Financial Health
How New Bank Rules Will Improve Americans' Financial Health
By
Aug 26, 2010 - 11:52:54 AM

(HealthNewsDigest.com) - This summer, several new U.S. government rules went into effect, all designed to help Americans avoid unhealthy debt and to prevent banks from taking advantage of individuals and families.

As a result of these changes, many observers are concerned that the cost of credit will increase. Banks and credit card lenders are likely to raise interest rates and fees, especially on new accounts, to make up for increased reporting and record-keeping. On the other hand, supporters of the new rules believe that the rules will increase the stability of both individuals and the economy as people gain a clearer picture of what credit will cost them.

Here is an overview of the most recent changes and what they might mean to you and your financial health

* The Financial Reform Plan bill, passed in July, redesigned the financial regulatory system and established a new Consumer Financial Protection Bureau (CFPB). The agency will have the power to set regulations and rules for providers of consumer financial services. The CFPB will supervise the products financial institutions offer, including credit cards, loans and mortgages, and will oversee consumer complaints, fair lending and consumer financial literacy. This law also makes mortgage underwriting stricter. The hope is that the new rules will protect consumers from shady mortgage practices and prevent another situation like the subprime mortgage crisis.

* New overdraft rules took effect July 1. The amended rules no longer allow banks and credit unions to automatically overdraw customers' accounts from a debit card or ATM transaction. To continue receiving overdraft protection, customers must opt in by Aug. 15.
* CARD (Credit Card Accountability, Responsibility and Disclosure) Act rules. These rules aim to make it easier for consumers to understand and repay their debt by using credit responsibly. The new rules have several implications. First, they limit penalty fees for late or missed payments or going over the credit limit. Penalty fees are limited to $25 for first-time offenses, and fees cannot exceed the minimum payment. Second, credit card companies can only raise interest rates with advance warning and detailed explanation. If they raise a rate as a penalty, they must re-evaluate the higher rate after six months and reduce it again if the borrower's performance has improved. Finally, fees are limited to one fee per incident, and account inactivity fees are no longer permitted.

The challenge for people who are working to pay off debt is that they may be less likely to be able to persuade credit card companies or other lenders to reduce interest rates. People also might be unable to obtain new credit at affordable rates.

These rules emphasize how important it is for consumers to do their best to get out of debt soon and get on the road to financial health. In light of the changing financial landscape, those who have debt they cannot pay off would be wise to seek help as soon as possible. If you find yourself in this situation, look into all debt relief options – including credit counseling, debt settlement, debt consolidation and even bankruptcy, although it is becoming more difficult and costly to file – to make 2010 your healthiest year ever.

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