Senator Toomey Says New Financial Products Benefit Consumers
Commentary by Steven Lofchie
Senate Banking Committee Ranking Member Pat J. Toomey (R-PA) urged regulators to adopt policies that facilitate innovation and consumer choice through the development of a healthy competitive market.
In remarks before the Committee at a hearing on new consumer financial products, Senator Toomey said that as financial institutions develop technology-oriented solutions to meet consumer needs, consumers gain knowledge to help them make informed decisions, and individual consumers are better positioned than politicians to understand their own needs.
Senator Toomey said that innovative financial technologies, such as "buy now, pay later" services or earned wages access to receive payday advances, have the potential to benefit both consumers and retailers. He said that "marketplace competition has successfully generated more and cheaper options for many consumers to meet their needs[,]" and reminded regulators that healthy competition often benefits consumers the most.
Senator Toomey said that regulation should allow room for innovation, and he criticized Democrats for having a "panic" reaction to novel technologies. He criticized direct actions taken by regulators such as the CFPB for its "demonstrated hostility" to innovation, as well as the Democrats for their role in the OCC overturning a rulemaking that solidified partnerships between financial institutions and FinTechs.
Commentary
The fundamental question that Senator Toomey poses is whether the regulatory resistance to new consumer lending products protects low-income consumers from a bad deal or deprives them of needed credit. Unless the regulators are able to point to alternative sources of credit that are cheaper and more readily available, it seems an uphill battle to argue that consumers are benefitting from protection that prevents their access to credit.
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