What the Financial Reform Bill Means for You

You'll often hear a lot of talk about how financial reform might be able to help us avoid another crisis (or not).  Normally, there's a lot of talk about how banks need to reformed, or the mortgage industry.  These are all big-picture issues.  While no one wants to see another financial crisis, many of these issues might not seem to directly affect your pocketbook.  If you're not in the market to buy a home, for example, mortgage reform may seem less pressing. 

So how does the new financial reform bill affect everyday people?

Keep in mind that big picture issues will affect you directly.  For instance, even if your mortgage is bought and paid for, mortgage reform for new borrowers will cut down on the rate of foreclosures, potentially affecting the value of your equity.  While the idea of "let anyone and everyone get a loan" sounds like a nice idea, it's not quite practical.  Credit ratings exist for a reason - to prove that you can make payments.  Lenders will not be able to offer boatloads of loans to high-risk borrowers as they have in the past. 

The Consumer Financial Protection Bureau will oversee a number of different financial institutions  to make sure there are no shady dealings or unethical fine print.  These are:

1. Banks
2. Mortgage companies
3. Credit card companies
4. Debt settlement companies
5. Payday lenders

Chances are you will be affected by one of those industries.  Everyone's got a bank account and the CFPB will regulate banking fees.  However, banks are tricky and if they're losing money in one area, they'll raise money in another...until another regulation comes along.

Small businesses will also benefit from the bill.  Businesses like dentists or health clubs often offer a credit line to customers ("Put it on the tab") so that people can pay off a bill in installments.  With the crisis in banks and the freeze on credit, these types of payments were either too high or non-existent.  So there will be more ways to pay for big-ticket expenses without having to break the bank every month or paying exorbitant interest rates.

Here's a bad thing: are you used to using your debit or credit card to make small purchases?  Well, every time you do that, the merchant gets charged a fee--sometimes very sizable compared to the price of the actual purchase.  These fees will now be regulated.  That won't, however, mean that your local 7-11 will lower costs if they're paying lower fees.  Instead, this probably means that you won't be able to buy a Slurpee on credit.  Then again, you should probably be paying small dollar amounts in cash.

All told, there are things to be happy about.  Is this just a band-aid on a bigger problem?  Time will tell, but at least a band-aid than not addressing the wound at all.