What this means to consumers is that if they are provided with a loan or extension of credit at less than the best possible rate of that institution, the consumer has the right to be provided a full accounting of that decision. This law also applies if a consumer is declined for credit. So, instead of receiving a letter of adverse action (denial) with a list of vague reasons for denial and the name and address of the credit bureau that you would have to contact to obtain a credit report, the financial institution will have to provide you with a credit score and the 4-5 key factors that impacted the lender’s decision.

This legislation also creates an independent watchdog at the Federal Reserve called the Consumer Financial Protection Bureau. This watchdog will have the power to ensure that consumers are provided transparency in the terms of financial products. This will also allow the federal government to watch the activities of financial institutions to help avoid another economic disaster.

In addition to banks, mortgage lenders and loan servicers, companies providing payday loans, student loans, as well as debt collectors and consumer reporting agencies will be examined and regulated by this new independent watchdog.