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Visions of Halloween Past and Christmas Future

By Blair Rugh 31 May 2017

The Dodd Frank Act which was passed on July 21, 2010, created more of a compliance burden on community banks and credit unions than any single piece of legislation that has ever been enacted. While it wasn't passed on Halloween it contained just as many witches, ghosts and goblins. One of the announced goals of the Trump administration is to reduce regulatory burden, in particular many of the rules of Dodd Frank; hope may be on the way. The Financial Services Committee of the House of Representatives has passed the Financial CHOICE Act amending many of the provisions of Dodd Frank. While this is a relatively small step, it is a step in the right direction and gives hope that someday soon there will be a gift in bankers' Christmas stockings. Relative to issues for community banks and credit unions, the most significant change that the legislation would cause is a reformation of the Consumer Financial Protection Bureau (CFPB). It would be renamed the Consumer Financial Opportunity Commission and would become an independent agency outside of the Federal Reserve whose funding would come from congressional appropriation. It would have a dual purpose; the protection of consumers and the promotion of market competition. All regulations would be required to have an initial and thereafter, periodic cost/benefit analysis and would be subject to review by congress. The commission would be run by a five member board and would have its own inspector general. Its employees would be compensated on the General Services scale and its facilities would be run by the General Services Administration, it would also be much easier to make judicial challenges of Commission actions.


The legislation also makes four specific changes to Dodd Frank requirements. If the commission is going to publish complaint data it must first verify the accuracy of the complaint. Second, the term, "abusive" is deleted from the UDAAP definition and it reverts to the old UDAP rules. Third, the Durbin amendment which places limits on debit card interchange fees is repealed, and finally the prohibition on arbitration clauses in consumer financial contracts is eliminated.


The Financial Services Committee determined that the unintended consequences of the creation of the CFPB did more harm than the intended good. The ranks of the unbanked has grown, the availability of credit has been reduced to low-income persons and small businesses. The price of basic banking services has increased and consumers have been pushed into more expensive credit options.

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