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Click here to access a PDF of IBAT's Summer 2015 Federal Legislative Issues.
Federal Legislative Priorities – Winter 2015/2016
In the 114th Congress, the Independent Bankers Association of Texas is focused on reasonable changes to statutes which have resulted in significant burden on community banks and their customers. These laws and subsequent regulations, many of which were promulgated as a result of The Dodd-Frank Wall Street Reform and Consumer Protection Act, have taxed the productivity and resources of smaller financial institutions which did nothing to contribute to the 2008 financial crisis. Further, the cumulative effect of the myriad “enhancements” to regulatory oversight have disproportionately impacted the ability of community banks to meet the needs of their customers.
Common-sense reform of CFPB Mortgage Rules which limit credit availability
Enacted in early 2014, new mortgage rules promulgated by the Consumer Financial Protection Bureau have had a chilling effect on mortgage availability for many Americans. The rules have led some community banks to limit their available offerings in the mortgage arena. Other small community banks have made the decision to exit the mortgage business altogether. IBAT supports legislation to:
- Provide “qualified mortgage” safe harbor status for loans originated and held in portfolio by banks with less than $10 billion in assets, including balloon mortgages. Exempt banks with assets below $10 billion from escrow requirements for loans held in portfolio (CLEAR Act – H.R. 1233 by Luetkemeyer; CLEAR Relief Act of 2015 – S.812 by Moran).
- Exempt from the higher risk mortgage appraisal requirements for loans of $250,000 or less provided they are held in portfolio by the originator for a period of at least three years (CLEAR Act – H.R. 1233 by Luetkemeyer).
- Create a process whereby an individual can petition the CFPB to reevaluate the rural or non-rural designation of his/her county in applicability of certain mortgage rules (Help Expand Lending Practices in Rural Communities Act – H.R. 1259 by Barr, Hinojosa).
- Preserve the role of community banks in the mortgage servicing business by increasing the “small servicer” exemption threshold to 20,000 loans, up from 5,000 (CLEAR Act – H.R. 1233 by Luetkemeyer).
Eliminate onerous, unnecessary and duplicative regulations
While the banking industry continues to evolve, many of the regulations under which the industry operates have not. This has led to many onerous, unnecessary and duplicative regulations which, cumulatively, result in regulatory burden that is costly, counterproductive and serves no logical purpose. IBAT supports legislation to:
- Amend Gramm-Leach-Bliley to exempt financial institutions from issuing an annual privacy notice when the institution has not changed its policies and practices with regard to disclosing nonpublic personal information (Eliminate Privacy Notice Confusion Act – H.R. 601 by Luetkemeyer).
- Allow community banks to file a short form call report in the first and third quarters of each year (CLEAR Act – H.R. 1233 by Luetkemeyer; S.927 by Moran).
- Extend the examination cycle to eighteen months for well-rated community banks with up to $1 billion in assets (CLEAR Act – H.R. 1233 by Luetkemeyer).
- Require regulators to consider the risk profile and business model of regulated financial institutions, and effect appropriate regulatory policy and procedures (TAILOR Act – H.R. 2896 by Tipton).
- Exempt financial institutions of $10B or less in assets from all CFPB rules unless CFPB provides detailed justification for inclusion (H.R. 3048 by Williams).
- Eliminate the CFPB (H.R. 3118 by Ratcliffe).
Increased data-security standards
Understanding that financial institutions face liability for losses in the event of card or account fraud, IBAT supports new data-security standards that would:
- Apply Gramm-Leach-Bliley security standards for all industries that handle sensitive customer data (Data Security Act of 2015 – S.961 by Carper and Blunt; H.R. 2205 by Neugebauer and Carney).
We further support any legislation that would require merchants to report any breach in a timely manner and would require merchants to share the cost of a breach with affected financial institutions.
Limit further expansion of small business lending authority by credit unions
Credit unions have used their exemption from taxation at the federal level to undercut the rates of other financial institutions and, in effect, buy many lines of consumer credit. They are now trying to use the same market advantage to take more small business loans from other financial entities. IBAT opposes legislative initiatives that would:
- Expand the member business lending cap from 12.25 to 27.5% of total assets (Credit Union Small Business Job Creation Act – H.R. 1188 by Royce and Meeks).
We additionally take strong exception to regulatory initiatives to weaken existing limitations on business lending, which appear to be an effort to skirt clear Congressional intent in this area.
Provide Additional Opportunities for Subchapter S Banks
There are currently some 2100 Subchapter S community banks in the United States. Restrictions on raising additional capital have stymied growth and economic opportunities. IBAT supports legislation that would:
- Raise the limit on S-Corp shareholders from 100 to 500; allow S-Corp banks to issue preferred stock; make dividends on preferred stock deductible; and, allow dividends issued to preferred shareholders to be treated as ordinary income (The Capital Access for Small Business Banks Act – H.R. 2789 by Marchant).