The Right Choice to Roll Back Dodd-Frank

This week, the House Financial Services Committee marked up and passed landmark legislation, H.R. 10, the CHOICE Act. If it can get signed into law, this bill can help small businesses, Americans who are struggling economically, and improve congressional oversight. Not bad for government work.

Rep. Jeb Hensarling (R-Texas ), chairman of the committee, introduced the bill which would right many of the wrongs committed by the Dodd-Frank Act. That law from the left has acted like a restrictor plate on the American economy. Two components of the Dodd-Frank Act, the Durbin amendment, and the establishment of the Consumer Finance Protection Board (CFPB), have been onerous obstacles to economic growth in the United States.

H.R. 10 would repeal the Durbin amendment, thus undoing a provision of central planning that is contrary to capitalism. The Durbin amendment, included as part of the Dodd-Frank Act “required the Federal Reserve Board of Governors to cap the debit card interchange fees that large banks charge,” as explained by Norbert Michel of the Heritage Foundation. How unconventional was the Durbin amendment? As one expert wrote,

“The Durbin Amendment’s regulation of debit interchange represents a radical effort to extend price regulation to areas in which it has never been attempted before. That effort was undertaken in response to strong factional industry pressures, but without any serious examination of how payment systems operate.”

The consequences of the Durbin amendment have been dire. As the fee was capped, banking revenue dropped. Banks had to make up the shortfall. As the committee explained, the Durbin amendment resulted in a decrease of free checking accounts, increased minimum balance requirements, and increased deposit fees. The freefall in free checking accounts harmed those households most in need, according to the committee.

H.R. 10 remedies the economic injustice and market distortion of the Durbin amendment by eliminating it. The role of the federal government isn’t to substitute its judgement for that of markets and restrict consumer choice. The CHOICE Act’s repeal of the Durbin amendment promotes consumers over bad policy, and opportunity over economic obstruction from misguided lawmakers.

The CHOICE Act would also institute important reforms to CFPB. Created by the Dodd-Frank Act, CFPB is charged “with rulemaking, enforcement, and supervisory powers over many consumer financial products and services, as well as the entities that sell them.” That sweeping power should come with significant oversight, but it doesn’t. Currently the CFPB is funded by the Federal Reserve, placing it outside the funding oversight of the American people.

H.R. 10 would bring CFPB under the appropriations process in the House and Senate, instead of the current practice where  the Federal Reserve funds the agency. This will improve congressional oversight of CFPB. Under the legislation, the CFPB would also have to “obtain permission before collecting personally identifiable information on consumers.” This is a key reform since as of 2014, CFPB had collected “up to 600 million credit cards, 11 million credit reports, 700,000 auto sales, 10.7 million consumers, co-signers and borrowers, 29 million active mortgages, and 5.5 million private student loans.” The CHOICE Act would rein in this intrusive practice.