Legislation and congress

Legislation and congress
Question 1
The financial industry is one that has been and will continue to go through substantial transition as a result of the fallout from the implosion of the sub-prime mortgage crisis and the great recession in 2009. In order to prevent a future crisis, the actions of banks and financial institutions became increasingly restricted. In 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, the most sweeping overhaul of financial regulations since the 1930s. The Act expands the power of key government agencies and creates a new consumer-protection agency to oversee financial products. The full requirements of the Dodd-Frank legislation are still being developed and the financial industry is working to block some of the provisions from being implemented. Although this legislation may be able to protect some consumers from the unscrupulous actions of financial institutions, whenever society relies on legislation to prevent problems, people need to be concerned about the “law of unintended consequences.” For instance, Dodd-Frank dramatically improves the protections for credit cards offered to consumers, but not for credit cards marketed to businesses. Thus, more consumers are being targeted with “business” credit card offers rather than consumer cards and some consumers have learned too late that their “business” card does not offer the same level of protection or come with the same consumer rights. If new legislation is passed that limits the ability of credit-card issuers to raise interest rates, this will likely help some consumers, but perhaps hurt others. In order to recoup the lost revenue from higher interest rates on existing cards, banks may start to simply charge higher interest rates on new cards from the beginning. Thus, credit may be more difficult for young adults wanting to open their first credit card to access at affordable rates.

There is talk in Congress to overhaul or completely eliminate the Dodd-Frank legislation.

Assume that you are member of Congress. What would you do in light of the facts in this case? Assume one of the positions and defend it based on a discussion of ethics, culture, corporate social responsibility and other concepts from the book and class.

1. Create legislation that does not allow credit-card issuers to raise interest rates for those who cannot pay their bills.
2. Create legislation that makes it a crime to entice people to spend money on a credit card when they can’t afford it.
3. I would not create any legislation. Consumers need to be more vigilant of their own actions. People must be responsible for their own behavior.
4. Create other options.