By Steve Urbon
Average Americans will quickly see changes and improvements in their finances when and if the compromise financial reform bill passes both houses of Congress and is signed by President Barack Obama, U.S. Rep. Barney Frank, D-Mass., told The Standard-Times Friday.
Hoarse from the all-night deliberations and with just a few hours' sleep, Frank said the new Consumer Credit Bureau will immediately begin looking for abuses in such things as "credit card fees, overdraft fees, payday lending."
Frank said the new agency can be up and running almost immediately, and although it is technically a part of the Federal Reserve, it will be autonomous. 'It will get its mail there," he said.
Another change coming: "Until the bill is signed, if you hire a mortgage broker, he can steer you to a mortgage with higher interest" and make more money himself. That will end with this bill, Frank said.
He said the bill also will help the unemployed keep their houses by making loans available to them to bridge the gap until they regain a job. Frank said, "These are solid mortgages but the buyers are unemployed."
"We will lend you, not give you, money to pay the mortgages," he said.
Investors, meanwhile, will be protected in the future because those selling investments will have a fiduciary responsibility, Frank said.
He said he was disappointed that automobile dealers were exempted from lending oversight, but he said they lobbied hard and were a relatively sympathetic special interest group, especially since so many had been badly treated by automakers during the recession.
Frank bristled at criticism that Fannie Mae and Freddie Mac were not included in the bill, saying that Congress had already dealt with them separately. "The argument that we haven't touched them is ass-backwards. They got hit first."
The new Consumer Financial Protection Bureau will have the power to write consumer protection rules for banks and other financial institutions, such as mortgage lenders. It will also examine and enforce regulations already in place at mortgage lenders and banks that hold more than $10 billion in assets.
The bureau will have the power to ban financial products that it considers unsafe. It could also outlaw anything that might be confusing to consumers, such as the fine print on credit cards or mortgages.
In theory, it could also block credit-card companies from charging especially high interest rates. The idea is to bring consumer regulation under one roof, rather than spreading it out among seven different agencies.
The new bureau will cover only half the bank branches in the nation because of the $10 billion asset requirement, according to data from the National Community Reinvestment Coalition, a Washington-based consumer group.
It also might not be as independent as it seems. If federal banking regulators object to new consumer protection rules, they can appeal to a newly created council made up in part of their fellow banking regulators.
Minimum credit card purchase requirements are also to be capped. Under the new legislation, the minimum can be no more than $10, and only the Federal Reserve can raise it.
The Federal Reserve will also have the power to limit the fees that card issuers can collect on debit card transactions.
But the rule applies only to big banks, not to credit card issuers such as Visa and MasterCard. Right now, banks usually charge stores 1 to 2 percent for each swipe, fees that totaled nearly $20 billion last year. Stores and restaurants say lower fees would allow them to cut prices, and to hire more people.
But even if prices do fall at the store, banks might raise fees and rates for their customers. They could also scale back "reward" cards or free checking to make up for the money they are not collecting from stores and restaurants.
Material from The Associated Press was used in this report.