Personal Finance

Dodd-Frank overhaul heading for likely passage in Congress. Here's how it affects you

Key Points
  • The legislation, which cleared the Senate in March, is expected to pass the House this week and head to President Trump for his signature.
  • The measure includes various provisions that affect consumers, including one that might make it easier to get a mortgage at their local bank or credit union.
  • Freezing your credit report also would become free nationwide under the bill, and other changes would affect the rules for private student loans.
House to vote on Senate banking bill next Tuesday, say sources

Legislation that would ease banking regulations — and modify rules governing credit reports and some consumer loans — is headed for likely passage in Congress.

The bill cleared the Senate in March with some bipartisan support and is expected to be voted on by House lawmakers as early as Tuesday. The House Rules Committee met Monday to nail down the procedures for considering the legislation, clearing the way for a floor vote.

The measure rolls back some of the regulations imposed by the Dodd-Frank Act of 2010. That legislation came on the heels of the financial meltdown that rocked the U.S. economy a decade ago, when risky and unaffordable mortgages contributed to millions of homeowners losing their houses to foreclosure.

The U.S. Capitol Building in Washington, D.C.
Adam Jeffery | CNBC

Among the current bill's major changes is one that would raise the threshold for when a bank is considered "systemically important" (and therefore subject to stricter regulations) to $250 billion in assets from $50 billion.

Here are some parts of the legislation that are geared toward consumers.


One of the bill's provisions could make it easier to get a mortgage from a community bank or credit union.

In simple terms, the changes would let smaller institutions — those with up to $10 billion in assets — offer mortgages that are not subject to some of the strictest federal underwriting requirements, as long as they meet certain other conditions.

The Dodd-Frank Act created a so-called "qualified mortgage." Basically, if lenders meet a variety of strict guidelines — such as ensuring a borrower's loan payment is no more than 43 percent of their income — they get legal protection if a consumer later makes a claim that they were sold an inappropriate mortgage.

What you need to know before shopping for a mortgage

The bill under consideration would let those smaller banks and credit unions still qualify for the legal protections without meeting all of the requirements that typically go with underwriting qualified mortgages.

However, the bill would still require them to assess the borrower's financial resources and debt as part of the underwriting process.

The loan also could not be interest-only or one whose balance could grow over time (so-called negative amortization). Those types of loans proliferated leading up to the mortgage crisis and contributed to homeowners' inability to keep up with their payments.

The lender also would be required to keep the mortgage in its own portfolio instead of selling it to investors. That would mean the risk remains with the bank.

Private student loans

The bill includes two provisions affecting the repayment of private student loans.

The first would prohibit a lender from declaring default or accelerating repayment terms when a co-signer of the loan declares bankruptcy or dies.

Also, if a student borrower were to die, the lender would be required to release the co-signor from any remaining debt.

Student loans are getting more expensive

The other provision would make it easier for you to remove a private student loan default from your credit report.

Basically, if a lender offers a rehabilitation program that involves a borrower resuming consistent payments on the loan, the borrower could ask the bank to remove the mark from their credit. The request could only be done once per loan.

These new rules would apply to private loan agreements entered into 180 days or more after the bill's passage.

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Credit reports

Under the bill, consumers would be allowed to put a freeze on their credit report without having to pay a fee.

Freezing your report generally blocks outside access to your file. This means a scammer can't use your personal information to get a loan or establish credit, because the potential lender can't check your report to approve the application.

The congressional push for the change came in the aftermath of the 2017 cyberattack at Equifax, in which the personal information of about 148 million consumers was compromised. The data revealed in the breach included names, birth dates, Social Security numbers, addresses and driver's license numbers.

How to protect yourself from identity theft in the wake of Equifax data breach

As it stands now, only a few states require credit freezes to be free. Consumer advocacy group U.S. PIRG estimated last year that consumers collectively would face a $4.1 billion tab to freeze their credit reports at the three largest firms: Equifax, Experian and TransUnion.

In states where fees currently are legal, consumers can pay anywhere from $2 to $10 per freeze.

The bill would also ban charging you for a temporary removal of your freeze when you want a lender to check your credit report so you can get a loan.

Additionally, short-term fraud alerts would be extended to one year from the current 90 days. These alerts are separate from freezes: Under a fraud alert, a lender seeking to approve an application must first contact you to verify the request is not from an imposter.

With such an alert, you only need to contact one credit reporting firm, which in turn is legally obligated to share your notice with others. It also already is free.

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Correction: This story was revised to correct that the Dodd-Frank "qualified mortgage" provision ensured that the borrower's loan payment was no more than 43 percent of the borrower's income.