President Obama signs Dodd-Frank financial reform law, July 21, 2010.
The massive financial reform bill known as Dodd-Frank turns five on Tuesday. The White House is celebrating by issuing a handful of long overdue rules to protect service members from predatory lending, and the Consumer Financial Protection Bureau celebrates with a new $700 million enforcement action for credit card customers.
These new rules, the White House says, build on the consumer protections already achieved because of the law.
[The Department of Defense's] actions build on an historic effort to strengthen consumer protections since the President signed the Dodd-Frank Act into law on July 21, 2010. Dodd-Frank created the Consumer Financial Protection Bureau (CFPB), a first-of-its-kind consumer watchdog, which has created strong safeguards for Americans taking out mortgages, paying student loans, using credit cards, and dealing with debt collectors. The Bureau’s enforcement activities have also returned more than $10.1 billion to more than 17 million consumers. Building on that record, the Department of Labor recently proposed new rules to crack down on conflicts of interest in retirement advice, requiring retirement advisers to put their clients’ best interests first.
More than $10 billion dollars in five years is a hell of an accomplishment, making the CFPB and consumer protection arguably the biggest success so far of the law. As if to punctuate that success, the CFPB
announced a $700 million enforcement action against Citibank Tuesday, for "'deceptive marketing' practices, which included misrepresenting costs and fees and charging customers for services they did not receive" for more than 7 million customers, and for charging more than 1.8 million customers unnecessary and unexplained same-day payment fees.
The CFPB is one of the three major pillars of the law, and the other two—fixing derivatives and ending "too big to fail" banks—have had varying success. There's more transparency in the derivatives market since Dodd-Frank—derivatives being "contracts written to derive their value from the movements in the price of other things—stocks, bonds, foreign currencies, or physical commodities like oil or wheat." But there's still work to be done, including rulemaking that has been languishing for five years. Part of the problem is that two regulatory agencies are involved, the Commodities Futures Trading Commission and the Securities and Exchange Commission. Fractured rulemaking means delays, and the SEC is way behind.
Likewise, ending "too big to fail" banks has had some hiccups. It's a complicated process that involves both preventing big bank failures and winding down big banks after they fail in a way that minimizes economic damage. Last August, the biggest banks submitted "living wills," plans for winding down operations in the event of a financial disaster they were required to develop under the law. The Federal Reserve threw out all of them and ordered the banks to come back with new proposals, which were submitted last week. That's just one example of some of the hurdles left in this huge portion of the law.
Meanwhile, the law firm Davis Polk estimates that "just 63.3 percent of Dodd-Frank rules have been finalized, with 21.3 percent of the required rules not yet even proposed," and congressional Republicans still maximize every opportunity to try to repeal bits and pieces of the law. At five years, Dodd-Frank is still a work in progress, one that the Obama administration is going to have to work very hard to complete by the end of President Obama's term.