Trump and your finances
Consumer advocates say policies will hit us squarely in the pocketbook.
When he took office, President Trump vowed to take a meat cleaver to regulations that he says have stifled corporate America 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 U.S. households squarely in the pocketbook. The White House and Republicans in Congress also have enacted a sweeping tax overhaul that will result in cuts for some but hikes for others and introduced legislation to repeal parts of the Dodd-Frank financial reform law.
“The financial markets will be skewed in favor of financial institutions rather than consumers,” if pro- posed changes are finalized, says Rachel Weintraub, legislative director for the Consumer Federation of America.
Not everyone agrees. U.S. Chamber of Commerce President Tom Donohue decried “burdensome labor regulations that hampered business operations and harmed workers; and onerous financial rules that would have suppressed retirement investment and disadvantage consumers.”
The Trump initiatives scale back, or aim to reduce:
Taxes: 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 lower-income Americans will pay no taxes while others gain from the expansion of the child tax credit.
But most of the benefits go to the wealthy, the TPC says. And by 2027, households earning $40,000 to $75,000 overall would pay billions more in taxes. Upper-middle-class house-
holds could be hurt because 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. Protections for student loan bor
rowers: The Department of Education is rewriting Obama administration rules aimed at protecting students who attended career preparation programs at for-profit colleges but failed to earn projected incomes or claimed they were misled by schools. Under a rule scheduled to take effect last July, defrauded consumers could have asked the federal government to forgive their loans. Another regulation, partly in effect, denies college programs federal funding if graduates don’t earn enough to support themselves and repay their loans.
The Institute for College Access and Success says the changes would make it easier “to defraud students and evade accountability.” But Education Secre-
tary Betsy DeVos says the rules went too far and made it too easy for students to evade debt repayment. ❚ Lawsuits 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 in class-action lawsuits. Currently, many financial firms require consumers to resolve any disagreements through arbitration.
But the financial industry says customers typically win bigger payouts through arbitration than through classaction suits, which, they argue, mostly benefit lawyers. Average relief for consumers in arbitration cases was $5,389 compared to $32.35 in class action settlements, according to a CFPB study of disputes that were resolved between 2010 and 2012. However, consumers got relief in just 9% of arbitration cases compared to about 25% of class-action suits that reached settlements.
❚ Safeguards for investors: A Labor Department regulation required financial advisers to put their clients’ best interest ahead of their own when recommending investments for retirement accounts, and to disclose conflicts. Although the standards took effect in June, enforcement effectively was delayed to July 2019 while Trump’s Labor officials seek more public input. ❚ Protections for low-income borrowers: The Consumer Financial Protection Bureau said this week it will reconsider a rule that required payday lenders to determine if borrowers can afford to repay loans before approving them. The rule, set to take effect in August 2019, also would curtail repeated attempts by lenders to debit payments from a borrower’s bank account.
CFPB officials say the regulation will fix a system that’s rigged against borrowers. Payday loans, which carry annual interest rates of 300% or more, are typically for up to $500 and are due in full by the borrower’s next paycheck. Many borrowers repeatedly roll over or refinance the loans, incurring expensive new charges each time.
But thousands of payday lenders were expected to close as a result of the constraints, and the industry says it would cut off a vital credit pipeline for financially strapped consumers.
❚ Overtime pay: The Obama administration passed a rule that would have made an estimated 4.2 million more workers eligible for overtime pay. It raised the threshold at which executive, administrative and professional employees are exempt from overtime to $47,476 from $23,660. A federal judge struck down the regulation. The Trump administration is appealing, but Labor Secretary Alexander Acosta has indicated it went too far, and he will seek a more modest increase in the threshold, making fewer workers eligible.
❚ Restaurant tips: The Trump Labor Department has proposed a rule that would allow restaurants to share waiters’ tips with employees such as cooks and dishwashers. But nothing in the proposed rule would prevent restaurants from keeping the tips themselves, Shierholz says. An Obama-era rule had clarified that waiters can keep their tips. ❚ Dodd-Frank financial reform: Since Trump took office, Congress has tried to chip away at the sweeping reform law enacted after the 2008 financial crisis. A bill passed by the House would weaken the CFPB, replacing its current funding from the Federal Reserve with appropriations from Congress and thus leaving it vulnerable to political squabbles. Besides the rules on class-action suits and payday lenders, the CFPB has created new safeguards for mortgages and sued a major student loan provider. It has returned nearly $12 billion to more than 30 million consumers who have been cheated by banks or other financial firms.