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Financial Flash Newsletter

Legislative Update: Government Approves Financial Reform

On July 21 the President signed into law the “Dodd-Frank Wall Street Reform and Consumer Protection Act,” legislation intended to overhaul the way the federal government regulates the financial industry.

This new law, enacted in response to the 2008 financial crisis, is the result of about two years of debate. Key provisions are expected to have far-reaching consequences.

Creation of a Consumer Financial Protection Bureau (CFPB)
Under the law, a new, watchdog government agency (housed within the Federal Reserve) is tasked with safeguarding consumers of financial products.

  • The Bureau will have the ability to regulate credit counseling, payday loans, mortgages, & credit cards, as well as a wide array of other financial products.
  • The Bureau will be the place for consumers to voice complaints about various business practices (e.g., issues with practices in the debt relief services industry).
  • The Bureau will have multiple offices including a new, national Office of Financial Literacy, which is tasked with improving Americans’ financial literacy through various activities to include “providing opportunities for consumers to access financial counseling” and doing research on financial counseling.

Creation of an Office of Housing Counseling
The law establishes an Office of Housing Counseling within the U.S. Department of Housing and Urban Development for the purpose of boosting homeownership and rental housing counseling.

  • The statute authorizes a total of $45 million for this new office and for grants/assistance to “entities providing homeownership and rental counseling.”
  • The director of this office will receive advice from a 12-member advisory committee whose membership must “equally represent the mortgage and real estate industry, including consumers and housing counseling agencies certified by the Secretary."

Mortgage Counseling Requirements
The law imposes new requirements that are supposed to protect consumers of certain mortgages.

  • The statute requires that a first-time home buyer seeking an Adjustable Rate Mortgage must first receive housing counseling from a HUD-certified agency.
  • Pre-loan counseling is required for certain high cost mortgages.

Next Steps - Regulations have yet to be written implementing many of the bill’s provisions and a number of issues have been left to regulators to decide. The rulemaking process occurs over the upcoming months to further articulate the statute's implementation.

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