I’ve been doing some soul-searching in the hours since President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. I’m trying to dig deep and figure out why my initial reaction to the consumer protections in the legislation is so blasÃ©. I’m just not impressed. Why? Check out the highlights for yourself:
There’s a new Consumer Financial Protection Bureau. This bureau will operate from within the Federal Reserve and will have the authority to write new rules governing most consumer financial products.
- The bureau will regulate consumer debt products such as mortgages and credit cards, making sure that contracts are written in plain English. The new office will make sure that banks can’t change hidden fees for checking account overdrafts.
- The new mini-agency will also have jurisdiction over check-cashing operations and so-called payday lenders
There are brand new mortgage and credit card rules.
- Banks and other lenders are forced to verify that borrowers have the ability to repay loans. (Federal authorities will levy fines to banks that engage in irresponsible lending practices.)
- When a bank or other financial institution refuses a loan applicant, the applicant is entitled to receive free information about their credit score
- Consumers can no longer be charged “pre-paymentâ€ fees for attempting to pay off their mortgages early
Cracking open this new legislative package is like finding a gift-wrapped box of socks and underwear under your Christmas tree. There are necessities contained here to be sure, but I refuse to get excited about them. In almost every case, the new consumer protection rules seem like essential tenets for doing financial business in this country, basic codes of conduct that should’ve been in place long ago. Wait a sec. You mean, banks will now have to check into a loan applicant’s resources and ability to repay? Before they issue someone a loan? How novel.
Don’t get me wrong, as someone who spends his days thinking about new ways to help consumers make sense of the complexities of personal finance, I welcome the new consumer protections in the bill. The changes this new law will bring about are massive. The implications are broad and consumers will benefit. And, of course, there are additional provisions in the law will that dictate how Wall Street firms and banks operate.
But I’m feeling a bit disappointed that it took more than a year of Congressional debate and millions of dollars of financial industry lobbying money to bring us to this point. So if you’re a fan of Washington’s reforms you’ll have to forgive me for not shouting “hallelujahsâ€ down the hallways of Black Enterprise. I’m thinking, “Duh!â€
John Simons is the senior personal finance editor at Black Enterprise.