Delay in Dodd-Frank regs creates uncertainty

Editor’s note: Roby Brock, with our content partner Talk Business, wrote this report. He can be reached at [email protected]

Last year’s financial overhaul reform measure — the Dodd-Frank law — was on a fast track to begin regulating financial firms by this summer.

Not so fast.

Federal agencies charged with developing more than 40 immediate regulations are experiencing delays and now say they won’t be able to meet a July 21, 2011 deadline. All told, Dodd-Frank calls for 230 regulations, 41 reports and 71 studies during the next 10 years.

The result for now: Arkansas banks and investment firms may continue playing under the same rules a little longer, but it is unlikely to ease their concerns.

“Like elsewhere, companies and financial institutions in Arkansas are anxious to find out how these new rules are going to affect their business," said Courtney Crouch, an attorney with Little Rock-based Mitchell Williams Law Firm. "It looks like we are going to have wait longer on a significant number of these anticipated rules, which, unfortunately, adds some continued uncertainty to the outlook for many of these companies and institutions.”

The Securities and Exchange Commission (SEC) will delay until sometime next year a rule requiring investment advisers with $25 million to $100 million in assets to switch their registrations from the SEC to their states.

New guidelines to monitor derivatives trading — a provision of Dodd-Frank championed by former Arkansas Senator Blanche Lincoln — will not be ready by July either. The Commodity Futures Trading Commission and SEC have both acknowledged that they will miss the July target date.

Charles Miller with the Arkansas Bankers Association says another draft rule that has met resistance would cut into interchange fees, the charge banks apply to credit card transactions. A draft rule proposed as part of Dodd-Frank would cap that charge at 12 cents per transaction.

“That’s going to cost millions of dollars for every bank — big and small," Miller contends.

Consumer advocates suggest this will save American shoppers money, but banking experts predict financial institutions will have to make up the lost revenue from somewhere, likely leading to the elimination of free checking accounts or reward programs with credit cards.

Banking leaders in Arkansas and across the nation have poured thousands of comments into that lone rule docket, which regulators must read and process before deciding on the final terms. Miller says there is also pending legislation in Congress to possibly delay implementation of this rule.

Elizabeth Warren, an advisor to President Barack Obama and a leading candidate to head the new Consumer Financial Protection Bureau created by Dodd-Frank, will speak at the Clinton School of Public Service on Thursday (May 5). She’s likely to address the Dodd-Frank regulatory slowdown.

Prior to the Clinton School speech, Warren will meet with Arkansas banking leaders who are holding their annual conference in Little Rock this week.

U.S. Rep. Barney Frank, D-Mass., co-author of the law and the ranking Democrat on the House Financial Services Committee, told a legal audience earlier this week that he’s okay with the delay, but he’s opposed to Republican efforts to roll back the reform bill.

“There is no penalty for not meeting the deadline,” Frank said. “There’s no gun at their heads. Nobody gets fired.”