At the top of the agenda during the American Bankers Association (ABA) Washington Summit last week was how the ABA’s advocacy strategy is focused on countering the threat from actions by regulatory agencies and pending legislation. The bottom line for banks was: Don’t stick your neck out. Innovation is important, but it’s too risky to be at the forefront. As one panelist put it: “This is not the time to be incredibly innovative.”

Here are six things we heard:

1.  “Regulators have overstepped.”

Rob Nichols, the ABA’s president, highlighted litigation against regulation. He included a lawsuit challenging the Consumer Financial Protection Bureau’s (CFPB’s) scope for Unfair and Deceptive Acts and Practices (UDAAP), a lawsuit challenging the CFPB’s changes to a rule implementing the Community Reinvestment Act, a stay on the CFPB’s Section 1071 rule on small business lending pending a Supreme Court ruling on the CFPB’s funding structure, and a lawsuit challenging the CFPB’s recent rule on late fees.

“Litigation is never our first or preferred course of action. But regulators have overstepped their authority from Congress.” — Rob Nichols, president, ABA

2.  Rules and pending legislation on credit cards are of strong concern.

The CFPB’s rule on credit card late fees, issued a few weeks ago, caps credit card late fees at $8 and stops automatic inflation adjustments for issuers with 1 million or more open accounts. It updates a 2010 Federal Reserve rule that implemented the Credit Card Accountability Responsibility and Disclosure Act, and capped fees at $35, adjusted for inflation. Speakers argued that fees are transparent and reasonable, and that the rule will limit the options consumers have for credit cards.

Additionally, they expressed concern over the Credit Card Competition Act, which would prohibit credit card issuers with more than $100 billion in assets from placing certain restrictions on the number of networks used to process transactions. Specifically, the position shared was that this law would reduce credit card rails’ security, limit banks’ ability to offer cards, and cap or eliminate rewards and other benefits.

And finally, several participants came down on proposed changes to Regulation II, which covers debit card interchange fees and routing. Adjustments would alter the formula for calculating the interchange fee cap for debit cards and update the number automatically every two years. They argued that the changes would cut the interchange price cap by 30% and create savings for merchants that they wouldn’t pass along to consumers.

“Durbin [the amendment to the Dodd-Frank Act pertaining to debit card interchange and routing] was a disaster for debit card rewards programs.” — Panelist

3.  Banks are deeply unhappy with the CFPB’s 1071 rule.

The CFPB’s Dodd-Frank Section 1017 rule amends Regulation B, which implements the Equal Credit Opportunity Act, to mandate that many banks and other lenders collect data on the principal owners of small business loan applicants “including those that are owned by women or minorities.” As we wrote about in detail in February, the final rule sparked a fight that’s ongoing — Congress voted to repeal it, President Biden vetoed the repeal, and for now, the rule is held up in court. Speakers argued that the rule poses an immense compliance burden for banks, will increase the cost of lending to small businesses, and could reduce credit access.

The way the CFPB finalized this rule “will do so much more harm than good.” — Panelist

4.  The industry wants proposed capital rules to be withdrawn and rewritten.

The Basel III Endgame proposes to change banks’ capital requirements, applying in general to banks with $100 billion or more in total assets. It includes provisions that respond to 2023’s regional banking crisis, such as requiring banks to include certain unrealized gains and losses in their capital ratios and subject them to several other capital requirements. Participants said that new requirements are unnecessary, that the proposed rules would cost the economy, and that the rule unfairly applies a “one-size-fits-all” standard.

“The US benefits from the ‘tailoring supervision’ approach.” — Panelist

5.  An update to Community Reinvestment Act regulation is overdone.

A joint final rule changing implementation of the Community Reinvestment Act (CRA) creates a new framework for CRA regulations to evaluate lending outside “traditional assessment areas” enabled by the digital delivery of banking products and services. It adopts metrics for evaluating community development financing and requires banks to comply based on their size. Several speakers argued that the rule goes beyond what Congress legislated, is needlessly complex, and may reduce access to credit for mortgages, small business loans, and community development loans.

This rule “goes beyond what Congress authorized and creates disincentives to offer certain products or operate outside their branch network.” — Rob Nichols

6.  Digital assets are still on the agenda, but not top of mind.

Two key pieces of legislation on digital assets have been introduced in the House. One is a bill related to the market structure for digital assets, and the other is a bill related to stablecoins. The first bill defines and gives the Commodity Futures Trading Commission (CFTC) authority over digital assets and defines and gives the Securities and Exchange Commission (SEC) authority over digital asset securities. The second creates a framework for the issuance of stablecoins. The ABA has argued for a “same activity, same risk, same regulation” approach to digital assets. Rep. Tom Emmer (R-MN) was hosted to emphasize support for those bills — and speak out against a Central Bank Digital Currency (CBDC).

“The existing structure [for the dollar] needs to be allowed to evolve.” — Rep. Tom Emmer (R-MN)