5 years on, consumers still paying price for Dodd-Frank

Patrick McHenry
Patrick McHenry

In 2008, our economy was a mess. We faced our greatest financial crisis since the Great Depression, a crisis that cost nearly 9 million Americans their jobs.

Our region was not spared. As the nation’s second largest banking center, Charlotte and surrounding counties were deeply impacted. In response to this crisis, President Obama and Congressional Democrats passed the Dodd-Frank Wall Street Reform and Consumer Protection Act with the goal of preventing another crisis.

This week we mark the fifth anniversary of Dodd-Frank becoming law. In that time, our economy has improved but deep problems persist. Small and medium-sized banks are closing and N.C. consumers are worse off. The root cause of the issues that continue to plague our financial system is the law designed to fix it, Dodd-Frank.

Dodd-Frank comes in at 849 pages. These rules are not cheap. According to the American Action Forum, Dodd-Frank’s rules have imposed compliance costs of almost $25 billion on financial institutions. On top of those staggering costs, the paperwork associated with complying requires more than 60 million hours of work.

These overwhelming compliance costs pose a challenge to any bank, but they are especially punishing to the community banks and credit unions that serve my constituents in rural Western North Carolina. Many of these banks have not survived this regulatory onslaught. Since June 2012, nearly 20 percent of N.C. banks have been forced to close or merge with other institutions because of Dodd-Frank.

Those that have survived face difficult choices. One option is to cut product lines such as mortgages or equity lines of credit. The other is to pass increased costs along to consumers. In 2009 – before Dodd-Frank passed – 76 percent of banks offered free checking. Three years later – after Dodd-Frank became law – that number had dropped to 39 percent.

It is ultimately the consumer who pays. Much-needed banking services that many of us take for granted – like a free checking account – are now inaccessible to a significant segment of the population.

What’s worse is that those who most need these vital banking services are the most likely to be adversely impacted. Thanks to Dodd-Frank, it is the Gastonia teenager working a summer job who cannot afford to open his first bank account or the just-married couple in Lincolnton looking to finance their first home who cannot obtain a loan.

Dodd-Frank was designed to reform our financial system following last decade’s collapse. Instead it has grown government and empowered Washington regulators, while hurting those most impacted by the collapse: every day families.

Republican U.S. Rep. Patrick McHenry represents North Carolina’s 10th Congressional District.