The start of the new Congress marks a fresh opportunity to address critical issues to help our country thrive and prosper. To that end, the National Association of Federally-Insured Credit Unions (NAFCU) recently presented Congress with our 2017 priorities. Regulatory relief and the repeal of the Durbin amendment are top among our priorities.
The impact of excessive regulation cannot be overstated. It slows economic growth, hampers innovation, stymies job growth and pushes compliance costs to astronomical levels. The Competitive Enterprise Institute (CEI) estimated that federal regulations cost $1.885 trillion in 2015. Based on these costs, CEI describes federal regulation as an unseen tax that costs about $15,000 per U.S. household.
The Dodd-Frank Act of 2010 represents a pendulum that has swung too far to the side of overregulation. This law, passed in response to the 2008 crisis, was supposed to be aimed at the bad Wall Street actors and the unregulated financial service providers.
Instead, Dodd-Frank has mired credit unions—the financial institutions of Main Street—in a regulatory swamp. Virtually every rule impacting credit unions, especially those promulgated by the Consumer Financial Protection Bureau (CFPB), is more complex and repressive than the previous one, and the costs continue to escalate.
For credit unions—not-for-profit, member-owned financial cooperatives—the costs of overregulation have been dramatic. Total compliance expenses have grown an estimated 59 percent since Dodd-Frank, and they are expected to grow 86 percent over the next three years. Credit unions have lost approximately 20 percent of the industry since the second quarter of 2010, when Dodd-Frank was enacted.
Today, there are only 5,844 federally-insured credit unions. Credit unions provide financial services with low fees, competitive interest rates and exceptional service. As credit unions disappear, there are fewer low-cost options for consumers. Regulatory relief for credit unions is necessary to allow these institutions to continue to meet the needs of their more than106 million members.
The Durbin amendment, which caps interchange fees on debit-card transactions, was added in the 11th hour to the Dodd-Frank Act, and it has been a colossal failure on many fronts. It has failed to generate any meaningful savings for consumers. After nearly six years, merchants have pocketed roughly$8 billion a year in additional profits, money they promised to pass along to their customers in the form of lower prices.
A study by the Federal Reserve Bank of Richmond found that 99 percentof merchants have either raised prices, harming consumers, or left them unchanged since the Durbin provision was implemented.
Another failure of the Durbin amendment is that the legislation increased costs on many of the same community banks and credit unions that were supposed to be exempt from this law. The provision’s burdensome network routing and exclusivity provisions have resulted in substantial and recurring administrative costs for institutions that were supposed to be protected from the harmful effects of the Durbin amendment.
The last six years have demonstrated the hollowness of retailers’ claims that the Durbin amendment would result in lower prices for their customers. It is time to recognize that Congress must reverse a law that has failed to do what its champions promised it would do.
Repealing the failed Durbin amendment and enacting meaningful regulatory relief during the 115th Congress are to priorities for credit unions, in order to help them better serve their 106 million members and to benefit American consumers at large.
B. Dan Berger is president and chief executive officer of the National Association of Federally-Insured Credit Unions (NAFCU), an industry association that provides credit unions with federal advocacy, education and compliance assistance.