Legislation Relieves Financial Institutions From Regulatory Burden

Kenny Douglas, CPA, CAMS, CRCM, ACT Specialist

Risk Advisory Manager

December 6, 2018

Earlier in 2018, legislation was signed into law that will relieve significant regulatory burden that community banks and credit unions have faced since the passage of the Dodd-Frank Act eight years ago.

Many industry observers believe that the Economic Growth, Regulatory Relief, and Consumer Protection Act will make it easier for these financial institutions to lend money to creditworthy customers – which in turn, will enable them to better serve their communities.

However, the Act is not a widespread repeal of the Dodd-Frank Act, as some mistakenly believe. For example, it does not completely repeal the Volker Rule, although this was the original goal of some legislators. Additionally, following the recent elections and the Democrats taking control of the House of Representatives (and with that, the House Committee of Financial Services), it remains to be seen if or how this Act may be amended or repealed.

Here are a few of the legislation’s main provisions that will directly impact community banks and credit unions in the foreseeable future:

  • The total consolidated asset threshold to qualify for an 18-month examination cycle by prudential regulators has been increased from $1 billion to $3 billion for banks that are well managed and well capitalized.
  • Institutions with less than $10 billion in total consolidated assets will be considered in compliance with capital and leverage requirements even if their tangible equity falls to an amount that causes their institution leverage ratio to exceed 10 percent.
  • Certain institutions with total consolidated assets of less than $5 billion will be subject to reduced call reporting requirements.
  • Under the Truth in Lending Act, if certain provisions are met, a depository institution can forgo certain Ability to Repay requirements under Appendix Q for residential mortgage loans.
  • The requirement of an independent home appraisal for a mortgages in a rural area can be waived under certain situations.
  • The Home Mortgage Disclosure Act has been amended to increase the reporting threshold for the expanded fields to 500 open-end lines of credit or 500 closed-end loans in each of the prior two years.
  • The SAFE Act has been amended to allow a temporary 120 day grace period for loan officers moving from one state to another or from a depository institutions to a non-depository institution, in which they can continue to originate mortgages while waiting for an updated license.
  • The Social Security Administration is directed to develop a database to facilitate the verification of consumer information upon request by a certified financial institution. Such verification shall be provided only with the consumer’s consent and in connection with a credit transaction. The purpose of this is in part due to the increase in Synthetic ID theft.
  • The Fair Credit Reporting Act has been amended to increase the length of time a consumer reporting agency must include a fraud alert on a consumer’s file (90 days increased to 1 year).
  • The Safe Senior Act will provide some immunity from liability to financial institutions when elder abuse is reported if certain provisions are met.
  • The Protecting Tenants at Foreclosure Act (previously expiring on December 31, 2014) has been restored.

As you can see, the Economic Growth, Regulatory Relief, and Consumer Protection Act will have an immense impact on financial institutions – and will hopefully relieve much of the stress many of our clients face as it relates to regulatory compliance. Should you have any questions on the Act, or how it could impact you directly, please feel free to reach out to me at kdouglas@pkm.com.


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