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Loans and Financial Reform

[Jul 23, 2010.]

 

What's going to happen now that financial reform has been signed into law? President Obama this week signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which ushers in sweeping changes in the nation's financial rules. Here are just a few of the changes that are on the way.

More Protection for Consumers

A Consumer Financial Protection Bureau is going to set up and enforce rules regulating the marketplace, including payday lenders that offer high-interest no credit check loans. Financial companies such as check cashiers, pawn brokers, debt collectors, and debt settlement firms are going to be heavily regulated for the first time.

Among the bureau's charges is to regulate mortgage lenders so that borrowers don't get in over their heads by getting loans they can't afford. Curiously, the auto loan industry won't be regulated by the bureau.

More Information for Consumers

One of the reasons so many homeowners got in trouble during this financial crisis is because they borrowed loans without really understanding how they worked. The financial reform aims to make loan terms more transparent instead of hiding the information in the fine print. Consumers should expect to become more informed about fees and penalties involved with getting loans.

"It’s a reform that will help us put a stop to the abusive practices of mortgage lenders and credit card companies, and ensure that people get the straight, unvarnished information that they need before they take out a loan or open a credit card," President Obama said during a press conference.

No More Bailouts?

Financial reform also aims to do away with bailouts funded by taxpayers. "It will bring the shadowy deals that caused the financial crisis into the light of day.  And it will end taxpayer bailouts of Wall Street firms and give shareholders a say on executive compensation," said the President.

Qualifying for a Loan

You can expect to face stricter requirements when applying for a personal loan and other types of loans. Lenders are going to be required to verify your finances to make sure you can afford to pay back a loan, especially if it is an adjustable rate mortgage (ARM) that may ultimately adjust upward.

The financial reform law isn't perfect, and some argue that it should be repealed. But hopefully it can achieve its goal of protecting consumers from unscrupulous practices when applying for personal loans and other financial products.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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