The Wall Street Reform Bill, which we have all been anxiously awaiting approval on for over a year, was finally signed into effect on July 21st. The bill represents the largest set of changes to the finance industry since the Great Depression and is meant to prevent any further economic catastrophes, including the most recent in 2008.
Since there are so many changes going into effect, it’s doubtful the average person is aware of them all. Here’s a look at some of the lesser-known consequences of these shifts in the financial landscape and how they’ll affect you.
You Have to Prove You Can Pay Lenders Back
One of the new laws creates a Consumer Financial Protection Bureau, which will now establish and enforce regulations related to mortgages, credit cards and other financial products.
Jim Kuhnhenn of the Associated Press reports for MSNBC.com that while lenders will face new restrictions regarding the loan approval process and discouragement against persuading borrowers to take on more debt than they can realistically afford, the individual on the other end of the deal will now be held more accountable as well. Risky no-documentation loans that were so prevalent just a couple of years ago will no longer be approved.
Some banks and lending institutions are concerned this increased regulation will be too restrictive and burdensome, and that some credit products may even be banned.
It’s Going to Be a Slow Process
Many changes have been approved, but that doesn’t been we’ll see the effects right away. The bill leaves quite a bit of decision-making yet to be accomplished, delegating the task to several organizations with plenty of time to arrive at a conclusion.
According to ABC News, “By some counts the government and regulators now have to conduct more than 45 studies, more than 70 reports, and engage in more than 200 acts of ‘rule-making.'” Some of these decisions will take months to solidify.
Will the Bill Actually Prevent Future Crises?
The purpose of this bill is to spare the country from future economic meltdowns by establishing stricter regulation and accountability on the part of financial institutions and consumers, but it’s uncertain whether wall street reform is a fail-safe plan. Though the president is convinced all necessary issues are addressed by the new laws, only time will tell if we’re truly protected.
Alan Lake of Subprime Blogger, for one, is doubtful. He writes that “bad credit unsecured personal loans were one of the main causes of the first recession but economists are stating that unemployment and foreclosures could be the cause of a double dip.” As mentioned, the problem of risky loans has been addressed, but there’s no way to give everyone a job and a home. It’s possible mortgage and foreclosure troubles could lead us into another dark period regardless of financial reform.