BANKRUPTCY UPDATES

• Taking Your Credit Score from Bankrupt to Perfect 10 (May 21, 2012)
• Music Storage Website MP3Tunes.com Seeks Bankruptcy Protection (May 22, 2012)
• Book Publisher Houghton Mifflin Harcourt Files for Bankruptcy (May 17, 2012)
• Las Vegas Tycoon Lists $500 Million in Debts in Bankruptcy Filing (May 15, 2012)
• Nassau Broadcasting Sells its Assets in Bankruptcy Court (May 22, 2012)

Financial Overhaul Bill Promises More Consumer Protection

After months of endless debate, both houses of Congress have settled on a final draft of a bill to overhaul the nation’s financial system.

While the bill tackles mind-numbingly complex issues such as the regulation of complex derivatives, it also addresses tangible problems that affect the everyday lives of Americans consumers. Some of the most important reforms are tallied below.

Creation of a New Consumer Bureau

According to the New York Times, the proposed bill would create a Consumer Financial Protection Bureau. This new bureau, headed by a director appointed by the President, would promulgate rules for most banks, mortgage lenders, credit-card distributors, and private student loan companies.

In theory, this new bureau would give consumers a stronger voice in the complex web of federal financial regulation. In practice, it remains to be seen whether the new bureau will possess enough strength to adequately enforce its rules.

Easier Access to Credit Scores

Each year, you are entitled to receive one free credit report from each of the three large credit bureaus: TransUnion, Equifax, and Experian. This list of your latest credit activity is a key element of the current laws governing consumer protection.

However, consumers usually do not get free copies of their actual credit scores. Under the rules of the new bill, if a lender refuses to extend a loan based on problems with your credit score, which could result from excessive credit card debt, the lender would have to provide you with a free copy of your allegedly subpar credit score.

Credit and Debit Card Reforms

The bill poses numerous measures designed to control merchants’ treatment of debit and credit cards. According to reports, merchants will still be allowed to set a minimum limit for each credit card purchase, provided that the limit is not higher than $10.

In more consumer-friendly news, merchants will no longer be able to charge different prices for people using different sorts of cards. Also, merchants will still be able to give discounts to consumers who pay in cash, helping shoppers who prefer paper over plastic.

Financial Advisers Could Face More Regulations

Today, financial advisers are required to put their clients’ interests before their own. This time-honored rule is known as a fiduciary duty. However, as evidenced by the actions of investors before the financial crisis, financial advisers may sometimes take unreasonable risks with their clients’ money.

To curtail this practice, the bill establishes a six-month study of the brokerage industry, which will primarily focus on finding gaps in the regulation of financial advisers. This is welcome news for consumers, though some consumer advocates are disappointed that heightened regulations failed to appear in the bill itself.