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credit & debt

The New Banking Law Has Perks for You

Provisions to the Dodd-Frank reform act gives small banks more discretion to make loans and mandates free credit freezes.

Jamie Hopkins is retirement income director at the American College of Financial Services.

The new law that rolls back some provisions of the Dodd-Frank financial reform act primarily affects banking regulations, but will it also have an impact on consumers? The primary purpose of the law is to ease the regulatory restrictions on banks. Some of the relaxed lending rules for smaller banks may make it possible for them to provide mortgages to consumers who couldn’t get loans under the old law because they had higher debt-to-income levels and lower credit scores.

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This change will give small banks more dis­cretion in determining whether a potential borrower can repay a mortgage. A small bank that knows an individual or an individual’s business can use that relationship to offer more-creative and more-flexible mortgage loans than a larger bank.

How does the new law help protect consumers from identity theft? The new law makes placing and removing a credit freeze free for all consumers. Before, fees ranged all over the place. In some states, a credit freeze was free, but in others you’d have to pay $5 or more to freeze or remove the freeze at each of the three credit bureaus.

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The law also extended fraud alerts from 90 days to a year. A fraud alert is essentially a warning on your credit record—lenders are supposed to require proof of identity before issuing a new credit card or loan.

Who should consider a credit freeze? If you’re worried about becoming a victim of fraud, there is little downside to setting up a credit freeze because it doesn’t cost anything.

A credit freeze won’t impact your ability to borrow from existing lenders; it just stops the credit reporting agencies from sending out your information to new lenders. But if you want to apply for a new credit card or loan, you’ll have to unfreeze your report with the bureaus, and that could take a little bit of time.

What else may change for consumers because of the new law? By loosening some lending restrictions for small banks, it may be easier to get car loans, personal loans and business loans at some small banks, too.

Some small banks may also jump back into the reverse mortgage business later this year. More com­petition can bring down fees and make it easier for homeowners to qualify for a reverse mortgage.

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