Throughout his campaign Donald Trump pledged to repeal and “dismantle” burdensome financial regulations such as the Department of Labor’s (DOL) “fiduciary rule” and regulations enacted under the Dodd-Frank Act. Now that President-elect Trump has clinched the Whitehouse and has the backing of a Republican House and Senate, he now has the ability to act on his campaign pledge.
Looking ahead to 2017, there are five financial reforms that Trump can undertake to relieve the burdensome and costly regulatory impact left over from the Obama administration.
- Repeal the DOL’s Fiduciary Rule. Trump should look to repeal the DOL’s costly fiduciary rule before it takes effect April 2017. The massive rule spans over 1000 pages and reduces the ability of financial advisors to give advice to IRA and 401(k) holders. Estimates show the fiduciary rule could disqualify up to 7 million IRA holders from investment advice, and reduce the number of IRAs opened annually by up to 400,000.
- Repeal the Durbin Amendment. The Durbin Amendment, passed as part of the Dodd-Frank Act, requires the Federal Reserve to fix the price of fees charged to retailers for debit card processing. Prior to Dodd-Frank, issuers of debit cards received a fee from the merchant to offset the cost of running the debit card system. This has increased the cost of accepting debit cards for many small businesses, which in turn pass those costs onto consumers.
- Repeal the Volcker Rule. Passed as part of the Dodd-Frank Act, the Volcker Rule, named for former Federal Reserve Chairman Paul Volcker, limits the type of trading activities that banks can engage in, specifically proprietary trading (trading for ones own accounts). Volcker has since acknowledged however proprietary trading did not lead to the financial crisis, calling the justification behind the rule into question. As a result, U.S. financial institutions have become less competitive globally, the cost of raising capital for small businesses has increased, and market liquidity has been reduced.
- Stop or repeal the Arbitration Rule. The CFPB is currently racing to finalize the proposed Arbitration Rule before President Trump takes office in January. The proposed rule would ban arbitration clauses in consumer finance contracts such as those used by lenders and credit card companies. The rule would be a boon for trial attorneys and a burden for consumers. The CFPB’s own study found arbitration clauses result in better outcomes for consumers, with awards being given in a matter of months, while class-action awards take years and have average payouts of less than $2 per person.
- Reform the CFPB. The Consumer Financial Protection Bureau (CFPB) is the fastest rulemaking body in the federal government. Of the nearly 50 rules the CFPB has imposed, 26 of them have directly resulted in $2.8 billion in costs and 16.9 million hours of increased paperwork. Two primary CFPB reforms Trump can focus on are subjecting the bureau to Congressional oversight and shifting CFPB leadership from one unaccountable bureaucrat to a 5-member board.
Photo Credit: Gage Skidmore