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What consumers should expect from governmental financial reform

The average consumer surely has a number of questions about all this talk of financial reform.

Much of what is being done by the government to help protect consumers from the costly practices of lenders can be a bit confusing, but a new report from the Associated Press could help explain the labyrinthine tangle of proposals and protections. The most important thing for consumers to keep in mind is that the practices of consumer lenders that gave out mortgages and credit cards to unfit borrowers was what got the country into its current financial mess, and made the average nationwide credit score plummet. These new laws are aimed to help prevent that from ever happening again.

Consumers will be better protected because there is now regulatory oversight of financial services and products that did not previously exist, the AP said. These regulators will have the power to both write and enforce rules that lenders must follow, like outlawing mortgages that it considers unsafe for consumers.

There will also be an extra layer of oversight for all lenders, the report said. In addition to the several government bodies that already regulate banks, a consumer agency will be added to monitor any financial company that serves consumers, unless Congress exempts that type of company. A number of companies were not previously regulated at all, but they will come under these new regulators as well.

What all this means is that normal consumers will be able to rest easier in the knowledge that they are not going to be able to enter into an agreement that could potentially be hazardous for them, the AP said. These new governing bodies will make sure all documents related to mortgages and credit cards are clear and in no way misleading or confusing. Presidential appointees will define these regulators' roles in the future.

The bill does, however, stop short of giving these agencies direct power over lenders like small banks, retailers, pawn brokers or auto dealers, who also offer credit cards and loans. Nor could they police lenders that are regulated by the Securities Exchange Commission.

A MarketWatch report added that many of these regulators will fall under the jurisdiction of the Federal Reserve, though the level of independence with which they can operate is still very much in question. There has also been squabbling over just who will fund these new consumer bureaus.