New Consumer Protection Laws

NEW CONSUMER PROTECTION LAWS 11/22/10

You may have read that congress recently passed the Dodd-Frank Finance Reform Law. So why should we care?

The new finance reform law is mostly aimed at better regulating wall street. But congress also included a number of provisions that will be helpful to consumers.

We've made a list of the top 3 consumer benefits.

First, let's start with the creation of a new consumer protection agency. There will be a new bureau of consumer financial protection. It will oversee all federally insured banks and credit unions, all servicers of home mortgages, and all credit and debit card issuers. This should help avoid financial fraud and abuses that harm consumers. And it will have the power to investigate consumer complaints.

Number 2 on our list of consumer protections: free credit scores. Right now, you have a right to a free copy of your credit report once a year. Your report lists all of your debts, your promptness in payment of mortgage, credit cards, etc. But that does not include your credit score. Your credit scores are created based on your credit report - crunch all those numbers and come up with your credit score - which measures your risk level. Credit scores are important because they may be the determining factor as to whether you get a loan, such as a mortgage, or the terms of your loan. Currently, credit score reports are available only if you pay a fee, usually about $15. Under the new law, you'll be entitled to your credit score for free if you are rejected for a loan or given less favorable terms due to your credit score.

Number 3 new consumer protection: more FDIC insurance coverage. Two years ago, the FDIC insurance coverage for your accounts was raised from $100,000 to $250,000 per account. The new law makes that increased coverage permanent.

Plus, here's a bonus! Let me give you an example that has happened to many of us. Interest rates drop, and you go to a lender to refinance your mortgage. But you are told there will be a stiff prepayment fee to pay off your old loan. Now there's good news for homeowners: prepayment fees are banned except for the most basic 30 year fixed rate loans. And even for those, the prepayment fees are limited to the first 3 years of the loan.

When congress passes a new law, it's often hard to understand how it will impact our daily lives. These new consumer protections will work for all of us.

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