REFinBlog

Editor: David Reiss
Brooklyn Law School

February 15, 2017

Impact on Consumers of Dodd-Frank Repeal

By David Reiss

TheStreet.com quoted me in What Would a Repeal of Dodd-Frank Mean to Consumers? It reads, in part,

With the political atmosphere unsettled at best, much of the current talk out of Washington, D.C. centers on unraveling the Dodd-Frank Act.

But what would such a move mean to the normal Main Street consumer?

“Consumers should not get too freaked out in the short term,” said David Reiss, a professor of law at the Brooklyn Law School. “The rollback is not going to happen overnight and we don’t yet know how far it will go.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010, as a response to the financial crisis the country saw in 2007 and 2008. However, with a new administration in the White House, some now see it as too restrictive to banks.

“Consumers should focus on the fundamentals — what are their short- and medium-term goals and how can they best achieve them?” Reiss said.

Reiss said homebuyers, for instance, should stay focused on identifying a home that is affordable for the long-term, and educate themselves about how mortgages work. And homeowners should evaluate whether their current mortgage is right for them — or should they refinancing with a mortgage that has a lower interest rate?

Repealing the act could affect more than mortgages, with many pointing to the credit card industry as being impacted the most. Ben Woolsey, president of CreditCardForum.com, said many of the protections afforded in Dodd-Frank were intended to roll back abusive practices by the financial services industry, often triggered when consumers occasionally strayed — such as by paying their card late or exceeding their credit limits. These consumer errors resulted in interest rate hikes and penalty fees.

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The good news likely is consumers still have time to prepare.
“People have plenty of time to act, but they should also not be putting off until tomorrow the things they should be doing today,” Reiss said. “We don’t know where interest rates are heading, so it makes sense to be on top of things while rates are still at historically low levels, notwithstanding the bump we saw after the election.”
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