After a long battle in the Senate, President Barack Obama finally signed the Wall Street Reform bill into law on July 21, 2010. The historic legislation includes plenty of new laws that apply to large financial firms, but will also have a significant impact on U.S. taxpayers. The contents of the bill changed frequently as the legislation made its way through Congress, so I wanted to make sure and explain the impact of the new law to all of my readers.
Taxpayer Funded Bailouts
One of the biggest goals of the new law is to prevent any future taxpayer-funded bailouts. The President has promised that no big banks will ever be bailed out at the American taxpayers’ expense. In fact, federal regulators now have the ability to disassemble a financial institution that could pose a threat to the economy. This does not mean that they will go around closing random banks- experts predict the authority will only be used for situations that need a quick solution.
Credit Card Fees
Starting in 2011, a hand full of new rules will take affect that are going have a significant impact on credit card companies. The new restrictions aim to get rid of undisclosed fees and soaring interest rates. However, there is a provision in the legislation that will allow businesses to setup minimum purchase requirements of $10 for credit card transactions.
Consumer Disclosure
To provide additional protection to American consumers, the law will introduce a set of consumer disclosure laws. They will prevent banks and other financial institutions from misleading customers to enhance their own profits. This also means that as a consumer you now have the right to more information about your finances, such as easy access to a free credit report.
Bureau of Consumer Financial Protection
One of the most debated parts of the financial reform bill was a new division it created: the Bureau of Consumer Financial Protection. President Obama has not yet selected a person to lead the new bureau, which will have an impact on how the agency acts. The committee will have an annual budget of $500 million, and the ability to act without Congress approval. Front runners for the leader include Elizabeth Warden, chair of the Congressional Oversight Panel; Eugene Kimmelman, a Deputy Assistant Attorney General in the Justice Department; and Michael S. Barr, an assistant Treasury secretary.
Small Business Relief
A lot of small business owners have become frustrated as they watched large financial institutions get huge bailouts, while they had to struggle without any government assistance. To help these small business owners, new rules have been included in the legislation which aim to increase funding for small business loans.
Mortgage Changes
Several changes have also been made to the way mortgage lenders can run their business. In the past, lenders could take commissions or bonuses for putting a client in a riskier but more expensive loan. However, this act is now illegal, and there will also be a new cap on mortgage origination fees, as well as requirements for all lenders to check borrowers assets and income.