Financial Reform Bill 101: What It Means for Consumers

Article excerpt

The financial reform bill would create a new Bureau of Consumer Financial Protection tasked with safeguarding the public from shady financial deals and helping people make informed financial decisions.

The big financial reform bill now under consideration in the Senate is about more than collateralized back-flip derivatives and other stuff you have to be an MBA to understand. It could also affect how average Americans acquire credit cards, mortgages, bank accounts, and other ordinary features of modern monetary life.

Specifically, it would change who (or what) is supposed to protect you from being cheated when you sign up for complex financial products. Because after all, who really reads all the fine print that comes with credit card applications and mortgage loans?

Right now, a number of different government agencies regulate various kinds of consumer financial goods. Under the Senate bill as it stands at the beginning of the floor debate, a new Bureau of Consumer Financial Protection would unite these groups. Think of it as a cousin to the Department of Homeland Security, which was created by bundling together various existing US law enforcement organizations.

This new bureau would focus only on what's good for consumers, and not on whether banks, say, are making enough money to stay in business. Its objectives would include ensuring the public gets timely and clear information, so you can make informed decisions about important financial moves; and protecting you from abusive or deceptive or discriminatory practices.

The Senate would make this new consumer bureau part of the Federal Reserve. The House version of the legislation sets it up as a completely independent agency, on the theory that this would allow it better to focus on its mission. But the Fed finances itself by its own activities, so tucking a Bureau of Consumer Financial Protection under its wing means the bureau won't have to worry about Congress voting on its budget, among other things.

The Fed's governors won't be able to block or delay the new consumer bureau's work, according to Senate legislative language. The "BCFP" would be run by an executive director, appointed by the president to a five-year term.

The bureau would maintain a toll-free number and a website to collect consumer complaints, according to the Senate bill. …