Dodd-Frank rules slowly kick into consumers’ lives

By DOROTHY ZHANG, MEDILL NEWS SERVICE, Written for UPI  |  July 21, 2011 at 11:01 AM
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WASHINGTON, July 21 (UPI) -- The Dodd-Frank law is slowly kicking into U.S. consumers' lives, one year after the most sweeping U.S. financial regulation since the Great Depression was enacted.

The ways the overhaul touches regular people can be seen in the creation of a new advocacy group, as well as new rules on credit disclosures and debit card swipe fees.

The Consumer Financial Protection Bureau

Created by the Dodd-Frank Act, the Consumer Financial Protection Bureau was charged with one job: looking out for ordinary consumers. After being unofficially led by the Treasury Department and White House adviser Elizabeth Warren for almost a year, the agency is formally established Thursday on Dodd-Frank's first anniversary.

Business lobby groups such as the U.S. Chamber of Commerce have been calling for restrictions of the agency's "far-reaching" authority but consumer groups are strongly opposed to such changes.

Calling consumer financial protection "an orphan mission" before the establishment of CFPB, Adam Levitin, professor of law at Georgetown University, said during a Senate banking committee hearing this week that it is "premature to consider reforms to the oversight structure" of CFPB while the agency hasn't had an opportunity to begin to exercise its regulatory authority.

U.S. President Barack Obama nominated Richard Cordray, a former Ohio attorney general, as the new director for the bureau Monday but it is unclear whether Cordray will be confirmed by the Senate.

Consumers will finally have "a real cop on the beat" if the president's pick is approved, said Bartlett Naylor, a financial policy advocate at the consumer advocacy organization Public Citizen in Washington.

Credit scores

Starting Thursday, the final rules implementing the credit score disclosure requirements under the Dodd-Frank Act will enable consumers who are denied credit or offered a higher-than-usual interest rate to find out the reasons by getting a free look at their credit scores.

The regulation requires financial institutions to send consumers a free copy of the credit score with factors that have decreased their score when they aren't given the best loan terms and lowest rates after applying for a credit card or a home loan. This gives consumers an opportunity to gain a clear understanding of how they are judged by lenders.

Kathy Virgallito, regional director of partnerships at the consumer credit counseling service organization Apprisen in Ohio, stressed that not only the number of the credit scores but also the explanations of the factors that make up the score matter.

"The real positive impact here is that those factors can give people a road map to what they need to do to improve that score," Virgallito added.

Consumers can get free credit reports once a year from the three major credit-reporting agencies -- TransUnion, Experian and Equifax -- but they have to pay around $10 to pay for the processing of the credit score.

Along with the benefits coming with the free credit scores, consumers are challenged by the information they are provided with at the same time, Virgallito warned.

"Consumers also need to be proactive about understanding how credit scores work and be responsible for learning more about them," Virgallito said.

Debit card swipe fees

Under the Federal Reserve Board's final rule kicking in on Oct. 1 as an addition to the Dodd-Frank overhaul legislation, the maximum permissible interchange, or swipe, fee that an issuer may receive for an electronic debit transaction will be 21 cents per transaction and 5 basis points multiplied by the value of the transaction, down from the current swipe fees average 44 cents.

The cap on swipe fees could be good news for consumers, should retail companies and small businesses take the lower swipe fee into consideration and lower the price of their goods and services to pass along the savings to consumers and try to tie them back to the stores, said Marvin Silver, outreach director at Americans for Financial Reform.

"The rules taking effect in October happens right around the holiday season when people will be going out shopping, so that will definitely have an impact on consumers who are looking to get a deal," Silver added.

But it is still uncertain whether retailers would reward customers with lower prices from "their billion dollar windfall" or simply "pocket" the money, warned Frank Keating, president of American Bankers Association, in a statement.

Even if consumers might save at the store, they may still end up paying more in fees at the bank since banks would try to make up their losses in the swipe fees someplace else.

"Consumers will see higher fees for basic banking services," Keating said.

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