Financial Reform
The Wall Street Reform and Consumer Protection Act was signed into law in late July. Before the pains of the financial crisis were just a thing of the past, Congress passed the biggest financial reform measures since the Great Depression. While much of the bill covers Wall Street measures and regulations, there are several changes consumers should be aware of. The following are the top measures related to financing for consumers:
- Mortgages. Lenders must determine if borrowers will be able to meet monthly obligations including mortgage, taxes, insurance, and assessments. Borrowers of adjustable rate mortgages must qualify at the highest rate. Additionally, lenders won’t be able to incentivize mortgage brokers to make higher-rate or riskier loans.
- Credit Reports. All consumers will no longer have access to government-mandated free annual credit reports. Consumers who are denied a loan or who are not offered the best interest rate will receive free copies of their credit scores. Credit scores and reports will be available for purchase through a credit bureau or myFICO.com.
- Credit and Debit Card Changes. Most notably, merchants may start incentivizing consumers to pay with cash, debit, or check. There may be changes to credit card rewards programs.
- Consumer Financial Protection Bureau. This new bureau will regulate consumer loans including mortgages, credit cards, student loans, payday loans, and check-cashing companies. Auto loans and insurance lending will be excluded.
The government’s goal of creating safer and easier to understand lending practices is to benefit the long-term strength of the economy.
For more information, see the following links:
Sources: The Wall Street Journal, USA Today, myfico.com