Although politicians and pundits argue whether the comprehensive measure could actually avert another financial meltdown, most agree consumers should get the fair shake they’ve been waiting for. In fact, Austan Goolsbee, a member of the President’s Council of Economic Advisors, held a roundtable for African American journalists, which included our Washington Correspondent Joyce Jones, saying the new measure would keep large numbers of African Americans from falling prey to predatory lending, credit card and payday loan abuses.
A central feature is creation of the Consumer Financial Protection Bureau with oversight of financial products and a mandate to become operational within a year. The new agency includes divisions to handle issues specific to minorities, women, senior citizens and military families. Moreover, a new office of financial literacy would provide education to consumers so they can make better decisions. A number of other provisions will force many to change banking habits:
- The FDIC coverage limit will be permanently raised to $250,000.
- Financial institutions will engage in due diligence and other processes to ensure they approve mortgages customers can afford.
- Mortgage brokers will no longer gain fat commissions for pushing people into bad loans.
- Loan origination fees will be limited and prepayment penalties for adjustable rate and other complex mortgages will be banned.
- Merchants can set a $10 minimum purchase requirement on credit and debit card transactions.
- Consumers will receive additional accessible, reader-friendly documentation.
The downside of the new legislation? Car buyers will not receive a bit of protection from the long arm of the Bureau when it comes to auto loans and that the legislation bans any type of taxpayer bailouts. Moreover, banks will continue to tighten lending.
While prospects of financial reform may give most a moment to exhale, the dithering on Capitol Hill regarding extension of unemployment benefits is enough to make the jobless hyperventilate. Congress has failed to extend unemployment insurance during the worst period of long-term joblessness since the Great Depression. Those suffering the most are “99ers,” the 1.4 million who have been out of work for 100 weeks or more – a group that reportedly made up 3% of the total unemployed in June 2007 but grew to 9.7% by June 2010. Although the House passed the measure, a number of Republican deficit hawks – along with a few Democrats— have prevented a final vote in the Senate, objecting to an allocation of more than the $33 billion in response to state unemployment