Making good on promises made earlier this year, the House Financial Services Committee, under the leadership of its chairman, Rep. Jeb Hensarling (R-TX), has introduced The Financial CHOICE Act to reform our financial regulatory system. This legislation repeals The Durbin Amendment and several other economically destructive regulations imposed by the enaction of the Dodd-Frank financial regulations law signed by President Barack Obama in 2010. A key part of Dodd-Frank being eliminated is The Durbin Amendment that put in place restrictions on the “interchange fee” charged to retailers for processing payments via credit and debit cards.
The excessive regulatory complexity imposed by Dodd-Frank has created a less resilient financial system that has caused great harm to economic growth. The regulatory scheme gave competitive advantages of the “too big to fail” firms as the expense of others. The complexity and government micro-management under Dodd-Frank caused basic financial services to be less accessible to small businesses and lower-income Americans while putting America’s small and medium-sized community financial services providers under a crushing regulatory burden.
The fix for the problems created by Dodd-Frank is coming forward; The Financial CHOICE Act, that will soon be debated in Congress. This legislation will reform burdensome regulations, lead to much needed economic growth in the financial services and the economy overall, and lead to consumers have more choices in financial services.
While most major banks offered free checking in 2010, just six year after Dodd-Frank, only 39 percent of banks offer checking accounts without regular monthly fees. The increased cost of business incurred by the enacting of the Durbin Amendment was inevitably passed along to consumers. After Dodd-Frank was signed into law, several major banks responded shortly after by charging monthly fees of five dollars of more on basic checking accounts that had been previously offered without monthly fees.
“According to a 2015 study by researchers at Harvard University’s Kennedy School of Government entitled “The State and Fate of Community Banking,” the “increasingly complex and uncoordinated regulatory system [embodied by Dodd-Frank] has created an uneven regulatory playing field that is accelerating consolidation [among community financial institutions] for the wrong reasons.” The study described a post-crisis competitive landscape characterized by “community banks’ declining market share in several key lending markets, their decline in small business lending volume, and the disproportionate losses being realized by particularly small community banks,” The House Financial Service Committee reports.
Rep. Hensarling has made good on promises take up a strong pro-consumer regulatory reform agenda, including repealing the Durbin Amendment. The legislation introduced will free the economy of jobs-killing and excessively draconian regulations.
Dodd-Frank has done much economic damage in the last six years. Lower-income Americans have less access to much needed credit products while the availability of key banking services, such as free checking accounts, has shrunk. While 75 percent of banks offered free checking before Dodd-Frank, the Committee reports that has fallen to just 37 percent by 2015. Bank fees have risen dramatically, including the growth of monthly services fees by 111 percent since Dodd-Frank. Unbanked Americans, who are disproportionately lower-income Americans, have risen from 9.1 to 9.6 million. Credit card interest rates have risen 200 point higher and there are 15 percent fewer credit card accounts now than there were in 2008.
Rep. Hensarling and the Financial Services Committee are working strongly in the public interest, and doing the jobs the American people sent them to Washington D.C. to do, by bring forward The Financial CHOICE Act to remedy the problems caused by Dodd-Frank. Now Congress and fix those mistakes made in 2010 by enacting this strongly pro-consumer and pro-economic growth legislation.
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