Alabama families and small businesses are confronting affordability issues in nearly every part of their lives — from buying a home to financing a car to opening a neighborhood business on Main Street. While inflation and supply-chain disruptions are often blamed for rising costs, there is another factor quietly driving prices higher: overregulation of the banking sector.
Banks play a unique and essential role in addressing affordability challenges because we are on the front lines of economic opportunity. Mortgage lending, auto loans, and small business financing are the most direct ways banks help families build wealth and entrepreneurs create jobs.
Yet excessive regulatory burdens — many of them well-intentioned but poorly calibrated — act as a hidden tax that ultimately increases borrowing costs for consumers across Alabama.
These regulatory costs are not theoretical. According to a February 2026 report from the White House Council of Economic Advisers, compliance requirements imposed by the Consumer Financial Protection Bureau have cost U.S. consumers an estimated $369 billion since 2011.
When compliance costs increase, to avoid scaling back services or tightening lending, financial institutions must absorb the costs, which are passed on in the form of higher interest rates, higher fees, and reduced access to credit.
Nowhere is this more obvious than in the housing market. Federal mandates now add $1,100 to $1,700 to the cost of a typical home mortgage. For a first-time buyer already struggling to save for a down payment, that additional cost can be the difference between owning a home and remaining on the sidelines.
Similarly, outdated regulatory capital requirements discourage mortgage lending by Internal Use banks, thereby decreasing competition. Auto borrowers and consumers seeking personal credit are seeing similar effects, as reporting and administrative rules have increased the cost of individual consumer loans by as much as $126 per loan.
These burdens hit hardest where they do the most damage: community and regional banks. Our local banks do not have armies of compliance officers or massive scale to absorb regulatory overhead.
When Washington applies one-size-fits-all rules, smaller institutions are forced to spread those costs across fewer customers. The result is regressive: higher costs for everyday Alabamians who rely on hometown financial institutions.
Worse still, excessive regulation is constricting access to credit altogether — especially in rural and underserved areas. The CEA report highlights how expansive data-collection mandates, including the CFPB’s Section 1071 small-business rule, discourage relationship-based lending.
These “handshake loans” have long been the lifeblood of local entrepreneurs — the kind of financing that can’t be neatly reduced to a national spreadsheet. When compliance risk outweighs lending margins, banks are left with fewer options, and Main Street loses.
Fortunately, Alabama has had leaders willing to push for that common-sense recalibration. Senator Katie Britt has been a consistent voice for modernizing regulatory thresholds, recalibrating capital requirements, and ensuring federal oversight reflects the operational realities of Alabama banks.
She has consistently pressed federal regulators to acknowledge the unnecessary regulatory burdens they often place on regional and community banks and to reconsider regulations that don’t satisfy a cost-benefit analysis.
The Senator has also highlighted a quiet but growing problem: regulatory bracket creep. When the Dodd-Frank Act was enacted, roughly 80 banks nationwide exceeded the $10 billion asset threshold that triggers heightened requirements. Today, due largely to GDP growth rather than risk, more than 130 banks exceed that line.
Similarly, many regional banks that are simply growing with the economy are subjected to heightened regulatory requirements not associated with risk. Crossing the threshold can strip banks of revenue that is reinvested into fraud prevention, cybersecurity, and consumer services — all with no corresponding benefit to customers.
In addition, Senator Britt introduced the “PROTECTED Act” to reform the CFPB’s Section 1071 small-business data collection regime. The proposal recognizes what bankers and borrowers alike understand: excessive data rules raise loan costs, threaten borrower privacy, and discourage lending where it is needed most.
She also supports bipartisan legislation – the “ROAD to Housing” – designed to make housing more affordable by streamlining regulations and removing lingering barriers to financing.
Alabama banks are committed to responsible lending, consumer protection, and financial stability. We supported strong reforms after the financial crisis and continue to do so today. But regulation works best when it is tailored, targeted, and rooted in economic reality.
Every unnecessary compliance dollar is a dollar not invested in lower loan rates and expanded credit to our communities, or new technology that protects consumers. If we want to make life more affordable for Alabama families and give our small businesses room to grow, we must recognize regulatory overreach for what it is — a hidden tax that consumers ultimately pay.
It’s time for a smarter approach — one that strengthens the financial system without suffocating the very institutions that fuel local growth and opportunity across Alabama.
The Alabama Bankers Association represents 115 banks. Banks in Alabama have combined deposits of more than $185 billion and have 1,923 locations across the state.
