An Open Letter to Elizabeth Warren

> Posted by Michelle Romeu
In her most recent Huffington Post blog, Elisabeth Rhyne writes to Elizabeth Warren, sharing insights on consumer protection from the microfinance industry—and specifically on how regulators can deal with three different groups of financial service providers (the good girls and boys, the opportunists, and the bad apples) to promote healthy consumer protection practices.

The industry is trying to fix itself right now
Elizabeth Warren, speaking on “In Business with Margaret Brennan

Dear Ms.Warren,

What an important challenge you face in bringing the new Consumer Financial Protection Bureau into being! Although you’re reputed to be a woman not easily daunted, it might still be comforting to know that you are not alone. At the recent Alliance for Financial Inclusion meeting of banking authorities from more than 60 developing countries, I had the opportunity to talk with regulators from countries as diverse as Peru, Malaysia and South Africa struggling with some of the same choices that confront you.

All around the globe, bank regulators are acknowledging the importance of ensuring that financial services providers treat the less powerful members of society well. They are even recognizing that protecting consumers is a prerequisite to a stable financial system. But the tools and resources regulators wield just can’t compare to the vast number of client-provider interactions taking place every minute of every day. Regulators can never sit in on every transaction (nor would anyone want them to), so they have to act strategically. One sometimes undervalued way to be strategic is to encourage the industry to, as you say, fix itself.

Listening to regulators give their takes on client protection, I found them preoccupied with three different groups, each requiring different regulatory tools. Let’s call them the good girls and boys, the opportunists and the bad apples. The good girls and boys are providers that actively seek to employ good client protection practices. They may be motivated by reputation, by social aims, or by the business case in favor of treating clients right. I am hopeful that across the world most of the microfinance institutions I deal with are good girls and boys, and am convinced that in the United States there are mainstream banks, community banks and especially credit unions in this category. The great thing about such institutions is that they and the regulators are basically on the same side. A regulator from the banking superintendency of Peru stated, “In our consumer protection efforts, the banks are out greatest partners.” Wow. A statement like that would be jeered in most places in the U.S. In fact, an American consumer advocate I spoke with recently said, “What we’ve learned is that banks are the enemy.” How sad, and what a missed opportunity. Read more >