The recently signed financial reform act and how it might affect you

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President Barack Obama signed into law on Wednesday the Restoring American Financial Stability Act of 2010(RAFS). The bill was signed despite lingering questions surrounding many of the legislation's details.

The legislationweighs in at approximately 2,300 pages, and more than 200 regulations that will arise from RAFS have not yet been written, according to a report by

As part of the act, President Obama has the power to create an agency known as the Consumer Finance Protection Bureau (CFPB), which will operate within the Federal Reserve rather than as a stand-alone entity. The identity of the CFPB chief has not been made public, which has caused a lot of concern, according to Though much has been left undecided, critics argue that there is little room for the agency in its current proposed form to become more consumer-friendly.

So how will RAFS affect your pocket book? It’s hard to say. Most of the changes will be to banks, credit unions, other lenders, and the inhabitants of Wall Street. speculated that many smaller banks, like community banks and credit unions, probably will not survive under the hand of the CFPB.

Other provisions in the bill might affect you, depending on how you manage your finances.

Previously, retailers could not refuse to allow a customer to use a credit card to make a small purchase, though many of them did. Now merchants will be permitted to set a minimum purchase of at least $10. Analysts expect that the upshot of this will be that many merchants who did not previously set minimums will do so now.

Regarding mortgages, liar loans presumably will vanish. Lenders will be required to fully document the borrower’s income and establish that borowwers have the ability to repay the loan.

Another provision that will affect individuals is the establishment of a liaison for the military in credit matters, though it is unclear what level or type of help the liaison will provide. The liaison will function through the CFPB.

Credit agencies already have to give consumers one free credit report each year upon request. But the credit score is another matter. RAFS will dictate that consumers who have suffered an adverse action because of information in their credit reports must now be given their credit scores for free. Adverse actions resulting from a poor credit score include a cost increase to insurance, being turned down for a job, or being charged more to lease a car or being denied altogether.

Currently, retailers are charged a fee (by VISA or MasterCard) for allowing consumers to use a debit card. RAFS will place a soft cap on that fee, meaning that the fee must be reasonable and proportional to the processing fees that the card companies incur. Bank analysts disagree on how much this will help consumers, but most do agree that of all the provisions of RAFS, this will have the greatest positive consumer impact.

The one or two percent that is now charged for debit card usage is “far higher than the actual cost of processing,” according to Sen. Dick Durbin (D-IL). The Federal Reserve will be empowered to monitor the fees by such means as allowing retailers to offer discounts depending on how consumers pay.

It’s hard to say how or if this feature of the legislation will actually save consumers money because if card issuers are forced to lower these fees, they are likely to raise other fees to make up for the loss. Only one thing is certain, the new bill will make business much more complex for retailers.

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