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How Regulation Can Save Consumers Big Money

David Callahan

The drive for deregulation during the 1970s found support among Democrats and Republicans alike. And I don't just mean centrist Democrats, by the way. Many liberal Democrats favored deregulation in the face of evidence that elaborate forms of red tape favored monopoly-like corporations and prevented competition. Many deregulatory proposals were viewed as pro-consumer. 

Today, though, the opposite is often true: loose regulatory oversight costs consumers money in many areas by leaving them easy prey to deceptive advertising, excessive fees, shoddy services and practices, and more. 

This has been particularly true in the area of finance, with credit cards as a prime example. Starting a decade ago, Demos spotlighted abusive credit card practices that cost consumers dearly and our work helped to produce the 2009 Credit CARD Act.

Now comes new evidence that this law is saving consumers $20 billion a year by lowering borrowing costs. Wow. 

These savings aren't just good for consumers. They are also good for the entire economy since $20 billion not spent on interest and fees is money that can be spent on goods and services.

Today's apostles of deregulation argue that loosening rules is crucial for spurring growth. But to the extent that deregulation leads to an "extractive" society whereby financial elites are able to suck wealth from the rest of the country, the opposite can occur because ordinary people have less money to spend. 

Inclusive economic systems are the ticket to growth. Our regulatory system needs to promote that goal. The success of the CARD Act shows how this can be done.