Top 6 Changes That Financial Reform Brings To Consumers

June 25, 2010 — -- Consumers will be significantly affected by the financial reform agreement that was hammered out between House and Senate lawmakers last night. Described by some as the biggest financial reform since the Great Depression, the bill, if passed, would overhaul many of the rules that govern relationships between financial institutions and consumers.

"It's historic legislation," says Michael Calhoun, president of the Washington-based Center for Responsible Lending. "It's a big win for consumers."

The agreement reached by congressional negotiators during the night represents a compromise between a bill that passed the House last December and the version proposed by the Senate earlier this summer. Votes by the House and Senate are expected next week.

What do the reforms really mean for consumers? All the details have not yet been released, but here are some of the big changes identified by consumer advocates and political experts so far:

A Bureau of Consumer Financial Protection, an independent regulator housed within the Federal Reserve, would consolidate oversight of a wide variety of financial products, including mortgages, credit cards and payday loans. Responsibility for these areas is currently scattered across a variety of government agencies, and experts say that creating a single supervisor will help make financial products easier to understand and not take unfair advantage of borrowers.

"The creation of this consumer bureau is really important," says Ellen Bloom, director of Federal Policy at Consumers Union. "Consumers have suffered plenty during this financial crisis and now they have an entity that's watching out for them."

If you get turned down for a loan because of your credit score, or are offered an interest rate you deem too high, you would have the right to see the score your lender is working with, for free. Consumers Union's Bloom says consumers may currently see their report, but don't have access to their score. She adds this provision will help consumers understand whether their lenders' concerns are legitimate.

Why does it matter? "Credit scores tell you how much you should be paying for a loan," says CRL's Calhoun. "It's creates transparency."