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December 10, 2007
Federal Reserve Consumer Protection Initiatives
The Federal Reserve Bank is currently researching ways in which to provide much needed relief for the sub-prime housing crisis that is tearing apart consumers particularly in the mid-west states where job losses are occurring very heavily, mainly due to lay-offs in the auto manufacturing industry.
In the coming weeks, the Federal Reserve will be proposing new regulations in advertising financial offers such as credit cards and mortgages particularly in regards to disclosures. The Federal Reserve will be looking into how to outlaw unfair or deceptive advertising practices deployed by the financial sector.
Here is a break-down of what the Federal Reserve has been and will be doing to protect consumers from unscrupulous lenders that prey on people who are less informed.
1. Coordinated enforcement of consumer protection laws
The Federal Reserve has been involved in researching, monitoring and examining subprime credit card and mortgage lenders through a cooperative initiative with individual state regulators. The Federal Reserve is continually reviewing consumer protection laws for compliance as well as review the terms by which subprime lenders grant loans to consumers.
This is an excellent initiative by the Federal Reserve because the end result will be fewer bad loans being issued.
If you are a sub-prime consumer, on the surface this may sound bad, however it is a good thing because you will not end up in a situation where you have a line of credit which you can’t afford to repay. You are much better off getting rejected for credit than having to try to pay for a loan that you simply can’t afford.
2. Loss mitigation efforts
The Federal Reserve is working with lenders to set guidelines for restructuring loans that are in delinquent and could be facing foreclosure and keep the consumer in their home while providing the lender ongoing recovery of the loan.
Note: If your mortgage is up for renewal soon, you may want to take a proactive stance and call your bank as soon as possible to negotiate your options in order to stay in your home. There is legislation in place to help you keep your home a prevent bankruptcy.
3. Consumer protection regulations
The Federal Reserve will use it’s authority under HOEPA (The Home Ownership and Equity Protection Act) to devise rules and regulations to prevent unfair or deceptive advertising practices particularly to the subprime market.
While it’s nice that the Federal Reserve is looking out for you, it’s best to educate yourself and take responsibility for your choices. If you start learning about finances right now and avoid taking on too much debt you are going to live a much happier life.
Having a house that you can’t afford is far worse than renting an apartment that you can afford. Live within your means, by that, I mean spend less than what you make and all will be fine. Go outside what you can afford and you will know stress far beyond what you ever care to experience.
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