Regulatory Relief For Community Banks & Expanding Consumer Credit Protections (S. 2155)

What is S. 2155?

(Updated July 21, 2019)

This bill was enacted on May 24, 2018

This bill would aim to improve consumers’ access to mortgages, and provide regulatory relief for smaller financial institutions — defined as those with less than $10 billion in assets — while enhancing consumer protections for veterans, senior citizens, and victims of fraud.

Credit reporting agencies would be required to provide consumers with one free freeze alert and one free unfreeze alert per year, and provide further protections for minors. Protections would be extended to individuals who in good faith and with reasonable care disclose the suspected exploitation of a senior citizen to a regulatory or law enforcement agency.

Medical debt incurred by veterans that predates a credit report by less than one year, and a fully paid or settled medical debt that had been delinquent or in collection would be excluded from consumer reporting information. A dispute process for consumer reporting agencies related to veterans’ medical debt would be established.

Private student loan borrowers would be able to request that a reported default be removed from a credit report if the borrower successfully participates in a rehabilitation program offered by a financial institution.

The Protecting Tenants at Foreclosure Act would be permanently reauthorized after it was repealed at its sunset on December 31, 2014.

Mortgage loans that are originated and retained in portfolio by an insured bank or credit union with less than $10 billion in assets would be deemed “qualified mortgages” for regulatory purposes, while consumer protections under the Truth in Lending Act are maintained.

Small depository institutions that have originated less than 500 closed-end mortgages or less than 500 open-end lines of credit in each of the two prior calendar years would be exempt from certain disclosure requirements.

The three-day wait period for the combined TILA/RESPA mortgage disclosure would be removed if a lender extends to a consumer a second offer of credit with a lower annual percentage rate.

Federal banking agencies would be required to establish a community bank leverage ratio of tangible equity to average consolidated assets of between 8 and 10 percent. Banks with under $10 billion in total consolidated assets maintaining tangible equity in an amount exceeding the leverage ratio would be considered in compliance with capital and leverage requirements.

The consolidated asset threshold in the Federal Reserve’s Small Bank Holding Company Policy Statement would be raised from $1 billion to $3 billion. Such banks would qualify for an 18-month regulatory examination cycle.

The threshold for apply enhanced prudential standards would be raised from $50 billion to $250 billion. Bank holding companies between $50 and $100 billion would be exempt immediately, while those between $100 and $250 billion would be exempt after 18 months. The Federal Reserve would still have the authority to apply enhanced prudential standards after the effective date or exempt firms from the standards, and be required to conduct periodic stress tests after the standards are applied.

Argument in favor

This bipartisan bill provides common sense reforms to modernize regulations for community banks and credit unions, while enhancing consumer protections for veterans, senior citizens, victims of fraud, and people who fall on hard times.

Argument opposed

While the consumer protections in this bill are worthwhile and community banks need some regulatory relief, this bill goes too far in trying to lift burdens on smaller depository institutions.

Impact

Consumers of financial services; banks and credit unions, particularly those with less than $10 billion in assets; and financial regulators.

Cost of S. 2155

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sponsoring Sen. Mike Crapo (R-ID) introduced this bill to provide regulatory relief for community lenders and enhance consumer protections:

“A strong and vibrant economy is important for American consumers, businesses, and the stability of the financial sector. This bipartisan legislation will significantly improve our financial regulatory framework and foster economic growth by right-sizing regulation, particularly for smaller financial institutions and community banks.”

This legislation has the support of 25 bipartisan cosponsors in the Senate, including 13 Democrats and 12 Republicans.

Media:

• Sponsoring Sen. Mike Crapo (R-ID) Press Release
  
• Senate Banking Committee Press Release