More Bank for Your Buck

The overhaul of banking laws presents new opportunities and a series of challenges. Here's how these changes may affect you.

or her own needs should be the starting, middle and end point of all their efforts.”

So, where does this leave you? To safeguard your financial future, shop around carefully for the best deal whether this be at a conglomerate or single-service firm. Use industry regulators and the Internet as resources before you latch on to any one financial-service company. A number of firms on the Web are already collecting account information from financial institutions so that customers have one consolidated statement. Your ability to make an informed decision will be key in shaping the outcome of this new law.

Meeting CRA Requirements
One of the biggest criticisms of the Gramm-Leach-Bliley Act is its increased leniency toward the Community Reinvestment Act (CRA), which forces banks to
provide services in communities where they operate. Here’s where critics say the new law falls short:

  • Regulators are becoming less rigorous about monitoring the community reinvestment activities of banks. Prior to the law, every two years regulators examined small banks or thrifts with $250 million or less in assets for CRA compliance. Under the new law, those entities will only be examined every four to five years. “Cutting regulatory oversight gives these institutions less of an incentive to make loans and other commitments to minorities and low-income consumers,” says John Taylor, president and chief executive at the National Community Reinvestment Coalition. He says this could impede access to credit among minorities.
  • Banks will receive less scrutiny from community organizations. Prior to the new law, the CRA allowed for public input or comment-whether it be from a local business owner, minister, mayor or community leader-about a lending institution’s performance. Under the Gramm-Leach-Bliley Act, there’s a “sunshine provision,” which exposes business owners and community groups to being examined by regulators. They face fines up to $1 million if they cannot show specifically how funds they borrowed or were granted were used. “This could discourage people from commenting on a bank’s performance,” Taylor says, because their comments could expose them to government scrutiny.
  • No reinvestment requirements for insurance companies or brokerage firms. The act allows insurance companies and brokerage firms to expand into banking services without making any financial commitment or obligation to minority communities for investment purposes. Mel Gravely, co-founder of an Akron, Ohio-based engineering firm, is concerned about the shaky track record that insurers and banks already have with black consumers. “Will they get better because of
    their affiliation with the other [institutions]?” he asks. “I doubt it.”
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