Oklahoma Bankers Association We make bankers better!
We have finally reached our first deadline at the state legislature, and it couldn’t come fast enough.
We started off the session tracking 678 bills, and after the deadline dust settled, we are down to 211 bills.
All of the bills we have introduced made it past the deadline and are still alive. We will spend the next couple of weeks hearing bills on the floor of the body where it originated.
While the first co
uple of weeks have flown by, it was successful. Bills we were opposed to didn’t get moved for one reason or another. One bill in particular – the credit union low-income designation bill – was never heard in committee. After a healthy discussion with the author, he decided not to have the bill heard.
There are several bills that deal with tax cuts, both income and corporate, still alive. It’s way too early to know what the final product will look like, but I feel safe we will have some kind of tax cut this year.
We have already had a couple of elections this session as both Speaker Pro Tempore of the Senate Greg Treat and Speaker of the House Charles McCall are term limited, and this will be their final legislative session. Sen. Greg McCortney (R-Ada) was selected by his caucus to be the next president pro tempore of the state Senate.
McCortney is a strong advocate for community banking and will continue to be an asset for our industry in his new role next year. We’ve worked very closely with the senator while he’s been in office and look forward to working with him for the next couple of years.
On the House side, Rep. Kyle Hilbert (R-Bristow) was selected by his caucus to be the next speaker of the House of Representatives.
Hilbert is also a strong supporter of community banking. He has always supported our issues and knows how important community banks are to Oklahoma’s success.
On a side note, I’m in a fantasy football league with a bunch of lobbyists and legislators, in which Rep. Hilbert finished last this past season. The punishment for finishing in last place is the individual must host a lemonade stand in the middle of the rotunda during the legislative session. We are already looking forward to the future speaker of the house providing refreshments in a couple of weeks.
While things are going well at the state level, we are still wrestling with multiple issues at the federal level. It seems the closer we get to the elections in November, the more things slow down and, at the same time, get even crazier. It tends to happen during presidential elections, when the leaders of the regulatory agency who share the same party as the president try to get out as many rules as they can in the possibly still-remaining months they are in power.
Below is an update on some of the rules we are involved with as well as some pieces of legislation that are good and some that just won’t go away.
CFPB proposed rule on overdrafts
On Jan. 17, the CFPB released a notice of proposed rule-making to amend Reg. E and Z to update regulations for overdraft credit provided by very large financial institutions.
The proposed rule would apply to banks with at least $10 billion in assets.
The proposed rule would go into effect in October 2025 after the presidential election. A new presidential administration might overturn the rule due to the effective date.
The proposed rule would provide three options for covered financial institutions.
Treat overdrafts as an extension of credit, which would require Regulation Z disclosures with each overdraft.
Charge a “break-even” amount that allows banks to recoup the cost of providing the overdraft.
Charge the safe harbor amount that the CFPB establishes. The CFPB is considering setting the benchmark fee at $3, $6, $7 or $14, and has requested comments on which calculation is best.
The proposed rule would also prohibit covered banks from automatically repaying overdrafts from a consumer’s account. Instead, the consumer would have the choice of how to repay the overdraft and the fee.
The CFPB’s proposal to cap overdraft fees would have a significant negative impact. The estimated cost to the very large banks would be $3.5-5.6 billion.
The rule is based on the assumption consumers will benefit from increased protections at very large banks, covering around 80% of consumer deposits and 68% of overdraft charges as of Dec. 22. Banks with assets fewer than $10 billion are exempt from the rule, and their regulatory requirements remain the same.
The deadline for comments is April 1.
Trigger leads
Sen. Jack Reed (D-R.I.) and Sen. Bill Hagerty (R-Tenn.) recently introduced the Homebuyers’ Protection Privacy Act (S.B. 3502). The Act would amend the Fair Credit Reporting Act to prohibit credit reporting agencies from selling trigger leads in certain circumstances.
Trigger leads are a marketing product sold by credit bureaus containing contact information for consumers who have had a credit report pulled while in the process of shopping for a mortgage loan. In the bill, a consumer reporting agency would not be able to furnish a trigger lead to a third party unless: The third party certifies to the consumer reporting agency that the consumer has authorized the solicitations; or the third party certifies it has originated the consumer’s current residential mortgage loan, is the servicer of the consumer’s current residential mortgage loan or is an insured depository institution or insured credit union and holds a deposit account for the consumer to whom the consumer report relates.
Similar legislation has been introduced in the House.
S. 2642 (The Financial Institutions Examinations Fairness and Reform Act)
We are looking at offering an amendment to this bill, which reads that current technology service providers of IT services for banks and credit unions are subject to examination by state and federal banking regulators.
Under current rules, reports of examination of regional service providers are treated as confidential, yet are available to the vendor’s existing customer base. These same reports are not available for banks and credit unions doing their due diligence on the company before signing on as a customer.
What’s being proposed is an amendment to make the public portion of a service provider’s report of examination available upon request for purposes of a federally insured depository institution’s due diligence process. Such an amendment would conform with the bill’s stated intention of increasing transparency for the bank examination process.
Banking regulators may object to the amendment, but there’s a difference between keeping a report of examination for a depository institution confidential and treating a report for a service provider in that same manner. In the case of an insured depository, there are public policy issues of customer privacy and preventing a run on the institution to consider. No such concerns exist for third party vendors/service providers.
Credit Card Competition Act (S.1838)
Durbin 2.0.
Being pushed by big-box merchants.
Government-imposed routing mandates.
Data security risks.
Rewards program would be eliminated.
NDAA and others must pass pieces of legislation.
The proposal would mandate requiring banks with more than $100 billion in assets to offer merchants multiple credit card processing networks.
The practical impacts of this mandate on the largest issuers would fall on smaller issuers as well, likely making community bank credit card issuance uneconomical.
On April 9, Senate Judiciary Chairman Dick Durbin has invited the CEOs of Visa, Mastercard, United Airlines and American Airlines to testify regarding competition in the credit card market. Recently, Durbin and Sen. Marshall have requested the Department of Transportation and the CFPB open a report regarding “troubling reports” of unfair and deceptive practices in airlines’ frequent flyer and loyalty programs.
CRA lawsuit
On Feb. 5, the ABA and other associations filed a lawsuit in the Northern District of Texas against the Federal Reserve, FDIC and OCC for exceeding their statutory authority with their recent amendments to the Community Reinvestment Act rules. You can read more about this on the front page of this issue of Oklahoma Banker.
The lawsuit asks the court to vacate the Final Rule and seeks a preliminary injunction pausing the new rule while the courts decide the merits of the case.
The proposed rule unlawfully exceeds what Congress authorized and fails to recognize banks’ demonstrated commitment to fully serving their communities. The Final Rule also undermines the very goals of the CRA by creating disincentives for banks to offer certain products or lend in geographic regions outside their branch network.
• • •
We have lots of action happening at both the state and federal level and the next couple of months will be exciting. We’ll keep you posted on everything that is happening in both Washington and Oklahoma City. Please contact me if you ever have any questions or comments!