Washington UpdateArkansas Community Bankers2018 Compliance Conference

Michael Emancipator, Assistant Vice President – Regulatory CounselIndependent Community Bankers of America

September 19, 2018

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Today’s Agenda

Legislative Developments• Economic Growth, Regulatory Relief and Consumer

Protection Act – S.2155• Government Sponsored Enterprise (GSE) Reform

Regulatory Developments• Bureau Updates• Agency Activity• Competitive Landscape

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Legislative Developments

Economic Growth, Regulatory Relief and Consumer Protection Act – S.2155

• Signed into law on May 24

• Incorporates numerous House-originated bills

• Several provisions are self-executing• Will still need regulatory clarifications

• Many provisions require legislation

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Economic Growth, Regulatory Relief and Consumer Protection Act - S.2155 • Key Provisions

• Automatic qualified mortgage (QM) status and escrow relief for mortgages held in portfolio

• HMDA relief for banks originating fewer than 500 mortgages annually• Relief from Basel III capital rules intended for larger banks• Smarter, risk-targeted examination and risk policies• TILA-RESPA relief• Eases restrictions on reciprocal deposits to keep deposits in the community• Appraisal requirement exemption in areas with scarcity of licensed appraisers

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Government Sponsored Enterprise (GSE) Reform

Five Things You Should Know About GSE Reform and Why No Legislative Solution Any Time Soon

1. The current system works 2. The US Treasury likes the money3. Strong bipartisan support missing4. Administrative reform most likely route5. ICBA Reform Position

• Build upon what is in place today and working• Focus on current system aspects that are not working or place taxpayers at risk• Allow GSEs to rebuild capital to support operations and reduce risk to economy, housing

market and taxpayers

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Regulatory Developments

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Bureau of Consumer Financial Protection

• New Leadership• Formal Review of

Bureau Structure and Policies

• Upcoming Rules from the Bureau

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Bureau of Consumer Financial Protection

• New Leadership• Formal Review of

Bureau Structure and Policies

• Upcoming Rules from the Bureau

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Reorienting the Bureau Under New Leadership

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Mick Mulvaney• Named Acting Director in

November 2017 • Can only serve until new

Director is appointed and confirmed by the Senate

• Currently Director at OMB

Mulvaney’s New Structure

• Mulvaney very vocal in his rebuke of the Bureau’s expansive and unchecked authority

• Mulvaney calls for 4 major structural reforms:1. Put the Bureau on congressional appropriations2. Create a dedicated inspector general3. Give President more oversight of Bureau4. Subject all major new regulations to congressional approval

New Structure

“[t]he accumulation of all powers, legislative, executive, and judiciary, in the same hands…may justly be pronounced the very definition of tyranny.”

- Mulvaney, quoting the Federalist Papers

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Mulvaney’s Guiding Principles

• Indicated in letter to staff that CFPB will stop “pushing the envelope” & reprioritize due process

• Stop regulating through enforcement• Enforcement will focus on quantifiable and

unavoidable harm to the consumer• Data will guide its actions

• Less than 3% of consumer complaints were related to prepaid cards and payday loans; yet Bureau drafted thousands of pages of new regulation on those two issues, alone.

New Policies“It is not appropriate for any government entity to “push the envelope” when it comes into conflict with our citizens. The damage that we can do to people could linger for years and cost them their jobs, their savings, and their homes.”

- From Mulvaney’s letter to staff

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Holistic Review of CFPBBureau seeking public comment on its functions 1. Civil investigative demands and investigational hearings - April 26, 20182. Administrative adjudication processes - May 7, 20183. Enforcement processes - May 14, 20184. Supervision program - May 21, 20185. External engagement - May 29, 20186. Public reporting of consumer complaint information - June 4, 20187. Rulemaking processes - June 7, 20188. Adopted regulations & rulemaking - June 19, 20189. Inherited regulations & rulemaking - June 25, 201810. Guidance and implementation support - July 2, 201811. Consumer financial education programs – July 9, 2018 12. Consumer complaint inquiries – July 16, 2018

Scope“Simply put, we will be reviewing everything that we do, from investigations to lawsuits and everything in between.”

- From Mulvaney’s letter to staff

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Transition to Permanent Director

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Kathy Kraninger• Passed Senate Banking

Committee• Awaiting confirmation by

full Senate• Currently Program Associate

Director at OMB

Small Business Loan Data Collection

• Similar to HMDA, but for small business loans• DFA Section 1071 requires the CFPB to promulgate rules

that would make banks collect and report data on loans made to:

• Small businesses• Minority-owned businesses• Women-owned businesses

• Required information would cover 12 data points

ICBA Position• This data collection will

impose significant new burdens on community banks

• ICBA supports the repeal of Section 1071.

• In the alternative, ICBA urges the Bureau to exempt community banks from the rule’s coverage

Background & Summary

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Small-Dollar(Payday)Loan Rule

• Compliance date is August 19, 2019• Covered loans include:

• Short-term loans with terms of 45 days or less• Longer-term loans longer than 45 days with balloon• High cost longer-term loans longer than 45 days without balloon

payment, but APR higher than 36%

• Generally, covered loans must undergo ATR analysis• Community bank exemption – loans made by a bank that:

• Makes fewer than 2,500 covered loans, and • Revenue from loans less than 10%

ICBA Position• ICBA urges the CFPB to

retain and improve the current exemption for community bank lending

• CFPB should recognize that community banks are responsible lenders that work with their customers to increase their financial health

Background & Summary

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Federal Banking Agency Appointments & Leadership at Prudential Regulators

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Joseph OttingNovember, 2017

Jerome PowellSeptember, 2017

Jelena McWilliamsMay, 2018

Community Reinvestment Act Modernization• Treasury Study – April 3, 2018

• Regulatory & administrative changes consistent with CRA’s original intent• Common sense reforms that reduce complexity and burden on banks,

regulators and community advocateso Assessment areaso Examination clarity and flexibilityo Greater consistency and predictability across each agencyo Simplified record-keeping procedureso Clearer standards for CRA eligibilityo Expansion of loans, investments and services eligible for CRA credit

• More frequent CRA evaluations

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Bank Secrecy Act

• Top area of compliance expense for most community banks

• Banking agencies evaluating areas potentially warranting more tolerance

• Congress• Hearings• Informal panel discussions• Draft legislation

ICBA PositionICBA supports increasing • CTR reporting threshold

to $30,000• SAR reporting threshold

to $10,000• ICBA supports FinCEN

collecting beneficial ownership information

Background & Summary

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FinTech Charters

• Treasury’s FinTech report includes over 80 FinTech related recommendations

• Embracing digitization, data and technology

• Aligning the regulatory framework to promote innovation

• OCC published FinTech Chartering Manual

• Will not be federally-insured• Will note be subject to CRA-regulations

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Credit Union Developments

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Questions?Michael EmancipatorAVP, Regulatory CounselMichael.Emancipator@icba.org202-821-4469www.icba.org

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