Single moms may face some serious money problems as the new administration moves to dismantle crucial protective financial reforms.
Dodd-Frank, officially known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (I added the bold), came in response to the massive financial crisis of 2008 – after millions of Americans lost their homes and saw their retirement savings wiped out. The law was designed to protect us from financial predators, greedy Wall Street manipulators, and banks that gamble with our money.
Decimating those protections puts our money…our financial futures…our families’ futures…at risk.
That’s not just a possibility. Stripping us of these safeguards will absolutely impact our finances in five significant ways:
- Dumping the CFPB takes away our #1 defender
The Consumer Financial Protection Bureau, led by Richard Cordray, has one goal, and it’s right in the name: Protect consumer finances. And it’s not just talk. Since their doors opened in 2010, the CFPB has given more than $11 billion (in either cash compensation or debt reductions) back to consumers duped by predatory lenders and financial fraudsters (like the Wells Fargo bank account scam), along with protection against harassment by debt collectors. If you have a complaint about debt collectors, credit card companies, payday lenders, student loan officers, or mortgage banks, let them know before it’s too late – and they will fight for you.
- Say goodbye to free credit reports
Credit problems can make it hard to get loans, credit cards, housing, and even jobs. And things like identity theft, simple mistakes, and the financial fallout of divorce can sink your credit score quickly. In the past, on top of having credit issues, you’d have to pay a fee to see your credit report. Now, though, thanks to Dodd-Frank provisions, any time you get turned down for something because of a credit problem, you can get a free copy of your credit report (and that’s in addition to your annual free credit report). The same holds true if your credit card company changes your rate or terms because of a negative credit blip – you can get a free report to see exactly what the glitch is. In the meantime, if you haven’t looked at your credit report for a while, do it now.
- Say hello to predatory lending practices
Dodd-Frank includes provisions to protect us from predatory mortgage lenders, unscrupulous bankers who prey on our desire to make a permanent home for our kids. Before this shield was in place, vulnerable borrowers – which include a LOT of single moms – desperate to buy homes would get bamboozled into signing loan documents for houses and mortgages they couldn’t afford. Tricked by talk of no money down, confusing interest and payment structures, and no credit or income verification, millions ended up in extreme financial distress…and so many of us lost our homes to foreclosure. Right now, that trickery and manipulation is explicitly against the law – mortgage lenders have to give you the best loan for you, must make sure you understand and can afford the monthly payments, and verify that you will be able to keep up with those payments. Erase this protection, and single moms will once again be saddled with unmanageable debt – and a high risk of losing their homes. The single mom fix: Know what you can afford, both in home price and total monthly payments (I’ll be posting on exactly how to figure that out ASAP). And don’t get sucked into “special” loans like adjustable-rate mortgages that sound good at first, but can sucker punch your budget if you’re not ready.
- Confusing language and fine print will hide fees once again
Ever read a credit card application all the way through – including the terms and conditions? Financial companies banked on the fact that most people don’t pay attention, and buried fees, fines, and rate information in the middle of dense, convoluted language. On a good day, finance language can be very confusing – and, sometimes, it’s designed that way. But Dodd-Frank calls for “plain language” explanations of fees and terms when it comes to bank accounts, credit cards, and loans. Under this law, everything you need to know has to be stated clearly, in simple language, and included up-front rather than buried somewhere most people don’t get to. The only fix here is to read everything, all the way through, so you know what you’re getting into. Actively look for information about extras like late payment charges, interest rate increases based on payment activity, and overdraft or insufficient funds fees (for checking accounts). Here’s a great guide to some of the most common credit card fees.
- Banks will be free to gamble with our money, and we’ll pay when they crap out
This one causes most people’s eyes to glaze over with talk about derivatives and subprime markets and hedge funds. Here’s what you need to know: Big banks do everything they can to make money, and that includes making extremely risky investments that they may not actually understand if there’s a possibility they’ll see huge returns. Everything is fine when their bets pan out – and that’s what these are, just bets – but when the banks lose, it’s our money that disappears – TWICE. Not only will that torpedo our savings and investments, we’ll also – again – have to pay to bail them out.
How can you protect your family finances from the next inevitable bank crash? Check out community banks – they often offer more services, better customer care, and better deals than national bank conglomerates. And look into credit unions, which also provide superior service, mainly because they’re customer-owned, and don’t answer to shareholders who only care about the bank’s bottom line.