Consumer-finance myths and other obstacles to financial literacy
William R. Emmons
The consumer-finance market for middle and upper-income households in the United States is characterized by a wide range of choices, both in terms of financial-services providers and the specific products and services available.1 Prices generally are determined in competitive markets. Consumer-protection regulation is extensive. Why then is there so much dissatisfaction with the U.S. consumer-finance market, even for prime-quality customers? ; This paper focuses not on inadequate choices, inadequate competition or regulation, but on the difficulty many middle and upper-income households encounter in making good financial decisions—that is, a low average level of financial literacy. Millions of households are unable to make wise financial decisions even when adequate information is available. Low levels of financial skills provide a fertile environment for consumer-finance myths to arise and gain widespread acceptance.
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