This letter, which is submitted on behalf of the National Consumer Law Center’s low income clients, makes several overarching points and refers lawmakers to a number of materials on “fintech” topics for more detail.
Financial products and services are developing and changing rapidly as a result of a number of factors, including the spread and capacities of mobile devices and the internet, the growth of computer power, the increasing use of big data, algorithms and machine learning, and an explosion of nonbank startups that are taking a new look at how to design and deliver financial products and services. Many of these developments have led to innovations that will benefit consumers through improved access, lower prices, increased transparency, and financial management.
At the same time, it is critical to keep in mind that consumer protection must remain paramount, and that many innovative approaches also yield problems. “Innovations” such as pick-a-payment mortgages and securitized no-doc loans not only ruined many families but devastated our economy. There is no free lunch, and many products that appear to be free or low cost are paid for in some fashion – whether through hidden fees or costs, or by selling the consumer’s personal data. New products or services may result in new problems that are hard to anticipate today or to identify through slick presentations.
The following are key points that we urge the Committee to keep in mind as it digs more deeply into the myriad of complicated fintech topics.