Dodd Frank

The Dodd Frank Act rewards whistleblowers with monetary compensation Dodd Frank and Consumer Protection Act

In July of 2010 President Obama signed the bill that changed the way that the large financial institutions operate. The Dodd Frank Wall Street Reform and Consumer Protection Act, or the “Dodd Frank Act” as it became known, was brought about as a reaction to the financial crisis of 2008 which saw the collapse of billion dollar financial institutions, massive down turns in the global stock markets, and of course the governmental bail out of the banks.

Dodd Frank Act Whistleblower Protection

Dodd Frank The Dodd Frank Act also has a special whistleblower provision which says that anyone who has knowledge that a company is committing fraud against the government can report that crime and receive compensation for doing so. Whistleblowers can receive 10-30% of the fees recovered as long as it is in excess of one million dollars. If you think that your company is committing fraud against the government, you should contact a whistleblower attorney immediately. It’s important to talk to an attorney well-versed with the law before you do anything else. At the Law Offices of David H. Greenberg we can help you navigate this confusing area of law and help advise you on what your next steps should be. Call us for a free and confidential consultation at 1-888-204-1014. We handle cases from across the U.S. including all fifty states.

What is the Dodd Frank Act?

Since the overriding factor in the near collapse of a global economy was placed squarely at the door of the financial institutions, one of the main aims of the Dodd Franks bill is to reduce the level of dependence upon the banking world. This is done by subjecting them to a plethora of rules and regulations, as well as breaking up companies that were in the past classed as 'too big to fail'. Now banks are required to have 'funeral plans' in place should an institution go under that will result in a quick shut down process. In essence the aim of the Dodd Frank Act is that by keeping a very tight rein on financial institutions, it means that the need should be eliminated for any future tax payer funded bail outs. Under the laws of the bill the committee will also ensure that the banks have total transparency and accountability for their actions.

Violations of the Dodd Frank Act

There are many types of Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) violations that are covered by the Dodd Frank Act. These include:

  • Insider trading
  • Ponzi schemes
  • Failure to file reports
  • Bribing foreign officials
  • Manipulations of stock price
  • Misleading or false statements
  • Misappropriation or theft of funds
Whistleblower Policy under Dodd Frank Act

To make doubly sure that this sort of thing doesn't ever happen again, the government has created a whistleblower policy under the Dodd Frank Act. This is cleverly used under the guise of something called 'qui tam' law. Qui tam is an old law and is shortened Latin for 'qui tam prodomino rege quam prose ipso in hac parte sequitir' which translated means “He who sues in this matter, is for the king and himself”. What this means is that if a person were to report any wrongdoings that effect the government, then that person can receive a share of the recovery as part of a reward. For example, if an employee knows that his company is intentionally overbilling the government for services, and he contacts a whistle blower lawyer to take his case, he could receive as much as 25% of the fees recovered. So if his company was cheating the government for $20 million, then the whistle blower stands to earn up to $5 million just for reporting the violation. This act also affords the whistle blower protection from retaliation by their employer as well as any other party who might not appreciate the whistle blowing activities.

The Consumer Financial Protection Bureau (CFPB)

In addition to the committee, an internal watchdog has been set up in order to protect consumers from unregulated and in some cases, unscrupulous banks. The commission is known as the Consumer Financial Protection Bureau (CFPB). They aim to work with the regulators within the large financial institutions to stop any risky lending practices that may eventually hurt borrowers. They operate a 24 hour hotline that will give consumers help and advice as well as access to credit control scores and unbiased information on mortgages.

Dodd Frank Act Summary- where it stands now

President Obama is determined that this sort of thing will never happen again (at least not on his watch anyhow) but the Dodd Frank bill hasn't gone through totally unopposed. On the contrary, politicians opposed to the bill say that the government has already spent over $50 million simply trying to change the law and that they fear that the power and scope that the CFPB and the committee have will mean that tightened reigns will restrict the country's power to expand overseas, thus placing America at a severe disadvantage.

Supporters of the bill feel that now stringent checks are being put in place on the financial institutions, they will start to take responsibility for their actions and as a result the economy can move forward slowly and surely, without fear of being hit by another financial crisis.

What caused the financial crisis?

The financial crisis did not happen overnight and was a culmination of valuation and liquidity issues within the US banking sector. Primarily it all started with the collapse of the housing market back in 2006. The financial institutions had already witnessed an alarming rise in the rate of defaults on sub-prime and adjustable rate mortgages due to poor lending and a lack of quality control, so to counteract the fact that house prices were in free fall, the banks began to hand out more loans. This temporarily buoyed the housing market as house prices did see a brief resurgence. The banks encouraged home owners to take out considerably larger loans in the belief that as the housing prices started to rise, home owners could pay back the loans. However the banks and financial institutions failed to predict one important factor.

In 2007 interest rates started to rise significantly and this meant that the individuals who were already overstretched financially had no chance of paying back the loans. This brought about a glut of foreclosures which had a negative effect on housing prices, which in turn took a dramatic tumble. Houses went into negative equity which meant that the loans that people took out were now worth more than the prices of their property.

During the period prior to 2007 and buoyed by large egos, the financial institutions were only too happy to give easy credit and mortgage. Credit card and car loans became child's play to obtain. This led to millions of consumers becoming laden with debt that they were hard pressed to pay back, which brought about defaults and losses on thousands of other types of loans which only managed to fuel the crisis significantly. By 2008 the financial institutions were in crisis and had lost money to the tune of multi billions of dollars, eventually bringing them to their knees. The rest as they say is history.

In 2011, significant findings by the Financial Crisis Inquiry Commission concluded that the whole crisis was indeed avoidable and blame was placed squarely within the financial institutions as widespread failures in monetary regulations were cited as the cause. In order to prevent this from happening again the Dodd Frank Bill was passed.

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