On July 21, 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act was officially signed into law. So, as a consumer, what should you know? What are your rights? A recent Fox Business article outlines 'seven hidden gems' of this new financial reform:
- Office of Financial Education (Sec. 1013) This new law creates a new Office of Financial Education to 'improve the financial literacy of consumers' through financial counseling and education programs. It will provide information regarding handling savings accounts and other mainstream financial transactions to financial aid applications for students.
- Six Months' Notice to Reset Hybrid ARMs (Sec. 1418) As you know ARM loans allow borrowers to keep monthly payments low for a set period of time, after which monthly payments essentially shoot up. Consequently, many borrowers are caught up surprise. Under this new law lenders must inform homeowners at least six months ahead of time of an introductory mortgage-rate reset. Along with the notice, lenders will have to include an explanation of how the new mortgage rate will be set, a good faith estimate of the monthly payment, a list of alternative financial options and contact information for credit counseling agencies.
- Consumer Hot Line (Sec. 1013) That's right... a Hot Line. When you've been burned, you now can call a toll-free telephone number in case you encounter unfair or deceptive lending practices. Complaints will be routed to the appropriate federal or state agency and must be responded to in a 'timely' fashion, according to the law. The law also calls for the establishment of an Internet portal for submitting complaints.
- SIPC Maximum Cash Advance Raised (Sec. 929) The Securities Investor Protection Corp. (SIPC) will provide a higher level of protection to those who hold accounts in SIPC-insured financial institutions than in the past. When a brokerage or other such investment house fails, the SIPC returns stocks, bonds and other securities to their registered owners immediately. However, sometimes a failed firm's assets need to be audited and liquidated to reimburse account holders. While that process is taking place, the SIPC sends cash advances to those waiting for the return of their assets. In the past, the amount of a cash advance was limited to $100,000, regardless of the amount the former account-holder had coming to him. However, with the passage of financial reform, the limit has risen permanently to $250,000.
- Help for Foreclosure-Related Legal Proceedings (Sec. 1498) Lawyers are expensive and can add further financial drainage to those already in a hole. To make matters worse, banks have great access to a wide range of highly-talented lawyers very familiar with their field. To help those in such a position, the financial reform law provides grants for legal assistance to low- and moderate-income homeowners to help with costs related to homeownership preservation and foreclosure prevention. Tenants involved in legal disputes with landlords also will be eligible for assistance.
- Low-Cost Alternatives to Payday Loans (Sec. 1205) Payday loans are often guilty of making a bad situation worse, but many consumers often feel they have no choice but to take one out. To provide more options, the new financial reform law provides grants for experimental, small-loan programs that could serve as an alternative to payday loans. The loans must be coupled with financial literacy and education opportunities, such as free debt counseling, and could be expanded if they prove successful.
- Foreclosure Rescue Scam Warnings (Sec. 1452)
Unfortunately, real estate scams did not go away with the real estate bubble. One such scam, known as foreclosure 'rescue' scams steals from them homeowners through a variety of methods, from charging fees for nonexistent counseling services to tricking homeowners into signing over their homes and leaving them stuck with a mortgage mess.
The new law allocates funds to the Neighborhood Reinvestment Corp. to create an awareness campaign for homeowners who are behind on their payments. The campaign will focus on giving distressed homeowners the information they need to avoid falling prey to scam artists. As an alternative, the campaign also will provide contact information for legitimate alternatives such as nonprofit foreclosure counseling.