Bankruptcy

What to Expect from the Latest Financial Reform

By Chris Kramer

The financial reform bill approved by the Senate last month and now being revised before it faces votes in both houses of Congress could lay the groundwork for significant changes in the country?s financial system. Here?s a look at what you, as a consumer, can expect.

• More protection: If passed and signed into law, the bills would introduce an agency devoted solely to consumer protection. As part of the Federal Reserve, the Consumer Financial Protection Bureau would be charged with regulating lenders and protecting consumers from predatory lending.
• Free credit scores: While free credit report access (available at www.annualcreditreport.com) has been a reality for a while, Americans still have to pay to view their credit scores. The new bill would give citizens the right to view one free credit score along with their free reports from each of the bureaus per year.
• Increased protection at the bank: For now, the FDIC insurance limit for bank accounts remains at $250,000 (before the change, they stood at $100,000). This limit is set to expire in 2013, but could be made permanent with the new bill.
• More privacy: Currently, employers are permitted to check a potential employee?s credit report during the hiring process; one provision of the new bill would prohibit such employment-related credit checks unless the job involves matters of national security.
• Fewer mortgage penalties: Some provisions of the bill would limit or eliminate prepayment penalties on mortgages, which can act as a disincentive for a borrower to repay a loan early. Similarly, the bill would prohibit mortgage lender compensation that?s based on loan type, which has been linked to lenders leading customers into more expensive loans than they qualified for.
• Debit card fee limits: One provision seeks to lower debit card fees vendors pay, which could lower prices for consumers but could also backfire by prompting banks to raise fees in other areas to make up for lost revenue.
• Credit card use changes: In addition to offering customers discounts for shopping with a specific type of credit card, retailers would be able to set minimum transaction amounts for credit card use (as long as they?re applied universally).

As of now, of course, none of these provisions is guaranteed to make it into the final draft of the bill, but the changes reflect concerns brought on by the collapse of the housing market and the general problems associated with predatory lending that have reared themselves in recent years.

Additional Resources

Summary: Senate Financial Reform Bill

Summary: House Financial Reform Bill

Full post as published by The Bankruptcy Blog on June 07, 2010 (boomark / email).