Banks, lawmakers tussle over Dodd-Frank regulations
Jeremy Hobson: The Federal Reserve says it will not make its April 21 deadline to issue new rules on the fees banks can charge merchants when a debit card is used. The rules are part of the new Financial Reform Law and the delay is being blamed on the flood of complaints coming into the Fed. Some of those complaints coming from big banks.
For more, we’re joined by LA Times Consumer Columnist David Lazarus. Good morning.
David Lazarus: Good morning Jeremy.
Hobson: So tell us what this fight is really all about?
Lazarus: Well profits, not to put too fine a point on it. Now the financial reform legislation that was passed in Washington — the Dodd-Frank bill — it cuts a broad swath. It goes after late fees on credit cards, it goes after overdraft protection, it goes after swipe fees. I mean, it really cuts a lot of ground. Now a lot of these practices, lawmakers said, were abusive towards consumers. Banks said, no, this is part of our regular cost structure.
Hobson: And the Dodd-Frank law is supposed to make things better for consumers and maybe therefore tougher on the banks?
Lazarus: Well it’s supposed to make things more transparent for consumers and also fairer for consumers. But here’s the real thing now: some would say that the $25 billion or so that’s estimated to be lost to the banks was simply ill-gotten booty when it came to all the charges. The banks would say, no, this is money that was part of our regular profit line and our shareholders are expecting it. So the result is even though they’ve been cut off on some sides of the revenue structure, they’re now imposing new fees in other places. Such as free checking — forget about it, it’s gone. B of A imposing a $59 on some credit cards; Chase experimenting with $5 ATM fees.
Hobson: And do they really have to do that stuff? Or is that just a way to try to get regulators to weaken these new rules?
Lazarus: Well it’s complicated. On the one hand, they’re trying to make up revenue and they want to keep their shareholders happy. On the other hand, they’ve been saying all along, look, if you turn the screw somewhere for us, we’re going to need to turn the screw somewhere else. And they’re kind of putting consumers in the middle. It’s a little bit of a game of chicken right now between regulators and banks as to who’s going to blink first.
Hobson: And how do consumers end up in all of this?
Lazarus: Well, they end up between a rock and a hard place. But they do have some choices. For the moment, it looks like credit unions offer a good alternative. But they too might follow suit. A lot of the smaller institutions will probably follow the bigger banks down the more-fees road. But there are choices in the marketplace, you should look around for them.
Hobson: L.A. Times consumer columnist David Lazarus, thanks so much.
Lazarus: Thank you.
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