Overview: The White House’s Financial Reform Plan

Enforcing common-sense rules for consumers, investors

Credit Cards

For African Americans with credit cards: The new consumer financial protection agency will enforce the new credit card law signed by President Obama that bans rate hikes on existing balances and other unfair practices. For African Americans who have used credit cards to get by when times are tight, the law will give them clarity on the interest rates they are charged.

Overdraft

For African Americans caught by unexpected overdraft fees: Many households have been automatically enrolled in expensive overdraft programs. These programs can hit consumers with costly overdraft fees for even the smallest purchases. For example, the FDIC found that the average overdraft charge for a single purchased item—like a $2 cup of coffee—is $30 at banks with assets over $1 billion. The new consumer financial protection agency will enforce new rules that give consumers a real choice as to whether to join expensive overdraft programs so that they are not unknowingly charged unnecessary fees. [FDIC, “FDIC Study of Bank Overdraft Programs” (November 2008) at Table IV-3]

Student Loans

For African Americans who must take out loans to go to school: For students who need to take out loans to cover the costs of higher education, the new consumer financial protection agency will be able to fight unfair practices, require lenders to follow fair rules of the road and give students the information they need to make smart choices.

Financial Literacy

Empowering African Americans to make smart financial choices by promoting financial education and financial literacy: The new consumer financial protection agency will promote consumer financial education and financial literacy, with a dedicated office focused on ensuring that the agency’s expertise and research are used to help raise awareness, educate and empower consumers to avoid unfair practices and make smart financial choices.

Saving and Investments

During the height of the financial crisis, over the last three months of 2008, Americans lost five trillion dollars in household wealth. [Federal Reserve, “Flow of Funds Accounts of the United States: Flows and Outstandings Second Quarter 2009” (September 17, 2009), Table B.100]

Protecting African Americans’ retirement security, savings and investments: In the wake of the Madoff scandal, it is clear that all investors need better protection from fraud and unscrupulous actors. The Administration’s proposed legislation strengthens investor protection through the Securities and Exchange Commission (SEC) by:

• Raising the standards for brokers and investment professionals when giving advice so that they have a fiduciary duty and are required to act in the interests of investors, rather than their own;

• Requiring mutual funds to disclose costs and risk factors to investors prior to selling a product, instead of after it is purchased;

• Creating a permanent Investor Advisory Council to the SEC—so the government will hear about the needs and interests of real investors; and

• Increasing protections for those who uncover financial frauds.

(Source: White House)

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