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Making Sense of the Federal Reserve

Consumer Protection

Consumer Protection
Buck the tour guide

Fed examiners specially trained in consumer protection regulations examine banks for compliance with laws written to ensure that they treat consumers fairly. For example, the Fed enforces fair lending regulations which require that loan applications be judged based on the consumer's ability to repay the loan and not on the consumer's race, gender, age, neighborhood of residence, or other discriminatory practice.

Another Fed goal is to protect consumers in lending and deposit transactions.

Fed examiners not only ensure that credit costs and interest rates are stated accurately, but they also make sure they are stated clearly. For example, borrowers must not only be told the interest rate, but they must also be told the annual percentage rate (APR), fees, terms and conditions for a loan. In addition, home mortgage loans are examined to be certain that banks are charging reasonable interest rates and lending to people who can afford to pay back the loans.

The Fed also regulates banks’ issuance of debit cards. Consumers use debit cards to make purchases in lieu of using cash or checks; the purchase amount is deducted immediately from the card holder's bank account. Fed examiners ensure that these transactions are conducted fairly, fees are appropriate, and errors are resolved in a timely manner. As with examinations of loans, Fed examiners also ensure that all fees and other features of consumers’ bank accounts are stated accurately and clearly.

Community Development departments at Federal Reserve Banks also help local institutions broaden access to loans by bringing together lenders, government agencies, nonprofit corporations, and community development groups.

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