If the recent news from Washington isn't a little unsettling, maybe you should look again. A new administration has brought some unconventional thinking to the Oval Office, and the repercussions could be felt for years by American consumers.
Among the changes:
- An executive order that whenever an executive department or agency publicly proposes a new regulation it will identify at least two existing regulations to be repealed.
- The appointment of cabinet members and agency heads openly hostile to government regulation, notably Federal Communications Commission Chairman Ajit Pai, who rescinded a plan to regulate cable TV set-top boxes.
- Heads of industry have been meeting with the new president and his cabinet members, and the signs are alarming. In one recent meeting with business leaders, the president vowed, "We're gonna be cutting regulation massively."
It doesn't matter how you voted in the last election, or if you voted at all. These actions are bound to affect you. The question is: where, when and how?
"The industries that are likely to deregulate faster—where consumers will also notice—are the healthcare and financial sectors," says Suryadipta Roy, and associate professor of economics at High Point University.
The financial industry has already felt some of the deregulatory effects, notably through an executive order that scaled back some of the financial reforms of the Obama administration. But it's just the beginning.
"The deregulation will likely relax financial oversight that is carried out under the Dodd-Frank Reform Act," says Roy. "In the short run, this kind of deregulation is likely to shore up share prices for banking stocks. The potential downside to this piece of legislation is that it can lead to [a] repeat of the mistakes that aggravated the 2008 financial crisis."
Another area of deregulation: Relaxing the fiduciary rule that requires financial professionals to put their clients' interests first when giving advice on retirement investments. Roy says this might lead the asset managers toward excessive risk-taking by driving uninformed clients toward high-risk assets without proper understanding of the risks.
Those are hardly the only industries that will be affected, say experts. The energy sector faces massive deregulation, and some see that as a good thing.
"‘Deregulation of [the] energy sector will help the country achieve complete independence from foreign sources of oil," says Prabir Chetia, who heads the business and research advisory department for Aranca, a research firm. "America will be able to tap the untapped energy—$50 trillion in shale energy, oil reserves and natural gas on federal lands, in addition to hundreds of years of coal energy reserves."
That will lead to lower energy prices, he predicts.
Chetia also expects the Food and Drug Administration to face significant deregulation, which would bring in new ways to vet drugs before commercial roll-out. "One idea is vetting new drugs through consumer reviews of medications," he says. But, he adds, it could easily backfire, potentially exposing patients to ineffective and potentially dangerous drugs.
"It could be catastrophic," he says.
Perhaps the biggest impact will be felt by customers of financial institutions as the Consumer Financial Protection Bureau (CFPB) is reformed, or possibly eliminated. As a reminder, the CFPB is tasked with administering important federal statutes, including the Truth in Lending Act, Fair Credit Reporting Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Home Mortgage Disclosure Act, and the Electronic Fund Transfer Act, as well as new responsibilities for consumer financial protection.
"It’s a difficult argument to lessen the strength of a governmental entity looking out for consumers," says Braden Perry, a litigation, regulatory and government investigations attorney with Kennyhertz Perry, a law firm in Kansas City. "But it may happen."
Perry predicts the underlying protections will either be redistributed to other agencies or the single-director CFPB will be replaced with a commission-style agency with congressional oversight.
"But the CFPB is facing a serious reshaping," he says.
Bottom line for consumers: The age of laissez faire deregulation has begun. During this time, you won't be able to turn to the government for help. You'll have to be more vigilant than ever—and you'll have to expect the worst as a consumer.
If you tilt to the right politically, all this talk of deregulation may make your day. But the ramifications for consumers could be serious, and the negatives will almost certainly outweigh the positives, if the predictions are true. If the regulations go out the window, then ordinary consumers will lose an important ally with the power to create and maintain a fair, competitive marketplace.
You don't have to be a political activist to shudder at the thought of credit cards with gotcha fees and confiscatory interest rates, of financial advisers working to enrich themselves instead of helping their customers, of drugs not properly vetted and of federal lands being drilled for oil. You just have to be a concerned citizen.
Consumer advocate Christopher Elliott's latest book is How To Be The World’s Smartest Traveler (National Geographic). You can get real-time answers to any consumer question on his new forum, elliott.org/forum, or by emailing him at email@example.com