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Aids Provided By The Consumer Protection Act And Dodd-Frank Wall Street Reform

Consumer Protection

The Dodd-Frank Wall Street Reform and the Consumer Protection Act are both considered to be the massive pieces of financial reform legislations passed by the former Obama administration in 2010. This was primarily done in response to and to deal with the effects of the great financial crisis of 2008.

The facts and features of Dodd-Frank Wall Street Reform are:

As of now, President Donald Trump has sworn to repeal this Act and on May 22, 2018, the House of Representatives also voted to roll back a few significant pieces of Dodd-Frank Wall Street Reform.

The break down

While breaking down the Dodd-Frank Wall Street Reform and the Consumer Protection Act you will see that the primary monitors are The Financial Stability Oversight Council and Orderly Liquidation Authority.

Similarly, the responsibility of the new Federal Insurance Office is also separated and designated to identify and monitor all insurance companies that are also considered as “too big to fail.”

Role of the CFPB

The role of the Consumer Financial Protection Bureau, CFPB is also distinguished as they are supposed to prevent any predatory mortgage lending. This reflects the fact that the extensive sentiment that the subprime borrowers in the mortgage market was the fundamental cause of the 2008 catastrophe.

While most of the money lenders follow these rules strictly but there are still a few that may take the benefit of your ignorance about the money lending laws by following a few dishonest practices. It is for this reason you visit sites such as https://www.libertylending.com/ or any other third party review sites to make the right choice of lender.

The useful components

The components of the Dodd-Frank Wall Street Reform and the Consumer Protection Act are all useful for the borrowers especially though several rights and risks of the money lenders are also protected by these Acts.

One of the most significant components of Dodd-Frank is the Volcker Rule in the Title VI of the Act. According to this rule there are lots of limitations and restrictions imposed to the banks and financial institutions such as:

Ideally, with so many restrictions imposed on the banks and financial institutions, the Volcker Rule is openly a push back to the direction of the Glass-Steagall Act of 1933. This was the law that first accepted the intrinsic dangers of the financial entities while extending their commercial as well as investment banking services.

The CPA contains specific provisions for regulating the different derivatives such as the credit default swaps. This was the widely blamed contributor to the 2008 financial crisis. These exotic financial derivatives when traded over the counter pose a significant amount of risk to the economy at large due it extensive size of market as opposed to any centralized exchanges such as commodities and stocks.

These Acts set up the centralized exchanges for such swaps trading and in turn reduce the chances of any counterparty default. It also provides specific swap trading information through greater disclosure to the public. This eventually increases transparency in these markets.

In short, these Acts along with the Volcker Rule regulates the financial firms to prevent them from failing and wreak havoc on the broader economy.

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