WASHINGTON – Rep. Jeb Hensarling’s (R-TX), the chairman of the House Financial Services Committee, has provided additional details on the alternative plan that he said he will put forward that would replace the Dodd-Frank Act and include regulatory relief.
The plan includes the repeal of “federal price controls” in the Durbin amendment and calls for an 18-month exam cycle.
Hensarling shared the details during a speech at the Economic Club of New York on Tuesday morning, after also mentioning in remarks last week, as CUToday.info reported here.
During his remarks, Hensarling said the bill will "provide much-needed relief to community financial institutions that are being crushed by Washington's 'one-size-fits-all' regulatory approach." The bill, "The Financial Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs (CHOICE) Act," also includes measures that would allow credit unions to appeal exam findings more easily.
NAFCU said it supports much of the legislation, noting it staunchly opposed the Durbin amendment because the cap on interchange fees results in profits for retailers but no passed-on savings for consumers. The amendment required the Federal Reserve to set a cap on debit interchange fees charged by financial institutions with $10 billion or more in assets. The Fed’s final rule caps debit interchange transaction fees at 21 cents plus one basis point for fraud costs.
The bill would also address extended exam cycles for credit unions, Hensarling said.
"We are losing, on average, one community financial institution each day – and they are not dying from natural causes but from the sheer weight, volume, complexity and expense of Washington’s rules," Hensarling said. "So our plan requires financial regulators to tailor regulations so they fit a bank or credit union’s business model and risk profile. This allows America’s small, hometown banks and credit unions to focus their time and resources on serving their customers rather than the dictates of Washington bureaucrats. Our plan provides for the timely release of exam reports, creates a mechanism for institutions to appeal exam findings without fear of bureaucratic retaliation, and creates an extended 18-month exam cycle for certain credit unions. We permit small institutions to more easily finance acquisitions and allow well-capitalized community institutions to file short-form call reports in the first and third quarters of each year," he continued.
Hensarling said the proposed legislation will also provide for an ability-to-repay safe harbor for loans held in portfolio, which would ensure credit for manufactured-home mortgages; would reform how points and fees are calculated; and would provide relief for small servicers from escrow requirements.
Hensarling said the proposed reform would also make changes to the structure of the CFPB, which was created by Dodd-Frank (both CUNA and NAFCU have indicated support for a board to oversee the agency rather than an individual); would revoke regulators’ power to designate companies as “systematically important,” and would remove the Volcker Rule, which limits the ability of financial institutions to grow their non-deposit liabilities and places restrictions on investment-trading activities.
Hensarling said additional details will come in the next month.
"We expect a number of other NAFCU-backed regulatory relief measures to be included in the larger package, including requirements for regulators to better tailor rules to different sizes and types of institutions," said NAFCU Vice President of Legislative Affairs Brad Thaler.
CUNA’s chief advocacy officer, Ryan Donovan, said the group appreciates “Chairman Hensarling’s provisions that tackle some of the regulatory burdens shouldered by Main Street, community financial institutions—especially the consideration it gives to credit unions' supervisory concerns.”
Among other provisions outlined by Hensarling, the Financial CHOICE Act also calls for:
- Creating an independent examination ombudsman and independent examination appeals process, as well as examination standards for financial institutions. Based on the Financial Institutions Examination and Reform Act (H.R. 1941), which passed the House Financial Services Committee in July 2015.
- Prohibiting a federal banking agency from suggesting, requesting or ordering a depository institution to terminate specific account, or restrict it from a relationship with a specific consumer. Based on the Financial Consumer Protection Act of 2015 (H.R. 766), which passed the House in February.
- Allowing credit unions and other lenders to treat mortgages held in portfolio as Qualified Mortgages for purposes of the CFPB’s mortgage lending rules. Based on the Portfolio Lending and Mortgage Act (H.R. 1210), which passed the House in November 2015.
- Requiring federal regulators to take risk into account when promulgating regulations, based on the Taking Account of Institutions with Low Operation Risk Act (HR 2896), which passed the House Financial Services Committee in March.