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What Financial Reform Might Mean for You

There’s been a lot in the news about the financial regulatory overhaul bill currently working itself out in Congress and, with the bill expected to be signed into law by the Fourth of July, it’s a good time to look at how you’re likely to benefit from the bill’s passage. Here’s a look at how various aspects of the legislation are likely to play out when the financial reform hits the books (adapted in part from this article).

Outlook Good for Consumers

One of the major changes the bill will make is the creation of the Consumer Financial Protection Agency, which would be a unit dedicated to regulating financial products with consumer rights in mind. The necessity for such an organization was made clear when millions of Americans fell victim to the terrors of subprime mortgages during the real estate boom.

In addition to the creation of the CFPA, the bill could benefit ordinary Americans for the following reasons.

• Because the CFPA would be part of the Federal Reserve, it will get funding from the Fed and be able to ask Congress for additional funds, if needed.
• The protections introduced to shield consumers from predatory and/or dangerous financial products can be lifted (by bankers’ petitions) only if such protections can be shown to threaten the larger financial system.
• The CFPA would have the ability to create and enforce rules for various consumer financial products, including mortgages and credit cards.
• One potential downside to watch out for is that auto dealerships likely will not be regulated by the CFPA, which means that consumers can probably not expect any amped-up protections for vehicle-related loans.

Credit Rating Agencies Face New Restrictions

Credit rating agencies were partly responsible for deceptively high credit labels on risky investment products like the securitized pools of subprime mortgages that led to the housing market’s crash in 2007 and touched off the Great Recession. The financial regulation bill would attempt to eliminate such deceptive ratings:

• These agencies will have greater liability for the ratings they give and will be subject to lawsuits if it can be proved that they recklessly ignored or failed to review important information when evaluating a product.
• The Securities and Exchange Commission (SEC) will develop a solution for the conflicts of interest that currently exist and are partly responsible for the incorrect and deceptive ratings of the past.

Essentially, the new regulations should make investments safer for investors by eliminating some of the guesswork and conflicted interests that led to past problems. Such improvements could lead to greater stability overall in financial markets and thus the entire economy.

Posted in Financial Literacy, consumer rights, financial reform | Comments Off

Debtor Collects from Creditor Harassment

Anyone who has ever been hounded by a debt collector has probably fantasized about giving the collector a taste of his or her own medicine. That fantasy may be much easier to realize than most people imagine, as the story of a Dallas debtor shows.

Background: Your Rights as a Consumer

Laws are in place at both the federal and the state level to protect all Americans from overly aggressive debt collection practices. In fact, between the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Telephone Consumer Protection Act, a lot of behaviors typical of debt collectors are prohibited.

In addition to other things, debt collectors cannot:

• Lie about their ability to take legal action to collect on a debt
• Call you repeatedly with intent to annoy or harass
• Call you outside of 8 am and 9 pm local time
• Contact you directly when you have indicated that you have legal representation
• Contact you by any embarrassing media (like postcards)

Unfortunately, many consumers are not aware of their rights and so do not take legal action against collectors who break these laws.

A Man with a Plan

According to the Dallas Observer, a man named Craig Cunningham has taken it upon himself to stand up for his consumer rights.

The Observer reports that Cunningham made some poor investment choices when credit was easy and ended up with more than $100,000 worth of debt. But, when collectors began contacting him and asking him to pay up, he decided to fight back.

Essentially, here’s how Cunningham has managed to make the most out of a bad situation:

• He hired a lawyer to represent him and help him understand the intricacies of the consumer protection laws that were relevant to his case.
• He began recording calls from his creditors and saving all forms of contact he received.
• With the help of his attorney, he filed lawsuits whenever a debt collector violated a national or state consumer protection law.
• He began receiving court settlements from successful cases.

Most collection agencies, it seems, prefer out-of-court settlements (which often involve a statutory fine) to taking a case to trial, since settlements save them money. The Observer notes that Cunningham has thus far earned $20,000 from suits against law-breaking collectors.

If you think your rights have been violated by a debt collector, consider contacting an attorney to determine whether you could take steps to receive compensation for the violations.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Creditors, Financial Literacy, consumer rights, debt collectors | Comments Off