Dodd-Frank Wall Street Reform and Consumer Protection Act

On July 21st, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, which has been described as the biggest financial reform since the great depression.

Below are some of the ways that Americans can expect financial reform to affect them:

New Consumer Protection Agency

A major feature of the bill is the creation of a Consumer Financial Protection Bureau within the Federal Reserve. The creation of this new agency is designed to protect consumers. Its task will be to oversee consumer financial products offered by banks, mortgage companies, credit cards, debt-settlement firms, loan providers and payday lenders. It will have the authority to create regulations, launch investigations and act on consumer complaints

Free Credit Scores

Another change is that it requires credit card issuers, lenders, landlords, utility providers and other companies that reject an applicant or take any adverse action because of the consumer's credit score disclose the actual score used in that decision. The Fair and Accurate Credit Transactions Act gives consumers the right to request a free annual credit report, but not a free score.

New Mortgage Lending Rules

The new financial reform includes provisions to stop lenders from offering mortgages borrowers can't afford or understand. The legislation says its purpose is "to assure that consumers are offered and receive residential mortgage loans on terms that reasonably reflect their ability to repay the loans and that are understandable and not unfair, deceptive or abusive."

In addition, consumers with adjustable-rate mortgages and other tricky mortgage products would no longer have to pay pre-payment penalties if they want to pay off their mortgage early. This ban will make it easier for homeowners to switch out of their loans if they feel they have been given a poor deal.

Also, the bill will prohibit brokers and bankers from earning bonuses based on the type of loan they sell, which would reduce the incentive to write higher-risk loans.

New Debit Card Rules

Consumers might not be able to charge a piece of candy for $1.50 anymore. Store owners would now be allowed to set minimums on credit card transactions of up to $10, which they are currently not allowed to do.

The bill would also let the Federal Reserve check that card issuers are charging "reasonable and proportional" fees, which could bring down costs to store owners, and potentially could also reduce prices for consumers.

Stricter Auto Financing Rules

Auto lenders will stay under the eye of the Federal Trade Commission however, the FTC has been granted more authority to create and implement new rules to protect consumers from unfair and abusive auto financing.

Wall Street Reforms

A range of other, intricate financial regulations are meant to reform some of Wall Street's aggressive business practices with the aim of preventing a repeat of the financial crisis.

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