Regional banks’ argument against the CFPB misguided

The Consumer Financial Protection Bureau (CFPB) is coming under fire in Congress. The CFPB supervises the activities of banks with over $10 billion in assets. The “Consumer Financial Protection Bureau Examination and Reporting Threshold Act of 2014” would change the CFPB “big bank” threshold from at least $10 billion in assets to at least $50 billion in assets, decreasing the number of banks the CFPB currently supervises by two-thirds. The Dodd-Frank Act gave the CFPB authority to supervise the largest banks in the United States, but changing the threshold would make a big impact on the number of banks the CFPB monitors and an even bigger impact on the number of consumers the CFPB could protect.

Proponents of raising the threshold argue that small banks, or community banks, would benefit from this change. According to an American Banker article, small bankers believe that the rules intended for big banks are negatively impacting community banks, ultimately impeding their ability to grow. Sen. Elizabeth Warren stated in an article in The Hill that big banks are using small banks as an excuse to weaken regulation that primarily affects big banks.

The Federal Deposit Insurance Corporation’s quarterly report shows that community banks (defined as banks with assets between $100 million and $10 billion), have been growing in number and assets since 1985. Overall, by the end of 2013, 68 percent of community banks had assets between $100 million and $10 billion, which means 68 percent of community banks already are not subject to the CFPB rules that apply to larger banks. A blog on Credit Slips highlighted additional ways in which CFPB regulatory burden has been reduced and access increased for community banks. They include, but are not limited to:

  • The Dodd-Frank Act exempts community banks from examination and enforcement by the CFPB
  • The CFPB must go through a special process to create rules for community banks
  • The CFPB created community bank exceptions for certain rules
  • The CFPB voluntarily created a community bank advisory board

The CFPB has made great strides in protecting consumers from predatory practices of financial institutions. In June 2014, the CFPB ordered that Synchrony Bank pay back $225 million to 746,000 customers for “deceptive credit card add-on practices and discriminatory debt relief promotions.” Synchrony Bank has $46 billion in assets. If the CFPB “big bank” threshold was raised to $50 billion, Synchrony Bank customers would not have received financial justice.

Limiting CFPB’s authority over community banks with assets over $50 billion so that it covers only 38 banks would be detrimental for consumers. Woodstock supports maintaining CFPB’s existing level of authority over community banks so that more consumers will be protected.