Since the onset of the Great Recession, the federal government has taken steps to protect big businesses, consumers and various parties in between.

This has included multibillion dollar bailouts of financially-strapped institutions like Bear Stearns and the American International Group. It also included the introduction of a series of laws aimed at prohibiting credit card companies from unfair lending practices.

Financial reform creates new consumer protection bureau

The Senate Committee on Banking, Housing and Urban Affairs is taking these protections even further by approving a set of financial reforms. Under the reforms, a Consumer Financial Protection Bureau would examine policies practiced by financial institutions, including banks and non-banks, with more than $10 billion in assets.

This would prevent such institutions from using deceptive practices, abusive terms and hidden fees. Heightened oversight could also stop financial fraud and conflicts of interest before they damage consumers’ credit. Additionally, the Consumer Financial Protection Bureau would eliminate confusion about which federal agency has which regulatory responsibilities by combining all such powers into one independent office.

Doing so will also allow the agency to act faster than it would under congressional oversight and provide consumers with a single toll-free number to report problems with financial services or products.

Bill also protects against too-big-to-fail institutions

Another part of the financial reform would eliminate too-big-to-fail bailouts by discouraging excessive growth and requiring large institutions to periodically submit information about how a rapid and orderly shutdown could be pursued. These “funeral plans” would protect taxpayers from the financial burden experienced under previous bailouts.

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