What is Dodd Frank Compliance?

by Dori Tery on December 14, 2013

Financial Institutions Must Make Sure They Are In Dodd Frank Compliance Before They Approve Mortgages

After years of not holding Wall Street and banks accountable, 2008 brought the United States a financial disaster that was of a magnitude not seen since the early 1900s when the Great Depression hit the country. Businesses were forced to close their doors, people lost their homes and over 7 million jobs were lost. Personal savings were cleaned out, and many people were placed in situations unlike anything the country has seen in over 70 years. As a result of the turmoil, new legislation was passed and part of the legislation requires that all financial institutions are in Dodd Frank Compliance.

There are several parts of the law that should be highlighted so that people are aware of how the law will change the way that people and lenders are able to go through any financial transactions.

Dodd Frank Compliance – Consumer Protection

A new watchdog group has been formed, and this group is headquartered in the Federal Reserve. This group was created to make sure that the American people get the accurate information they need when they are in the market to purchase mortgages or other types of financial products. This information is given to prevent consumers from unclear terms, hidden fees and other questionable practices.

Dodd Frank Compliance – Advance Warning System

In accordance to being in dodd frank compliance, a secondary agency has been formed that will identify and report systematic threats to the national economy. These threats can be considered:

  • Complex companies
  • Financial products
  • Financial activities

These threats will be identified and handled promptly so the economy stays stable.

Dodd Frank Compliance – Executive Compensation

The amount of money that CEOs, CFOs and other executives will be paid is now regulated. Shareholders are now given the opportunity to state their opinion on the salaries of executives. They will voice their opinion via a non-binding vote.

Making Exotic Instruments More Transparent

Another highlight of the law is that greater transparency and accountability will be required for instruments such as:

  • Hedge funds
  • Payday lenders
  • Mortgage brokers
  • Asset-backed securities
  • Mortgage brokers

The Consumer Financial Protection Bureau

There are several layers or departments of this bureau. This bureau acts as the watchdog to ensure consumers are protected. The levels and departments are as follows:

The Independent Head is the part of the bureau that is ran by an independent director. This director is appointed by the President of the United States. This person is confirmed by the Senate.

The independent budget is the budget that is set by the Federal Reserve System. It is also paid by the Reserve.

The consumer hotline is set up so consumers are able to report any problems they encounter with financial products and/or services.

This watchdog group also handles accountability. When several agencies are handling the responsibility for accountability, it is easy for problems and issues to go unnoticed. This department is responsible for consumer protections.

The Dodd Frank compliance requirement has changed the way that mortgages and other financial instruments are distributed to consumers. These regulations are in place to prevent another financial crisis from occurring in the country.

dodd frank compliance

Watch the Video – Dodd Frank Compliance Training

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