consumers to protect themselves.
The Consumer Financial Protection Agency may help some people but an agency alone can not do enough. If President Obama really wants to protect Americans he would use his bully pulpit, incredible rhetorical skills, and fantastic popularity to promote a culture of self-reliance, independence, and accomplishment. Call it Financial Karate.
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