Industry Gives Mixed Reaction To Dodd-Frank Bill

ry reaction to yesterday's U.S. Senate passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act was divided between praise for some of the legislation's objectives and concern that it may create new problems. Edward L. Yingling, president and CEO of the American Bankers Association, said that while the legislation included some reform measures that the industry supported – particularly the creation of a systemic regulatory body and the end of the too-big-to-fail concept – its ultimate impact may be problematic. ‘While its core provisions provide needed reform, it is overloaded with new rules and restrictions on traditional banks that did not cause the financial crisis,’ Yingling said. ‘The result will be over 5,000 pages of new regulations on traditional banks and years of uncertainty as to what the massive new rules will mean. Its impact will be felt not only by the banking industry itself, but by the millions of consumers and businesses that rely on financial services every day to meet their saving, borrowing and financing needs. It will also, by extension, have a considerable impact on the broader economy and the capability of traditional banks to provide the credit needed to create jobs and drive economic growth.’ Fred Becker, president of the National Association of Federal Credit Unions, echoed Yingling's concerns. ‘While we appreciate and support the need to rein in Wall Street's bad actors, we are greatly disappointed that this far-reaching legislation contains provisions that will hamper credit unions' ability to provide low-cost financial services to 92 million Americans,’ Becker said. ‘Credit unions have been widely recognized for not contributing to the financial crisis because of their prudent and consumer-friendly business practices. Yet this bill will punish credit unions with unnecessary new regulation and restrictions on their ability to offer free checking and debit card programs.’ Becker also noted the legislation's interchange fee amendment, which he stated would not help consumers. ‘Contrary to popular belief, consumers will pay more for products and services because of this legislation,’ he continued. ‘Credit unions will be severely disadvantaged in a marketplace tilted toward bigger players as they struggle to offer products and services to their members at competitive rates and with low fees.’ Bill Cheney, president and CEO of the Credit Union National Association, also expressed disappointment on the interchange aspect of the legislation. However, he noted that much of the legislation was not aimed at the credit union industry, adding that the new law is constructed to help credit unions with under $10 billion in assets avoid the oversight, examination and enforcement of the new Consumer Financial Protection Bureau. Cheney also stated that while credit unions will not pay for the funding of the new bureau, the industry's regulator – the National Credit Union Administration – will maintain a seat on its board. The Independent Community Bankers of America issued a statement that while it ‘still vigorously disagrees with some sections of the final bill,’ it was satisfied that the legislation affirmed an ‘important precedent that recognizes two distinct sectors within the financial services spectrum: Main Street community banks and Wall Street megabanks.’ Two consumer advocacy groups with strong involvement in the mortgage banking sector issued statements praising the legislation as bringing new transparency to the financial services industry, but they rued that it took too long for the legislation to come to fruition. ‘The tragedy is that so many millions of families have had to lose their homes and financial stability before lawmakers took action,’ said the Center for Responsible Lending. ‘The next step must be to help those ensnared by the predatory products that federal regulators allowed to flourish over the last two decades. And we must turn quickly to putting in place new consumer protection rules under the new law to prevent abusive lending in the future.’ ‘Over the last three years, older Americans have lost billions of hard earned dollars due to the failure of an outdated and compromised financial regulatory system,’ said Bob Gallo, Illinois senior state director for the AARP, which lobbied for the bill's passage. ‘The failures that led to this crisis require bold action to restore responsibility, accountability and consumer confidence in our financial system, and this bill will protect Americans' money and help stabilize our entire economy.’ However, Gibran Nicholas, chairman of the CMPS Institute, an Ann Arbor, Mich.-based organization that trains and certifies mortgage bankers and brokers, believed more problems were down the road. ‘The massive financial reform law that just passed Congress has two main components that could very negatively impact homeowners and homebuyers in the future,’ he warned, adding that the legislation increase mortgage rates while making it more difficult for borrowers to qualify for a home loan. ‘To be clear, there are a few positive elements to the bill,’ Nicholas said. ‘These include consumer protections involving pre-payment penalties and loans originated in states that have laws that prohibit lenders from pursuing judgments against homeowners who owe more than the value of their homes. However, the main takeaway for homeowners and buyers is that is that mortgage rates are currently very low, and lending guidelines are not as bad as they could be once the new law goes into effect. This means that if you can qualify for a mortgage now, you should do so, and not gamble your homeownership goals on the future impact of the new law


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