Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

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New Credit Card Protection for Consumers Focus of November 22 Economic Perspectives

Posted by Hopeton on August 15, 2010

Gail Cunningham, Vice President of the  National Foundation for Credit Counseling (NFCC), will discuss  the provisions of the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) that were implemented in August in on the November 22 edition of Economic Perspectives on KAZI 88.7 FM, 5:30 p.m. – 5:50 p.m.  Listen live online at kazifm.org.

This interview was orignally broadcast on August 16.

The new set of regulations includes the following protections:

  • The credit card company cannot assess a late fee of more than $25 unless one of the consumer’s last six payments was late, in which case the fee may go up to $35.  However, if the credit card company can demonstrate that the costs it incurred as a result of the late payments justified a higher fee, they are allowed to impose a higher penalty.
  • The issuer cannot charge a late payment fee that is more than the minimum payment.
  • When a charge exceeds the account’s credit line, an over-the-limit fee of more than the amount charged cannot be assessed.
  • The credit card company cannot charge a consumer an inactivity fee for not using their card.
  • Consumers can no longer be charged multiple penalty fees for the same transaction. For instance, both a late fee and an over-limit fee resulting from the same transaction cannot be charged.
  • The company must explain any increase in the card’s Annual Percentage Rate (APR).
  • If the APR is increased, the credit card company must re-evaluate the increase every six months, and if appropriate, reduce the rate within 45 days after completing the evaluation.

“As a result of the CARD Act, consumers have an added layer of protection related to their credit cards,” said Gail Cunningham, spokesperson for the NFCC.  “In addition to being familiar with these provisions, consumers need to open their credit card statements promptly, and read all inserts that accompany the monthly mailings.  These simple steps are a critical part of creating a financially stable life.”

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House Committee Passes Legislation to Modernize Financial Regulations

Posted by Hopeton on December 4, 2009

From the press office of the U.S. House Committee on Financial Services
The House Financial Services Committee completed its work on a comprehensive set of reforms that responds to the recent economic crisis by modernizing America’s financial regulations. The Wall Street Reform and Consumer Protection Act (H.R. 4173), which will be considered on the House floor next week, incorporates nine major pieces of legislation approved by the Committee to address the myriad causes – from predatory lending to unregulated derivatives – that led to last year’s meltdown.

The Wall Street Reform and Consumer Protection Act includes the following provisions:

  • Consumer Protections: Creates the Consumer Financial Protection Agency (CFPA), a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services.
  • Financial Stability Council: Creates an inter-agency oversight council that will identify and regulate financial firms that are so large, interconnected, or risky that their collapse would put the entire financial system at risk. These systemically risky firms will be subject to heightened oversight, standards, and regulation.
  • Dissolution Authority and Ending “Too Big to Fail”: Establishes an orderly process for dismantling large, failing financial institutions like AIG or Lehman Brothers in a way that ends bailouts, protects taxpayers, and prevents contagion to the rest of the financial system.
  • Executive Compensation: Gives shareholders a “say on pay” – an advisory vote on pay practices including executive compensation and golden parachutes. It also enables regulators to ban inappropriate or imprudently risky compensation practices, and it requires financial firms to disclose any compensation structures that include incentive-based elements.
  • Investor Protections: Strengthens the SEC’s powers so that it can better protect investors and regulate the nation’s securities markets.  It responds to the failures to detect the Madoff and Stanford Financial frauds by ordering a study of the entire securities industry that will identify needed reforms and force the SEC and other entities to further improve investor protection.
  • Regulation of Derivatives:  Regulates, for the first time ever, the over-the-counter (OTC) derivatives marketplace. Under the bill, all standardized swap transactions between dealers and “major swap participants” would have to be cleared and traded on an exchange or electronic platform. The bill defines a major swap participant as anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk, or whose positions create such significant exposure to others that it requires monitoring.
  • Mortgage Reform and Anti-Predatory Lending: Would incorporate the tough mortgage reform and anti-predatory lending bill the House passed earlier this year. The legislation outlaws many of the egregious industry practices that marked the subprime lending boom, and it would ensure that mortgage lenders make loans that benefit the consumer.  It would establish a simple standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold.
  • Reform of Credit Rating Agencies: Addresses the role that credit rating agencies played in the economic crisis, and takes strong steps to reduce conflicts of interest, reduce market reliance on credit rating agencies, and impose a liability standard on the agencies. 
  • Hedge Fund, Private Equity and Private Pools of Capital Registration: Fills a regulatory hole that allows hedge funds and their advisors to escape any and all regulation.  This bill requires almost all advisers to private pools of capital to register with the SEC, and they will be subject to systemic risk regulation by the Financial Stability regulator.
  • Office of Insurance: Creates a Federal Insurance Office that will monitor all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis and undermine the entire financial system.

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Legislation Unveiled to Reform U.S. Financial System

Posted by Hopeton on November 10, 2009

Senate Banking Committee Chairman Chris Dodd (D-CT) joined by fellow committee members Jack Reed (D-RI), Charles E. Schumer (D-NY), Robert Menendez (D-NJ), Daniel K. Akaka (D-HI), Jon Tester (D-MT), Mark Warner (D-VA), Jeff Merkley (D-OR) and Michael Bennet (D-CO) unveiled a bill today to reform the way that our financial system is regulated.  Enclosed below is a summary of the highlights of the bill provided by the press office of the Senate Banking Committee.

Dodd

Senator Christopher Dodd

Summary: Restoring American Financial Stability – Discussion Draft

HIGHLIGHTS OF THE DISCUSSION DRAFT

Consumer Financial Protection Agency: Creates an independent watchdog to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, while prohibiting hidden fees, abusive terms, and deceptive practices.

Ends Too Big to Fail: Prevents excessively large or complex financial companies from bringing down the economy by: creating a safe way to shut them down if they fail; imposing tough new capital and leverage requirements and requiring they write their own “funeral plans”; requiring industry to provide their own capital injections; updating the Fed’s lender of last resort authority to allow system-wide support but not prop up individual institutions; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

Protects Against Systemic Risks: Creates an independent agency with a board of regulators to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the financial system. The agency could require companies that threaten the economy to divest some of their holdings.

Single Federal Bank Regulator: Eliminates the convoluted system of multiple federal bank regulators to increase accountability and end unnecessary overlap, conflicting regulation, and “charter shopping;” keeps in place the healthy dual banking system that governs community banks.

Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and director nominations.

Closes Loopholes in Regulation: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated – including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

Protects Investors: Provides tough new rules for transparency and accountability from investment advisors, financial brokers and credit rating agencies to protect investors and businesses.

Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses.

For more information on the proposed legislation click here.

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Financial Services Committee Approves Maloney-Frank bill to Speed Up Credit Card Reforms

Posted by Hopeton on October 25, 2009

The Financial Services Committee unanimously passed H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, which would move up the effective date for credit card reforms from February 22 to December 1. The bill, sponsored by Rep. Carolyn Maloney (D-NY) and Financial Services Committee Chairman Barney Frank (D-MA), changes the date by which banks and credit card issuers would have to comply with the remaining provisions of the Credit CARD Act, new consumer-friendly legislation signed by President Obama earlier this year. The bill now moves to the House floor for consideration.

Rep. Carol Maloney

Rep. Carol Maloney

Rep. Carolyn Maloney (D-NY) said: “This marks a step forward in bringing consumers badly-needed relief,” Maloney said. “Just in time for the holidays, Congress can lock in a ban on interest rate hikes on existing balances and the tricks that have kept far too many consumers trapped in a never-ending cycle of debt: tricks like double-cycle billing, due-date gamesmanship, and applying payments to lowest rates first.”

“The card companies brought this on themselves, by using the time between when the bill was signed by President Obama and when it goes into effect to ‘get in under the wire’ with a last gasp of unfair practices,” Maloney said. “Today’s action shows Congress can act with speed when necessary to provide consumers the protection they need.”

In reporting the bill out, the committee voted to keep the original effective date of February 22, 2010 for prepaid gift cards (which are now all printed and on the way to retailers for the holiday season), and for small credit card issuers with under 2 million cardholder accounts. The six largest card issuers control over 80% of the credit card market.

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