How Financial Reform Could Affect You

BOSTON (TheStreet) -- Once signed into law by President Barack Obama, how will the new financial reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act affect consumers?

One of the most prominent features of the bill is the creation of a Consumer Financial Protection Bureau within the Federal Reserve. Its mission will be to oversee consumer financial products offered by banks, mortgage companies, credit cards, debt-settlement firms, loan providers and payday lenders. It will have the authority to craft regulations, launch investigations and act on consumer complaints.

The following is a sample of other ways the bill may -- or may not -- act on average Americans.

Loans and credit: The bill allows consumers to access a free copy of their credit report and credit score if they learn of an "adverse action," such as being denied a loan, resulting in a higher interest rate based on their credit profile.

Count auto dealers, gyms and dentists among those pleased by the final version of the bill. These businesses are among those that frequently bypass the need for a bank by offering their own credit lines, often through a third party. Initially, these loans were to fall under the regulatory purview of the CFPB, but were spared in the final language. So little Susie's braces and that Chevy Nova you've had your eye on are still within reach for "low" monthly payments.

Mortgage rates: Gibran Nicholas, chairman of the CMPS Institute, an organization that trains and certifies mortgage bankers and brokers, claims the bill could make it harder to qualify for a mortgage and lead to higher rates.

"The new law dictates certain guidelines that lenders must follow when making loans," Nicholas said in a statement. "Some of these guidelines are simply a copy of the current situation. However, now that the guidelines are built into law, lenders will find it even more difficult to loosen them once the economy and housing market improves."

He uses the example of a business owner with a 750 credit score, plenty of equity in his home, no history of late payments and plenty of cash in the bank. If that person experienced a loss in their business last year, he might be prevented from qualifying for a home mortgage under the new law because of the temporary decline in income. The bill requires lenders to document a borrower's income, but it does not specifically state the terms under which loans can be made.

"Regulators may address this ambiguity when writing the regulations implementing the law," Nicholas says. "However, if they don't, many lenders will be tempted to tighten their guidelines even further in order to err on the side of caution and stay in compliance with the new law."

The bill also requires lenders to keep a 5% stake in the mortgages they originate unless the loans meet a certain criteria. Nicholas says this means lenders won't be able to offload some of the higher risk associated with these loans, and interest rates will rise.

With the future of Fannie Mae ( FNM) and Freddie Mac ( FRE) still unresolved by the bill, that uncertainty could also prompt the marketplace to react by driving up rates, Nicholas says.

Charge cards: The convenience and petroleum retail industries are praising the bill's handling of interchange fees, the percentage of each purchase assessed to businesses when they process a credit card transaction.

Provisions within the package, known as the Durbin Amendment, direct the Federal Reserve to issue rules to ensure "swipe fees" are regulated. Visa ( V) and MasterCard ( MA) currently charge debit swipe fees of around 1% to 2% of the transaction amount, processing costs the National Association of Convenience stores claims are "among the highest rates in the industrialized world" and the "industry's top pain point and second-largest expense item, behind only labor costs."

The bill also allows merchants to decline the use of credit cards for small-dollar purchases.

In a perfect world, if retailers save money on these transactions, the cost savings would be passed along to customers. Only the greatest of optimists, however, would actually expect that to happen. The primary effect will be one of convenience. The days of throwing a 99-cent pack of gum on your credit card are likely coming to an end.

Another impact could be reductions or new standards for credit card rewards programs and new or higher fees for bank accounts. As banks lose some of the massive revenue stream provided by processing fees, they will likely seek out ways to cut costs and pass on the hit to customers.

Cheaper airfare? The airline industry isn't directly mentioned in the bill, but it could benefit from lower operating costs.

The Air Transport Association, a trade group that has executives from nearly every major airline on its board of directors, praised the bill's clamp-down on commodities speculation, which it claims "led to sky-high fuel prices."

"Energy prices should be determined by supply and demand, not manipulation and secretive trading by investment banks." says ATA President and CEO James C. May.

The ATA claims that the volume of oil traded "on paper" has been as much as 22 times greater than the volume of oil consumed. As a result, trucking companies, airlines and consumers have been hit with higher fuel costs.

Will new regulation actually lead to lower fuel prices? Perhaps, but don't assume you will be getting a break from baggage fees any time soon.

-- Reported by Joe Mont in Boston.

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