When big banks go bad, it’s the community banks that pay the price.

Nick DiFrancesco, president and corporate executive officer of the Pennsylvania Association of Community Bankers, said that since the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed in 2010, 15 counties in Pennsylvania no longer have chartered community banks headquartered in their jurisdictions, he said.Schuylkill County had four community banks whose headquarters were there. All have since merged with other banks.“The burden far outweighs the risk and takes capital out of the system,” he said about regulatory costs.Dodd-Frank was passed in response to the market crash in 2008 and a decade of mortgage loans being made to people who ultimately couldn’t afford them.The law was meant to protect consumers, but ultimately hurts community banks that didn’t commit the unethical loans in the first place.Sen. Pat Toomey told a gathering at the Pennsylvania Press Club in September that 125 new community banks used to open each year in the United States, before the passage of Dodd-Frank.Since then, only two banks have opened due to the regulatory costs.“The regulatory costs have wiped out an entire category of local community financing for start-up businesses, for small business to fund their dreams, and the opportunities for the folks in all of our neighborhoods,” Toomey said.“We stay in business because we customize our services to that person,” said Patrick Reilly, the president and corporate executive officer of Mauch Chunk Trust in Jim Thorpe. “More rules don’t make people honest.”In September, Wells Fargo Chairman and CEO John Stumpf, who has since resigned, went before the Senate Banking Committee to explain why his bank was involved in unethical business practices.Toomey, a member of the Senate Banking Committee, asked Stumpf for some answers, but got little in explanation as to why it happened.“Signing up customers for products when you know the customer doesn’t want the product, failing to notify customers about these sham accounts opened in their name, this isn’t cross-selling — this is fraud,” he said.Wells Fargo was fined $185 million when it was caught creating about 2 million unauthorized accounts for customers without their knowledge.The federal Consumer Financial Protection Bureau stated in a consent order in September that the bank “(1) opened unauthorized deposit accounts for existing customers and transferred funds to those accounts from their owners’ other accounts, all without their customers’ knowledge or consent; (2) submitted applications for credit cards in consumers’ names using consumers’ information without their knowledge or consent; (3) enrolled consumers in online banking services that they did not request; and (4) ordered and activated debit cards using consumers’ information without their knowledge or consent.”The bank has set aside $5 million to be used for customer remediation.Greg Hartman, executive vice president and corporate financial officer of Jim Thorpe Neighborhood Bank, said the fine incurred on Wells Fargo is “minute for a bank that size.”According to an income report released by Wells Fargo on Oct. 14, its quarterly net income in 2016 was $5.6 billion, compared with $5.8 billion in the third quarter of 2015.They targeted a population of people who are “not financially literate,” Hartman said.Over the past five years, Wells Fargo has fired 5,300 employees.“Regulations are designed to help customers, but can get in the way,” Reilly said.Hartman said 25 percent of a bank’s costs are in compliance.Because of more regulations, the fastest-growing job in banks today is in compliance, said DiFrancesco from the Pennsylvania Association of Community Bankers.“Our banks really have to go out and hire people to make sure they are meeting the regulations,” he said. “It’s tying up a lot of their capital.”DiFrancesco said as a result of the fallout from Dodd-Frank, the federal government has incorporated a tiered-regulation system. The system is meant to lessen the financial impact of regulations on community banks with less than $10 billion in assets.“There’s still additional burden, but not for those at the higher asset level,” DiFrancesco said.