Taxes, student loans and payday loans, reductions

When he took office a year ago, President Trump pledged to apply a meat cleaver to regulations he says have stifled American business and the economy.

But consumer advocates say some of the Trump administration’s rollbacks of Obama-era financial rules, as well as its support for new legislation, will hit American households squarely in the pocketbook. Among other things, the regulations have given Americans the right to unite in class action lawsuits against banks, to seek forgiveness for student loans generated by fraud, and to receive financial advice that is in their best interest rather than that of of their advisers.

Continued:Trump administration to revise student loan rules aimed at helping borrowers

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The White House and Republicans in Congress also signed into law a sweeping tax overhaul that will see cuts for some people but hikes for others and introduced legislation to repeal parts of the Dodd-Frank financial reform act.

“Capital markets will be skewed in favor of financial institutions rather than consumers,” if the proposed changes are finalized, says Rachel Weintraub, legislative director of the Consumer Federation of America.

But not everyone agrees. In a recent speech, US Chamber of Commerce President Tom Donohue denounced “onerous labor regulations that impede business operations and hurt workers; and onerous financial rules that would have suppressed retirement investments and disadvantaged consumers.

Trump’s initiatives reduce or aim to reduce:

Taxes

Trump touted the tax overhaul as a middle-class tax cut, and the average low- and middle-income household will realize annual savings of about $1,000 in the short term, according to the Tax Policy Center. Since the standard deduction will double, many low-income Americans will pay no tax while others will benefit from the expanded child tax credit.

But most of the profits go to the wealthy, according to the TPC. And by 2027, households earning between $40,000 and $75,000 in total would pay billions in additional taxes. Upper-middle-class households could be hit as the deduction for state and local taxes will be capped at $10,000 and the mortgage interest deduction will be limited to home values ​​up to $750,000, up from $1 million previously .

Protections for student borrowers

Education Department rewrites Obama administration rules aimed at protecting students who have completed career-prep programs at for-profit colleges but failed to earn expected earnings or claimed have been misled by the schools. Under a rule that was due to take effect last July, defrauded consumers could have asked the federal government to cancel their loans. Another regulation, partially in force, denies federal funding for college programs if graduates don’t earn enough to support themselves and repay loans.

The Institute for College Access and Success says the changes would make it easier “to defraud students and evade accountability.” But Education Secretary Betsy DeVos said the rules went too far and made it too easy for students to escape debt repayment.

Lawsuits filed by bank and credit card customers

A rule passed by the Consumer Financial Protection Bureau (CFPB) and set to take effect next spring would have allowed customers of banks, credit card companies and others to join class action lawsuits. Currently, many financial companies require consumers to resolve any disagreements through arbitration.

Consumer advocates say customers deserve to have their day in court. They cite the credit rating agency Equifax cyber breach and the rogue accounts scandal at Wells Fargo as examples justifying class action lawsuits. But the financial industry says clients typically win bigger payouts through arbitration than through class action lawsuits, which they say primarily benefit lawyers. According to a CFPB study of disputes that were resolved between 2010 and 2012, the average consumer relief in arbitration cases was $5,389, compared to $32.35 in class action settlements. However, consumers got relief in only 9% of arbitration cases, compared to about 25% of class actions that resulted in settlements.

Guarantees for investors

A Department of Labor regulation required financial advisers to put their clients’ interests before their own when recommending investments for retirement accounts and to disclose conflicts. Although the standards went into effect in June, their application has effectively been delayed from early 2018 to July 2019 as Trump Labor officials seek more public input.

Protections for low-income borrowers

The Consumer Financial Protection Bureau announced this week that it would reconsider a rule that required payday lenders to determine whether borrowers could afford to repay loans before approving them. The rule, which is expected to come into effect in August 2019, would also reduce repeated attempts by lenders to debit payments from a borrower’s bank account.

CFPB officials say the settlement will fix a system that is rigged against borrowers. Payday loans, which carry annual interest rates of 300% or more, are typically up to $500 and are due in full by the borrower’s next paycheck. Many borrowers repeatedly refinance or refinance loans, each time incurring costly new fees.

But thousands of payday lenders had to close due to the constraints, and the industry says it would cut off a vital credit pipeline for financially-struggling consumers.

Overtime payment

The Obama administration passed a rule that would have made about 4.2 million additional workers eligible for overtime pay. It increased the threshold at which managerial, administrative and professional employees are exempt from overtime to $47,476 from $23,660. A federal judge struck down the settlement last year. The Trump administration is appealing the decision, but Labor Secretary Alexander Acosta said it had gone too far and would seek a more modest increase in the threshold, making fewer workers eligible.

Restaurant tips

Trump’s Labor Department has proposed a rule that would allow restaurants to share servers’ tips with employees such as cooks and dishwashers. But nothing in the proposed rule would prevent restaurants from keeping tips themselves, Shierholz says. An Obama-era rule had specified that servers could keep their tips.

“In each of these cases, it’s about wresting influence from workers and transferring it to employers,” says Heidi Shierholz, senior economist at the left-leaning Institute for Economic Policy.

The Dodd-Frank financial reform

Since Trump took office, Congress has tried to undo sweeping reform legislation enacted after the 2008 financial crisis. A bill passed by the House would weaken the CFPB, replacing its current funding of the Federal Reserve with appropriations from Congress and thus leaving it vulnerable to political wrangling. In addition to rules on class action lawsuits and payday lenders, the CFPB has created new collateral for mortgages and sued a major provider of student loans. It has earned nearly $12 billion from more than 30 million consumers who have been cheated by banks or other financial companies.

A Senate proposal would give homebuyers greater access to mortgages, but Weintraub says it would make it easier to review riskier loans, increasing default risks for less creditworthy borrowers. These defaults contributed to the financial crisis.

Contributor: Kevin McCoy

About Judith J. George

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