The U.S. Senate passed its financial overhaul bill Thursday, meaning it’s no longer a question of ‘Will the legislation affect me?’ but a question of ‘How will the legislation affect me?’
The short answer is: in a lot of ways.
For the long answer, let’s analyze what the various pieces of the bill will mean to every day American consumers. Note that the new rules could be further tweaked when the Senate meets the House to share thoughts and produce a final bill.
Increased availability of free credit scores
You won’t have to go to FreeCreditReport.com to obtain a credit score any longer. Instead, the new rules mandate you are entitled to a free credit score report from any person or company that uses your credit score as a reason to prevent you from getting a job, loan or line of credit.
The lender, landlord or card issuer will be required to give you the score they used to make the decision. Congress nearly passed into law a regulation that would require a free credit score be issued by the government to anyone who made a request, but the legislation was not included in the Senate bill.
Possible discounts on cash purchases
The Senate’s bill gives retailers the freedom to offer discounts for customers who pay with cash. This is part of a rule that forces the Federal Reserve to lower the fees merchants face every time someone pays with a credit card.
This could be a good news, bad news proposition for consumers. Certain retailers might cut their prices or at least hold off on increasing them, but card companies could react by cutting some rewards programs or adding additional fees to checking accounts to help recoup some of the money they will lose.
The changes to merchant fees will have to be discussed by the two chambers of Congress, meaning the ruling could change when the final bill is passed.
Protection from predatory lending
Mortgage lenders would face restrictions on their ability to penalize borrowers for paying off their loan early. Pre-payment penalties would still exist, but they would be less common.
Mortgage lenders would be required to study and consider applicants’ income, assets and credit history before issuing a loan. A big part of the mortgage
Mortgage lenders would not be allowed to accept varying amounts of compensation depending on the terms of the mortgage deals they closed. In the wake of the mortgage meltdown, it was discovered that mortgage brokers made extra commission for locking customers into high-fee loans.
New agency in charge of transparency
The Senate and House both included the creation of a new agency that would watch over the consumer loans business. We won’t know the exact parameters of the agency’s power until the final bill arrives, but it will certainly act to protect consumers from predatory loans and the risky behaviors of financial institutions.