The Financial Choice Act Controversy


Rep. Jeb Hensarling first announced The Financial Choice Act last year, but the legislation didn’t go anywhere. Now that Representative Hensarling has a republican administration and congress to back him up; he is reintroducing his legislation.  

The act’s main purpose is to empower Americans so they can achieve financial independence. There’s a section dedicated to fighting fraud on Wall Street, as well as lifting the regulatory burden on main street.

A main measure included within the bill will end too big-to-fail and big banks bailouts. This is something that will be popular with even far left members of congress and free market libertarian leaning republicans like Senator Rand Paul and Justin Amash.

The Financial choice act would also repeal the Volcker Rule, which restricts banks and financial institutions from making speculative investments with their own money.

There is controversy brewing with the Financial Choice Act, and it’s with a section that promises to reverse the Durbin Amendment, which is a large part of the 2010 Dodd-Frank financial act.

Laura Knapp Chadwick is the director of commerce and entrepreneurship policy for the National Restaurant Association, claimed that retailer groups, “will be putting up a big fight…. We’re hoping it doesn’t get ugly on the House flour, but we are preparing to go down that route.”

The Durbin Amendment

The Durbin Amendment was a last-minute addition to the act added by Illinois Senator Richard Durbin (aka the Durbin amendment). The amendment requires the Federal Reserve to limit fees charged to retailers for debit card processing. Which hurts banks, but helps retailers, which is why Ms. Chadwick is opposed to the repeal of the Durbin act.

According, to Nerd Wallet the law costs consumers yearly an estimated $4 billion.

The Federal Reserve Bank of Richmond did a study that found out that bank revenues fell $5.1 billion, after the first year of the legislation being in place.

A 2014 Federal Reserve paper claimed that the banks had to find a way to recoup the $14 billion a year of lost revenue. This led to consumers facing increased fees, losses in perks, and specifically debit card reward programs.

The effects are deeper than people losing their ability to have free checking. There has also been increased fees on monthly account maintenance charges, insufficient-funds fees, and inactivity fees. Deposit account fees increased an average of 3% to 5%.

The Durbin Amendment however does not include financial institutions with less than $10 billion, so community bank users, and credit union users have not been affected at all.

If this act makes it to the Senate Floor – expect a fight between retailers and bank to ensue.

It is surprising that this act hasn’t gotten the light of day with media coverage. This legislation will have an affect on the U.S’s current financial state.  Banks still feel the affects that the Dodd-Frank Act has had on us, and if the Durbin Amendment is repealed we will feel the affect in a positive way.

The Financial Choice Act is important, and will have an impact on the US. Yet, it has gotten little news or press coverage.

Let’s Change that..