Does the CFPB have it in for small banks?

The American Bankers Association has a bone to pick along with the CFPB, according to Investor’s Business Daily. The banking conglomerate insists that once the Consumer Financial Protection Bureau begins enforcing new Dodd-Frank Act laws concerning loan disclosure and transparency this summer, the costs of bureaucracy will send 1,000 community banks and credit unions to their doom. It’s the kind of change small banks can’t see a good reason in which to believe.

Customers protected with enforcement

The CFPB’s interim chief is Elizabeth Warren. She said that U.S. financial institutions should watch out since change is about to come and change the regulation. More than half of the Customer Financial Protection Bureau’s budget will be directed at supervision and enforcement, a fact Warren has used on multiple occasions to accentuate talk of the fervor with which the CFPB will defend the financial rights of United States consumers.

Chances a financial institution will go out of business

Several of the ABA representatives explained the Dodd-Frank rules could be devastating to banks. Over 1,000 could go out of business before the end of the decade with the rules. The ABA thinks that small banks will have to take away too many resources to be able to give the Consumer Financial Protection Bureau any information it wants whenever it is requested. The Consumer Financial Protection Bureau will most likely make an effort to determine if discrimination is happening by asking the banks to collect even more information about a borrower’s demographics in order to stop predatory lending with the Home Mortgage Disclosure Act.

ABA Chairman Stephen Wilson told Investors Business Daily that all of this amounts to bad news for community banks and credit unions, as smaller financial institutions tend to make loans that larger banks keep away from. There are fewer sources of capital if small banks start shutting down. With this, customers will have higher rates and fees. This is because it will simply be passed on.

“If we tie up our capital system, it’s going to take money away from the people who need it to create jobs,” warned U.S. Chamber of Commerce President Tom Donohue.

The battle over Elizabeth Warren

The Consumer Financial Protection Bureau does not have a chairman still even though it is anticipated to launch on July 21. Many lawmakers that support the banking industry are against Warren as the director. She will most likely get President Obama’s nomination though. Warren says that her goal is to make the Consumer Financial Protection Bureau “toothless” although Republicans are concerned too much power is being given to the CFPB.

There were sixteen rule changes with the Sarbanes-Oxley Act of 2002. Only two and half years were taken to do this. Over 250 rule changes will be required by the Dodd-Frank Act in a matter of years.

Articles cited

American Bankers Association

aba.com/default.htm

Florida Realtors

floridarealtors.org/NewsAndEvents/article.cfm?id=259538

Investor’s Business Daily

investors.com/NewsAndAnalysis/Article/572889/201105201812/1000-Small-Banks-May-Be-Shut-Down-Due-To-Dodd-Frank.htm

SEC

sec.gov/about/laws/soa2002.pdf

Rep. Sean Duffy (R-Wisc.) fights for community banks and credit unions

youtube.com/watch?v=8yqmp_kIucQ