WASHINGTON – Small banks are struggling to comply with the Dodd-Frank Act, which was passed to regulate the financial industry in the wake of the 2008 financial crisis, said Rep. Scott Tipton.
The Republican from Cortez received some national attention this week for challenging Federal Reserve Chairwoman Janet Yellen to support his plan to ease the burden of Dodd-Frank on small banks.
The Consumer Financial Protection Bureau, which the Dodd-Frank Act created, already has returned more than $10 billion to consumers who complained to the bureau about companies they suspected of breaking the law.
Congressional challenges to the consumer bureau continued Thursday afternoon with a hearing on the agency’s constitutionality before the Senate Judiciary Committee.
C. Boyden Gray, a lawyer in the principal court case challenging the consumer bureau’s authority, told members of the committee that the bureau threatened his bank’s ability to grant “character loans” that smaller institutions make.
Mike Burns, president of Alpine Bank for the Southwest region, said in a phone interview that Dodd-Frank is creating head winds.
“We really want to focus our time and energy in supporting the communities in which we operate,” he said. “This (dedicating staff to ensure compliance) creates a distraction for us.”
But the U.S. District Court for the District of Columbia ruled against State National Bank of Big Spring, Texas, which is represented by Gray, mainly because it failed to show any actual harm.
“They must have suffered an injury in fact that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical,” the court wrote.
Gray and Burns are both concerned about what they see as looming regulations. The Consumer Financial Protection Bureau rules apply only to banks with assets of more than $10 billion that participate in proprietary trading or investment activities.
Alpine Bank, as a much smaller institution, reports to the Colorado Federal Deposit Insurance Corporation.
But Burns said Alpine Bank’s payroll costs have increased as the bank prepares for increased regulations in the future stemming from the Dodd-Frank Act.
“Only two-thirds of the law has been implemented. We’re ramping up for what’s coming,” he said.
Tipton, acting on concerns Burns expressed to him, asked Yellen to support his bill requiring regulators to consider the consequences of their legislation on smaller banks.
In testimony Thursday before the Senate committee, Adam J. Levitin, a professor at Georgetown University Law Center, said the Consumer Financial Protection Bureau already has implemented advisory boards on small banks and credit unions, and the boards include representation by members of the industry. He added that the consumer bureau is one of only three agencies required to comply with the Small Business Regulatory Enforcement Fairness Act.
Danny Katz, executive director of the Colorado Public Interest Research Group, defended Dodd-Frank.
Reached by phone, Katz said of Tipton’s bill to modify Dodd-Frank, “There’s an assault on Dodd-Frank every day in five different ways in the House, so it’s tough to keep track of all of them. I’m at a loss for why Congress is reviewing the constitutionality of the CFPB because previous constitutional challenges at the courts have all been thrown out.”
firstname.lastname@example.org. Mariam Baksh is a student at American University in Washington, D.C., and an intern for The Durango Herald.