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What Does the Dodd-Frank Rollback Mean for You?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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It’s been a year since Congress adjusted parts of the Dodd-Frank Act financial reform package, which was originally implemented in 2010 to address the financial industry excesses that helped cause the financial crisis of 2008.

The Dodd-Frank rollback was a bipartisan effort designed to make life easier for smaller banks, and also extend certain consumer protections. However, the effort drew negative attention from those who argued that dialing back some bank oversight could possibly contribute to another financial crisis.

So what happened with the Dodd-Frank rollback, anyway? In this article, we’ve rounded up what parts of Dodd-Frank changed, what stayed the same and what it all means for your banking and personal finances.

Why was the Dodd-Frank reform enacted in the first place?

The Obama administration proposed the Dodd-Frank reform bill in response to the financial crash of 2008, which set off the worst economic downturn since the Great Recession. Congress passed the bill in 2010.

The Dodd-Frank Act spans 2,300 pages and directs federal regulators to enforce more than 400 new rules and mandates. According to David Reiling, CEO of Sunrise Banks, “It imposed particular attention on the mortgage lending industry which was considered the main trigger for the Great Recession of 2008.”

Some of the rules under Dodd-Frank include:

  • New disclosure requirements for mortgage loans, so consumers could better understand what they are applying for.
  • More oversight over banks to make sure they have enough cash reserves.
  • The launch of new regulatory agencies for the banking, credit rating and insurance sectors.
  • The creation of the Consumer Financial Protection Bureau, a new government agency focused on helping consumers with money issues.

For more on the specifics of the original Dodd-Frank bill, check out part one of this series here.

What changed with the Dodd-Frank rollback?

Under the original terms of Dodd-Frank, banks faced greater regulation and oversight from the Federal Reserve when they held $50 billion or more in assets. Supporters of the Dodd-Frank rollback thought that this threshold was too low and created an excessive regulatory burden for smaller regional and community banks that don’t have the same resources as the big banks.

After the rollback, the cutoff for mandatory extra regulation was pushed up to $250 billion in assets. In addition, regulators were given the discretion to require stress tests and extra regulations for banks with between $100 to $250 billion in assets, provided the regulators think it’s appropriate.

Brandon Renfro, assistant professor of finance at East Texas Baptist University, is supportive of the rollback overall. “Bigger players are better able to handle the regulations, due to economies of scale, while the Dodd-Frank rollback will give smaller organizations slack and flexibility to operate.”

How could the Dodd-Frank rollback impact your banking?

The Dodd-Frank rollback set to reduce regulations and improve profits for smaller banks. Since these banks no longer need to go through the same strict compliance rules and stress testing, they should be able to earn more. Supporters of the rollback believed that small banks could pass these savings on to consumers, by paying higher interest rates on products like CDs and charging less for loans.

The Dodd-Frank rollback also loosened the requirements small banks face for setting up a mortgage loan. Small banks no longer need to follow the Dodd-Frank data reporting requirement meant to help detect predatory and discriminatory lending. This makes it slightly easier for these small banks to offer mortgages.

Finally, the rollback added a new protection for small lenders offering mortgages (those with less than $10 billion in assets). “One of the changes of the rollback was to allow certain small creditors additional safe harbors when determining a consumer’s ability to repay a mortgage loan,” said Reiling. “By providing additional protection to these institutions who have historically always verified a consumer’s repayment ability, this may translate to easier access to credit for consumers seeking loans at these institutions.”

Overall, the intent of the Dodd-Frank rollback is to make it easier for small banks to operate with the goal that this will improve banking and borrowing for consumers. However, this is just an inclination as there are no specific rules in the bill requiring these banks to offer better rates for their customers.

Free credit freezes, extended credit fraud protections

Beyond changes for banking, the Dodd-Frank rollback also created new benefits for consumer credit reports. First, consumers can now request a free credit report freeze from the credit bureaus — Equifax, Experian and TransUnion. A credit freeze locks up your report so new loans and lines of credit can’t be opened under your name — a good safeguard if you’re worried someone stole your identity.

Before the rollback, you had to pay up to $10 per credit bureau to get this protection in place. Now, this service is free for any credit user who wants it.

The Dodd-Frank rollback also extended the length of a short-term fraud alert on your credit report. It’s now one year, up from 90 days. When your report has a fraud alert, the bureaus must take extra steps to verify your identity before issuing new credit, like by calling you first.

It’s not as strict as a credit freeze so you can still set up accounts yourself, but adds extra protection against identity theft. Before the rollback, you would need to reapply for a new short-term fraud alert every 90 days, but now it lasts a full year.

Could the Dodd-Frank rollback fuel a financial crisis?

It took years for the country to recover from the last financial crisis and it’s understandable to be concerned about any legislation that might make another one more likely. While the Dodd-Frank rollback does loosen some of the measure’s original rules, it retains the majority of the original protections: the new regulatory agencies, the Federal oversight of large banks, the new disclosures for mortgages, among many others.

“Could the rollback increase the chances of a financial crisis? Yes, but only by some marginal degree,” said Renfro. “The key thing of the rollback is that it limits the regulations on the small banks, who were not key contributors to the financial crisis. The large banks are still constrained by the rules of Dodd-Frank so I’m not too concerned about the change.”

The final word on the Dodd-Frank rollback

Passing new legislation is always a balancing act, and the government decided that the extra potential growth and consumer benefits justified removing some of the Dodd-Frank’s rules. The main framework of the measure’s protections remains in place, while small banks and community banks get some regulatory relief. That seems like a fair trade-off, but only time will tell whether this is the right move.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

David Rodeck
David Rodeck |

David Rodeck is a writer at MagnifyMoney. You can email David here

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Banking

Money Management Tips to Help You Save Successfully

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Increasing your savings is easier said than done. The National Endowment for Financial Education’s most recent annual consumer survey found that saving money is the biggest cause of financial stress for more than 51% of Americans. If you feel the same way about your savings, don’t despair. There’s a way to manage your money instead of letting it manage you.

Top 14 money management tips

Have enough income to cover your monthly expenses, but can’t seem to gain traction when it comes to building a college savings fund, saving for a down payment on a home or growing your retirement nest egg? Start by taking charge of your finances by using these simple, yet practical, money management tips.

1. Use a budgeting app

Tracking your spending on the go is easy when you use a budgeting and personal finance app, like Mint or YNAB. Simply download your app of choice and, if you want to, link it to your bank account. You can then input your fixed and variable expenses and monitor your spending with the swipe of a finger. Keeping your budget within arm’s reach also helps you to stay on top of your daily spending and stick to a monthly budget.

2. Trim unnecessary expenses

Examine your spending habits to determine where you can cut unnecessary spending. Food is a common expense that can be reduced with a little planning. A grocery shopping list can be your first line of defense against overspending, as it’s easier to make impulse buys at the grocery store when you don’t have a shopping list to guide your purchases.

3. Commit to a written savings goal

Establishing a clear savings goal can keep you motivated and put a stop to impulse buys. Make your goal SMART: specific, measurable, attainable, relevant and timely. For example: “I will transfer $100 a month to my savings account so that by Month 20YY, I will have $800 to put toward a new television.” Post your written goal in visible locations to help reinforce your commitment to achieving it.

4. Live below your means

Spending more than you earn is a recipe for financial heartburn. When you have more bills than money with which to pay them, you could be subject to late fees and other financial penalties which make it harder to save. Cancel services you no longer need or can access at a lower cost. For example, nix the gym membership if you haven’t used it in five months or downgrade your cable package to only include the channels you actually watch.

5. Pay off debt

Eliminating debt may allow you to save more money. By bringing your balances to zero as quickly as possible, you’ll save on future interest charges. To potentially save money now, consider refinancing your debt to a lower interest rate or transferring your debt to a credit card with a lower interest rate.

Once your credit cards and loans are paid in full, you’ll have additional funds to contribute toward your financial goals. Use the same amount you were paying your creditors each month and deposit those funds into your savings account.

6. Build an emergency fund

Financial experts recommend stashing three to six months of living expenses in a liquid high yield deposit account in case of an unexpected job loss or another financial emergency. If this sounds overwhelming, start with a smaller goal of $500 for your emergency fund.

You can grow your emergency fund account by setting up an automatic transfer from your checking account to your emergency savings account each pay period. To grow your emergency fund faster, consider cutting unnecessary expenses, selling unused items around your home, depositing your tax refund or starting a side job.

Without an emergency fund, you risk paying for your next dental emergency or major car repair with your credit card or a personal loan, which can keep you in a debt cycle that’s hard to escape.

7. Increase your income

As long as you save the money instead of spending it, increasing your income with a side hustle, part-time job or more hours at the office is one of the quickest ways to reach your savings goal.

Before adding additional work to your already busy schedule, determine how many hours you have available along with how many months or years you’ll need to commit to the side hustle. When searching for side jobs, be wary of jobs that require an initial outlay of money to get started.

8. Plan for a regular review

Block out time on your calendar to evaluate your progress toward your savings goals. Consider establishing a monthly or bi-weekly financial review. Asking yourself if you’re still on track or if you’re able to contribute more towards your objectives is key to meeting your goals. A quick assessment of your savings plan can also help identify areas where you may still need to reduce expenses.

9. Never pay full price

Online and mobile coupons make it easy to save on groceries, clothing and big-ticket items like televisions and computers. When saving money is convenient, you’re more likely to stick to your savings plan. Do you do most of your shopping online? Install browser extensions that give you cash back when you shop through their online portals. Is mobile shopping more your thing? Download your choice of mobile app that offers cash back, gift cards and notifications of online and in-store deals.

10. Eat out less

Brown bag lunches and meal planning are smart money management strategies that can save you thousands of dollars annually, but sometimes you’ll want to treat yourself. To keep your spending under control, be selective about when and where you eat out. Make a list of local happy hours, upcoming culinary events and prix fixe restaurants to reinvent what it means to eat out on a budget.

11. Bank your financial windfalls

While it may be tempting to go on a shopping spree, upgrade your ride or take a weeklong vacation in the Caribbean when you get a financial windfall, that might leave you with a financial hangover. Once the thrill has subsided, you’re no closer to your savings goal. Instead, be strategic with any unexpected funds that come your way. Commit to adding at least half of these funds to your savings account.

12. Make savings automatic

Contact your financial institution to sign up for electronic funds transfer. This allows you to designate a set dollar amount for transfer from one account to another before you spend it on something else. For example, set $50 to automatically transfer from your checking account to your savings account on the fifth of each month.

If you have multiple savings goals, use a money savings app connected to your bank account to help to make auto transfers goal-specific.

13. Entertain your options

Movie buffs and avid readers rejoice! Free and low-cost services are available that allow you to binge-watch or read the latest big hit without busting your budget.

Movie rewards programs are available across the country. These programs allow you to earn points based on the amount you spend. Points can then be redeemed for additional movie tickets or concession items. Movie clubs allow fans to consume at least one movie per month at a discounted rate in addition to concession discounts.

The public library is an often overlooked resource for endless media entertainment. Look beyond the hardcover and paperback books, and you’ll find CDs, DVDs and magazines. Many libraries now provide a portion of their catalog online, which means you can access e-books, audiobooks, movies and music on your device of choice — for free.

14. Become rate savvy

Online search tools can reduce the time it takes to locate financial institutions offering the best returns on savings deposits. Use the Maximize Your Bank Savings tool from DepositAccounts, another LendingTree company, to help you identify the best place to park your funds to meet a specific goal. The higher the annual percentage yield (APY) the account pays on deposits, the faster your money can grow. Generally, certificates of deposit (CDs) limit withdrawals but offer higher APYs over savings accounts.

Next steps

A consistent savings habit is necessary to reach both short-term and long-term financial goals. If you’re intentional with your money, you’ll see the results. Recognize each achievement for what it is — documented proof that you’re in control of your financial future. Open a dedicated savings account today, and you might only be a few months away from achieving your first savings goal.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Tracy Scott
Tracy Scott |

Tracy Scott is a writer at MagnifyMoney. You can email Tracy here

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Banking

Money Inflation: How Inflation Has Affected Your Money

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Do you remember when you used to be able to buy a regular cup of coffee for less than a dollar? How about gasoline? As recently as 2004, the average gallon of gas cost less than $2. Today, these prices are a distant memory. Inflation is the metric we use to describe the phenomenon of rising prices, which is a basic fact of economic life that you should know about.

Inflation is the gradual increase in the price of goods and services over time. As inflation rates rise, you’ll pay more for the same goods and services, which impacts your daily life, as well as your investments. In the U.S., the current inflation rate is 2.2% as of July 2019.

What is inflation?

Inflation is a general upward trend in the cost of goods and services across the economy, from the price of food to the cost of housing, gas and clothing. As inflation rates rise, the buying power of currencies like the U.S. dollar falls, which means you’ll pay more for a product than you did several years ago.

However, it’s not quite as simple as comparing the cost of milk from one year to the next. Rather, economists determine inflation by looking at the prices of a “basket” of products and services and then measure the average price changes over time.

How inflation affects your money

Inflation impacts the buying power of the dollar, which in turn erodes the value of a consumer’s cash reserves. Each year, your dollars buy fewer goods and services, even if it’s a small change from one year to the next.

While inflation is largely inevitable, there are ways you can protect your money against inflation. Start by looking at your savings account. Up to 99% of savings accounts have interest rates that fall below inflation rates, which means that even as your money grows, it’s not growing quickly enough to keep up with inflation. A MagnifyMoney study found the average savings account rate is just 0.26%, well below the average 2% inflation rate.

You are most susceptible to inflation if you keep large reserves of cash rather than investing your money in vehicles that are more resistant to inflation. Look for investments that have historically appreciated at greater rates than inflation, as well as those that are specifically designed to protect against inflation. Treasury Inflation-Protected Securities (TIPS) are the most direct investments that can help keep your money safe from inflation.

Most bond investments set interest rates that account for inflation, but a TIPS investment has a principal adjustment mechanism increases with inflation and decreases during times of deflation. When your TIPS has reached maturity, you’ll be paid the adjusted principal amount or the original amount, whichever is larger. These investments pay out fixed-rate interest twice a year – the rates also rise and fall with inflation and deflation rates. TIPS are a good way to diversify your portfolio and the most direct way to hedge your money against inflation.

How inflation is calculated

Economists measure inflation with the Consumer Price Index (CPI), which focuses on how inflation affects consumers; the Personal Consumption Expenditures (PCE) index, which is more tightly focused version of CPI; and the Producer Price Index (PPI), which is based on surveys of prices businesses charge for goods and services. These three indices measure the cost of baskets of products and services, and each month reports are published on changes in CPI, PCE and PPI.

In 2016 and 2017, the CPI surveyed approximately 24,000 individuals in the U.S. Those consumers provided the CPI with detailed data regarding their quarterly spending habits, while another 12,000 provided information on their spending over a two-week period.

One easy way to understand inflation is to compare the buying power of $100 over the course of the last several decades. Think of how much rent and other housing costs have increased over the years. Those increases are likely be due to a wide variety of factors, but one of them is inflation and the declining buying power of the dollar. This graph indicates the changing value of $100 in 2019 money:

A closer look at inflation rates historically

As you can see in the graph, inflation has held pretty steady since 1940. However, there are also some aberrations that reflect the state of the U.S. economy at any given time. For example, the economy experienced deflation during the years of the Great Depression through the 1930s, when markets crashed and unemployment rates sat at historic highs. Deflation is the opposite of inflation: When the buying power of a currency increases over time.

You can also see rapid inflation growth in the 1970 to 1980 period. The Great Depression and the 1970s are outside of the norm, and the Federal Reserve Bank tempers inflation rates to keep them around 2%. The Fed aims to keep inflation rates at about this rate to provide greater spending stability for consumers, promote high employment rates and to temper long-term interest rates.

The bottom line

Inflation is inevitable, and it has a direct effect on your money. It’s important to understand how inflation affects your money and to keep an eye on the rate of inflation over time.

Despite the fact that you can’t stop inflation and the impact it has on your cash reserves, you can take steps to protect your finances from inflation. Look into investments that have inflation embedded into their returns, such as as fixed-income securities. You can also explore bond investments that account for inflation in their interest rates and principal payouts, such as TIPS.

Seek out investments that have historically appreciated more quickly than inflation has increased at a rate greater than 2% each year. You may not be able to stop inflation, but by diversifying your portfolio and monitoring the CPI over the years, you can know what to expect and how best to protect your money.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Anne Bouleanu
Anne Bouleanu |

Anne Bouleanu is a writer at MagnifyMoney. You can email Anne here