Financial Reform Bill- Update
By Consumers Union on Friday, June 25th, 2010
House and Senate negotiators today approved the financial reform bill now both legislative bodies need to vote quickly and get this bill to the President’s signature.
The overall bill would set up a warning system to minimize financial disruptions, require large financial institutions to liquidate rather than be bailed out by taxpayers, and set new rules for financial procedures and instruments, such as derivatives, that have been largely unregulated. The full House and Senate are expected to vote on the conference committee’s bill next week.
Consumers have been pounded by the financial crisis, not just from job losses, but from punishing credit-card fees and skyrocketing interest rates. The bill gives consumers a fighting chance. The idea of a consumer watchdog was deemed dead on arrival last fall but a wave of consumer activism helped bring it back to life over and over again.
The new bureau will be housed in the Federal Reserve, and will have an independent director with reliable funding and full rulemaking authority over a broad range of financial products.
The bureau will provide consumers with timely and understandable information they need to make responsible decisions about their financial transactions. This really is a victory for any consumer who has ever signed a complicated financial agreement, or been trapped in a costly loan.
In addition to the consumer bureau, the bill contains several other strong reform measures:
All consumers will be able to get free credit scores when they are denied credit because of the content of their credit report.
Mortgage lenders must determine whether a borrower has the ability repay the loan.
An Office of Credit Ratings is established to promote accurate credit ratings and ensure these ratings are not unfairly influenced by conflicts of interest, and the bill allows investors to sue credit agencies.
The Federal Trade Commission (FTC) can develop and enforce new rules to protect consumers from unfair and abusive auto financing transactions.
The consumer bureau may prohibit or impose conditions or limitations on the use of arbitration.
The bill contains tough language that brings the derivative market out of the shadows and on to public exchanges.