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From Banking and Finance Law Daily, July 13, 2017

Hearing mulls over regulatory relief legislation,

By John M. Pachkowski, J.D.

A recent House Subcommittee on Financial Institutions and Consumer Credit hearing examined a series of legislative proposals and heard testimony from a panel of witnesses on targeted relief for community financial institutions.

According to a memorandum released in connection with the hearing, the following legislative proposals were discussed during the hearing:

  • H.R. 864, the "Stop Debt Collection Abuse Act of 2017," introduced by Rep. Mia Love (R-Utah);
  • H.R. 924, the "Financial Institutions Due Process Act of 2017," introduced by Rep. Keith Rothfus (R-Pa);
  • H.R. 1457, the "Making Online Banking Initiation Legal and Easy Act of 2017," introduced by Rep. Scott Tipton (R-Colo);
  • H.R. 2133, the "Community Lending Enhancement and Regulatory Relief Act of 2017," introduced by Rep. Blaine Luetkemeyer (R-Mo);
  • H.R. 2148, "Clarifying Commercial Real Estate Loans," introduced by Rep. Robert Pittenger (R-NC);
  • H.R. 2396, the "Privacy Notification Technical Correction Act," introduced by Rep. Dave Trott (R-Mich);
  • the "Access to Affordable Mortgages Act of 2017," sponsored by Rep. David Kustoff (R-Tenn);
  • the "Ensuring Quality Unbiased Access to Loans Act of 2017," sponsored by Rep. Trey Hollingsworth (R-Ind); and
  • bill sponsored by Claudia Tenney (R-NY) that would simplify the process for national banks to obtain deposit insurance, and for other purposes.

The witnesses testifying at the hearing were:

  • Robert Fisher, President and Chief Executive Officer, Tioga State Bank, on behalf of the Independent Community Bankers of America;
  • Rick Nichols, President and Chief Executive Officer, River Region Credit Union, on behalf of the Heartland Credit Union Association;
  • Scott B. Astrada, Director of Federal Advocacy, Center for Responsible Lending; and
  • Professor J.W. Verret, Associate Professor, Antonin Scalia Law School of George Mason University.

Services can’t be duplicated. Fisher said, "Like thousands of other community banks across the country, Tioga State Bank provides services that cannot be duplicated by banks that operate from outside the community." His testimony outlined several recommendations included in ICBA’s Plan for Prosperity and advanced in the legislation that was the topic of the hearing.

Significant strides. In his testimony, Nichols noted, "Some of the legislation being discussed today would make significant strides in furthering the goal of removing regulatory barriers to allow credit unions to more fully serve their members."

Dismantling essential reforms. Astrada called on the subcommittee members to continue and expand the two-tier approach that regulators use to supervise banks. However, he cautioned that dismantling essential reforms, such as the mortgage ability to repay standard, or reducing the effectiveness of the Consumer Financial Protection Bureau (CFPB) "would harm consumers, banks and the overall economy." Astrada added that "many of the legislative proposals before the committee today do not build on the success of recent reforms and would, in the name of helping small banks, harm consumers while helping very large financial institutions."

Certainty and predictability. Verret testified that the "legislation under consideration today includes vital reforms to the bank examination process by banking regulators, to the Consumer Financial Protection Bureau’s (CFPB) jurisdiction and enforcement powers, and to the statutes enforced by the CFPB." He added, "These changes will help to provide more certainty and predictability to banks, and they will begin to alleviate barriers to entry which have made it all but impossible to open new banking institutions in recent years. These new provisions will help to ensure economic growth and access to financial services for all Americans."

Preserving choice. Following the hearing, Luetkemeyer, the subcommittee’s chairman said, "Our nation’s community financial institutions are getting buried under red tape." He added, "The bills that were discussed today are all designed to take the first steps in relieving pressure on our nation’s community financial institutions and preserving choice and financial independence for all consumers."

A win-win. Commenting on his bill, H.R. 2396, Trott noted, "This critical legislation finally allows auto lenders to modernize their privacy notification process, cutting down on the high compliance costs they’re forced to pass along to consumers while increasing consumer access to important privacy information. In Michigan, the heartland of our nation’s domestic auto industry, legislation that decreases the burden placed on auto manufacturers and provides greater access to information for automotive consumers is a win-win."

CLEARR Act. A letter by the Consumer Bankers Association indicated support for a number of the bills under consideration, including the Ensuring Quality Unbiased Access to Loans Act of 2017 and the Community Lending Enhancement and Regulatory Relief Act of 2017 or CLEARR Act.

The CLEARR Act would remove the "abusive" standard from the CFPB’s unfair, deceptive, or abusive acts or practices authority and require the bureau to consult with the appropriate prudential regulator before taking action in an effort to eliminate duplication and ensure that there is a uniform standard for unfair or deceptive acts or practices.

On the other hand, the National Community Reinvestment Coalition released a letter strongly opposing the CLEARR Act. The NCRC noted that the CLEARR Act contains a number of provisions that would "undermine our nation’s consumer protection and fair housing laws. The NCRC added "a vote for this bill is a vote against working class Americans, pure and simple, and would fly in the face of promises made to them by the administration, historical lessons learned in the recent rescission."

Companies: Center for Responsible Lending; Consumer Bankers Association; Heartland Credit Union Association; Independent Community Bankers of America; National Community Reinvestment Coalition; River Region Credit Union Tioga State Bank

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