Consumer Protection Versus Financial Misdirection

Consumer Protection Versus Financial Misdirection

Applying for jobs unemployment

There’s been a quite a stir in Washington these days. Depending on your status, the recent political activity could either give your wallet a boost or a wallop. With less than a month before summer recess and eight weeks until mid-term campaigning, the White House and Congress have focused on two fiery issues–financial reform and extension of unemployment benefits. I discussed these topics this morning with crusading attorney and radio host Warren Ballentine on his nationally-syndicated show. Both of us share the belief that it’s important to know details and debates of upcoming legislation. In today’s unpredictable environment, the stakes are high and missteps can cost you money and your life.

First, let’s take financial reform. President Obama has maintained that the overhaul will prevent another crisis of the magnitude of the subprime-induced financial tsunami of 2008 that swept away the homes and nest eggs of millions. The devastation left survivors who may never recover. He asserts that the 2,300-page bill sponsored by Democratic Sens. Christopher Dodd and Barney Frank will offer protection “against the unfair practices of credit card companies and mortgage lenders. Before Independence Day, the House approved the package with little Republican support. In today’s vote on financial reform, the Senate bill is expected to have the 60 votes necessary to overcome filibuster and ensure passage.

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.

a new office of financial literacy would provide education to consumers so they can make better decisions

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
checks drying up after 26 weeks. Other conservatives have used the inane argument that lengthening such benefits make job seekers lazy or too finicky about employment choices. Apparently, they haven’t spent time with hordes of highly-educated, well-credentialed professionals unable to get a nibble quarter after demoralizing quarter.

There’s no proof people prefer unemployment checks to paychecks. For one, job markets have collapsed and a number of positions aren’t coming back. Benefits are vital to keeping households intact while prospective breadwinners engage in retraining or seek other options. Moreover, there’s a ripple effect when individuals have little money to spend in local economies; businesses fail and unemployment grows exponentially.

So here’s the rub: Congress is about to enact reforms to help you protect your money but if you’re among the long-term unemployed then political inaction may lead to financial ruin. In both cases, you can ill-afford to sit on the sidelines. At Black Enterprise, our Wealth for Life philosophy has been that you’re on your own and you must take initiative when building wealth, preserving a career or reinventing oneself. Related to the financial overhaul legislation, be proactive and learn every nook and cranny of the new law so you can use the provisions to full advantage. Find out from your bank programs such as mortgage loan modifications that can help you to maximize dollars. Make sure your increase your emergency savings in case you lose your job. As you can see, gaining new employment may take months, even years.

There’s no proof people prefer unemployment checks to paychecks.

If you are among the unemployed, immediately downsize your life to minimize expenses. It may mean living with family members for a while. Also if you have been looking for a job in your field for well over 18 months, you may want to consider making a career change and developing skills in growth industries. Read our series on “Where the Jobs Are” in the Powerplay section of BLACK ENTERPRISE and on the Black Enterprise’s online Careers channel to discover areas of opportunities.

Lastly, whether its consumer protection, unemployment benefits or another measure affecting your family’s livelihood or financial well-being, fight for your future. Let your voice be heard in congressional offices and at the polls. Now is the time to do it. It is an election year after all.