The government’s drive to reform the U.S. financial system is currently at full strength as President Barack Obama urges the Senate to pass legislation emphasizing consumer protections and regulating the practices of Wall Street institutions.
“You have a stake in it if you’ve ever been treated unfairly by a credit card company, misled by pages and pages of fine print, or ended up paying fees and penalties you’d never heard of before. And you have a stake in it if you’ve ever tried to take out a home loan, car loan, or a student loan, and been targeted by the predatory practices of unscrupulous lenders,” President Obama said in his latest weekly address.
Senators are currently hashing it out in Washington, D.C., per the President’s request. So what might all this debate and discussion on Capitol Hill mean to the every day consumer? Let’s break it down point-by-point.
Some of the major amendments impacting consumer credit and banking include:
• Limits on credit card interest rates
A proposal looking to put a cap on credit card interest rates at 15% is facing strong opposition. The legislation would also prohibit extraneous fees that are not considered finance charges. The elimination of such fees would prevent card issuers from charging cardholders to compensate for lost revenue.
• Free credit scores
Credit scores are the prized reflections of a person’s creditworthiness that have major effects on interest rates on consumer loans. Typically, consumers have had to pay in order to obtain credit scores, while a free annual credit report is provided by each of the three credit reporting agencies. A proposed amendment could require credit-reporting agencies to provide free credit scores in the same way they provide free annual credit reports.
• Caps on ATM fees
The Senate has proposed an amendment that would cap ATM surcharge fees at $0.50 and better align ATM usage fees to the actual transaction processing costs. According to U.S. Sen. Tom Harkin (D-Iowa), the realized cost of an ATM transaction is approximately $0.34. At that rate, banks could still turn a small profit. One fallback is that capped fees could lead to banks to reduce ATM coverage.
• FDIC insurance increase extended
In October 2008, amidst the troubled economy, insurance coverage of deposits at each FDIC-insured institution were increased from $100,000 to $250,000 per depositor, set to expire in 2010. The FDIC insurance increase was then extended until 2014. One amendment, if passed, would make the increase permanent. The extension of increased insurance could make consumers feel more safe depositing their funds into banks during this uncertain time.
• Ban on credit checks for employment purposes
Current or prospective employers could be no longer allowed to perform credit checks on employees, regardless of consent from the employee. The exceptions would include jobs related to national security, work with certain government agencies, or involvement in handling customer and company finances.