John Rigler, the head of the Iowa-based State Bank & Trust, recently said that Sen. Chuck Grassley (R-Iowa) is to blame for the closing of the only bank in New Hartford, Iowa.
Rigler said that Grassley voted in favor of an amendment to the 2010 Dodd-Frank Act that will cut the bank’s $76,000 annual debit fee revenue in half, ultimately contributing to the bank’s closing. The SBT branch is set to close on Nov. 15, though it is the only bank in New Hartford – a town with a population of 506, the Des Moines Register reports.
Some banking experts maintain that Dodd-Frank has had a similar effect on Main Street across the U.S.
“The Dodd-Frank Act has hundreds of new rules that are intended to fix Wall Street, but they’re also applicable to Main Street,” Rigler said, according to the Des Moines Register. “I’m unhappy with Congress for having done this. They say we’re not being impacted, but we really are.”
Grassley voted against Dodd-Frank, but voted in favor of the Durbin Amendment, a provision that seeks to cap interchange fees — the amount a bank can charge a merchant to process a debit transaction.
“I’m disappointed,” Rigler said of Grassley’s vote on the amendment, the Des Moines Register reports. “I’ve always voted for Grassley and supported him financially. I’ve even driven floats in parades for him.”
The Federal Reserve capped interchange fees at 21 to 24 cents, nearly a 50 percent decrease from the pre-Durbin rate, for transactions through banks with more than $10 billion in assets.
“In this case, the debit-free loss is less than one-half of [one] percent of the bank’s annual income, according to documents filed with the [Federal Deposit Insurance Corp.],” Jill Kozeny, Grassley’s spokeswoman, said, according to the Des Moines Register. “As far as the Durbin [A]mendment, it responded to the unfair treatment of retailers and consumers by the big banks. Banks under $10 billion in assets were exempted, and that’s every bank in Iowa, including the [SBT].”
Smaller community banks have suffered as a result of the amendment, which has increased market competition and forced the fees below the cap. John Sorenson, the head of the Iowa Bankers Association, said that this makes the exemption for community banks meaningless.
Before Dodd-Frank, Iowa debit fees averaged 44 cents per transaction. The IBA said that the federal cap is costing banks in Iowa $25 million every year.
“Some have said that the rates will eventually be driven down to zero, and that’s a huge impact to community banking revenue streams,” Sorenson said, the Des Moines Register reports.
Rigler said that the SBT branch was one of the costliest to operate, adding that the bank opted to remain open until the impact of the Durbin Amendment became apparent.
“It affects small town Main Street businesses—it costs us and it costs our customers,” Rigler said, according to the Des Moines Register. “New Hartford is a small town, and we’ll be one of the last lights on Main Street to be shut off there.”