topic Re: What you should know about the Dodd-Frank Act in What you should know about the Dodd-Frank Act

What you should know about the Dodd-Frank Act

Barry — Tue, 20 Jul 2010 18:29:24 GMT

Hello FICO Forums community!

The Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) is a piece of legislation proposed by U.S Senate Banking Committee Chairman Chris Dodd that is part of President Obama’s financial regulatory reform plan of 2009. While much has changed and will continue to change with this act before passage, it aims:

To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.

Some key provisions of this legislation include:

Free Credit Scores

Consumers will have the right to a copy of their credit score if they were turned down for a loan, or if they were offered a rate other than the rate that the lender gives its best customers.

Mortgage

Lenders will not be allowed to pay mortgage brokers a commission based on an interest rate for a home loan to remove the incentive for mortgage brokers to put borrowers into a high interest rate loan; prepayment penalties will be limited or prohibited, depending on the type of loan; and before a loan is approved, lenders will be required to determine if a borrower can realistically can pay the mortgage payments, insurance and property taxes.

Interchange Fees and Use of Payment Cards

Stricter limits will be imposed on “Interchange Fees” -- fees that banks charge retailers when a customer pays with a debit or credit card – for debit card purchases only.

Loans

A newly-created federal agency called the Bureau of Consumer Financial Protection will have the authority to regulate mortgages, credit cards, payday lenders, check-cashing companies and lenders that provide private student loans.

The folks at FICO want to know what you think about this historic extensive overhaul of laws governing U.S. lending institutions. Do you think it goes far enough? Too far? What would you add or eliminate? Do you feel protected?

Please share any thoughts you might have on this topic by replying to this post. Many thanks for your contributions!

-Barry

Re: What you should know about the Dodd-Frank Act

Tazman81 — Tue, 20 Jul 2010 14:06:14 GMT

I do not think it goes far enough. Can we also throw in Experian not allowing us to get our FICO scores? We should have access to every score and all information that a lender can possibly use to deny or give us worse interest rates.

Re: What you should know about the Dodd-Frank Act

Anonymous — Tue, 20 Jul 2010 15:02:37 GMT

The points outlined here I completely agree should be implemented moving forward. What we don't know is what no one has seen yet buried within the 2000+ page reform bill. I'm pretty sure our representatives + the senate has not read every page of it. They don't need to, as long as they have talking points they can hand it off to someone else.

I'll be in the market for a new house in 2011 (if not sooner) and what worries me will be another large delay in loans to provide time to adjust to this bill.

So, for the most part I agree with the talking points of the bill and I believe it will help protect 90%+ of the population. The other 10% who could properly manage their money and stay in check with spending will be at a disadvantage moving forward.

Re: What you should know about the Dodd-Frank Act

Anonymous — Tue, 20 Jul 2010 15:50:50 GMT

@Tazman81 wrote:
I do not think it goes far enough. Can we also throw in Experian not allowing us to get our FICO scores? We should have access to every score and all information that a lender can possibly use to deny or give us worse interest rates.

I'm with you. Sure seems like a consumer ought to be entitled to any information that any entity maintains on them. I'd like to be able to tell my grocery store, hand over all the records associated with my bonus card.

However, if I'm the entity, I'm not sure I'd like that. Seems like I ought to be able to keep my own customer data private, short of extraordinary circumstances, such as a court order.

And the bill would allow you to get your Experian score if that was the basis for not getting a loan.

Re: What you should know about the Dodd-Frank Act

Anonymous — Wed, 21 Jul 2010 14:33:26 GMT

I've enclosed a couple a summaries from the Dodd act:

S.3217
Title: Restoring American Financial Stability Act of 2010
Sponsor: Sen Dodd, Christopher J. [CT] (introduced 4/15/2010) Cosponsors (None)
Related Bills: H.R.4173
Latest Major Action: 5/25/2010 Senate floor actions. Status: Returned to the Calendar. Calendar No. 349.
Senate Reports: 111-176

SUMMARY AS OF:
4/15/2010--Introduced.

Restoring American Financial Stability Act of 2010 - Financial Stability Act of 2010 - Establishes the Financial Stability Oversight Council to: (1) identify risks to the financial stability of the United States; (2) promote market discipline; and (3) respond to emerging threats to the stability of the United States financial markets.

Establishes within the Department of the Treasury: (1) the Office of Financial Research (Office) to support the Financial Stability Oversight Council; and (2) the Financial Research Fund to fund the Office.

Grants the Board of Governors of the Federal Reserve System (Board) additional authority to require reports and conduct examinations of certain nonbank financial companies and bank holding companies.

Revises supervision and prudential standards for nonbank financial companies supervised by the Board and for certain bank holding companies.

Establishes in the U.S. Bankruptcy Court for the District of Delaware an Orderly Liquidation Authority Panel to authorize the Secretary of the Treasury (Secretary), under specified circumstances, to appoint the Federal Deposit Insurance Corporation (FDIC) as receiver of a financial company in default or in danger of default whose failure would have serious adverse effects on financial stability in the United States.

Enhancing Financial Institution Safety and Soundness Act of 2010 - Transfers all functions of the Office of Thrift Supervision (OTS) and the OTS Director to the Board, to the Office of the Comptroller of the Currency, and to the FDIC.

Abolishes OTS.

Prohibits the issuance of charters for federal savings associations.

Private Fund Investment Advisers Registration Act of 2010 - Amends the Investment Advisers Act of 1940 with respect to: (1) the regulation of advisers to hedge funds; (2) collection of systemic risk data; and (3) the asset threshold for federal registration of investment advisers.

Office of National Insurance Act of 2010 - Establishes within the Department of the Treasury the Office of National Insurance to monitor all aspects of the insurance industry, including identification of issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the United States financial system.

Nonadmitted and Reinsurance Reform Act of 2010 - Sets forth procedures for: (1) reporting, payment, and allocation of nonadmitted insurance premium taxes; and (2) regulation of credit for reinsurance and reinsurance agreements.

Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2010 - Imposes a moratorium upon FDIC provision of federal deposit insurance for credit card banks, industrial loan companies, and certain other companies under the Bank Holding Company Act of 1956.

Amends the Bank Holding Company Act of 1956 to revise requirements for reports, examinations, and regulation of functionally regulated subsidiaries, including concentration limits on large financial institutions.

Over-the-Counter Derivatives Markets Act of 2010 - Amends the Commodity Exchange Act to: (1) extend joint rulemaking and regulatory authority of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) to over-the-counter derivatives markets; and (2) require large swap trader reporting.

Amends the Gramm-Leach-Bliley Act to repeal the prohibition against the regulation of security-based swaps.

Amends the Securities Exchange Act of 1934 to set forth: (1) clearing requirements for security-based swaps; (2) registration and regulation procedures governing security-based swap dealers and major security-based swap participants; and (3) position limits and position accountability for security-based swaps.

Directs the SEC, the CFTC, the Financial Stability Oversight Council, and the Treasury Department, individually and collectively, to consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards with respect to the regulation of certain SWAPS.

And the other:

http://thomas.loc.gov/cgi-bin/bdquery/z?d111:H.R.4173:

Look at "CRS Summary."

Re: What you should know about the Dodd-Frank Act

Anonymous — Thu, 22 Jul 2010 20:11:42 GMT

I personally believe there should be FULL disclosure of all of EVERY lender's underwriting criteria, available on the Internet, including the origin of the credit scores used (tell us if it's FICO or FAKO), so that everyone could determine if they will be approved BEFORE possibly wasting an inquiry, and spending the time to do an app for nothing. Nondisclosure should have a fine attached to it, with half of the fine going to the potential borrower. I also believe that the auto dealers, bank's new account dept, insurance companies, and potential employers (anyone and everyone who has a *reason* to pull a credit report) should be subject to the new rules, as well. And, as long as we're going, all those companies who do "soft" pulls to make credit offers should be required to drop us a note in the mail if they pull also. And lastly, we the people, should be allowed to choose which companies are allowed to do a "soft" pull. For example, if I don't want B of A to do soft pulls to offer me a credit card, I can say NO, just to B of A, and , if I like Wells Fargo, I can say OK to only Wells Fargo. And again, any violation has a fine, half payable to the individual whose report/score, is pulled.

Oh, I like the idea of half of the fine monies going to t...

IOBA — Thu, 22 Jul 2010 21:51:04 GMT

Oh, I like the idea of half of the fine monies going to the consumer! Yes, pay me please!!!

Re: What you should know about the Dodd-Frank Act

Anonymous — Sat, 24 Jul 2010 09:15:02 GMT

Given the political climate in an election year and the hassle to get 60 votes in the senate to pass everything, this has led to the watering down of this bill. However, it is a giant leap in terms of improvement with key benefits that will protect tax payers, consumers, small businesses and the public in the future.

ANOTHER important fact I would like to add:

This Dodd-Frank Legislation Extends Protecting Tenants at Foreclosure Act

Renters who find themselves indirect victims of foreclosure were not forgotten in the financial reform legislation signed by the President on Wednesday July 24.

The Dodd-Frank bill will extend the Protecting Tenants at Foreclosure Act (PTFA) through the end of 2014. PFTA provides renters whose landlords have lost their properties to foreclosure the right to stay in the home for 90 days after the foreclosure or through the term of their lease.

The legislation also includes a provision that requires the HUD secretary to develop a program to refinance troubled multifamily mortgages.

According to the National Low Income Housing Coalition (NLIHC) a growing number of multifamily buildings are facing foreclosure, the combined result of inflated mortgage costs and financially strapped renter households.

As a owner of multifamily property, I have seen the horror first hand with friends who have to walk away left tenants and the banks standing. Therefore, addressing the growing multifamily foreclosure rate shows a keen understanding that it is not just homeowners who are losing their homes to foreclosure.

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Remember The GOLDEN Rule: It is NOT about where you live, It’s about how you live. Be sure to do unto others as you would have them do unto you. Behave toward others as you would like to have them behave toward you! JAH Guide!
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Re: What you should know about the Dodd-Frank Act

Anonymous — Tue, 27 Jul 2010 11:21:48 GMT

As a small business owner, i would love to see tighter control on Interchange rates, we currently don't take Amex or Discover because the rates are just too high, And even with Visa/MC we are paying thousands a year for the privilidge of accepting credit cards. and we never know what the rate will be on any individual card, because each type of card has its own rate. it's a nightmare.

Re: What you should know about the Dodd-Frank Act

Anonymous — Tue, 27 Jul 2010 12:00:49 GMT

@Tazman81 wrote:
I do not think it goes far enough. Can we also throw in Experian not allowing us to get our FICO scores? We should have access to every score and all information that a lender can possibly use to deny or give us worse interest rates.

I disagree. I don't think that we necessarily should have access to our credit scores. It sort of defeats the purpose if we're allowed to create entire communities dedicated to micromanaging our scores. For the algorithm to be effective, I think it should be based on consumers' typical behavior, not how they act to manipulate their scores, lol.

I'm not saying I want EQ and TU scores unaccesible, and I'm not saying I don't want access to my EX score. Just saying I don't think it's owed to us. We have access to any score when denied for credit or when given a crappy rate. That's enough to make sure that dealers and creditors aren't playing games with us.

Re: What you should know about the Dodd-Frank Act

Anonymous — Tue, 27 Jul 2010 22:20:30 GMT

@Anonymous wrote:
@Tazman81 wrote:
I do not think it goes far enough. Can we also throw in Experian not allowing us to get our FICO scores? We should have access to every score and all information that a lender can possibly use to deny or give us worse interest rates.
I disagree. I don't think that we necessarily should have access to our credit scores. It sort of defeats the purpose if we're allowed to create entire communities dedicated to micromanaging our scores. For the algorithm to be effective, I think it should be based on consumers' typical behavior, not how they act to manipulate their scores, lol.

I'm not saying I want EQ and TU scores unaccesible, and I'm not saying I don't want access to my EX score. Just saying I don't think it's owed to us. We have access to any score when denied for credit or when given a crappy rate. That's enough to make sure that dealers and creditors aren't playing games with us.

I'm sorry, but, I sorely disagree with the very last sentence above. We, the people, need every possible rule & regulation to make sure that dealers and creditors, etc aren't playing games with us. I would dare to say that if the HQs of the biggest banks were located in Heaven, they would still try to sneak a few things by us. The bottom line reason that there is need for rules and regulations, is that raw human nature cannot be completely trusted. Especially when it comes to $$$$.

There really needs to be a completely level playing field. It is alot like a war. Both sides want to get, or keep, as much $$$ as is realistically possible.

Re: What you should know about the Dodd-Frank Act

Anonymous — Wed, 28 Jul 2010 12:13:34 GMT

John1956 wrote: I'm sorry, but, I sorely disagree with the very last sentence above. We, the people, need every possible rule & regulation to make sure that dealers and creditors, etc aren't playing games with us. I would dare to say that if the HQs of the biggest banks were located in Heaven, they would still try to sneak a few things by us. The bottom line reason that there is need for rules and regulations, is that raw human nature cannot be completely trusted. Especially when it comes to $$$$.

There really needs to be a completely level playing field. It is alot like a war. Both sides want to get, or keep, as much $$$ as is realistically possible.

Funny...we should trust professional politicians to write the regs that will "protect" us. The same politicians whose campaigns are funded in part by the big banks and Wall Street.

And in skimming portions of the legislation (as posted earlier in this thread), I see a whole lot about "protecting the economy", but not a whole lot about "protecting the American people".

Just observing here...make of it what you will.

Re: What you should know about the Dodd-Frank Act

Anonymous — Fri, 30 Jul 2010 13:20:22 GMT

Just as John1956 stated, I beleive that the criteria for being approved should be clearly stated to prospective borrowers before the borrower applies. There is no sense in applying for something when you dont have the minimum score. As it stands now, someone could be 10 points shy of a banks threshold, be denied by that bank, and will subsequently lose more points because of the inquiry. Furthermore, I think scores should only change once per month or when information is changed/added/deleted. That way if I check my score on the 3rd day of the month and its a 703, I know that for the remainder of the month I can look into the best offers for that score. The bank cant come back and say, "when we checked your score it was only a 699...".

Re: What you should know about the Dodd-Frank Act

llecs — Fri, 30 Jul 2010 13:43:06 GMT

@Anonymous wrote:

Furthermore, I think scores should only change once per month or when information is changed/added/deleted. That way if I check my score on the 3rd day of the month and its a 703, I know that for the remainder of the month I can look into the best offers for that score. The bank cant come back and say, "when we checked your score it was only a 699...".

I have 15 active CCs and 15 times per month, my CRs update as the balance changes (though these days they are mostly at $0). If my reports can change 15x per month, then my FICO scores can change that many times, assuming nothing gets added or deleted. If I were a lender, I would want to see a real time update to someone's report and FICO scores vs. once per month so as to accurately predict risk. Conversely, if I was a borrower and I actively engaged in repair and debt paydown to get that loan, I would want the lender to know my improved scores more than just once per month if it is changing weekly to get that better rate.

Re: What you should know about the Dodd-Frank Act

Anonymous — Fri, 30 Jul 2010 16:41:09 GMT

@llecs wrote:
@Anonymous wrote:
Furthermore, I think scores should only change once per month or when information is changed/added/deleted. That way if I check my score on the 3rd day of the month and its a 703, I know that for the remainder of the month I can look into the best offers for that score. The bank cant come back and say, "when we checked your score it was only a 699...".
I have 15 active CCs and 15 times per month, my CRs update as the balance changes (though these days they are mostly at $0). If my reports can change 15x per month, then my FICO scores can change that many times, assuming nothing gets added or deleted. If I were a lender, I would want to see a real time update to someone's report and FICO scores vs. once per month so as to accurately predict risk. Conversely, if I was a borrower and I actively engaged in repair and debt paydown to get that loan, I would want the lender to know my improved scores more than just once per month if it is changing weekly to get that better rate.

I understand where you're coming from, but I still feel that scores should remain static for some period of time to allow the whole process to be transpararent. I'm thinking no more often than twice a month regardless of changes, with the only exception being something serious like a judgement having an immediate impact. We all file tax returns once per year, so having to wait two weeks between credit score updates shouldn't be that much of a detriment. My point in mentioning the tax returns is that most lenders will obtain these during the homebuying process. A lot can change from one tax return to the next.

Re: What you should know about the Dodd-Frank Act

Anonymous — Sun, 01 Aug 2010 08:56:16 GMT

Having a score remain static for a week, two weeks or a month sounds good on the surface... But lenders would develop some criteria to protect themselves from the prospective borrower(s) who would take advantage of the system... The prospective borrower(s) who has everything perfect on the "accounting" day, then maxes everything out and applies for several new loans just because they can... Whatever criteria the lenders developed would hurt 98% of us to protect lenders from the 2%....

I love playing with numbers, but, I think all the credit number systems are crazy... Lender A values item 1 for 20% of score and item 2 for 25% of score... While lender B values item 1 for 30% of score and item 2 for 15% of score... FICO scores, FAKO scores.... With all the number games, we are still saying "How well do you meet your financial obligations?"

Sometimes I wish we used the old alpha system from school..... Every scoring system would translate their numbers to the appropriate alpha... You would know if your score was an A, A-, B+, B, etc... A few points up or down would not effect you if your score was a solid "B"...

Re: What you should know about the Dodd-Frank Act

Anonymous — Thu, 05 Aug 2010 16:45:33 GMT

I absolutly agree that Experian shoul have to give consumers a score. I have been hit with this from my credit union. my scores are around 780 from the others and this particular credit union said it was under 650. that is way to big of a spread and with me having absolutly 0 negative items I believe they are lieing to me.

Re: What you should know about the Dodd-Frank Act

Anonymous — Thu, 05 Aug 2010 18:18:45 GMT

You think they'll implement this within 4 days like they did the bank bailouts? Or at all? Ever?

Re: What you should know about the Dodd-Frank Act

Anonymous — Thu, 05 Aug 2010 19:30:17 GMT

Whatever the government does, the banks will figure out another way to part your dollars from you! When the over-draft fees became regulated, the banks increased their interest rates on those who could not pay off their account. Those who gave up their right to the line of credit and closed their accounts, to avoid the higher rates, had their minimum payments increased. Whatever the government does to cut back on banks' incomes, the banks will find other ways to make up for the lost revenue. It is just a vicious cycle that allows government (politicians) to give the appearance that they are doing something good for the tax payer, when in truth it usually winds up costing the tax payer more, in tax dollars to oversee the banks and new fees the banks devise to get around the government regulations. It is all smoke and mirrors my friends!!!

Re: What you should know about the Dodd-Frank Act

Anonymous — Fri, 06 Aug 2010 21:09:43 GMT

@Anonymous wrote:
@Tazman81 wrote:
I do not think it goes far enough. Can we also throw in Experian not allowing us to get our FICO scores? We should have access to every score and all information that a lender can possibly use to deny or give us worse interest rates.
I disagree. I don't think that we necessarily should have access to our credit scores. It sort of defeats the purpose if we're allowed to create entire communities dedicated to micromanaging our scores. For the algorithm to be effective, I think it should be based on consumers' typical behavior, not how they act to manipulate their scores, lol.

I'm not saying I want EQ and TU scores unaccesible, and I'm not saying I don't want access to my EX score. Just saying I don't think it's owed to us. We have access to any score when denied for credit or when given a crappy rate. That's enough to make sure that dealers and creditors aren't playing games with us.

I disagree, thrasher. We consumers never asked for this scoring system, and there's no way a simple 3-digit number can tell the whole story, nor enough pertinent parts of it to permit an intelligent decision on whether or not to extend credit or under what conditions.

This system is forced upon us and we should have the right - if not the obligation - to do WHATEVER WE CAN to make it work in OUR favor FIRST, and the lenders' second.

Insult is added to injury when we are penalized for shopping around for the best deal because inquiries count against us. THIS IS TOTALLY UNFAIR!!!

We should be able to determine, as another poster mentioned, our chances of being granted credit by a lender BEFORE WE EVER CONTACT THEM DIRECTLY!

Remember: This whole scoring system is yet another way that creditors are allowed to manipulate us and keep us in debt.