Small banks and credit unions feel the CFPB is brandishing a big whacking stick. (Photo Credit: CC BY/dullhunk/Flickr)

The Consumer Financial Protection Bureau has been called out by the American Bankers Association, reports Investors Business Daily. The banking conglomerate insists that once the CFPB begins enforcing new Dodd-Frank Act laws regarding loan disclosure and transparency this summer, the costs of bureaucracy will send 1,000 community banks and credit unions to their doom. It’s the kind of change small banks can’t see a good reason for.

Strong enforcement arm in consumers’ corner

Elizabeth Warren, the interim chief of the CFPB, has warned that “change is coming” and that all U.S. financial institutions will have to play by new rules. More than half of the Consumer Financial Protection Bureau’s budget will be directed at supervision and enforcement, a fact Warren has used on multiple occasions to accentuate talk of the fervor with which the CFPB will defend the financial rights of U.S. consumers.

Community banks and credit unions fear their own Rapture

ABA representatives have stated publicly that if Dodd-Frank rules go into effect as they are currently written, more than 1,000 banks will be forced out of business before the end of the decade. As the CFPB will be able to request any information it wants at any time and in any format, the ABA believes that the strain of compliance will take too many resources away from small banks’ customer service efforts. Furthermore, the Home Mortgage Disclosure Act’s eye against predatory lending will reportedly require banks to collect more borrower demographic information than ever before so that the CFPB can determine whether discrimination is occurring.

ABA Chairman Stephen Wilson told Investors Business Daily that all of this amounts to bad news for community banks and credit unions, as smaller financial institutions tend to make loans that larger banks avoid. The more small banks that shut down, the fewer capital sources remain available. This is passed on to consumers in higher rates and fees, argues Wilson.

“If we tie up our capital system, it’s going to take money away from the people who need it to create jobs,” warned U.S. Chamber of Commerce President Tom Donohue.

The battle over Elizabeth Warren

Though the organization is slated to launch July 21, the CFPB still doesn’t have a permanent chairperson in place. Elizabeth Warren will likely be nominated by President Obama, but numerous lawmakers who support the banking industry have attempted to derail the Warren nomination. House Republicans believe the CFPB will have too much power, while Warren has countered that her critics’ true goal is to make the CFPB “toothless.”

By way of comparison, the Sarbanes-Oxley Act of 2002 – one of the more significant pieces of financial regulatory legislation, pre-Dodd-Frank – changed 16 rules over two-and-a-half years. The Dodd-Frank Act will require more than 250 rule changes over several years.

Sources

American Bankers Association

Florida Realtors

Investors Business Daily

Sarbanes-Oxley Act of 2002

Rep. Sean Duffy (R-Wisc.) fights for community banks and credit unions

Consumers fed up with bailouts, bonuses and bogus fees are switching to local banks and credit unions by the millions. Image: CC bk1bennett/Flickr

Wall Street banks watched their customers jump ship by the millions in 2010. Community banks and credit unions have watched their clientele grow as consumers disgusted with bailouts, big bonuses and deceptive fees move their money. A driving force behind the movement is the “Move Your Money” project, a campaign that assists consumers who want to divest from Wall Street and invest in local financial institutions.

Big bank defections a growing trend

Wall Street banks, in a game of cat and mouse with regulators, are devising creative new ways to gouge consumers as traditionally abusive practices are outlawed by financial reform. Big banks bet that their customers are too lazy, busy or negligent to notice they are getting nickeled and dimed into giving up dollars. For example, many banks that can no longer charge usurious overdraft fees have discontinued free checking. Carly Fried at MoneyWatch reports that in a recent presentation to shareholders, a Chase executive boasted of making about $1 billion simply by converting 8 million free checking accounts into a revenue stream generating $10 to $12 in monthly fees. But that windfall could be short-lived. The largest banks lost more than 4 million accounts last year. According to the research firm Moebs Services, 7 million to 9 million more accounts could move to community banks and credit unions in 2011.

The Move Your Money campaign

Consumers who question the new checking account fees are often told by their banks that the government forced it to take such action. What they should know is that 65 percent of banks in the U.S. still offer free checking despite the Dodd-Frank bill. The easiest way to find those financial institutions is at moveyourmoneyproject.org. Move Your Money is a campaign organized by Arianna Huffington. The Move Your Money website search tool locates the closest local community banks and credit unions simply by typing in a zip code. After Huffington appeared on CNN to promote the website in January last year, 80,000 people used it to find a local financial institution. In the past year moveyourmoneyproject.org has been getting up to 45,000 page views a day.

Closing a bank account

For consumers thinking about moving their money, closing a bank account should be done carefully. Open an account at your new financial institution first, then make sure all your checks have cleared. Physically go to your bank to close your accounts, but call before you leave to learn about its policies about closing accounts. Some banks will try to ding you one last time with a hefty fee. Be sure to go before 3 p.m. on a weekday so the staff has plenty of time to complete your request. Bring two forms of identification, including a photo I.D. Don’t leave without the balance of your accounts. If the bank can transfer the funds electronically, have it do so. If not, take the money with a cashier’s check or cash.

Sources

Huffington Post

Christian Science Monitor

CBS MoneyWatch

ehow.com

On the community level, smaller banks and credit unions give back to the people who need financial help.

You’ve seen it in the news and you’ve experienced it firsthand. Banks have cried to the government for bailout money to continue operating, they received billions of taxpayer dollars and what did they do with that money? High salaries and executive bonuses are still common in America’s big banks, and the American people are fed up. They use payday loans when they need quick cash, but what about long-term solutions? The Financial Crisis Inquiry Commission (FCIC) and well-informed panel members like Heather Murren are on the right track, pursuing bank CEO with probing questions about regulatory matters. But what can average consumers like yourself do with your money if you no longer want to support big banks and their greed and treachery? You can Move Your Money!

Community banks and credit unions build communities

Move Your Money is a grassroots effort that is designed to shift power “away from Wall Street and to Main Street,” according to MoveYourMoney.info. In a recent article, Phil Britt points out that the movement is supported by The Huffington Post, which is a significant organization to have in one’s corner. No more Goldman Sachs, Morgan Stanley, JP Morgan/Chase, Citibank, Bank of America or Wells Fargo, says Move Your Money. They all “took billions in taxpayer money and have cut lending to businesses by $100 billion.” Post founder Ariana Huffington identifies this as “populism at its best… a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest.” If the American people do not take a stand, big banks will continue to control your money (and likely mismanage it).

Community banks support them

Berdell Knowles of the Community Development Bankers Association defines the culture gap between average citizens and big bankers. He blogs that “The bank executives who make the decisions on how to use the earnings from your money, whether it be to pay management bonuses or to invest in sub-prime mortgages, will probably know little about you or your community.” The natural alternative is community banks that use their economic power to directly help local economies (rather than funneling it into the gigantic overhead big banks bring to the table).

Not only that, but Knowles acknowledges that a community bank might have better insight into a borrower’s creditworthiness if they’re familiar with the customer. It’s a personal touch that big banks can’t possibly duplicate. Another thing community banks have over big banks is specific community economic funds distributed by the government (federal and state). An example Britt gives is the three percent TARP funds for Small Business Lending. There were $1 billion in assets there, and it was specifically for community banks.

Are people listening to Move Your Money? Yes they are

Credit Union National Association CEO Dan Mica has blogged that “consumers are already voting with their wallets in favor of credit unions.” Two percent credit union membership growth in 2009 is the most that industry has experienced since 2001, so the swing is quite real. Rep. Barney Frank had his finger on the pulse of the people when he said that the mortgage crisis would never have happened if big banks behaved like community banks and credit unions. People see what needs to be done, and Move Your Money is a way to mobilize them. When the people need money, they can use payday loans, but in the long term, community banks and credit unions are much more worthwhile to support that America’s treacherous big banks.

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