InfoAugust 17, 2017 · Business
Recent Meetings in DC May Lead to Easier Lives for Independent ATM Deployers and Money Servicing Businesses
ATM Industry Officials push towards an end of Operation Choke Point and a drastic change to the Dodd-Frank Act so banks can work with IADs and MSBs to conduct business.Press Release VideoLoading the player...Details(prREACH)
On June 22, 2017, the ATM Industry Association (ATMIA) met with key House Financial Services Committee members and staff to discuss an end to “Operation Choke Point” (OCP) and the implementation of a Dodd-Frank Reform. On July 13th, ATMIA reported that the full day of recent meetings was very productive. The House has already approved legislation to erase a number of core financial regulations put in place by the 2010 Dodd-Frank Act, ultimately helping to bring expansive opportunities back to IADs (Independent ATM Deployers) and MSBs (Money Servicing Businesses).
The Financial Choice Act passed the House and seeks to undo significant parts of the 2010 financial reform law, but these business owners are not completely safe yet. Both ATMIA and The National ATM Council, Inc. (NAC) continue to report receiving copies of closure letters from ATM providers, which seem to have hit a troublesome level in 2017. With zero to 90 days’ notice of an account closure and the possibility of having funds frozen or unavailable, account closures continue to threaten small business owners, IADs included.
Several large financial institutions are displaying increased efforts to purge these small business owner accounts, and ATM industry leaders and other officials are not happy about it. Republicans in the House state that the goal now is to reform the Dodd-Frank Act which they claim has rules that strangle small businesses and stagnate the economy.
Before passing the Dodd-Frank Act in 2010, lenders got in trouble after mass defaults of risky mortgages required a government bailout when they didn’t have the capital to cover their losses. The Dodd-Frank reforms sought less risk and higher capital levels in order to prevent another Great Recession. The purpose of the Act was to make the financial system safer, but the Act has had a lot of bad consequences for our economy, mostly in small communities across the country.
Kim Schoenholtz, director of the Center for Global Economy and Business at NYU’s Stern School of Business, believes that the Dodd-Frank act has gone too far. “Dodd-Frank is just overly complex and burdensome. For the purpose of making the financial system safer, you can do a lot more of that with less complex and less burdensome regulation,” Kim stated, and most agree. Bankers have been complaining since the implementation that Dodd-Frank has repressed their business with unnecessary paperwork and data assembly.
Operation Choke Point (OCP) has also put a giant strain on bankers. OCP is a nationwide program initiated by the Department of Justice (DOJ) designed to close and deny bank accounts to businesses the DOJ determined at high risk for illegal activity by choking off their access to financial services, but the DOJ also included legal businesses they found to be politically offensive, like gun shops and payday lenders. Denials and account closures for legitimate businesses worldwide boomed. In 2015, OCP was halted and financial institution regulators were informed to pull back on the program, but regulators have never really stopped pushing the ruling. Most financial institutions continue federal bank examinations and audits under the Bank Secrecy Act (BSA).
Representative Blaine Luetkemeyer (R-MO), a true friend of the ATM industry, re-introduced legislation on May 25th that would curb Operation Choke Point. H.R. 2706 (The Financial Institution Customer Protection Act) will not allow agencies such as the FDIC and the Office of the Comptroller of the Currency, to request or order a financial institution to terminate a banking relationship unless there is a “material reason”, and that reason is not based solely on reputation risk. The bill goes on to state that a “material reason” is satisfied only when an agency believes that a specific customer or group of customers poses a threat to national security.
On June 8, 2017, Congressman Jeb Hensarling (R-TX), Chair of the House Financial Services Committee, introduced and got passed the Financial Choice Act. The bill, if enacted, will exempt some financial institutions from many of Dodd-Frank’s restrictions that limit risk taking as well.
Although ATM industry officials and members of the House are trying their hardest to stop account closure letters from coming in, the Dodd-Frank Act has really affected the growth of chartered community banks and the fact that some banks are still implementing Operation Choke Point is not helping. ATMIA USA is doing all they can to help IADs and MSBs keep their accounts open and business alive.
The industry leading company has created a whitepaper including tips for IADs on what to do if they receive an account closure letter and how to work with their bank to keep their account open. Although an immediate solution seems far off, industry officials are striving towards a resolution and community banks may see a significant easing of regulations.LinksQuotesDodd-Frank is just overly complex and burdensome. For the purpose of making the financial system safer, you can do a lot more of that with less complex and less burdensome regulation.ImagesContact
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