On May 22, 2018, the House of Representatives passed the bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) (the “Consumer Protection Act”), which had been previously passed by the Senate. The Consumer Protection Act will now be sent to President Trump who is expected to sign it into law in the coming weeks.
The Consumer Protection Act becomes the first legislatively enacted regulatory relief bill since the recession, and rolls back various Dodd-Frank Act provisions. Below we provide a brief summary of some of the Consumer Protection Act’s major provisions.
Capital Simplification for Qualifying Community Banks. The federal banking agencies would be directed to initiate the rulemaking process to develop a “Community Bank Leverage Ratio” of not less than 8 percent and not more than 10 percent for community banks and their holding companies with total consolidated assets of $10 billion or less. Any qualifying community bank or holding company that exceeds the Community Bank Leverage Ratio will be considered well-capitalized. Qualifying banks that meet this ratio would not even have to calculate the various other capital ratios currently employed by the federal banking regulators (e.g., Total Risk-Based Capital Ratio, Common Equity Tier-1 Capital Ratio, or Tier-1 Risk-Based Capital Ratio).
Continue Reading Update: Regulatory Relief Passed by Congress
On January 23, 2018, Mick Mulvaney, Acting Director of the Consumer Financial Protection Bureau (the “CFPB”), published an opinion editorial in The Wall Street Journal (the “Op-Ed”) describing his vision of the CFPB’s role in regulating the financial services industry. The Op-Ed struck a clear and contrasting tone from that of his predecessor, Richard Cordray, in declaring that the CFPB will no longer “push the envelope.” Specifically, Mr. Mulvaney provided his vision relating to three areas of current CFPB operations.
On December 21, 2017, under the direction of Acting Director Mick Mulvaney, the Consumer Financial Protection Bureau (the “CFPB”) announced that it intends to reopen the rulemaking process to reconsider various aspects of the CFPB’s 2015 Home Mortgage Disclosure Act Rule (the “HMDA Rule”). In reopening the rulemaking process for the HMDA Rule, the CFPB intends to reconsider (i) the institutional and transactional coverage tests and (ii) certain other aspects of the HMDA Rule’s discretionary data points. 
On August 22, 2017, the Office of the Comptroller of the Currency (the “OCC”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Board of Governors of the Federal Reserve System (the “FRB”) (the OCC, FDIC and FRB collectively, the “Agencies”) issued a proposed rule that would delay the effectiveness of certain rules which were designed to implement the Basel III capital standards (the “Proposed Rule”). Specifically, under the Proposed Rule, the Agencies are proposing to freeze certain transition and phase-in periods of Basel III capital standards relating to mortgage servicing rights, certain deferred tax assets and investments in certain unconsolidated financial institutions. The Agencies have specifically stated in the Proposed Rule that they expect in the near term to issue a separate proposal to simplify the regulatory capital treatment of the foregoing items. As a result, the Proposed Rule will allow most banks to avoid the burden of changing the capital treatment of these items as of January 1, 2018 while the Agencies draft the separate proposal to simplify the capital treatment of these items.