Changes to Dodd-Frank Act

Dodd-Frank Wall Street Reform and Customer Protection Act was signed into law in 2010 as a response to financial crisis of 2008 by targeting sectors that caused the crisis, banks, mortgage lenders and credit reporting agencies. It reshaped U.S. regulatory system, especially financial sector. From the beginning Dodd-Frank received criticism that it limits growth potential of financial firms and lovers overall market liquidity.

On February 3, 2017 Donald Trump signed an executive order that asked the U.S. Treasury to propose Dodd-Frank changes and a year later on May 24, 2018 President signed into law Economic Growth, Regulatory Relief and Consumer Protection Act. With this Act, Dodd-Frank wasn't repealed but some of its regulations were loosened. Consumer Financial Protection Bureau still has the control over mortgage lending and credit reporting agencies.

It was argued that regulations proposed by Dodd-Frank impose a burden on community banks and smaller financial institutions. It eased regulations for thousands of small and medium-sized banks. Under Dodd-Frank banks were deemed important financial institutions and hence subjected to strict regulations like annual stress test - measuring bank's ability to endure severe economic downturn. Size of the bank subjected to regulation was set at $50 million in assets. The new bill moved the threshold to $250 million in assets leaving fewer than 10 banks subject to strict federal laws.

The new bill also exempts small banks with less than $10 million in assets from Volcker rule that bans banks from investing in hedge and private equity funds and risky trading practices like proprietary trading. The argument was that small and medium- sized banks didn't have a role in financial crisis and that heavy regulations limits their ability to provide loans.

Equifax breach scandal urged Congress to add provision to the bill that gave consumers the right to freeze their credit for free. The bill also exempts some loan companies from certain requirements for disclosure established by Home Mortgage Disclosure Act.