Financial Reform: What's In It For Consumers?
This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.
It's been nearly two years since the financial system melted down and brought with it The Great Recession. Congressional leaders promised to pass laws that would prevent another financial crisis, but I have my doubts.
While the bill probably won't prevent the next crisis, it will help consumers by establishing the Consumer Financial Protection Bureau, which will be housed inside the Federal Reserve. The new regulator will have the authority to oversee the mortgage market and the credit card industry. It will also clamp down on "pay-day lenders," companies that charge a hefty fee to advance money to cash-strapped consumers, in anticipation of their next pay checks.
The new rules will prohibit mortgage brokers from steering customers into more expensive loans for a commission and will ban no-documentation or "liar" loans. It will also make credit card statements more readable and transparent, allowing consumers to more easily compare products.
While critics have said that some new rules could actually raise prices and lower access to products, one has to wonder how increased transparency could be a bad thing for consumers? Anything that makes clear the details of a financial transaction can only be a good thing for Americans.
Although the new consumer rules are a step forward, there are some noticeable omissions. During negotiations, two important consumer measures were left out: the oversight of auto dealers and the fiduciary standard. I'm particularly upset about the later, which would have made it law for financial professionals to put their customers' interests first.
All in all, consumers do get some added benefits and the financial reform is a step in the right direction.
Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.
