Taxes, student and payday loans, rollbacks
When he took office a year ago, President Trump pledged to apply a meat cleaver to regulations that he says have stifled American businesses and the economy.
But consumer advocates say some of the Trump administration’s setbacks to Obama-era financial rules, as well as its support for new legislation, will hit U.S. households squarely in the wallet. Among other things, the regulations have given Americans the right to join together in class actions against banks, seek the cancellation of student loans generated by fraud, and receive financial advice that is in their best interests rather than that of their advisers.
Following:Trump administration to revise student loan rules to help borrowers
Following:Arbitration vs Class Action: What Consumers Need to Know About the Differences
Following:Trump vows to cut federal regulation to pre-1960 level
The White House and Republicans in Congress have also passed a sweeping tax overhaul that will result in cuts for some people but increases for others and introduced legislation to repeal parts of the Dodd-Frank financial reform law.
“Financial markets will be skewed in favor of financial institutions rather than consumers,” if the proposed changes are finalized, says Rachel Weintraub, legislative director of the Consumer Federation of America.
But not everyone agrees. In a recent speech, US Chamber of Commerce President Tom Donohue denounced “burdensome labor regulations that hamper business operations and harm workers; and onerous financial rules that would have suppressed retirement investments and disadvantaged consumers. “
Trump’s initiatives reduce or aim to reduce:
Trump touted the tax review as a tax cut for the middle class, and the average, low and middle income household will see annual savings of about $ 1,000 in the short term, according to the Tax Policy Center. Since the standard deduction will double, many low-income Americans will pay no tax while others will benefit from the expansion of the child tax credit.
But most of the benefits go to the rich, according to the TPC. And by 2027, households earning $ 40,000 to $ 75,000 in total would pay billions more in taxes. Upper-middle-class households could be affected as the local and state tax deduction will be capped at $ 10,000 and the mortgage interest deduction will be limited to home values up to $ 750,000, down from $ 1 million.
Protections for student loan borrowers
Education Department Rewrites Obama Administration Rules To Protect Students Who Have Completed Career Preparation Programs At For-Profit Colleges But Have Failed To Earn Projected Income Or Have Claimed being misled by schools. Under a rule that was due to go into effect last July, defrauded consumers could have asked the federal government to cancel their loans. Another regulation, partly in force, denies federal funding for college programs if graduates do not earn enough to support themselves and repay their loans.
The Institute for College Access and Success says the changes would facilitate “student fraud and evasion of liability.” But Education Secretary Betsy DeVos said the rules had gone too far and it was too easy for students to evade debt repayment.
Lawsuits by bank and credit card customers
A rule passed by the Consumer Financial Protection Bureau (CFPB) and due to go into effect next spring would have allowed customers of banks, credit card companies and others to join class action lawsuits. Today, many financial companies require consumers to resolve any disagreement through arbitration.
Consumer advocates say customers deserve to have their day in court. They cite the Equifax rating agency cyber breach and the Wells Fargo unauthorized accounts scandal as examples for the class action lawsuits. But the financial industry says clients typically earn greater gains through arbitration than through class actions, which they say primarily benefit lawyers. According to a CFPB study on disputes resolved between 2010 and 2012, consumers only obtained redress in 9% of arbitration cases, compared to around 25% of arbitration cases. class actions that resulted in settlements.
Guarantees for investors
A Department of Labor regulation required financial advisers to put their clients’ best interests ahead of their own when recommending investments for retirement accounts and disclosing disputes. Although the standards went into effect in June, their application was effectively delayed from early 2018 to July 2019, as Trump’s Labor officials are seeking more public input.
Protections for low-income borrowers
The Consumer Financial Protection Bureau announced this week that it will reconsider a rule requiring payday lenders to determine whether borrowers can afford to repay loans before approving them. The rule, which is expected to take effect in August 2019, would also reduce repeated attempts by lenders to debit payments from a borrower’s bank account.
CFPB officials say the settlement will fix a rigged system against borrowers. Payday loans, which carry annual interest rates of 300% or more, typically have a maximum amount of $ 500 and are due in full by the borrower’s next paycheck. Many borrowers renew or refinance loans time and time again, each time leading to costly new charges.
But thousands of payday lenders were due to close due to the constraints, and the industry says it would cut off a vital credit pipeline for financially strapped consumers.
Payment of overtime
The Obama administration passed a rule that would have allowed approximately 4.2 million additional workers to qualify for overtime payment. He raised the threshold at which executive, administrative and professional employees are exempt from overtime to $ 47,476 from $ 23,660. A federal judge overturned the settlement last year. The Trump administration is appealing the decision, but Labor Secretary Alexander Acosta has said it goes too far and will ask for a more modest increase in the threshold, which will make fewer workers eligible.
Trump’s Labor Department proposed a rule that would allow restaurants to share waiter tips with employees such as cooks and dishwashers. But nothing in the proposed rule would prevent restaurants from keeping the tips themselves, Shierholz says. An Obama-era rule specified that waiters can keep their tips.
“In each of these cases, it’s about wresting influence from workers and transferring it to employers,” says Heidi Shierholz, senior economist at the Left Institute for Economic Policy.
Dodd-Frank financial reform
Since Trump took office, Congress has attempted to undermine the sweeping reform bill enacted after the 2008 financial crisis. A bill passed by the House would weaken the CFPB, replacing its current Federal Reserve funding with credits. of Congress and thus leaving it vulnerable to political wrangling. In addition to class action lawsuits and payday lenders, the CFPB created new mortgage guarantees and sued a major student loan provider. It has brought in nearly $ 12 billion to more than 30 million consumers who have been deceived by banks or other financial companies.
A Senate proposal would give homebuyers better access to mortgages, but Weintraub says it would make it easier to scrutinize riskier loans, increasing the risk of default for less creditworthy borrowers. Such flaws contributed to the financial crisis.
Contributor: Kevin McCoy