Posts Tagged ‘cfpb’

Elizabeth Warren Predicted The Financial Collapse Back In 2004

 

Elizabeth Warren,  a Harvard Law Professor and the current chairwoman of the Congressional Oversight Committee in charge of overseeing usage of the TARP bailout funds, predicted the financial collapse long before anyone else was talking about it.

In this 2004 interview with Dean Lawrence R. Velvel where she discusses her book, The Two Income Trap,  she reveals the instability that pervades the lives of most middle class Americans and why so many end up in Bankruptcy court. She says that in order to keep up with the expenses, people with median incomes have been forced to borrow and borrow. Why? Because the median income in the United States is increasingly not enough to keep up with the cost of living. She talks about the fixed expenses that families have, such as the mortgage payment, health insurance, and educational expenses as having grown dramatically in the last generation. It is important to understand, here, that, these fixed expenses can’t be cut back.  That’s why they’re called “fixed expenses.”

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Financial Reform Passes: What Does It Mean For The Average Consumer?

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So the Senate voted today to pass financial reform, a bill aimed chiefly at reining in Wall Street from doing the kinds of things that lead to the financial collapse of 2008. There has been a lot of talk about derivatives  and credit default swaps, and while these are important parts of the reform bill, which ultimately affect each and every one of us, there are other aspects of this bill that will more directly affect average Americans.

The largest of these is the creation of a new consumer watchdog agency known as the Consumer Financial Protection Bureau. This agency will be located within the Federal Reserve but will be completely independent from it. It will have an independent director and will have the authority to make and enforce rules against unfair and deceptive consumer credit practices. This agency will regulate the practices any business that engages in consumer lending, from credit card companies and mortgage lenders to payday loan companies. The one group exempted from CFPB authority are auto dealers.

Basically, what the CFPB will do is make sure that when you sign a credit card agreement, you know exactly what you’re getting into. Even more importantly, it will ensure that if you borrow money, you can do it safely and with the knowledge that you can pay it back without going broke. Hopefully, the CFPB will put an end to the usurious practices of payday lenders, for example.

Finally, the reform bill contains new regulations with respect to mortgage lending.  Lenders will no longer be allowed to pay brokers additional fees for steering borrowers into riskier and more expensive loans if they qualify for cheaper safer ones. It also forces lenders to adopt stricter underwriting standards to ensure that no one receives a loan they can’t afford to repay and it reduces abusive repayment terms like huge prepayment penalties and other “junk” fees.

While the reform bill isn’t as strong as many would like, it does have some good aspects that will help consumers better manage their debt. I hope that Elizabeth Warren is appointed to be the director of the CFPB. 

I’m curious….what do YOU think about the financial reform bill?

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