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Throwing the Baby Out with the Bath Water
Tuesday, February 21, 2017 6:35 AM

Steve Gibbs, CUCE, BSACS, AVP Shared Compliance, Credit Union Resources

On Feb. 3, 2017, President Donald Trump issued a memorandum for a review of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Ultimately, this action will facilitate the paring-back and possible repeal of the Act. 

For most financial institutions, particularly credit unions and community banks, this is a “win” in efforts to relax overly stringent regulations. Following this news, I was having lunch with a friend who is a retired IT professional. He said, “Hey, I hear the President is repealing Dodd-Frank and will be getting rid of all the others [regulations].” 

Although this guy is not an insider to the financial industry, he voiced something I’ve heard continuously (recently) from industry professionals: the regulations are going away. Is this true? I’m afraid not! Although the President has stated that two regulations must be taken away for every regulation added, this doesn’t change the large number of those in effect at this time.

In recent years, we’ve heard the onslaught of regulations referred to as avalanche, tidal wave, tsunami, and other unstoppable disasters. The sheer volume of the Dodd-Frank Act at 2,000 pages wore out many printers and copy machines. But in dismantling it in total, are we “throwing the baby out with the bath water”?

We all recall the near-collapse of our financial system almost ten years ago and the Wall Street Banks that created that disaster. Some elements of Dodd-Frank were made to ground the high-flyers by putting limits and monitoring requirements on banks considered too big to fail.

But for all the shortcomings of Dodd-Frank, should we judge all regulations in the same way?

Regulation Z (Truth-in-Lending), as well as its counterpart, Truth-in-Savings, were established to allow consumers to compare and shop for desirable rates, for loans and deposit accounts. Regulation B (Equal Credit Opportunity Act) came about as a measure to prevent prejudgment and discrimination in lending practices. Regulations E and CC were introduced as vehicles for informing consumers about how their transactions (both card and deposit) are carried out. With our efforts to provide financial education to this generation of consumers, no one can argue that these rules are needed to better inform and enlighten. 

For those people who would like to live in a world without regulation, I propose we take the next step:  get rid of all the traffic laws, stop signs, and traffic lights. Not only can you do what you want when you want, you can go where you want, as fast as you want. But remember, you’ll spend the rest of your life having to always be cautious of the other guy, in business and on the street.