Reactions to Financial CHOICE Act continue to mount

By Stephanie K. Mann, J.D.

In the wake of the introduction of the Financial CHOICE Act, multiple trade associations have taken the opportunity to respond to the proposed bill. Fifteen national conservative organizations and prominent activists have announced that they “wholeheartedly endorse” the Financial CHOICE Act, saying the Republican plan to replace the failed Dodd-Frank Act will “turbocharge the American economy.” In a letter released by the Financial Services Committee, the conservative organizations highlighted key features of the Financial CHOICE Act in their endorsement, noting the Republican plan will end taxpayer-funded bailouts for “too big to fail” banks, demand accountability from financial regulators, and “end the crony debit card price control scheme.”

“If we want the economy to improve—if we want to give all Americans the chance to prosper again—we need to put an end to Washington’s destructive regulatory agenda once and for all,” said the trade associations. “The Financial CHOICE Act aims to curb regulations to create opportunity and choice for investors, consumers, and entrepreneurs nationwide.”

The letter specifically addressed the following aspects of the CHOICE Act:

• Orderly Liquidation Authority—the CHOICE Act would require every financial regulation to pass a cost-benefit analysis before enactment by replacing the Dodd-Frank’s Orderly Liquidation Authority with a newly updated subchapter of the Bankruptcy Code.
• Durbin Amendment—the repeal of this provision from the Dodd-Frank Act would end the “crony debit card price control scheme.” According to the letter, the Durbin Amendment imposed price controls and other mandates on debit card transaction fees with the false promise that billions would be passed on to consumers. However, “studies show that many consumers have lost access to free checking and debit card rewards as a result.”
• Consumer Financial Protection Bureau—the Choice Act would replace the single director of the agency with a bipartisan, five-member commission subject to congressional oversight and make the bureau subject to the appropriations process. Currently, said the letter, the CFPB has the ability to “put entire industries out of business with the snap of its fingers,” and its unelected director can simply declare financial products “abusive” and outlaw them without congressional approval. The CFPB must be “reined in,” the letter concluded. 

Durbin Amendment. However, more than 160 national and state merchant trade associations have sent a letter to House leadership to express the merchant community’s strong opposition to H.R. 5465 and the Financial CHOICE Act language that would repeal the debit swipe fee reforms included in the Dodd-Frank Act. Also known as the Durbin Amendment, a cap was placed on debit card swipe fees and, according to the letter, brought the first piece of competition and transparency into a market that was historically void of it.

“The reforms in the law have benefited American consumers, merchants, small financial institutions and the economy as a whole. Repealing or weakening the law will only benefit fewer than two percent of the country’s largest banks and remove any and all competition from the debit routing market,” notes the letter. These reforms, added the trade associations, brought transparency—for the first time small businesses can see and know exactly how much they will be charged for a debit transaction from one of the covered institutions—and a level of competition into a market where fees were traditionally set collectively behind closed doors and without regard to the costs imposed on American consumers and retailers.

Contrary to opponents’ arguments, said the letter, debit reforms are working and Congress should strengthen them or “address the excessive and hidden credit card fees American consumers and merchants pay every year.” Since the Durbin Amendment was adopted, the cost of accepting debit has decreased 44 percent, according to bank self-reported data. And yet, by becoming more efficient, the largest issuers are now collecting a profit of almost 500 percent on a debit transaction currently under the cap. This demonstrates that the Durbin Amendment is working and that competition and transparency have only strengthened the marketplace.

The letter concluded by urging House leadership to oppose the Financial CHOICE Act and encouraging all members of Congress to do the same.

It can only be expected that as more time passes, the arguments in relation to the Financial CHOICE Act will only become more divisive.

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