Complying with an ever-growing mountain of federal and state red tape has become excessively burdensome to both the private and public sectors – and costly to consumers.
Government is a factory constantly churning out more laws and regulations created with good intentions – protecting consumers, preventing another economic meltdown, helping students get through college and providing financial help to the citizenry. Etc. Etc.
However, the cost of ensuring that laws and regulations are followed to the T has skyrocketed, and it’s negatively impacting people the rules are intended to help.
Nationally, credit unions and small community banks are struggling with costs to comply with 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act and the Durbin Amendment. These federal laws were intended to rein in big (as in too big to fail) banks and reform the financial industry.
But a recent Credit Union National Association report says regulatory compliance costs associated with the reforms annually have reached $7.2 billion just for U.S. credit unions and reduced their revenues by $1.1 billion.
So instead of having more money for car loans, or offering better loan rates or opening new locations, a huge pile of money is going toward complying with regs.
The same is true of community banks, which in many cases are so intimidated and overwhelmed by the new rules they have virtually quit lending. The difficulty and cost of compliance is simply too daunting.
Consumer protection is important, but at some point over-regulation ends up hurting the consumer.
New Mexico’s credit unions have signed on to a national effort to ask the Consumer Financial Protection Bureau and other regulators to roll back excessive federal regulations. Reps. Michelle Lujan Grisham, Steve Pearce and Ben Ray Luján have signed on to a letter to the bureau, saying Congress never intended the agency to apply these regulations to credit unions and community banks. Obama’s controversial Consumer Financial Protection Bureau is less than sympathetic.
Meanwhile, the University of New Mexico and other universities are spending millions of dollars each year just to make sure nearly 500 federal and state rules are being followed. Some are important. Others ridiculous.
Salaries and office budgets for staffers who are solely dedicated to compliance with government regulations for the current year cost $1.8 million for UNM and $3.3 million for the Health Science Center. Not included are other costs, including time other employees spend enacting the policies to comply with the rules.
Wouldn’t some of that money be better spent on faculty or lowering student costs?
Instead, in our ever growing nanny state it is spent on things like scouring incident reports from the Honolulu police department for the hotel and surrounding area when the Lobo baseball team visited for a tournament. The data was needed for an annual report the federal government requires of colleges and universities.
While some say we need more taxes to pay for the government we have, it’s fair to ask whether we are paying for some government we don’t need.
UNM compliance administrators don’t really know how much the real cost is. Even the federal government and higher education compliance trade organizations don’t know exactly what it costs a university to comply with the more than 3,000 pages of laws and regulations from the U.S. Department of Education and nearly 100 pages from the state.
However, Helen Gonzales, UNM’s chief compliance officer, notes “the cost of noncompliance could be catastrophic.” If schools don’t comply, they are subject to penalties such as loss of financial aid. That has yet to happen in the United States, but the threat is there, along with fear of lawsuits and potential payouts for damages if an institution is found at fault.
Whatever good intentions Congress, legislatures and bureaucracies had in mind, the result has been a vast overreach in which common sense has been replaced by fine print and reports. It should be pared back.
At the end of the day, the cost of playing by the rules might just put an enterprise out of business or out of reach because it’s so expensive.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.