Consumer Credit Bill of Rights

Here is a quick rundown of the Consumer Credit Bill of Rights. As a consumer of credit, you can look forward to more protection from credit provider and debt collector abuses.

Mortgages

Lenders would no longer be allowed to pay mortgage brokers a commission based on the interest rate for a home loan. The law would bar brokers from receiving any compensation tied to the terms of the loan, other than the principal amount.

The provision would prevent borrowers from paying a portion of their closing costs upfront. Rolling the rest into the loan in the form of a higher interest rate. Under the bill, loan originators will be required to collect all of their fees upfront or roll the entire amount into the loan.

• Prepayment penalties would be limited or prohibited, depending on the type of loan. Lenders won’t be allowed impose any pre-payment penalties on certain types of risky loans. Such as loans with a large balloon payment. For 30-year, fixed-rate loans, penalties would be limited to the first three years of the loan.

• Lenders would be required to determine that borrowers can afford the monthly mortgage payments, along with insurance, taxes and assessments. For adjustable-rate mortgages, lenders would have to assure that borrowers can afford the highest rate allowed under the terms of the loan.

Credit Scores

Consumers who are turned down for a loan would be entitled to receive a copy of their credit score. Consumers would also be entitled to a free credit score if they were offered a loan at a less-than-favorable rate. You’d have the right to a credit score any time it results in an “adverse action.” Which could include everything from a job rejection to a higher insurance rate.

However, you won’t get a free credit score when you order your free credit reports. Since 2005, all consumers have had the right to a free annual credit report from all three credit bureaus through www.annualcreditreport.com. But the only way to get a credit score is to buy one from one of the credit bureaus or through www.myfico.com.

Credit and Debit Cards

The bill includes a provision aimed at reducing some “interchange fees”. Fees banks charge retailers when consumers pay with debit cards. Here’s how you could be affected:

•The Federal Reserve Board would be required to determine what constitutes “reasonable and proportional fees” for debit-card transactions. Fees currently run about 1% of the transaction. The National Retail Federation says lower fees could lead to lower prices for consumers. But analysts doubt consumers will notice much of a change.

Debit cards issued by banks and credit unions with less than $10 billion in deposits are exempt from the rule. Prepaid debit cards used by government agencies to issue unemployment and other benefits are also excluded.

•Retailers would be allowed to offer consumers a discount for using cash, a check or a debit card instead of a credit card.

•Retailers would also be allowed to require a minimum purchase before they’ll accept a debit or credit card. If you’re used to using your credit card for your everything. Like a $2 cup of coffee for instance, you may need to start carrying cash.

Consumer Credit Bill of Rights

The Consumer Financial Protection Bureau, would have the authority to regulate mortgages, credit cards, payday lenders, check cashing companies. Also lenders that provide private student loans. Auto dealers’ financing and insurance arms would be exempt from the agency’s jurisdiction.

The Consumer Credit Bill of Rights was created by the government to protect consumers of credit from reckless credit providers.




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