A year and a half ago, U.S. legislators passed the most sweeping law to hit the financial industry since the Great Depression in response to the more recent Great Recession, with the intent to prevent it from happening again.
What the Dodd-Frank Act has accomplished so far is to squeeze revenues of financial institutions and delay the economic recovery, say local bank and credit union officials.
“We’re longer coming out of the recession because jobs are not going to be created as quickly.
We will lose credit unions and community banks from communities that really need them to drive their individual economies.
We’re going to have to pass on the cost of this to consumers, so the cost of them using financial products is going to be higher,” said Stephen Wilson, chairman and chief executive officer of LCNB National Bank.
Customers are already starting to see debit card fees and potentially checking account fees, harder qualifications to get a loan and increases in paperwork to buy a house, said Wilson and Tim Boellner, president and CEO of AurGroup Financial Credit Union based in Fairfield.
Wilson, the outgoing chairman of the American Bankers Association, and Boellner, also chair, Ohio Credit Union League Board of Directors, recently sat down with the JournalNews to discuss the impact of the law so far, which has yet to be fully implemented.
Public Citizen, a consumer advocacy group in Washington, D.C., said the act doesn’t do enough and it’s meant to reform a reckless industry that blew up the economy in 2008.
“The job killer was the reckless financial industry,” said Bartlett Naylor, Public Citizen’s financial policy advocate.
“What is galling to me and why community banks should be saying the opposite of what they’re saying now is the problem community banks say they’re facing is not because of red tape, but because the American economy is struggling to find consumers.”
Wilson and Boellner, who met for the first time for the joint interview, said the sheer volume of Dodd-Frank, at 5,382 pages, can put small financial institutions out of business.
“The bottom line is that Dodd-Frank is just so incredibly overwhelming, it’s so over the top, it’s so like nothing else we’ve ever had,” Wilson said.
The average institution has approximately less than $100 million in assets with 30 employees, Wilson said. Some American Bankers Association members now employ more compliance than loan officers, he said.
“You can’t do this. You cannot comply with this,” he said.
In addition to banks and credit unions hiring more compliance officers, the impact of the 23 percent of the law implemented to date has been to cut revenues from debit card interchange fees for financial institutions and increase their capital requirements so they have less to lend, Wilson said.
However, they also said LCNB and AurGroup are more liquid than ever because people are saving more money, but loan demand is weak.
The pendulum has swung from one extreme before the housing bubble burst and helped start the recent recession in late 2007 to the other extreme, they said.
“They’re going to over-fix the problem that was created,” Boellner said. “I’ve said all along that free checking is going by the wayside if they continue to do that.”
Dodd-Frank has created new regulations that add uncertainty to the economy, stifling investment and growth in Ohio, said Sen. Rob Portman, R-Ohio in a statement.
“We need pro-growth structural reforms that give consumers more confidence and job creators more certainty and incentives to invest.
This includes tax reform, smart regulatory relief, robust domestic energy production, an aggressive new trade policy that expands exports, better worker retraining to create a competitive workforce, and a credible plan to rein in Washington’s record debt and deficits,” Portman said in a statement.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was a response to promote financial stability in the U.S. by improving accountability and transparency, end too big to fail, end bailouts and protect customers from abusive financial practices, according to text of the act on the U.S. Securities and Exchange Commission website.
The three biggest changes to date have been the Durbin Amendment on debit card interchange fees, the Collins Amendment on capital requirements and increased costs of compliance, Wilson and Boellner said.
The Federal Reserve Board in June issued a final rule to implement the Durbin Amendment to Dodd-Frank that became effective Oct. 1.
The Federal Reserve ruled the maximum interchange fee allowed that an issuer may receive for an electronic debit transaction is the total of 21 cents.
If the card issuer meets standards for fraud prevention programs, they could receive up to approximately 24 cents per debit card transaction, according to the Federal Reserve.
Institutions with assets of less than $10 billion are exempt from the debit card interchange fee standards, according to the Federal Reserve.
“Whether you’re $10 billion in assets or $10 million in assets, it doesn’t really matter because all these regulations trickle down,” Boellner said.
Wilson said the debit card interchange fees have gone from generating revenues for banks to become break even or a loss for the costs of processing, fraud and infrastructure.
middletownjournal.com
What the Dodd-Frank Act has accomplished so far is to squeeze revenues of financial institutions and delay the economic recovery, say local bank and credit union officials.
“We’re longer coming out of the recession because jobs are not going to be created as quickly.
We will lose credit unions and community banks from communities that really need them to drive their individual economies.
We’re going to have to pass on the cost of this to consumers, so the cost of them using financial products is going to be higher,” said Stephen Wilson, chairman and chief executive officer of LCNB National Bank.
Customers are already starting to see debit card fees and potentially checking account fees, harder qualifications to get a loan and increases in paperwork to buy a house, said Wilson and Tim Boellner, president and CEO of AurGroup Financial Credit Union based in Fairfield.
Wilson, the outgoing chairman of the American Bankers Association, and Boellner, also chair, Ohio Credit Union League Board of Directors, recently sat down with the JournalNews to discuss the impact of the law so far, which has yet to be fully implemented.
Public Citizen, a consumer advocacy group in Washington, D.C., said the act doesn’t do enough and it’s meant to reform a reckless industry that blew up the economy in 2008.
“The job killer was the reckless financial industry,” said Bartlett Naylor, Public Citizen’s financial policy advocate.
“What is galling to me and why community banks should be saying the opposite of what they’re saying now is the problem community banks say they’re facing is not because of red tape, but because the American economy is struggling to find consumers.”
Wilson and Boellner, who met for the first time for the joint interview, said the sheer volume of Dodd-Frank, at 5,382 pages, can put small financial institutions out of business.
“The bottom line is that Dodd-Frank is just so incredibly overwhelming, it’s so over the top, it’s so like nothing else we’ve ever had,” Wilson said.
The average institution has approximately less than $100 million in assets with 30 employees, Wilson said. Some American Bankers Association members now employ more compliance than loan officers, he said.
“You can’t do this. You cannot comply with this,” he said.
In addition to banks and credit unions hiring more compliance officers, the impact of the 23 percent of the law implemented to date has been to cut revenues from debit card interchange fees for financial institutions and increase their capital requirements so they have less to lend, Wilson said.
However, they also said LCNB and AurGroup are more liquid than ever because people are saving more money, but loan demand is weak.
The pendulum has swung from one extreme before the housing bubble burst and helped start the recent recession in late 2007 to the other extreme, they said.
“They’re going to over-fix the problem that was created,” Boellner said. “I’ve said all along that free checking is going by the wayside if they continue to do that.”
Dodd-Frank has created new regulations that add uncertainty to the economy, stifling investment and growth in Ohio, said Sen. Rob Portman, R-Ohio in a statement.
“We need pro-growth structural reforms that give consumers more confidence and job creators more certainty and incentives to invest.
This includes tax reform, smart regulatory relief, robust domestic energy production, an aggressive new trade policy that expands exports, better worker retraining to create a competitive workforce, and a credible plan to rein in Washington’s record debt and deficits,” Portman said in a statement.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was a response to promote financial stability in the U.S. by improving accountability and transparency, end too big to fail, end bailouts and protect customers from abusive financial practices, according to text of the act on the U.S. Securities and Exchange Commission website.
The three biggest changes to date have been the Durbin Amendment on debit card interchange fees, the Collins Amendment on capital requirements and increased costs of compliance, Wilson and Boellner said.
The Federal Reserve Board in June issued a final rule to implement the Durbin Amendment to Dodd-Frank that became effective Oct. 1.
The Federal Reserve ruled the maximum interchange fee allowed that an issuer may receive for an electronic debit transaction is the total of 21 cents.
If the card issuer meets standards for fraud prevention programs, they could receive up to approximately 24 cents per debit card transaction, according to the Federal Reserve.
Institutions with assets of less than $10 billion are exempt from the debit card interchange fee standards, according to the Federal Reserve.
“Whether you’re $10 billion in assets or $10 million in assets, it doesn’t really matter because all these regulations trickle down,” Boellner said.
Wilson said the debit card interchange fees have gone from generating revenues for banks to become break even or a loss for the costs of processing, fraud and infrastructure.
middletownjournal.com
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