Financial CHOICE Act Will Reform Business-Killing Dodd-Frank
Touted as strong pro-consumer legislation, the Dodd-Frank financial regulation bill enacted in 2010 has cost consumers billions and limited consumer access to key financial services. Dodd-Frank, along with many other heavily regulatory big government policies of the Obama Administration, has impeded economic growth and suppressed job creation.
Thankfully, with the election of president-elect Donald Trump and Republican majorities in both houses of Congress that campaigned for reforming government and repealing needless regulations, there is a realistic chance for passage of the Financial CHOICE Act, a bill that will take the teeth out of this business-killing legislation in one fell swoop.
In 2010, consumers enjoyed near universal access to free checking accounts, from the large national banks as well as smaller and community banks. Never letting a good crisis go to waste, such as the financial crisis of 2008, Democrats in Congress passed, and President Obama signed into law, Dodd-Frank in 2010. Two years later, only 39 percent of banks nationally were offering free checking accounts. Most bank re-instituted monthly fees on consumer accounts to recover the costs of compliance with the regulations imposed under Dodd-Frank.
Sponsors of Dodd-Frank also argued it would benefit consumers to lower the interchange fees charged by banks to retailers when consumers pay for their purchases with credit and debit cards. They argued that retailers would pass these saving along to consumers at the cash register in the form of lower prices. While the lower fees added up to an estimated $36 billion in six years, none of these saving were passed along to consumers. The Durbin Amendment resulted in a giant crony-capitalist benefit for big box retailers, who pocketed the money in the form of increased profits. Consumers never saw any benefit, contrary to the claims of Dodd-Frank’s supporters in 2010.
Worse, the legislation also created a new, almost unaccountable, financial regulatory agency called the Consumer Financial Protection Bureau (CFPB), that derives its funding from the Federal Reserve so Congress can't exercise budgetary control over the agency. The CFPB sought to impose draconian regulations on several financial services industries -- some so severe that they would have likely put most small-dollar lenders out of business if implemented.
Dodd-Frank has proven costly to consumers and has resulted in almost none of the benefits its sponsors had promised back in 2010. But there is a strong proposal to reform this disastrous legislation-- the Financial CHOICE Act sponsored by Rep. Jeb Hensarling (R-TX).
The Financial CHOICE Act will free businesses from needless and strangling regulations, including the Durbin Amendment that placed failed price controls on the interchange fees, as well as the Volcker Rule, which prohibits banks from making risky trades with their own money. The Financial CHOICE Act’s reforms will free banks and other financial services providers to offer more choices to consumers, allowing them to invest more money in the economy to help create more jobs.
At a time when unemployment remains high and economic growth is stagnant, both changes will greatly benefit the American people. Better yet is that the legislation will also reform the structure and funding of the CFP to hold it accountable and reduce its almost unlimited authority over financial services industries.
Voters elected a new president and Republican majorities in both houses of Congress to reform government, deregulate the economy and bring about prosperity and strong job creation. Enacting the Financial CHOICE Act will go a long way to achieving all of those goals. The American people sent a strong mandate for this on Election Day, now it's time for Congress to act by passing the Financial CHOICE Act to reform and correct the errors of Dodd-Frank.