CIPP-US practice question 4 of 25

Which of the following is an important implication of the Dodd-Frank Wall Street Reform and Consumer Protection Act?

Answer options

A: Financial institutions must avoid collecting a customer’s sensitive personal information

B: Financial institutions must help ensure a customer’s understanding of products and services Correct answer

C: Financial institutions must use a prescribed level of encryption for most types of customer records

D: Financial institutions must cease sending e-mails and other forms of advertising to customers who opt out of direct marketing

Correct Answer:

B. Financial institutions must help ensure a customer’s understanding of products and services

Explanation

A central purpose of the Dodd-Frank Wall Street Reform and Consumer Protection Act was to enhance consumer protection in the financial sector. It established the Consumer Financial Protection Bureau (CFPB), which is tasked with ensuring that financial products and services are fair, transparent, and not deceptive. A key implication is that financial institutions have a greater responsibility to ensure that consumers understand the terms, costs, and risks associated with financial products. This is achieved through clearer disclosures (e.g., "Know Before You Owe" mortgage forms) and the prohibition of unfair, deceptive, or abusive acts or practices (UDAAP).

Why Incorrect

A. Dodd-Frank focuses on the fair and transparent use of information, not a mandate to avoid collecting necessary sensitive information.
C. While data security is regulated (e.g., by the GLBA Safeguards Rule), Dodd-Frank does not prescribe specific encryption levels.
D. Marketing opt-outs are primarily governed by other laws like CAN-SPAM and the GLBA Privacy Rule, not Dodd-Frank.

References

1. Consumer Financial Protection Bureau. (n.d.). The Dodd-Frank Act. "The Act created the Consumer Financial Protection Bureau (CFPB) to ensure that prices, risks, and benefits of financial products are clear and easy to understand." Retrieved from https://www.consumerfinance.gov/rules-policy/dodd-frank-act/

2. Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010). Title X, "Consumer Financial Protection Act of 2010," establishes the CFPB with the objective "to ensure that...consumers are provided with timely and understandable information to make responsible decisions about financial transactions."

3. Solove, D. J., & Schwartz, P. M. (2021). Information Privacy Law (7th ed.). Wolters Kluwer. Chapter 10, Section C.3, discusses how Dodd-Frank and the CFPB aim to simplify consumer financial disclosures to improve consumer understanding.

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