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 Federal Reserve official speaks about the advantages of consumer educationAgency walks the line between consumer protection and industry burden When it comes to federal consumer protection regulation and education in the financial services sector, the industry, consumers, and the Fed often find themselves in disagreement. In her capstone speech on the symposium's second day, Sandra F. Braunstein, director, Division of Consumer and Community Affairs, Federal Reserve Board, indicated that this is a natural consequence of the Fed's effort, within its regulatory function, to find a balance between industry and consumer interests—a balance that benefits both parties. In her role as director, Braunstein has responsibility for protecting the interests of consumers in the financial services marketplace. Her address provided insight into the Fed's regulatory and educational processes, which, she maintains, can help promote competition and lead to better customer relationships. She was particularly interested "in discussing how to tap into the extraordinary level of innovation in this area of the industry to better serve and inform consumers through cutting-edge technology." |
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Regulation and education Braunstein noted that electronic funds transfers have greatly increased consumer convenience in financial transactions and bill paying. "However, with that convenience comes the need for a higher degree of consumer knowledge of their rights and responsibilities when it involves management of personal finances," she said. "It's in this realm where we have a shared responsibility to consumers to provide the essential information that they need to understand financial obligations and make the best choices for their circumstances in today's ever-increasing financial services marketplace." The Federal Reserve principally uses regulation and education to fulfill this responsibility. "Broadly speaking, consumer protection regulation is a form of education," she said. "Disclosure laws not only help to level the playing field of information for consumers, but they also promote competition among providers—and therefore they improve market efficiency." Writing regulations requires the Fed to walk a very fine line between consumer protection and industry burden. To find the right balance, the Fed gathers information from all stakeholders via a public comment process, consumer surveys and focus groups, and the Consumer Advisory Council, whose 30 members include industry, community, and consumer advocacy representatives. "We joke a bit about it, in the sense that when we come out with a proposed regulation, if the industry hates it and the consumers hate it, we probably got it about right," she said. "Another way we try to help is by promoting financial education," said Braunstein. "We have a longstanding commitment to augment our consumer protection regulations with consumer education" to help people understand and use financial services more successfully. The Fed takes a multifaceted approach to this educational commitment, which includes
Braunstein challenged the industry to leverage its resources to help provide sound consumer education, particularly in the area of electronic financial services. "We think that the industry is very well positioned to proactively provide consumers with the information they need at a time when they need it," she said. Braunstein noted four industry advantages:
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