BOSTON ( TheStreet) -- There aren't many surprises contained in the financial-reform bill dropped on Congress by Senate Banking Committee Chairman Christopher Dodd (D-Conn.).Many of the bullet points have already been used as warning shots in recent months, challenging Wall Street firms, banks and other financial institutions. Protecting Main Street from Wall Street is a recurring theme. And its centerpiece, from a consumer viewpoint, is the creation of a Consumer Financial Protection Bureau. "American consumers already have protections against faulty appliances, contaminated food and dangerous toys," an executive summary of Dodd's bill reads. "With the creation of
Aside from those who are against further financial regulations, questions are emerging as to whether the legislation goes far enough to help consumers. The new Credit Card Accountability Responsibility and Disclosure Act offers a slate of protections to rein in fee and rate increases on existing card lenders. The new legislation, in theory, could pick up where the CARD Act left off, regulating fees, terms and rates for all such products issued in the future. But would the $10 billion threshold for financial institutions create a loophole, especially for smaller, community-based lenders? Would it trump state regulations or create legal entanglements that might take legal action to sort out? How much oversight would the bill provide for smaller entities such as payday lenders, pawnshops, auto dealerships or in-store financial services? Could oversight take years to implement? Stricter regulations could tighten credit lines. Would guidelines exclude certain borrowers based on the risk presented to an institution? Robert E. Story Jr., chairman of the Mortgage Bankers Association, is among those questioning the bill's effect on his industry. The legislation may have unintended consequences for borrowers. The bill requires companies that deal in products like mortgage-backed securities to retain at least 5% of the credit risk unless they meet risk standards. "Qualified residential loans that exhibit certain characteristics -- such as 30-year fixed-rate, fully documented, sufficient down payment -- ought to be exempted from any risk-retention requirement," Story says. "These types of loans have well-known and documented risk profiles easily understood by the investor and should not require that the originator retain a portion of the loan on its books. Requiring originators, especially small, locally-based lenders, to retain a certain percentage of the loan on their books threatens the very business model that offers consumers choice and competition, and thus more affordable loans." -- Reported by Joe Mont in Boston.