Consumer Protection

At Savvy Student, we always do our best to bring you the most up to date news as it pertains to the world of personal finance. That being said, we would like to introduce the recently created Bureau of Consumer Financial Protection created under the Financial reform Law signed by President Obama back in July. The agency will have the authority to rewrite the rules regarding mortgages, credit cards, and loans and will be responsible for ensuring that firms adhere to these rules. The hope is to prevent consumers from being taken advantage of by firms that dole out high interest loans to individuals and families without the means to repay. The agency will also ensure that credit card holders are protected from arbitrary rate increases and exorbitant fees.

You can find a detailed description of the new agency here (and the full bill here), but we have highlighted some of the most relevant points (also from the source provided).

The Consumer Financial Protection Bureau intends to:

• Apply to “consumer financial products or services.” These are understood to include financial products or services that are to be used primarily for personal, family or household purposes.

• Address all forms of credit, deposit, and payment products and services offered to consumers. It can also address related products and services such as prepaid debit cards, loan servicing, debt collection, and debt-related services.

• Have the power to determine that products, features, or practices are unfair, deceptive, abusive or unsustainable. Its powers should include banning, restricting, or imposing conditions on practices, products or features, creating product standards, and requiring special monitoring, reporting and impact review of certain products, features or practices.

• Require that all disclosures are clear, simple and concise.

• Take a lead role in educating consumers about all credit matters. Review and streamline existing financial literacy programs.

• Test disclosures regularly to see if they are clear and reasonable.

• Have a five-member board - Four appointed by the President, and subject to confirmation by the Senate and the fifth is the Director of the National Bank Supervisor.

• Provide a unified mortgage disclosure.

• Require credit card companies to provide calculators that give payoff terms under different circumstances (i.e., only making minimum payments or paying off in only a year).

• Require credit card issuers to offer "plain vanilla" credit cards in addition to other, more complex products for consumers who want basic cards.

• Review mandatory arbitration clauses in consumer financial contracts to assess fairness. If needed, develop standards for fair dispute resolution or ban mandatory arbitration clauses in certain products (such as mortgages).

• Have jurisdiction over debt collectors and debt buyers.

Many of these new rules are applicable to college students. Educating consumers about credit, ensuring that terms for loans and credit cards are clear and generally testing disclosures to ensure they are reasonable will greatly benefit the college-aged consumer. The point of all of this is to demystify the field of personal finance and make it more approachable for non-professionals.

Make sure you check out the resources we provided for more information. We’ll keep you updated as the agency begins its work.

Thanks,

Savvy Student