At what point?
The CFPB 1071 proposal represents another layer of regulation and is a driver of consolidation.
The Federal regulatory environment is a mess. As you will read in the Your Advocate column, the FDIC’s independence is now in serious question after a partisan power move politicized its board after 88 years of stability. And the Biden Administration intends to make an already complex regulatory environment for banks more burdensome.
What is the objective of all this regulation and the heavy-handed Federal approach? If you listen to the Administration’s agency leaders, they will tell you it is to protect consumers and to expand access to financial resources for everyone. But time and time again, their approach produces the opposite result.
On January 6, comments were due for the latest proposed layer of regulation — the CFPB’s proposed Section 1071 small business reporting requirements. The proposed regs, a result of the Dodd-Frank Act, emerged after being in limbo for nearly a decade. Most banks already spend about a third (or more) of their time and resources on meeting regulatory and compliance requirements. CFPB’s 1071 proposal would mandate that banks collect 21 new data points, further draining resources away from consumer and small business lending.
The CFPB 1071 proposal represents another layer of regulation and is a driver of consolidation. And still to come? Climate reporting on your bank and your customers. Acting Comptroller Michael Hsu says large institutions will be first. But he has been clear that community bank climate reporting will come if the Administration has its way. And make no mistake, the Administration still wants to find a legislative path to impose IRS reporting requirements.
In TBA’s 1071 comment letter we stated:
“At what point do community banks get to spend their time, personnel and resources on lending and expanding access to credit rather than spending them on compliance and reporting to the federal government? Regulators cannot say on the one hand that they respect the role of community banks and that they want to see them expand access to credit and capital, while, on the other hand, exacting laborious policies that crush the ability of community banks to do just that.”
I would hope that CFPB would listen to voices outside of Washington and withdraw the proposal. Or at the very least, they should delay implementation until they better understand the negative impact of these proposed regulations on community banks and small businesses as required by law. But I’m not optimistic.
Complaining, however, will not bring about the change necessary to respond to our customers and communities rather than to the ideologues and bureaucracy.
If you’re upset with what you see, and if your employees are frustrated with the impact on their work, we must act now. Encourage all bank employees to get involved, to register, vote and to give. Reach out to me, Celeste Embrey, John Heasley or Wynn Baker at TBA to find out how you can help. TBA has the tools, information and resources to make it easy for your bank and employees to take action. Beating back IRS snooping in 2021 showed what we can do when we are united. What we do together in 2022 will be far more consequential.