Six years ago in September, following a decade of under-regulation, reckless Wall Street practices crashed our economy. Two years later, in July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since then, the process of turning the financial reform legislation into implementable law has frequently been stalled. Armies of well-financed lobbyists representing banks and industry interests have labored to water down and delay the rules, but still, consumers are reaping huge benefits from the legislation. These accomplishments are exemplary of the way our regulatory system should work to hold corporations accountable and protect the public from harm, but they are only the first steps on a longer journey to financial security and regulatory transparency.
Without a doubt, the Consumer Financial Protection Bureau (CFPB), first envisioned by then-Professor Elizabeth Warren, has had an incredible impact on the ability of consumers to make informed decisions about financial goods and services. Since beginning to accept consumer complaints in July 2011, the CFPB has now reviewed more than 395,000 complaints on products ranging from credit cards to mortgages to student loans. This public record of complaints, along with educational tools and programs, has greatly reduced the types of predatory lending and misleading advertising that sent many consumers into debt leading up to the 2008 financial crisis.
However, powerful industry interests have taken advantage of the fact that the other regulators tasked with implementing the law, the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), must rely on congressional appropriations for their funding. By lobbying Congress to starve the agencies of funds and resources, Wall Street representatives have succeeded in delaying many of the rules mandated by Dodd-Frank. To date, 208 of the 398 rules associated with the initial legislation have been finalized, and of the 190 rules waiting to be implemented, 96 requirements have yet to even be proposed.
These rules are critical for protecting the country from a similar financial crisis. Here are the top three that consumers should know and care about:
1. Under Dodd-Frank, the SEC has the authority to prevent professional brokers from misleading consumers. As it stands today, brokers acting as financial advisers can make bad investment recommendations to unsuspecting consumers for their own profit. This rule has been stalled repeatedly by fierce opposition from industry representatives who benefit from these exploitive practices.
2. Another important provision under Dodd-Frank addresses executive compensation. Many of the highest-paid CEOs in the finance industry needed to be bailed out after the 2008 financial crash. The SEC has the authority to require companies to report their CEOs’ compensation, as well as the median compensation of all other employees, allowing the public to compare these values and make judgments about the type of company they are supporting through their investment. This is necessary to bring more attention and transparency to issues like income inequality and social mobility that consumers have a right to know about.
3. Although Dodd-Frank allows the SEC to more closely regulate credit ratings agencies, little has changed since the 2008 financial crash. These are the very agencies that gave toxic mortgage securities triple-A ratings, fueling the housing bubble and leaving the economy in disarray after the crash. The SEC can and should prevent the ratings agencies from getting paid by the very companies whose securities they are assessing.
Financial reform garnered widespread attention from millions of Americans of all backgrounds and political identities – particularly those who lost their jobs and homes because of Wall Street greed. It is this unprecedented support from the public that allowed congressional leaders and champions of reform to fight hard to pass the Dodd-Frank legislation. We must continue that fight to bring security to our markets by promoting greater transparency, holding offenders of the law accountable, and pushing regulators to fully implement Dodd-Frank. This is just one example of the way regulation of all kinds ensures that families who work hard and play by the rules can build a better future for themselves and their children.