Inside the Financial Regulatory Reform Proposal

Earlier today, the US Treasury released its proposals for financial regulatory reform. Here are some quotes from the proposal document based upon a very quick read:

Page 67: "In the credit card market, the opacity of increasingly complicated products led major card issuers to migrate almost uniformly to unfavorable methods for assessing fees and interest that could easily trap a responsible consumer in debt. Competition did not force these methods out, because consumers were not aware of them or could not understand them, and issuers did not find it profitable to offer contract terms that were transparent to consumers. For a variety of reasons, regulators have not brought enforcement actions under existing law."

Page 69: "One example is overdraft protection plans. These are a form of consumer credit, and consumers often use them as substitutes for other forms of credit such as payday loans, credit card cash advances, and traditional overdraft lines of credit. However, overdraft protection plans have not been regulated as credit, and, as a result, consumers may not overtly think of the plans as credit. Consumers may not, therefore, take the same care in their use of overdrafts that they take with other, more overt credit products. The CFPA would be authorized by existing statutes to regulate overdraft protection more like a credit product, with Truth in Lending disclosures as appropriate. The CFPA could also prohibit charging for overdraft coverage under a plan unless the consumer has “opted in” to the plan, just as the Credit CARD Act prohibits over-the-limit fees unless the consumer has “opted in” to over-the-limit coverage. It could also require affirmative consent at point of sale with debit transactions or at an ATM machine before collecting an “overdraft fee”. "

Also, here's a Fact Sheet on the reform proposals strengthening consumer protection.