What is the primary purpose of the Dodd-Frank Act?

The primary purpose of the Dodd-Frank Act is to promote financial stability and protect consumers from abusive financial services practices. Enacted in response to the 2008 financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act aimed to address the systemic risks that contributed to the crisis, ensuring a more stable financial system.

One of the key components of the Act is the establishment of the Consumer Financial Protection Bureau (CFPB), which is designed specifically to protect consumers by providing oversight and enforcing regulations surrounding financial products and services. This includes protecting consumers from deceptive or predatory lending practices, thereby enhancing transparency and accountability in the financial sector.

The Dodd-Frank Act also implements measures such as stricter capital requirements for banks and oversight of derivatives trading to reduce the risk of future financial crises. Overall, its comprehensive approach seeks not only to prevent systemic failures in the financial system but also to safeguard consumers against financial exploitation, making consumer protection an essential element of its mission.