Does the Consumer Financial Protection Bureau have it in for small banks?

Investor’s Business Daily reports that the American Bankers Association is less than thrilled with the CFPB in the future. The banking conglomerate insists that when 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 one thousand community banks and credit unions to their death. It’s the kind of change small banks cannot see a good reason in which to believe.

Soon there will be change

Elizabeth Warren, the interim chief of the CFPB, has warned that “change is coming” and that all United States financial institutions will have to play by new rules. Supervision and enforcement will take over half of the Consumer Financial Protection Bureau’s budget, which Warren has made clear in her speeches about the U.S. customers having the bureau to protect them now.

Chances a bank will go out of business

By the end of the decade, over 1,000 banks will most likely go out of business if the Dodd-Frank rules are established, according to ABA representatives. The ABA thinks that small banks will have to take away too several resources to be able to give the CFPB any information it wants whenever it is requested. Furthermore, the Home Mortgage Disclosure Act’s eye against predatory lending will reportedly require banks to collect more borrower demographic information than ever before so that the CFPB can determine whether discrimination is happening.

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. The more small banks that shut down, the fewer capital sources remain accessible. Wilson explains that consumers will end up with higher rates and fees this way.

“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.

Some don’t want Elizabeth Warren

Though the organization is slated to launch July 21, the CFPB still doesn’t have a permanent chairperson in place. Obama will most likely nominate Warren although lawmakers are not so keen on the idea if they support the banking industry. 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 Consumer Financial Protection Bureau.

There were sixteen rule changes with the Sarbanes-Oxley Act of 2002. Only two and half years were taken to do this. The Dodd-Frank Act will require more than 250 rule changes over several years.

Citations

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