Financial Reform: What’s in It for Me?

The House of Representative passed their Wall Street reform bill back in December, and the Senate just passed their own version last week. All that remains now is to reconcile the differences between the two bills.

While this legislation seeks to put restrictions into place to prevent another financial meltdown, there are also a number of consumer protections included in the legislation, or proposed as amendments. For example…

The new legislation seeks to establish an independent “Consumer Financial Protection Bureau” within the Federal Reserve — the House calls for a standalone entity. This new bureau will oversee lenders (except possibly car dealers) and protect consumers against predatory and/or deceptive lending practices.

Other consumer-related changes include:

• Free access to your credit score. Thanks to prior legislation, you’ve had free access to your credit report for several years. You may soon gain similar access to your credit score — once per year from each agency.
• Making the FDIC insurance increase permanent. As most of you are aware, FDIC insurance limits were increased from $100k to $250k, but this increase is set to expire at the end of 2013.
• No credit checks for employment. As I’ve noted in the past, employers often check your credit before offering you a job. Under an amendment to the reform bill, this would no longer be allowed (with exception for jobs related to national security, etc.).
• Mortgage prepayment penalties. Believe it or not, some lenders still levy penalties if you pay off your mortgage early. The proposed legislation could restrict such penalties, and make them go away entirely in many cases.
• Mortgage compensation. Mortgage brokers won’t be allowed to accept compensation that varies depending on the loan type. This is intended to discourage brokers from putting borrowers in fee-laden products with disadvantageous terms.
• Debit card fees. A late addition to the legislation limits debit card fees that merchants pay, meaning that banks might wind up adding other fees to make up for the lost revenue. For their part, retailers argue that they’ll be able to afford more workers, and also pass savings along to consumers.
• Minimum transaction amounts. It’s fairly well known that stores aren’t allowed to set a minimum transaction amount for credit card purchases (see: Visa guidelines, MasterCard guidelines). Under the proposed law, such minimums would be allowed as long as they’re applied across the board.
• Credit card discounts. Stores would also be allowed to provide discounts based on what type of credit card you’re using. For example, they could offer a discount for using Visa or MasterCard instead of American Express. Cash and debit card discounts would also be allowed.
• Brokers and “best interests.” The House version of the bill requires investment brokers to act in their clients’ best interests. The Senate version requires only that they recommend “suitable investments, ” with no “best interests” requirement.

Which of the above changes will make it into the final legislation remains to be seen, but there certainly seem to be a number of consumer-friendly measures under consideration. What do you think?