Consumer Law

Overhauling the US Financial System


Buried in the 2,300 pages of provisions that make up the new financial reform law is a measure that allows the Securities and Exchange Commission (SEC) to deny requests for information, even those that come under the Freedom of Information Act.

The new law says the SEC doesn’t have to reveal documents that come from "surveillance, risk assessments or other regulatory and oversight activities." Critics say that provision pretty much covers all of the SEC’s activities, which means the SEC has a free pass when it comes to FOIA requests.

SEC Chairman Mary Schapiro insisted in a letter to Congress that the new provision does not give the SEC a blanket exemption to FOIA requests. She explained that the provision helps further the agency’s goal of providing better Wall Street oversight. For example, investigations into insider trading are easier if the SEC can assure trading firms that personnel records, trading strategy, and other information will be kept confidential.


Congress passed the final version of a sweeping financial overhaul bill intended to reform Wall Street and boost consumer protections. The bill’s next stop is the President’s desk where it’ll be signed into law.

The measure is called the Dodd-Frank bill after its sponsors Sen. Christopher Dodd and Rep. Barney Frank. A heavy 2300 pages, it touches on almost every aspect of America’s financial system--from banks, mortgages, insurance, and securities to credit reporting and corporate executives’ pay.

Key provisions important to consumers include:

  • Establishing the Consumer Financial Protection Bureau. This watchdog agency will regulate financial companies to ensure consumers get accurate information and fair treatment when obtaining mortgages, credit cards, student loans, and other financial services
  • Credit score protection. Consumers get free access to scores that negatively impact lending or hiring decisions.
  • Mortgage reform. Regulations are intended to prevent hidden fees and bad lending practices that trap homebuyers in loans they can’t repay.

Original Article

The past five years have wreaked havoc on nearly every segment of the US economy. Giant corporations have fallen or nearly fallen and have been bailed out. Small companies have closed their doors.

Due to the near-collapse of the US economy and the continuing struggle for recovery, the federal government is in the process of overhauling the US financial system. One major effort is the creation of a new consumer watchdog agency. Other reforms are complete or in the works, too.

New Dog on the Block

In late May 2010, the US Senate voted for a new law designed to make broad changes and reforms throughout the US financial system. If passed into law, the Restoring American Financial Stability Act of 2010 creates the Consumer Financial Protection Bureau (CFPB).

This new agency will be part of the Federal Reserve and will have the power to make new rules and regulations on all sorts of consumer credit transactions to make sure, for example, your credit application is treated fairly and you're protected from high interest rates and excessive fees in things like:

  • Car loans, where consumers have been victimized by car dealers who get kick-backs for steering them to lenders with high interest rates, among other abuses
  • Credit cards, including a cap on the "swipe fees" charged to retailers and merchants by credit card companies, which essentially increases your cost when buying their goods or services
  • "Payday loans," including rules on how many loans you and I can take out and increasing the time to repay the loans
  • Mortgages, and particularly the "interest only" mortgages that were at the center of the financial crisis and crash of the real estate market in 2008 and 2009

Not all of these changes are brand "new." For instance, there's been some talk and movement about reforms in the debt settlement business. One senator wants to add new rules on it to the financial reform bill. And the CARD Act of 2009 and the Federal Trade Commission already made significant changes in credit card rules. This is the first time a new agency will be in charge of overseeing and regulating such a wide array of consumer credit transactions, though.

More Reforms

In addition to creating the CFPB, the Senate's reform bill does many other things, including:

  • Creating the Financial Services Oversight Council whose task will be to periodically examine the US financial system for signs of another meltdown like the one seen in 2008 and 2009
  • Closing the Office of Thrift Supervision - it regulates much of the banking industry in the US - and transferring its powers and responsibilities to the Federal Reserve, the Federal Deposit Insurance Corporation, and others
  • Overseeing and regulating of the derivatives market, that is, trading and investments in securities or other financial instruments that are connected to another security. Trading in derivatives is largely unregulated today
  • Creating the Office of National Insurance to monitor the insurance industry - except health insurance - and gather information
  • Increasing oversight of credit rating agencies
  • Giving shareholders of companies whose stock is traded on the stock market a "say on pay," meaning they get to vote on how much company executives are paid

What's Next

The next step in the reform process is for the bill to go to a committee made up of Senators and members of the House of Representatives (a "House-Senate conference committee") where both sides iron out any differences they have over what should be in the law. Expect to be passed into law perhaps as early as July.

What do you think? You should check out the law for yourself. Tell your elected officials in the US Senate and House of Representatives what you like and dislike about it. It's likely the law, once passed, will affect you and your family, so have a voice in what's in it.

Questions for Your Attorney

  • When writing a new law, are the federal lawmakers required to explain how they're going to pay for all the new programs and agencies the new law creates?
  • My state's representatives and senators and I don't agree on what the financial reform bill should include. What else can I do to stop the law from going forward as it's currently written?
  • Since the new Consumer Financial Protection Bureau hasn't been created yet, what should I do right now if I think my credit card company isn't following the law?
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