Legal Definitions - Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act is a law that was signed in July 2010. It made changes to the way financial regulations are handled. The goal of the law was to prevent another financial crisis like the one that happened in 2008.

Some of the major provisions of the Dodd-Frank Act include:

• Creating the Consumer Financial Protection Bureau to protect consumers from unfair financial practices
• Requiring banks to hold more money in reserve to prevent them from taking on too much risk
• Requiring companies to disclose more information about their executive pay and the risks they take
• Creating a new agency to oversee the trading of complex financial instruments

For example, the creation of the Consumer Financial Protection Bureau was meant to help prevent predatory lending practices that had contributed to the 2008 financial crisis. By requiring banks to hold more money in reserve, the law aimed to prevent them from taking on too much risk and potentially collapsing. Requiring companies to disclose more information about their executive pay and the risks they take was meant to increase transparency and accountability.