House Refinance Center
Financial Reform Bill
| Financial Reform...What YOU Need To Know The Financial Reform Bill is law. It provides application of the federal laws protecting consumers across a wide range of industries. From big banks to storefront pawnbrokers, most companies are regulated. There are a few exceptions. There was a lot of give and take, and the Obama Administration delivered a Bill that was long overdue. Not all parties affected are doing back flips, and dancing in the streets. The credit unions are not happy. They feel that the big banks have a clear advantage over fees. Banks, Credit Unions The Federal Reserve will set the fees that large financial institutions charge. Institutions with assets less than $10 million will be exempt. This covers most of the community banks and credit unions. The credit unions are upset about this. In particular the "interchange fees". These fees are charge anytime a consumer makes a purchase using a debit or credit card. Merchants pay the fee, usually 1% to 3% of the price of the product. The fee is paid to the financial institution that issued the card, and all the companies that were involved in the transaction. The credit unions feel that since large banks will be required to charge lower fees, retailers will steer customers to the banks by offering in store specials and other promotions. Bob Arnould, senior V-P at the California Credit Union League, said that in the end, consumers will pay because institutions, big and small will raise banking fees to make up for the loss revenue from debit card revenue. Wall Street FDIC $250,000 limit The Federal Deposit Insurance Corporation has raised the limit to $250,000 per deposit account. If you have several different accounts at a bank, each account is protected up to $250,000. For example, you might have a savings account, a checking account and a Certificate of Deposit, (CD). Each will have insurance protection of up to $250,000. Puts an end to the notion that a company is too big to fail. Taxpayers will not be on the hook for millions of dollars in bailouts. The bill creates an effective way to liquidate failed financial institutions. Mortgages Mortgage brokers and lenders have to document your income. They have to take all necessary steps to make sure that the borrower has the ability to repay the loan. Failure to do so will result in penalties. The penalties can be as high a three years interest payments, plus damages and attorney's fees. Furthermore, a mortgage broker can not receive a commission if he steers the borrower into a loan that will create more income for the broker and higher rates for the borrower. This Bill makes the payment of bonuses known as "yield spread premiums" illegal. One of the features of the Reform Bill is housing counseling. An Office of Housing Counseling will be created within HUD. |
| Financial Reform It Doesn't Go Far Enough Many businesses are not too happy with the new Financial Reform Bill. Some are of the opinion that the big banks should be regulated. Eric Norrington of Ace Cash Express asks "Why are we even a part of this?". Automobile dealers The National Automobile Dealers Association (NADA) and the International Car Dealer lobbied extensively to get an exemption from the Financial Reform Bill. They spent over $3.5 million from 2009 to the first quarter of 2010 in their efforts. They claimed that they were not lenders and that they did not service loans, therefore they deserve the exclusion. From my position, I believe that the Obama Administration missed the boat on this one. A car is the second most expensive item a family will purchase. Some families have 2 or more automobiles. Payday loans Studies have shown that high-cost payday lenders usually locate in poor and underprivileged neighborhoods. The interest rates charged can be as high as 400%. According to a recent report by the FDIC 53% of all black households use the services of a payday lender, a check-cashing store or a pawnbroker instead of a traditional bank. The figure was 43% in the Latino community. Financial reform will curb some of the abuses in this industry. Check cashing Cash-checking companies will also be regulated under the Financial Reform Bill |
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| Consumer Financial Protection Bureau...This Dog Has Teeth This is the strong watchdog that will protect the American consumer from deceptive and abusive financial practices. Director Appointed by the President and confirmed by the Senate. Budget Budget paid by the Federal Reserve Board. Rule writing Ability to write rules to protect the consumer. All institutions, bank and non-bank are included. Examination/Enforcement Authority to examine and enforce regulations for banks and credit unions with assets over $10 billion. Included in this group of companies are mortgage lenders, mortgage servicers, mortgage brokers, payday lenders, debt collectors and consumer reporting agencies. Consumer Hotline Creates a national consumer hotline. A toll free number to report problems or abuse. Consumer protection Consolidates the various agencies that protect the consumer. Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, and the Federal Trade Commission. |