Understanding The Consumer Financial Protection Bureau
Consumers of financial products and services have recently acquired a powerful government friend with the establishment of the Consumer Financial Protection Bureau, which opened officially on July 21. Created under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the new agency will be – according to its website – "a cop on the beat to enforce the laws on credit cards, mortgages, student loans, prepaid cards, and other kinds of financial products and services."
In an unprecedented move to protect consumers, the new CFPB will try to make sure the financial products and services market is fair, transparent and competitive.
Here's how the new bureau will help you:
New Rules to Insure Fairness
To make the market fair new rules will be enacted to prevent excessive interest charges, and or unanticipated interest or payment increases after the sale of the product or service. (For related reading, see Consumer Protection Laws You Need To Know.)
For example, if you own a credit card acquired at a certain specified fixed interest rate, the lender can't arbitrarily raise your rate.
The same would apply to insurance rates. If you purchased coverage at a certain guaranteed rate, your rate and payments should remain the same for the duration of the policy. This covers almost all forms of insurance – life, health-medical, home, auto, casualty, etc. -- which advertise fixed rates over a specified period of time.
Help For Borrowers
Consumers are also similarly protected when they borrow money for mortgages, consumer loans, home equity loans and student loans. Costs and interest rates must be stated up front, and terms of the loan must be stated clearly, with no baffling language to confuse or deceive the borrower.
Products and Services More Competitive and Transparent
These and other financial products and services will be more competitive and easier to compare, one against another, because of the new government-mandated transparency.
Rules and conditions of each product and service will be spelled out in understandable language in full detail, with the so-called "fine print" used to obscure certain of their aspects will be eliminated. The true and full price of the purchase will be clearly stated, along with the risks and benefits. (For related reading, see The History Of Consumer Credit Rights.)
Terms Up Front, Buying Decisions Easier
Getting the best terms and deciding what to buy should be easier once the new requirements are implemented and in place. This will not occur immediately, so potential buyers are advised to keep that in mind when shopping for financial products or services which have not yet complied with the new requirements.
The CFPB Watchdog is Watching Out for You
To assure full compliance with the new requirements, the CFPB will monitor the financial products and services industry, and investigate specific complaints. Included under the investigative and regulatory thumb of the agency will be the giant investment banks such as Goldman Sachs, commercial banks and credit card lenders. New laws have also been enacted to enforce compliance and to establish industry accountability.
How to Complain
For consumers who want to report what they perceive as any credit card problem, such as an unfair practice, abuse or deception such as hidden fees, interest rate changes, payment increases or other issues, a link for that purpose is provided on the CFPB Website. A space is provided for consumers to write out their complaint and submit it electronically to the CFPB. The CFPB will forward your issue to your credit card company, give you a tracking number, and keep you updated on the status of your complaint.
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Be Responsible, Read the Terms and the Fine Print
Although designed to help consumers avoid scams and swindles, the CFPB urges consumers to be responsible for their purchases and debts, and to conduct due diligence before buying any financial product or service. Read the terms carefully, especially the fine print if there is any, and if you have questions, ask the seller for a full explanation, and be sure you understand the answers before buying any financial product or service. (For related reading, see The Wall Street Reform Act: What You Need To Know.)