Barring unexpected challenges, lawmakers plan to send a compromise financial reform bill to President Obama for signing before July 4. Opinion columns in The New York Times and The Wall Street Journal liken the new regulations to "a tighter leash" on Wall Street, giving federal and state regulators broader oversight of lending and investing activity, including:
Consumer Financial Protection Bureau
Lawmakers compared the new bureau to a "financial EPA," but a compromise in the bill's language puts this powerful new body under the umbrella of the Federal Reserve. Despite warnings that a lack of oversight at the Fed led to 2008's market collapse, the CFPB streamlines oversight of most lending and borrowing activity in the United States.
$10 Maximum Minimum on Credit Card Purchases
Although new investing and trading rules have dominated financial press headlines, consumers will feel the fastest changes from the financial reform bill at their local checkout counters. Until now, vendors posting "$10 minimum credit card purchase" signs at the register have technically violated their merchant agreements. Upon passage of the bill, merchants can make their own policies for minimum acceptance, up to the Federal Reserve's $10 "maximum minimum."
Cash Discounts Returning to Retailers
Credit card payment processors assess service fees to merchants based on industry risk factors, causing some retailers to pay service charges as high as five percent. The financial reform bill gives merchants the option to pass savings along to customers in the form of percentage discounts or rebates for cash payments. Dual pricing options were once the norm at gas stations, and could return upon the bill's passage.
Caps on Merchant Service Fees from Large Banks
The financial reform bill also gives the Federal Reserve power to set limits on merchant service transaction fees. While retailers cheered the proposal, banks may curtail rewards and cash back rebates to preserve profits under the new rules. Although the bill enforces this rule only for banks with more than $10 billion in assets, analysts expect payment processors to set uniform rates that will affect smaller banks and credit unions.
Critics of the financial reform bill expressed concern about its unintended consequences. Just as previous interventions by the Federal Reserve resulted in tightened consumer credit lines, a sudden consumer shift to cash and debit away from credit card transactions could cause banks to rethink their service offerings. Lawmakers expressed optimism that the overall benefits of a tighter regulatory system for lending and investing would offset short term inconvenience.