National attention is fixed squarely on health insurance reform at the moment, but bankers are currently shoring up their efforts for a fight of their own.
The looming prospect of the Consumer Financial Protection Agency, in particular, has local bankers fretting about the enormous potential costs associated with meeting a new set of regulatory requirements.
Much about the proposed agency has yet to be clarified, but bankers such as Francis Campbell of Cohasset-based Pilgrim Bank say it will undoubtedly require hiring compliance consultants and putting in dedicated hours to being within the law.
Smaller banks might not have to pay to create the agency – the Obama administration said in August larger banks would foot the bill for the office’s creation – but Campbell says the agency will have a hefty price tag for everyone.
“They’re more soft costs than hard costs, but they’re going to be there,” he said.
Consumer advocates point to the Byzantine patchwork of regulatory structures that consumers must often try to untangle when fighting unfair charges or problems with their financial dealings. As it stands now, consumer protection is split among different agencies and critics say bank regulators’ first goals are to save the bank, not protect consumers.
Another Superfluous Agency?
But with regard to community or regional banks, industry experts say they can’t see the benefit to consumers.
“If I thought it’d help, I’d say, ‘Sure, go for it,’” said Eric Luse, a partner in Washington, D.C.-based Luse Gorman, Pomerenk & Schick. But Luse and other industry players say “safety and soundness” mandates on current regulators, along with consumer protection laws, provide security already. An agency of this kind would be superfluous – and burdensome.
“It’s an overreaction,” said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University.
After 19 years of Alan Greenspan’s libertarian philosophies, he said, the pendulum has swung too far in the opposite direction.
With congressional hearings on the subject yet to being, industry groups such as the American Bankers Association and the Independent Community Bankers of America are urging members to contact lawmakers and get the idea shot down.
Michael Whalen, a partner with Goodwin Proctor, brought particular attention to part of the proposal that would require financial institutions to offer “plain vanilla” financial products – simpler products with straightforward pricing that institutions would have to prominently offer.
On a practical level, he said, that’s a problem for community banks.
“Community banks have thrived on tailoring products to the communities they serve. Now, a requirement to offer plain-vanilla terms will further commoditize these products, so you’ll find community banks have to compete on price again,” he said – and when it comes to price, they can’t compete.
“This is the first foray that I’ve seen where the regulator is in the business of designing a financial product.”
But prognostications aside, bankers and industry players wonder at the usefulness of such an agency in terms of helping customers understand how to better navigate the financial system.
Jane Lundquist, vice president of retail banking, residential lending and corporate marketing with Rockland Trust, says she’d fully support anything that would help bring customers some clarity.
But customers are already loaded down with piles of paperwork for their banking transactions – “You wonder if they even look at it anymore” – and Lundquist questioned if giving them more forms to read would really further their understanding.
“If we’re going to have an agency, my hope would be that it’s done in a thoughtful manner to make it truly easier for the consumer,” she said.
