Banks Pressure Senate to Act on Reg Relief


Community bankers are launching a last-ditch effort to push the Senate this year to pass more than a dozen bipartisan regulatory relief bills that have already cleared the House with support from both parties.

Though the bills are considered relatively narrow, uncontroversial fixes, the Senate has not acted upon them, frustrating many in the industry. Some are hoping to use a Senate Banking Committee hearing on community bank issues scheduled for Sept. 16 to jumpstart the process.

“It’s disappointing to see the lack of attention being paid, by all accounts, to technical fixes and minor changes that can provide some relief to community banks,” said James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association.

The legislation in question may be small in scope, but it would provide a significant benefit for community banks, supporters say.

For example, the House passed a bill in March 2013 that would require financial institutions to send out privacy notices to consumers only when the provisions change, instead of every year. The Consumer Financial Protection Bureau proposed a similar rule in May, but bankers are still hoping for a legislative fix.

Sen. Sherrod Brown has introduced a Senate version of the bill which currently has 72 co-sponsors – almost three-quarters of the entire chamber. Yet it has not been acted upon by the Senate Banking Committee.

“It’s veto-proof and filibuster-proof, and it still has not come to the floor of the Senate,” said Camden Fine, president and chief executive of the Independent Community Bankers of America.

Bankers have also backed legislation that would set up a petition process to allow more areas to be considered as rural areas under the CFPB’s purview. Under the agency’s rules, the CFPB allows an exception in its qualified mortgage rule for certain rural and underserved areas to offer balloon mortgages.

Additionally, bankers are seeking to raise the Federal Reserve’s small bank holding company threshold to $1 billion from $500 million that exempts smaller institutions from certain regulatory and capital guidelines.

Credit unions, meanwhile, are pushing for bills that would extend deposit insurance coverage to Interest on Lawyer Trust Accounts and that would allow privately insured credit unions access to the Federal Home Loan Bank system. All of these provisions have passed the House by voice vote, an indication that they are not considered controversial.

It’s “the low-hanging fruit,” said Ryan Donovan, senior vice president for legislative affairs at the Credit Union National Association.

But a key hurdle to action in the Senate remains ongoing worries – mainly by Democrats – over opening up the Dodd-Frank Act to any changes, large or small. Many of the regulatory relief items up for discussion are not related to the financial reform law, but there is always the fear that the process could attract wider attention.

“It’s just a magnet” for debate about Dodd-Frank, said Mark Calabria, director of financial regulation studies at the Cato Institute. “There are 100 different regulatory relief complaints out there, and you really get into the weeds.

It could also prove difficult to attract the necessary support during a contentious election year. Democrats and Republicans remain locked in a crucial fight for control of the chamber next year, and lawmakers are expected to be in Washington for as little as two more weeks until after the elections. It’s unlikely they’ll tackle much more than passing a short-term funding bill to avoid a government shutdown next month.

Beyond that, it’s an open question whether the measures will have the same widespread backing in the Senate as they did in the House.

“It is not clear that there is unanimous or broad bipartisan support for these issues in the Senate, and the Committee is looking to explore the topics further,” said Kate Cichy, a spokeswoman for the Banking Committee.

Still, the banking panel hearing could provide a crucial opportunity for industry officials to make their case for some of these bills. Lawmakers are expected to hear from both financial regulators and industry representatives at the event.

In fact, the push for smaller tweaks could be particularly strident because the Senate was so quick to pass legislation earlier this year clarifying a Dodd-Frank provision on capital standards for non-banks, known as the Collins amendment. That bill is now being held up in the House.

“This hearing is about giving community banks an opportunity to vent,” said Calabria. “Now that the Collins amendment has passed, there’s the feeling that, if they’re willing to do this for the insurers, why not give the community banks a break? It really has ramped up the pressure.”

Industry officials also are optimistic that there could be an appetite to move some of these bills in the lame duck session this winter.

“In the last Congress we were able to get some small bills done using essentially same roadmap,” said Donovan, pointing to legislation that passed in late 2012 removing a requirement for physical fee placards at ATMs and ensuring that privileged information provided to the CFPB remains private.

He added: “We got the bills through the House as early as possible and worked with the Banking Committee on them. We were ultimately able to get them through the Senate in the lame duck session.”

ICBA’s Fine added that he’s hopeful that the chamber could even take up some of the measures by early next year, regardless of which party takes control of the Senate.

“I am confident that a number of regulatory relief measures can get done within the first six months with the new Congress convenes,” he said.

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