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Rep. Luetkemeyer on Politicized Financial Regulation and its Impact on Consumer Credit

WASHINGTON, D.C. – Today, Congressman Blaine Luetkemeyer (MO-3) questioned witnesses from the Center for Monetary and Financial Alternative Cato Institute, Consumer Bankers Association, Commonwealth Credit Union, and Unidos US on the impact politicization of financial regulation has on consumer credit and community development.

Watch the full exchange HERE.

Rep. Luetkemeyer: “Mrs. Johnson, I am worried about the Federal Reserve Board’s shoddy proposed Regulation II rulemaking and its impact on smaller financial institutions. As you are aware, when the debit interchange cap was originally implemented it led to a reduction in debit interchange at institutions that were under $10 billion in assets and therefore exempt from the cap. These small institutions already struggle to break even on debit product offerings and are the least able to absorb losses in debit interchange revenue.

How will the proposed rulemaking impact smaller financial institutions?

Lindsey Johnson, President and CEO, Consumer Bankers Association: “We’ve got 10 years’ worth of data now to go back to and say we know what happened. Last time the Federal Reserve reduced debit interchange by 40%, consumers saw their checking account access costs go up by about 30%.”

Rep. Luetkemeyer: By the way, there is study, after study, that shows this happening, is there not?

Ms. Johnson: The Fed, the GAO, academics, and smaller institutions also felt that impact. It had a direct impact on their ability to offer free checking accounts as well because they saw revenue decline by about 30%. We can carve out small institutions, and I know it might be politically savvy to do that, but people still feel it”

Rep. Luetkemeyer: “Well, there's this wink and nod with the regulators. They wink, nod, and say, this is a good idea to comply with this because sooner or later it may come to where you have to. So that's the way they operate.”