Sunday Savings Tip: August 15th

The Dodd-Frank Wall Street and Consumer Protection Act

On July 21, President Obama signed the Dodd-Frank Wall Street and Consumer Protection Act, which is considered the most wide-ranging overhaul of the U.S. financial system since Great Depression.
Provisions of the law include:

• Credit reports and scores: Before applying for a loan, consumers will be able to request a copy of their credit report and an explanation of how the rating was determined. If turned down for a loan, the new bill grants the right to see how the decision was made.
• Home loans: The law establishes new minimum underwriting standards for home mortgages and outlaws both payments to loan brokers for steering consumers toward high-priced loans and pre-payment penalties for paying off a mortgage early. Lenders will also be required to ensure borrowers are able to repay home loans by verifying income, credit history and employment.
• FDIC: The increase in Federal Deposit Insurance Corporation (FDIC) insurance coverage from $100,000 to $250,000, which was changed almost two years ago, is now permanent (the increase was previously set to expire in 2013). This means accounts at covered financial institutions (banks, credit unions, etc.) are protected up to $250,000 per person, retroactive to January 1, 2008.
• SEC: The Securities and Exchange Commission must write regulations for broker dealers requiring them to act in the best interest of their clients. This puts stockbrokers on the same footing as independent advisors—they won't be allowed to have a stake in which stocks are bought and sold by clients.

The new law also creates, in the next 12 months, the Bureau of Consumer Financial Protection. This new government entity is designed to create additional protection for consumers of financial products, including unfair credit card rate increases and illegal mortgage lending practices. While the structure and leadership of the new Bureau has not yet been established, many provisions of the new legislation are likely to fall under their jurisdiction.
For more background information on the law and its many provisions, please see Summary of New Financial Reform Law.