Dodd-Frank Regulatory Overhaul Likely To Get Tweaked
The ink is barely dry on the financial overhaul bill and already some lawmakers and interest groups are looking at ways to tweak it.
Rep. Michele Bachmann (R-Minn.) has introduced a bill to repeal the measure, and it has attracted seven co-sponsors, all fellow Republicans.
While the Republican-controlled House isn't likely to repeal the bill-and if it did the Democratic-controlled Senate would almost certainly defeat the effort-House Republicans have talked about modifying certain parts of the law. The Dodd-Frank regulatory overhaul was passed last year mostly along party lines, with almost all Democrats supporting it and almost all Republicans opposing it.
On top of many wish lists is interchange. Specifically, the provision in the bill that mandates that the Federal Reserve cap interchange fees.
House Financial Services Committee Chairman Spencer Bachus (R-Ala.) has scheduled a Feb. 17 hearing on the issue and on the proposed Fed rule.
Bachus has said he wants to examine all parts of the financial overhaul, especially those that could negatively impact job growth.
CUNA and NAFCU have made the issue their top priority during the early part of this session of Congress.
"The glaring issue that needs to be addressed in the Dodd-Frank bill is the unworkable and onerous provision on interchange-and that's where we are placing all of our focus, in terms of corrections, as we know our members want it to be. The bottom line is that credit union members will end up footing the bill, with the greatest impact being on those least able to pay," said CUNA Senior Vice President John Magill.
In a letter to lawmakers, NAFCU President/CEO Fred Becker said the interchange provision was "hastily included" and will have a "damaging impact on credit unions and other small financial institutions."
The interchange provision was first added during the Senate debate on the bill when that chamber adopted an amendment by Senate Majority Whip Richard Durbin (D-Ill.).
After the legislation was enacted, the Fed proposed a rule that would cap card interchange at no more than 12 cents per transaction. According to the proposed rule, the allowable costs for interchange would be limited to no more than the issuer's allowable costs divided by the number of electronic debit transactions on which the issuer received or charged an interchange transaction fee in the calendar year. Or the issuer could receive debit interchange capped at 12 cents per transaction.
Comments on the Fed's proposed rule are due Feb. 22, and the rule must be approved by April 21 and in effect by July 21.
Rep. Barney Frank (D-Mass.) has said he will work with the GOP on minimizing the impact of an interchange cap. However, even if the House does pass something, it's less clear that the Senate would follow suit even though Banking Committee Chairman Tim Johnson (D-S.D.) voted against the Durbin amendment.
Another key part of the financial overhaul bill is the Bureau of Consumer Financial Protection, which is scheduled to begin operating this July. Lawmakers are vowing close oversight of the bureau.
NAFCU's Becker has urged lawmakers to index monetary thresholds in the measure for inflation. For example, the bureau only has the power to be the primary examiner of financial institutions with assets of $10 billion or more, including three credit unions. Becker said that without indexing "more institutions will find themselves crossing this arbitrary line and becoming subject to new and unintended requirements."
Becker also asked lawmakers to clarify the bureau's power to pre-empt consumer protection rules issued by the NCUA.
Credit unions and other financial institutions received a small bit of good news when on Feb. 1, the Fed decided to let the new consumer financial agency issue final rules on three aspects of mortgage disclosure law under the Truth in Lending Act.
The proposed rule issued by the Fed dealt with what disclosures lenders must make to consumers on the right to rescind certain loans and on disclosures concerning reverse mortgages. They dealt with Regulation Z, the regulatory statute implementing the Truth in Lending Act.
The Consumer Financial Protection Bureau will be responsible for issuing rules regarding truth in lending and the Real Estate Settlement and Procedures Act. The financial overhaul bill mandated that within 18 months of its existence, the bureau must issue proposed rules to combine TILA and RESPA disclosures.