A recent study by the American Enterprise Institute (“AEI”) highlights the burdens imposed by the Dodd-Frank Act, which created the CFPB and rewrote the book on regulatory compliance concerns for banks and financial institutions. The full report, The Impact of Dodd-Frank on Community Banks, provides extensive references to support its analysis of the burdens that smaller institutions will face as a result of Dodd-Frank. Some of the key conclusions include:
- The community banking system serves unique needs and areas that are often bypassed by larger institutions. The report explains how nearly 3,000 banks have fewer than 30 employees (p. 4).
- Dodd-Frank furthers the trend toward “too big to fail” because its regulations will lead to greater asset consolidation in a smaller group of institutions (p. 6).
- With respect to the CFPB, the report highlights Section 1026 of Title X that allows the CFPB to “require reports . . . as necessary” to support its mission, and the corresponding inability of community banks to assess the impact of a rule that permits a regulatory agency to require reports whose content and scope is unknown (p. 32).
- Compliance costs are far more burdensome for small institutions, citing examples of several community banks that have not increased lending staff but have had to hire significantly more people in the compliance group.
Reports such as this one highlight the particularly problematic areas of the Dodd-Frank Act for community banking and other financial institutions. Industry participants should focus on pushing these issues and objective data to the CFPB in order to influence rulemaking. As shown by the CFPB’s recent about-face on the credit card ability-to-repay rule (Regulation Z), which it initially issued a few months ago, efforts to influence rulemaking could make the Dodd-Frank requirements less burdensome for smaller institutions.
If you have questions or wish to comment on CFPB rulemaking efforts, contact Spilman or regulatory counsel.