Government Banking Regulations

How do government regulatory agencies and laws affect organizations? Choose one or two specific regulatory requirements and explain what effect they have on organizations. How do they differ domestically and internationally?

There are two types of government regulation of business,

* general government regulation: regulation that can be applied to various industries;

* specific government regulation: regulation that applies to specific industries.

The main purpose of government regulatory agencies is to protect consumers and individuals from possible tort or fraud from businesses.

In banking world, the newest important regulation is Dodd-Frank Bank Reform Bill. the bill was introduced by senator Chris Dodd (hence the name) on March 15, 2010, passed by the Senate on May 20, 2010 and revised by the House of Representatives on June 30, 2010. President Obama signed the bill on July 21, 2010. The main objective of the bill is to lessen the possibility of future financial crisis by regulating non-bank financial companies, like hedge funds.

Also the new bill is supposed to increase Federal Reserve's Authority to regulate the economy.

After final signing the new reform, government set up a new Consumer Financial Protection Agency (CFPA) under Federal Reserve. This agency consolidated consumer protection from different other agencies. So now CFPA will oversee credit and debit card operations, consumer loans, excluding auto lending. It will protect consumers from excessive credit and debit card fees, and mortgage and bank fees. For the banking industry, new agency requires banks to verify information on the borrowers, such as their income, credit scores and employment.

As mentioned above, agency is housed within Federal Reserve but the director will be appointed by President.

There are some flaws in this new regulation, one is that the agency does not have any authority on the auto industry, and according to J.D. Power and Associates almost three quarters of new cars are financed through car dealerships.

But despite some flaws the new agency is hoped to help consumers with the lending and mortgage operations, and also help merchants with discounts on the credit and debit cards transactions.

And in conclusion, there is one more benefit for the consumers through this new regulatory body: if you as a consumer try to apply for a loan and get denied, or quoted a high interest rate, you will now be entitled to a free copy of your credit score. And though you will only be given a number, this will allow you to have the information you need to start either building your credit or fixing it.

So based on the information I was able