Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was signed into law by President Barack Obama on July 21, 2010, after a collapse in the subprime mortgage market spread to other financial derivatives and led to a near-failure of the entire financial system.

The 848-page document is named after Chris Dodd, who was chair of the Senate Banking Committee, and Barney Frank, who was serving as chair of the House Financial Services Committee. The act was designed to bring transparency to the over-the-counter (OTC) derivatives market, create a framework for the oversight and orderly liquidation of “too-big-to-fail” banks and other financial institutions, and enhance consumer protections.

The Dodd-Frank Act’s 16 provisions, known as titles, created new entities such as the Financial Stability Oversight Council (FSOC), the Consumer Financial Protection Bureau (CFPB), and the Orderly Liquidation Authority (OLA). The act also directed existing agencies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve to establish and enforce a new framework for the oversight of financial markets, including capital requirements, limits on leverage, and transparency of the previously opaque market for swaps and OTC derivatives.

After the Dodd-Frank Act was passed, agencies spent several years conducting research mandated by the act, working with banks, other financial institutions, and key market participants, passing hundreds of rules related to the 16 titles, and fending off challenges by industry groups and others opposed to some of the provisions. Many subsequent rulemakings have remained intact, while others have been scaled back, weakened, or repealed.

Title I: Financial Stability

Title I established two new entities.

• The Financial Stability Oversight Council (FSOC) was designed to ensure the financial system’s stability by monitoring bank and nonbank financial institutions, identifying emerging risks, and working with other agencies to mitigate threats. The council consists of 10 voting and 5 nonvoting members representing such agencies as the SEC, CFTC, FDIC, CFPB, Federal Reserve Board, the Treasury Department’s Office of the Comptroller of the Currency (OCC), the National Credit Union Administration (NCUA), and the Federal Housing Finance Authority (FHFA). The council meets regularly and publishes an annual report on the stability of the nation’s financial system, including potential risks and vulnerabilities.
• The Office of Financial Research (OFR) was designed to support the FSOC’s work through research, standardizing, and improving financial data quality to make it more useful and relevant to the FSOC and other policymakers.

Title I also authorized banking regulators—including the FDIC, OCC, FHFA, and NCUA—to set minimum capital requirements and leverage limits for entities under their jurisdiction, specifically those that trade and hold positions in swaps and other OTC derivatives.

As of 2025, the FSOC and OFR remain active and continue to carry out the missions assigned to them under Dodd-Frank.

Title II: Orderly Liquidation Authority

Before the passage of the Dodd-Frank Act, the FDIC had the authority to take over a failed financial institution and manage the wind-down or transfer of its assets and operations only if that institution were a member of the FDIC.

The mortgage crisis that began in 2007 quickly spread through the financial system. One reason was the expansion of leverage—borrowed money—among large investment banks that were not FDIC members, but held positions in trillions of dollars’ worth of derivatives. For many of those contracts, FDIC-insured banks were the other party to the agreements—known as counterparties—leaving them exposed if the investment banks defaulted. When investment bank Bear Stearns and later Lehman Brothers defaulted on derivative contracts, the nation’s top banks were put at risk.

Title II aimed to mitigate systemic risk in the case of the bankruptcy of any financial company deemed “systemically important,” not just FDIC member banks. It established the Orderly Liquidation Authority (OLA), which required the FDIC to enact rules governing the orderly liquidation or transfer of assets, liabilities, and positions of financial institutions that default.

A 2023 FDIC study on the implementation of Title II contained 17 recommendations to strengthen how it monitors and, if necessary, liquidates systemically important financial institutions.

Title III: Transfer of Powers to the Comptroller of the Currency, the Corporation, and the Board of Governors

Title III called for eliminating the Office of Thrift Supervision (OTS) and transferring oversight responsibilities to the FDIC, Federal Reserve, and OCC. Supervisory responsibility for federal savings associations was transferred on July 21, 2011, and the OTS formally shut down October 19.

Another provision of Title III relates to equal employment opportunity. Each regulatory agency was required to set up an Office of Women and Minority Inclusion to develop standards for increased participation in the financial sector by historically underrepresented groups.

Finally, Title III mandated that the FDIC raise bank reserve ratios and permanently increase the amount insured in each account to $250,000.

Title IV: Regulation of Advisers to Hedge Funds and Others

Some policymakers worried that several Dodd-Frank provisions could push risky activities from banks to the opaque world of hedge funds and other private funds. These provisions called for tighter capital controls and limits on leverage at banks and other major financial institutions, prompting concerns that risk would simply migrate to entities such as family offices, venture capital funds, and accredited investors (those with a net worth over $1 million, excluding their primary residence).

Title IV required most private fund advisers to register with the SEC and FDIC and keep records aimed at reducing systemic risk. Private funds considered systemically significant must report key information to regulators and the FSOC.

Private funds with less than $150 million and advisers who solely advise venture capital funds or family offices, however, are exempt under Title IV.

The major provisions of Title IV took effect in July 2011 and remain in force as of March 2025.

Title V: Insurance

Title V established the Federal Insurance Office (FIO), a new entity within the Treasury Department, to “monitor all aspects of the insurance industry, including identifying issues contributing to systemic risk.” FIO responsibilities include identifying gaps in insurance regulation, monitoring the availability and affordability of insurance in traditionally underserved communities, representing the U.S. in international insurance matters, and advising the Secretary of the Treasury on emerging social issues.

Title V does not allow the FIO to regulate the insurance industry (insurance is generally regulated at the state level). As of 2025, the FIO continues to carry out its Dodd-Frank requirements as part of the Treasury Department.

Title VI: Improvements to Regulation of Bank and Savings Association Holding Companies and Depository Institutions

Title VI aimed to strengthen banks and other financial institutions and reduce the risk that they could again destabilize the financial system. It directed regulators to study issues such as risk concentration and credit exposure. Banks had to maintain specific capital buffers, and the Federal Reserve was tasked with setting “countercyclical” capital requirements—that is, requiring banks to hold more capital during times of market stress.

One of the most contentious provisions of Title VI was Section 619, commonly known as the Volcker rule, which barred proprietary trading and limited certain relationships with hedge funds and private equity funds. The rule was named for former Federal Reserve Chair Paul Volcker, who led President Obama’s Economic Recovery Advisory Board and advocated for stronger financial regulations to help prevent future crises. It was intended to stop banks from speculating with their own capital and restrict the scale of their investments in private equity and hedge funds.

After years of lawsuits, implementation delays, and a few exemptions granted, the Volcker rule went into effect in 2014. Although a compliance date was set for July 21, 2015, the Federal Reserve approved a transition period of several years. Three years later, the Fed voted to loosen the restrictions.

As of 2025, under a less stringent Volcker rule, banks and bank holding companies can act as market makers; serve as agents, custodians, and broker-dealers in private funds (including private equity, venture capital, and hedge funds); and trade government securities. Banks with less than $10 billion in assets and those whose trading operations account for less than 5% of their total holdings are exempt from the Volcker rule.

Title VII: Wall Street Transparency and Accountability

Before the 2007–08 financial crisis, the multi-trillion-dollar market for swaps and OTC derivatives was loosely regulated. There was no central monitoring system, and most trades were negotiated privately between two parties using nonstandard (“bespoke”) contracts. When major swap dealer Lehman Brothers went bankrupt, default clauses were triggered in Lehman-related credit default swaps (CDS). And because Lehman’s swap portfolio consisted of more than 66,000 bespoke swap agreements, panic rippled through the financial system. 

To address the lack of oversight exposed during the crisis, Title VII aimed to bring transparency and regulation to the OTC derivatives markets. It called for greater use of electronic trading and required all firms involved in the swaps market, known as swap dealers and major swap participants, to register with regulators. It also mandated that trade data be reported in a standardized format and recorded in a central database monitored by regulators, with most trades routed through a central clearinghouse, much as they are in the futures markets.

Title VII also required swaps to trade on electronic exchanges or a newly defined venue called a swap execution facility (SEF). Jurisdiction was split between the SEC (for swaps based on a single security or company, known as security-based swaps) and the CFTC (all others).

Regulators also established rules for enforcement, whistleblower protections (see Title IX), position limits, and margin requirements for OTC derivatives.

Title VIII: Payment, Clearing, and Settlement Supervision

Title VIII required the Financial Stability Oversight Council and several of its member agencies (the CFTC, SEC, FDIC, and Federal Reserve) to examine the extent to which clearinghouses and other financial market utilities (FMUs) pose systemic risks and create a framework for monitoring FMU risks.

Section 803 defines an FMU as any “person”—meaning any legal entity—that manages or operates a multilateral system to transfer, clear, or settle financial transactions. Exchanges aren’t included in the FMU definition, although the clearing and settlement arms of derivatives exchange groups such as CME Group and the Intercontinental Exchange (ICE) are considered FMUs.

In 2011, the FSOC named eight entities as systemically important financial market utilities (SIFMUs) and identified which member agency would supervise them. The CFTC supervises SIFMUs that handle commodities, the Federal Reserve regulates those focused on banking, and the SEC oversees entities tied to securities markets.

CFTC

• Chicago Mercantile Exchange (CME), which clears and settles futures and OTC derivatives
• ICE Clear Credit (ICE), which clears and settles futures and OTC derivatives

Federal Reserve

• The Clearing House Payments Company, an interbank payment system owned by 20 top banking institutions
• CLS Bank International, which processes global foreign exchange transactions

SEC

• The Depository Trust Company, Fixed Income Clearing Corporation, and National Securities Clearing Corporation, three entities owned by the Depository Trust & Clearing Corporation (DTCC), which together process, settle, and clear all broker-to-broker transactions in the securities markets (e.g., stocks, bonds and other fixed-income securities, and municipal bonds)
• The Options Clearing Corporation (OCC), the clearing and settlement intermediary for all equity option contracts listed on U.S. markets

Title IX: Investor Protections and Improvements to the Regulation of Securities

In the aftermath of the financial crisis, policymakers identified certain gaps in protection for investors, shareholders, and whistleblowers, which Title IX aimed to close. It also addressed securitization, a practice of pooling assets like mortgages, auto loans, and credit card balances, then repackaging them into tranches and selling them to investors. Title IX required issuers of asset-backed securities to retain more of the underlying risk and provide clearer disclosure to investors.

During the financial crisis, many securities that had been rated as investment grade—even as high as AA and AAA—were subject to default and downgrade at much higher than expected rates. For example, about 75% of U.S. residential mortgage-backed securities rated AAA in 2006 were downgraded to junk bond status by 2008, according to a 2009 report by Moody’s (one of the “big three” credit rating agencies along with Fitch and Standard & Poor’s). Title IX required credit rating agencies to strengthen internal controls and procedures.

Because Title IX introduced new responsibilities for broker-dealers, investment advisers, and securities regulators, the SEC handled most of the rulemaking and oversight. Major provisions included:

• Risk retention. Under the final rules, issuers of asset-backed securities were required to keep 5% of the credit risk associated with the securities (unless the collateral backing the security consisted entirely of qualified residential mortgages).
• Whistleblowers. Employees who report alleged wrongdoing to the SEC are entitled to protections against retaliation. If their tip results in a judgment over $1 million, they may also receive a financial award from the agency.
• Executive compensation. Provisions included new say-on-pay requirements, the creation of independent compensation committees at all publicly held companies, rules on proxy access for shareholders, limits on golden parachute arrangements for CEOs and key executives, and new restrictions and reporting requirements for certain incentive-based compensation arrangements, particularly those that might expose a financial institution to a material loss.
• Risk and conflict-of-interest disclosures. Because many investors in asset-backed securities weren’t fully informed of the risks, Title IX required new fiduciary standards for investment advisers and broker-dealers, including new disclosures regarding conflicts of interest when offering securities to potential investors. 
• Improvements to credit ratings agencies. Title IX required agencies to strengthen internal controls and more closely monitor the accuracy of their past ratings, especially for asset-backed securities.
• Other studies to conduct. Title IX directed the Government Accountability Office (GAO) to examine how mutual funds market to investors and to evaluate potential conflicts of interest between firms’ investment banking and research divisions. It also required the SEC to study financial literacy among retail investors and recommend ways to improve it.

Title IX of Dodd-Frank remains intact, although a few provisions have been loosened since the law’s passage in 2011. (For example, the list of securitized products requiring risk retention broadened to include other classes of collateralized loans.) 

Title X: Bureau of Consumer Financial Protection

Title X called for establishing a new agency, the Consumer Financial Protection Bureau (CFPB). The CFPB reviews the practices of companies, banks, and lenders in the financial services industry and works to protect consumers from deceptive, unfair, and abusive practices, including fraud, discrimination, and predatory lending.

When the CFPB opened its doors officially in July 2011, it was given the power to fine companies it determined to have engaged in deceptive, abusive, or unfair practices. The bureau was also given a budget for education, offering tools and resources to help consumers understand their rights and make better financial choices. Senator Elizabeth Warren was instrumental in developing the CFPB and acted in an advisory capacity in its early days.

Although the CFPB’s mission has been favored among consumers, industry groups have decried some of the punitive actions taken by the CFPB, insisting that they are onerous, lacking oversight, and—because its annual funding comes not from congressional appropriations but rather through the Federal Reserve—may be unconstitutional.

When Donald Trump returned to the White House in 2025, he dismissed CFPB Director Rohit Chopra and appointed Russell Vought as acting director. Vought, who also heads the Office of Management and Budget, effectively shut down the bureau by declining its next draw of funding from the Fed and halting all current rulemaking and enforcement operations. As of March 2025, Jonathan McKernan had been nominated as permanent director, although his Senate confirmation was still pending.

Title XI: Federal Reserve System Provisions

Title XI was intended to add limits and transparency to the Federal Reserve. It created a new position on the Fed’s Board of Governors—the vice chair for supervision—and empowered the GAO to conduct an audit of the Fed and its practices.

Title XI also limited the Fed’s ability to provide emergency liquidity without oversight. Any such funding must be approved by the Office of the Comptroller of the Currency (OCC), a bureau of the Treasury. Within a week of taking action, the Fed must report to Congress, detailing the rationale, recipients, terms of the transaction, and expected cost to taxpayers.

In the event of a systemic liquidity event—when a major institution’s inability to meet short-term obligations threatens broader financial stability—the Fed was empowered to work with the FDIC to create a program for its orderly wind-down or transfer of funds to another institution, consistent with Title II of the Dodd-Frank Act.

Title XII: Improving Access to Mainstream Financial Institutions

Title XII was intended to establish fair access to traditional banking services—checking and savings accounts, small loans, and financial counseling—for individuals and small businesses who may have been traditionally shut out of such services. It sought to lessen lower-income borrowers’ reliance on predatory loans such as payday loans and title loans, which frequently trap borrowers in a cycle of debt. 

Despite the best intentions of Title XII, its mandates lacked the funding to affect meaningful change. Even so, predatory lending has declined in the years since the CFPB began targeting abusive loan practices. Interest rate caps and other regulations at the state level, increased scrutiny and public awareness campaigns by the CFPB (see Title X), and the growing availability of early access to direct deposit paychecks from banks, credit unions, and financial technology companies has given borrowers alternatives to traditional payday lenders, which carry annualized interest rates upwards of 400%.

As of 2023, 4.2% of U.S. households—about 5.6 million—were unbanked, meaning no one in the household had a checking or savings account, according to the FDIC. Another 14.2%, or 19 million households, were considered underbanked because they used services such as check cashing, money orders, or payday loans instead of traditional banking to manage their finances.

Title XIII: Pay It Back Act

During the darkest days of the financial crisis, the Emergency Economic Stabilization Act of 2008 was set up to prevent a collapse of the banking system and restore confidence in it. Its key provision was the Troubled Asset Relief Program (TARP), which was authorized to purchase up to $700 billion of subprime mortgages, mortgage-backed securities, and other “toxic” assets. The following year, a $787 billion stimulus package, the American Recovery and Reinvestment Act (ARRA), aimed to jump-start the U.S. economy by funding infrastructure, education, and renewable energy projects, as well as offering tax cuts and extended unemployment benefits to households.

By the time the Dodd-Frank Act passed, the economy had stabilized, and not all of the earmarked funds had been spent. Title XIII:

• Reduced the TARP authorization to $475 billion from $700 billion
• Redirected any unused ARRA funds to the general fund if unspent by the end of 2012
• Required that all remaining unspent funds go toward reducing the federal deficit

Title XIII also required the Federal Housing Finance Agency (FHFA) to submit a report to Congress detailing how it helped stabilize the housing industry and securities tied to the mortgage market and whether it had done so without burdening taxpayers. 

Title XIV: Mortgage Reform and Anti-Predatory Lending Act

The bursting of a housing bubble, largely fueled by lax lending standards and a sharp increase in subprime lending, is widely recognized as a chief trigger of the financial crisis. The eight subsections of Title XIV addressed mortgage and lending issues such as standards for origination, servicing, appraisals, foreclosure, and loan modification. It also established the Office of Housing Counseling within the Department of Housing and Urban Development (HUD).

The core of Title XIV is the amendment to the Truth in Lending Act (TILA) and Regulation Z (Reg Z) that gave the CFPB (see Title X) power to monitor lending standards. Lenders were required to conduct due diligence regarding each borrower’s ability to make mortgage payments.

Title XV: Miscellaneous Provisions

As with most large congressional acts, the Dodd-Frank Act contained several add-on pieces of legislation that covered diverse topics largely unrelated to Wall Street reform and consumer protection. Title XV includes:

• IMF loan restrictions. The International Monetary Fund (IMF) was required to calculate countries’ debt-to-GDP ratio before disbursing funds to assess the likelihood of repayment.
• Mineral extraction and mining disclosures. The SEC must require companies that use minerals sourced from the Democratic Republic of Congo to disclose their origin. It also requires public companies engaged in coal, oil, or gas extraction to report mine safety data and any payments made to U.S. or foreign governments.
• Brokered vs. core deposits. The FDIC was required to conduct a study to evaluate the impact of checking, savings, and certificate of deposit accounts held by local bank customers (core deposits) versus mobile funds brought in by third-party deposit brokers on behalf of investors  (brokered deposits) at U.S. banking institutions. The concern was that, before a bank’s failure, its asset base could grow quickly because of an influx of rate-chasing brokered deposits, making the bank’s failure more expensive for the FDIC.

Following the passage of the Dodd-Frank Act, the SEC implemented new disclosure rules. The FDIC concluded its brokered deposit study in July 2011, recommending no changes to brokered deposit statutes. Further, although the Dodd-Frank Act didn’t necessarily change the IMF’s policy of calculating debt-to-GDP ratios, the Treasury Department must ensure that the IMF conducts a debt sustainability analysis (which includes a debt-to-GDP calculation) as part of its evaluation.

Title XVI: Section 1256 Contracts

Title XVI closed a potential tax loophole by clarifying that swaps—a type of financial derivative—don’t qualify for special tax treatment under Section 1256 of the Internal Revenue Code.

In 1981, the U.S. tax code was amended to include a special tax consideration for derivatives contracts such as futures, foreign currency contracts, and options on futures and broad-based stock indexes such as the S&P 500, Nasdaq-100, and Russell 2000. Under Section 1256, all eligible contracts are marked to market at the end of the year, with 60% of the gain taxed as long-term capital gains (at the taxpayer’s marginal rate) and the remaining 40% taxed as short-term capital gains (at the prevailing capital gains rate).

When crafting Title XVI, lawmakers were concerned that giving swaps the same capital gains treatment could encourage tax gaming—letting traders time their gains or create mismatches in reporting to gain a tax advantage.

Legacy of the Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was an ambitious—but in many ways necessary—response to the 2007–08 financial crisis. It was designed to monitor emerging risks before they become a systemic threat, enhance consumer protections, and increase financial market transparency. Its 16 titles created new oversight bodies, imposed stricter rules on capital, derivatives, and mortgages, and reshaped the financial regulatory landscape.

Many provisions remain, but others have been softened or reversed, revealing the law’s vulnerability to shifting political winds. As financial innovation marches forward and memories of the fear, panic, lost jobs, and foreclosed homes fade, investors and consumers may wonder how enduring the Dodd-Frank Act’s framework of safeguards will be.