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Small banks say regulations are hurting industry

CHARLESTON, W.Va. -- Too many regulations are hurting community banks in West Virginia, representatives from the industry told lawmakers Monday.

Rep. Shelley Moore Capito, R-W.Va., chaired a subcommittee field hearing on the impact of regulations on jobs at the Robert C. Byrd U.S. Courthouse Monday morning. Sen. Joe Manchin, D-W.Va., and Ohio representative John Renacci also took part in the hearing.

Congress passed the Dodd-Frank Act in 2010. Aimed at preventing another financial crisis like the one in 2008, the law brought about 400 new regulations on the private sector.

Banking professionals who testified Monday said the new regulations put too much of a burden on small banking institutions and businesses.

Bill Loving, president and CEO of Pendleton Community Bank in Franklin, told the subcommittee that community banks should be shielded from the new regulations since they did not cause the financial crisis. Complying with the new regulations has been particularly difficult for small banks, which don't have large in-house compliance teams, he said.

"Every dollar spent on compliance is a dollar less than we have to lend and invest in the communities we serve," Loving said in his written testimony. "Every hour I spend on compliance is an hour I could be spending with customers and potential customers, acquiring new deposits and making new loans."

Tom Brewer, president and CEO of Peoples Federal Credit Union, testified that increased regulation is one of the most significant changes he's seen over 27 years in the credit union industry. Peoples Federal has 29 full-time employees and one of them is completely devoted to compliance with the regulations, he said.

"With a relatively small staff, having someone devoted full-time to compliance is a considerable financial burden and was unheard of only a few years ago," Brewer said in his written testimony. "It diverts resources from direct member service, such as from the teller line or from the loan department or from financial counseling. With budgets already very tight, this added expense impacts what we can pay members on their savings and what they have to pay on their loans."

Sarah Brown, an attorney with Mountain State Justice, a nonprofit law firm that acts on behalf of low-income state residents, argued that the regulations enable community banks to compete with national mortgage lenders.

"The protections of the Dodd-Frank Act benefit community financial institutions by eliminating incentives for brokers to steer borrowers to national lenders and requiring national mortgage lenders to properly underwrite the loans they originate -- just like our community lenders have always done," Brown said in her written testimony. "By doing so, the Dodd-Frank Act allows community financial institutes to compete for a larger share of the mortgage lending market, which benefits our clients, our communities, and our community lending institutions."

Capito, who spoke after the hearing, said she supports repealing large portions of the Dodd-Frank Act and getting rid of the parts of the law that are most onerous for members of the community banking and financial institutions.

Manchin said he does not support repealing the act, but many of the regulations in the law should be adjusted for community banks.

Howard Swint, who's running against Capito for West Virginia's second congressional district, said the congresswoman's hearing demonstrates she's more interested in "wealthy campaign contributors" from the banking industry than in the interest of average West Virginians.

"Today's banking laws are the direct result of Congress' failure to regulate predatory mortgage lenders, fraudulent credit rating agencies and corrupt banking interests that together led America into the financial crisis," Swint said, in part, in a written statement. "Yet these same Republicans like Rep. Capito who had their regulatory silence purchased through campaign contributions are now back beating the drum for further deregulation which is ludicrous."

Reach Lori Kersey at lori.kersey@wvgazette.com or 304-348-1240.


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