What Is the Dodd-Frank Wall Street Reform and Consumer Protection Act?

The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to simply as "Dodd-Frank," was legislation signed into law by President Barack Obama in 2010 overhauling federal regulations affecting financial institutions and their customers, explains Investopedia. The act was the result of an effort to lower risk in the U.S. financial system in the wake of the 2008 financial crisis.

Dodd-Frank established the Consumer Financial Protection Bureau to consolidate a number of different agencies that oversee credit reporting agencies, credit and debit cards, and payday and consumer loans, according to About.com. Dodd-Frank also created the Financial Stability Oversight Council, which oversees Wall Street and monitors risk across the financial industry, including in non-bank entities such as hedge funds. If the council determines that a company that it oversees grows too large, it has the authority to recommend the Federal Reserve assume regulation of that company.

Dodd-Frank implemented the "Volcker Rule," which prohibits banks from using or owning hedge funds for any purpose aside from benefiting its customers, reports About.com. The legislation extended the regulatory authority of the Securities Exchange Commission and the Commodity Futures Trading Commission to include certain types of derivatives, such as credit default swaps. Dodd-Frank also established the Office of Credit Ratings to regular credit ratings agencies and created the Federal Insurance Office to monitor the amount of risk at insurance companies.