How Financial Reform Affects Banks

The financial regulatory reform bill passed in Congress last week and is expected to make some significant changes in how banks do business. Some of the changes that banks and other businesses can expect are:

• Caps on interchange fees, also called “swipe fees.”  These are the fees merchants must pay to networks such as Visa or MasterCard when they process debit and credit card transactions. The cap will also apply to debit card transactions.
• Banks and other mortgage lenders must fully document income and assets of people applying for mortgage loans. The change is aimed at protecting borrowers from being hit with high fees and risky loan terms.
• Banks won’t be able to charge prepayment penalties on most mortgage loans.
• New rules aimed at stopping some of the problems that have lead to bank failures.
• A newly formed Consumer Financial Protection Bureau to regulate lending  at banks and other institutions.
• The ban on business checking accounts that pay interest would be lifted.

The bill  is a massive piece of legislation and it is tough to detail all the changes that are included. However, one of the areas that may directly impact consumers is the creation of an Office of Financial Literacy to help Americans learn more about savings, loans, and other financial issues.

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