It was a year ago that the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed on July 21, 2010. This stood as the largest financial overhaul since the Great Depression, and today, consumers are starting to feel the effects of the over 2,000-page law.
What makes the Dodd-Frank law so interesting is its time-released format. Few of the new rules went into effect immediately, but rather, industry regulators and banking leaders had to phase them in over a period of time. In fact, much of the law still has not gone into effect. That is why consumers are just starting to feel the effects of this massive law.
While regulators are going to have to follow 243 new rules and conduct 67 new studies under this law, this does not really affect the average consumer. What you probably want to know is how the changes are going to directly affect you. Here is what you can expect.
First, the average consumer is going to pay more fees from his or her bank. Because the banks have to spend money to strengthen their systems, while also being restricted on what they can charge retailers for debit card transactions, so the only place to turn is to the consumers, and thus fees are going to go up.
And the fees are not just the overdraft and late fees. Some of the larger banks, which are the ones most affected by this law, are opting to do away with free checking, or make it far less attractive, and start charging for checking accounts unless the consumer keeps a minimum amount in the account.
In addition to higher fees, consumers will find that their mortgages are harder to get. The problems caused in the subprime mortgage lending industry fiasco have led to tighter controls on mortgage lending as well as regulation of more companies. This will cause it to be much harder for less desirable borrowers to get a mortgage. Low debts and big down payments are going to be necessary to get a mortgage in the near future.
These two are negatives, but there are some positives for consumers. It will now be easier to access your actual credit score. Any time an entity uses your credit score and then offers you less desirable terms, you will be offered the chance to see your credit score and any related information.
Some banks will close. The higher costs combined with the requirement to have more assets on hand will lead to some closures and possibly some mergers. If your bank is one of these, you will be forced to look for a new bank.
So, is the Dodd-Frank Wall Street Reform Law a good one? If it helps consumers keep their money at stable banks, it just might be, but only time will tell. In the near future, it will be more expensive and somewhat more of a hassle to work with your bank, so be prepared.
