The Dodd-Frank Act, a U.S. federal law that allows the government to regulate the financial industry, may evolve soon.
The President elect’s transition website reveals that he plans to dismantle Dodd-Frank once he’s in the White House, describing it as “a sprawling and complex piece of legislation that has unleashed hundreds of new rules and several new bureaucratic agencies.”
It goes on to explain how Dodd-Frank will be replaced with new policies meant to encourage new jobs and growth in the economy.
Jeb Hensarling, the Republican chair of the U.S. House Financial Services Committee, supports this direction. This past summer he introduced the Financial Choice Act, which aimed to weaken Dodd-Frank and repeal the law’s Durbin Amendment. (The Durbin Amendment caps the fees merchants pay banks each time a customer makes a debit card purchase.)
The Financial Choice Act passed in September.
“Trump’s presidency makes it likely that the Financial Choice Act has a chance of becoming law,” Eric Grover, principal of Minden, Nev.-based Intrepid Ventures, told Digital Transactions.
Dodd-Frank: Republicans and Democrats Disagree
In a testimony to Congress in September, Democratic Treasury Secretary Jacob Lew defended Dodd-Frank, saying it has improved safety in the financial industry.
Trump’s transition team, however, disagrees, stating on their website that “big banks got bigger while community financial institutions have disappeared at a rate of one per day and taxpayers remain on the hook for bailing out financial firms deemed ‘too big to fail.’”
If Trump moves forward with plans that fundamentally align with Hensarling’s plan, other possible financial reforms may include:
- Dismantling the “Volcker rule,” which keeps banks from taking risks with their own money
- Overhauling the Consumer Financial Protection Bureau that polices areas like mortgage servicing, debt collection and payday lending
- Eliminating the authority of the Financial Stability Oversight Council to designate non-banks as “systemically important”
What Should Merchants Expect?
The Dodd-Frank Act is extensive (it’s 2,300 pages), so repealing it entirely right away may be too cumbersome. However, the Republican-controlled congress would likely approve big-time revisions, reports npr.org.