Which of the following was created to protect consumers from deceptive financial practices?
A) Sherman Act
B) Wheeler-Lea Act
C) Celler-Kefauver Act
D) Dodd-Frank Act
E) Robinson-Patman Act
The correct answer and explanation is:
Correct Answer: D) Dodd-Frank Act
Explanation:
The Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly known as the Dodd-Frank Act) was enacted in 2010 in response to the 2008 financial crisis. It was designed to reduce risks in the financial system and protect consumers from abusive financial services practices.
A key component of the Dodd-Frank Act was the creation of the Consumer Financial Protection Bureau (CFPB). This independent agency was established specifically to enforce consumer protection laws and ensure that consumers are treated fairly by banks, lenders, and other financial institutions. The CFPB monitors mortgages, credit cards, student loans, payday loans, and other financial products to prevent deceptive, unfair, or abusive acts or practices.
The Dodd-Frank Act includes regulations to:
- Increase transparency in financial products.
- Hold Wall Street accountable by imposing stricter rules on banks and financial institutions.
- Prevent future bailouts by establishing mechanisms for safe liquidation of failing firms.
- Regulate derivatives and risky speculative investments.
- Provide whistleblower protections and rewards.
In contrast, here’s why the other options are incorrect:
- A) Sherman Act: Passed in 1890, it addresses monopolies and anticompetitive practices, not consumer financial protection.
- B) Wheeler-Lea Act: Focuses on false advertising and unfair trade practices, but not specific to finance.
- C) Celler-Kefauver Act: Amends antitrust laws to prevent corporate mergers that reduce competition, not consumer protection from financial products.
- E) Robinson-Patman Act: Deals with price discrimination in commerce, not financial services or consumer protection.
In summary, the Dodd-Frank Act was created specifically to guard consumers against deceptive and abusive financial practices and to ensure the stability and fairness of the financial system.