Financial crisis still affecting you?


If one were to compare the economy to plate movements, the 2007 financial crisis would've been the "Big One." Five years after the financial crisis, Americans are still feeling aftershocks, some more so than others.

"We had a company announcement last year at Christmastime. No end-of-year changes of pay."

"We were just talking to somebody a week ago that had been in our condominium about eight years. And it got to the point where they couldn't even afford it. They had to leave and try to find a place that cost less money for them. So they left and they were quite old, they were about 80 years old, and it made it very difficult on them and I'm sure a lot of other people are having the same problem."

"I've had friends who – obviously -- a lot who have lost their homes because we're at the age where a lot of our friends were buying homes during the bubble so a lot of them have lost their homes. And then I do have my friends who just aren't good with their money and that are feeling the heat of those things."

"For me I definitely watch my money. I'm more into using the coupons and what not. Before I thought it was ridiculous. But now I use … every little bit helps me in the long run. So even if it's $5 or $10 a week. That's what? $50 at the end of the month. So that goes a long way. I'm learning now how to really count my pennies."

Americans haven't been left to pick up the pieces by themselves. Several pieces of financial reform legislation including the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CARD Act and the American Recovery and Reinvestment Act have been signed into law to provide stimulus to the economy and protect the consumer from unfair business practices.

Greg McBride, CFA, senior financial analyst,

"There have been some provisions enacted that are good news for consumers. In particular, requiring consumer consent for overdrafts when using a debit or ATM card. I mean, this is a good one for consumers because simply no one is willingly going to incur a $35 overdraft just for a bag of chips and soda at lunchtime. Another one is with regard to the CARD Act with credit cards. Requiring that your payments be applied to the highest-rate balance first. This is another win for consumers because it alleviates that situation where you've done a balance transfer at a low rate and any payments you make are applied to that low-rate balance first and your purchases are racking up at a higher rate, that scenario has been alleviated by applying those payments to the highest-rate balance first."

One much-talked -bout part of Dodd-Frank was the Durbin Amendment. This inclusion sets caps on the interchange fees that big banks can charge to merchants when a customer swipes a debit card.

Tinkering with how banks make money is not without some unintended consequences. Remember the days when free checking could be found at nearly every bank?

"What's known as the Durbin Amendment, part of Dodd-Frank, which basically cut in half the revenue that card issuers get every time a consumer swipes a debit card. Well that revenue hole has been filled by things like the elimination of free checking accounts, higher bank fees more creative bank fees. That basically stuck the consumer with the bill while transferring a bunch of revenue from the banks into the pockets of retailers. Another unintended consequence with regard to the CARD Act, there was one provision that was a real game changer. It requires a consumer to be 60 days delinquent before the card issuer can raise the interest rate on an existing balance. Well, that's like telling an auto insurance company they can only raise the premiums after the car gets totaled. If that were the case, we'd all pay higher auto insurance premiums immediately and from a credit perspective, that's, in effect, what has happened."

How these financial reform hits and misses affect you depend on your own financial habits. For those with good credit and little debt, you may find it harder to come by good borrowing terms. For those who are likely to miss payments or overdraft, there are now limits to the hardships you'll endure as a result. To learn more about how the financial crisis is still affecting you, visit I'm Lucas Wysocki.



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