HouseH. Rpt. 119-1652025-06-20
FINANCIAL INSTITUTION REGULATORY TAILORING ENHANCEMENT ACT
Summary
H. Rpt. 119-165 accompanies financial services legislation titled "Financial Institution Regulatory Tailoring Enhancement Act". Financial bills regulate banks, securities markets, consumer finance, insurance, housing finance, cryptocurrency, or anti-money-laundering. The Science, Space, and Technology Committee's report explains the financial regulatory changes, the problems they address, the compliance implications for institutions, and potential effects on consumers and markets. Financial services reports often balance industry concerns against consumer protection goals.
Full Text
Official report text. Use Ctrl+F / Cmd+F to search within the document.
House Report 119-165 - FINANCIAL INSTITUTION REGULATORY TAILORING ENHANCEMENT ACT
[House Report 119-165]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 119-165
======================================================================
FINANCIAL INSTITUTION REGULATORY TAILORING
ENHANCEMENT ACT
--------------
June 20, 2025.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
--------------
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 3230]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3230) to increase the asset thresholds at which
financial institutions become subject to certain requirements,
and for other purposes, having considered the same, reports
favorably thereon with an amendment and recommends that the
bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Committee Consideration.......................................... 2
Related Hearings................................................. 3
Committee Votes.................................................. 3
Committee Oversight Findings..................................... 7
Performance Goals and Objectives................................. 7
Committee Cost Estimate.......................................... 7
New Budget Authority and CBO Cost Estimate....................... 7
Unfunded Mandates Statement...................................... 7
Earmark Statement................................................ 7
Federal Advisory Committee Act Statement......................... 8
Applicability to the Legislative Branch.......................... 8
Duplication of Federal Programs.................................. 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 8
Minority Views................................................... 39
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Financial Institution Regulatory
Tailoring Enhancement Act''.
SEC. 2. INCREASED ASSET THRESHOLDS.
(a) Bureau Supervision.--The Consumer Financial Protection Act of
2010 is amended--
(1) in section 1025(a) (12 U.S.C. 5515(a)), by striking
``$10,000,000,000'' each place it occurs and inserting
``$50,000,000,000''; and
(2) in section 1026(a) (12 U.S.C. 5516(a)), by striking
``$10,000,000,000'' each place it occurs and inserting
``$50,000,000,000''.
(b) Volker Rule Requirements.--Section 13(h)(1)(B)(i) of the Bank
Holding Company Act of 1956 (12 U.S.C. 1851(h)(1)(B)(i)) is amended by
striking ``$10,000,000,000'' and inserting ``$50,000,000,000''.
(c) Qualified Mortgage Requirements.--Section 129C(b)(2)(F)(i) of the
Truth in Lending Act (15 U.S.C. 1639c(b)(2)(F)(i)) is amended by
striking ``$10,000,000,000'' and inserting ``$50,000,000,000''.
(d) Leverage and Risk-based Capital Requirements.--Section
201(a)(3)(A) of the Economic Growth, Regulatory Relief, and Consumer
Protection Act (12 U.S.C. 5371 note) is amended by striking
``$10,000,000,000'' and inserting ``$50,000,000,000''.
Purpose and Summary
Introduced on May 7, 2025, by Representative Andy Barr (KY-
06), H.R. 3230, the Financial Institution Regulatory Tailoring
Enhancement Act, increases the asset thresholds at which
financial institutions become subject to certain regulatory
requirements, from $10 billion to $50 billion.
Background and Need for Legislation
Over the past two decades, industry consolidation and
inflation have significantly changed the financial landscape.
However, regulatory thresholds have remained frozen, subjecting
relatively small and lower-risk banks to the same requirements
as the largest institutions. This has driven up compliance
costs, particularly for community and regional banks, leading
to more mergers and closures--especially in rural areas where
traditional banking services remain essential. The Federal
Reserve has noted that online banking does not fully substitute
for in-person services such as cash handling, deposit services,
and financial counseling. When branches close, communities
often lose key civic and financial resources, deepening
economic isolation and reducing access to credit.
H.R. 3230 updates outdated regulatory thresholds to reflect
modern economic realities. This bill ensures that financial
institutions are subject to requirements appropriate to their
respective size and risk profile. The result is a more
competitive, accessible, and stable banking system.
Committee Consideration
119TH CONGRESS
On May 7, 2025, Representative Barr introduced H.R. 3230,
the Financial Institution Regulatory Tailoring Enhancement Act,
with Representative Dan Meuser (R-PA) as an original cosponsor.
Representative Pete Sessions (R-TX) was added subsequently as a
cosponsor. The bill was referred solely to the Committee on
Financial Services. The bill was attached to the May 14, 2025,
hearing titled ``Enhancing Competition: Shaping the Future of
Bank Mergers and De Novo Formation'' held by the Subcommittee
on Financial Institutions.
On May 21, 2025, the Committee met in open session to
consider, among others, H.R. 3230. The Committee favorably
reported H.R. 3230, as amended, to the House of
Representatives.
118TH CONGRESS
On November 14, 2023, Representative Barr introduced H.R.
6398, the Financial Institution Regulatory Tailoring
Enhancement Act. Representative Meuser was added subsequently
as a cosponsor. This bill is an earlier iteration of H.R. 3230.
The bill was referred solely to the Committee on Financial
Services. The text of H.R. 6398 was included as Title II of
H.R. 8337, the Bank Resilience and Regulatory Improvement Act.
On May 16, 2024, H.R. 8337 was ordered to be reported, as
amended, by the Committee by a vote of 24 yeas and 22 nays.
Related Hearings
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearing was used to
develop H.R. 3230:
The Financial Institutions Subcommittee of the House
Financial Services Committee held a hearing on May 14, 2025,
entitled ``Enhancing Competition: Shaping the Future of Bank
Mergers and De Novo Formation.'' A discussion draft version of
the bill was considered in this hearing. The following
witnesses testified: Mr. Keith Costello, President and CEO,
Locality Bank; Ms. Mary Usategui, President and CEO, BankMiami;
Ms. Amanda Allexon, Partner, Simpson Thacher & Bartlett LLP;
Mr. John Berlau, Senior Fellow and Director of Finance Policy,
Competitive Enterprise Institute; Mrs. ReShonda Young, Founder,
Jabez Inc.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
On May 21, 2025, the Committee ordered H.R. 3230, as
amended, to be reported favorably to the House by a recorded
vote of 29 yeas and 23 nays, a quorum being present. (Record
Vote No. FC-128).
The Committee considered the following amendments to H.R.
3230:
Representative Barr offered an amendment in
the nature of a substitute, which made minor edits and
technical changes. This amendment was adopted by a
voice vote, a quorum being present.
Ranking Member Maxine Waters (D-CA) offered
an amendment (No. 7), designated AMENDHR_3230_12. This
amendment would prevent the underlying bill from taking
effect until the Director of the Consumer Financial
Protection Bureau (CFPB) has confirmed that the agency
has the average number of supervisory and examination
staff that are not on administrative leave and that are
performing supervisory duties as the Bureau had from
November 2017 to January 2021. This amendment failed by
a recorded vote of 23 yeas and 29 nays, a quorum being
present. (Record Vote No. FC-127).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal of H.R. 3230 is to update
outdated regulatory thresholds to reflect modern economic
realities to ensure that financial institutions are subject to
requirements appropriate to their respective size and risk
profile, which will result in a more competitive, accessible,
and stable banking system.
Committee Cost Estimate
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 3230. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee will adopt as its own
the cost estimate by the Director of the Congressional Budget
Office once it has been prepared.
New Budget Authority and CBO Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, a cost estimate was not made
available to the Committee in time for the filing of this
report. The Chairman of the Committee shall cause such estimate
to be printed in the Congressional Record upon its receipt by
the Committee.
Unfunded Mandates Statement
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Committee will adopt the estimate once
it has been prepared by the Director.
Earmark Statement
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the resolution and states that the provisions
of the bill do not contain any congressional earmarks, limited
tax benefits, or limited tariff benefits within the meaning of
the rule.
Federal Advisory Committee Act Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Duplication of Federal Programs
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
Section-by-Section Analysis of the Legislation
Section 1. Short title
Section 1 provides the short title is the ``Financial
Institution Regulatory Tailoring Enhancement Act.''
Section 2. Increased asset thresholds
Section 2 amends the Consumer Financial Protection Act of
2010 to increase the asset threshold from $10 billion to $50
billion for financial institutions to be subject to Consumer
Financial Protection Bureau (CFPB) supervision, the Volcker
Rule, qualified mortgage standards under the Truth in Lending
Act, and enhanced leverage and risk-based capital standards.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
CONSUMER FINANCIAL PROTECTION ACT OF 2010
TITLE X--BUREAU OF CONSUMER FINANCIAL PROTECTION
* * * * * * *
Subtitle B--General Powers of the Bureau
* * * * * * *
SEC. 1025. SUPERVISION OF VERY LARGE BANKS, SAVINGS ASSOCIATIONS, AND
CREDIT UNIONS.
(a) Scope of Coverage.--This section shall apply to any
covered person that is--
(1) an insured depository institution with total
assets of more than [$10,000,000,000] $50,000,000,000
and any affiliate thereof; or
(2) an insured credit union with total assets of more
than [$10,000,000,000] $50,000,000,000 and any
affiliate thereof.
(b) Supervision.--
(1) In general.--The Bureau shall have exclusive
authority to require reports and conduct examinations
on a periodic basis of persons described in subsection
(a) for purposes of--
(A) assessing compliance with the
requirements of Federal consumer financial
laws;
(B) obtaining information about the
activities subject to such laws and the
associated compliance systems or procedures of
such persons; and
(C) detecting and assessing associated risks
to consumers and to markets for consumer
financial products and services.
(2) Coordination.--To minimize regulatory burden, the
Bureau shall coordinate its supervisory activities with
the supervisory activities conducted by prudential
regulators and the State bank regulatory authorities,
including consultation regarding their respective
schedules for examining such persons described in
subsection (a) and requirements regarding reports to be
submitted by such persons.
(3) Use of existing reports.--The Bureau shall, to
the fullest extent possible, use--
(A) reports pertaining to a person described
in subsection (a) that have been provided or
required to have been provided to a Federal or
State agency; and
(B) information that has been reported
publicly.
(4) Preservation of authority.--Nothing in this title
may be construed as limiting the authority of the
Director to require reports from a person described in
subsection (a), as permitted under paragraph (1),
regarding information owned or under the control of
such person, regardless of whether such information is
maintained, stored, or processed by another person.
(5) Reports of tax law noncompliance.--The Bureau
shall provide the Commissioner of Internal Revenue with
any report of examination or related information
identifying possible tax law noncompliance.
(c) Primary Enforcement Authority.--
(1) The bureau to have primary enforcement
authority.--To the extent that the Bureau and another
Federal agency are authorized to enforce a Federal
consumer financial law, the Bureau shall have primary
authority to enforce that Federal consumer financial
law with respect to any person described in subsection
(a).
(2) Referral.--Any Federal agency, other than the
Federal Trade Commission, that is authorized to enforce
a Federal consumer financial law may recommend, in
writing, to the Bureau that the Bureau initiate an
enforcement proceeding with respect to a person
described in subsection (a), as the Bureau is
authorized to do by that Federal consumer financial
law.
(3) Backup enforcement authority of other federal
agency.--If the Bureau does not, before the end of the
120-day period beginning on the date on which the
Bureau receives a recommendation under paragraph (2),
initiate an enforcement proceeding, the other agency
referred to in paragraph (2) may initiate an
enforcement proceeding, including performing follow up
supervisory and support functions incidental thereto,
to assure compliance with such proceeding.
(d) Service Providers.--A service provider to a person
described in subsection (a) shall be subject to the authority
of the Bureau under this section, to the same extent as if the
Bureau were an appropriate Federal banking agency under section
7(c) of the Bank Service Company Act 12 U.S.C. 1867(c). In
conducting any examination or requiring any report from a
service provider subject to this subsection, the Bureau shall
coordinate with the appropriate prudential regulator.
(e) Simultaneous and Coordinated Supervisory Action.--
(1) Examinations.--A prudential regulator and the
Bureau shall, with respect to each insured depository
institution, insured credit union, or other covered
person described in subsection (a) that is supervised
by the prudential regulator and the Bureau,
respectively--
(A) coordinate the scheduling of examinations
of the insured depository institution, insured
credit union, or other covered person described
in subsection (a);
(B) conduct simultaneous examinations of each
insured depository institution or insured
credit union, unless such institution requests
examinations to be conducted separately;
(C) share each draft report of examination
with the other agency and permit the receiving
agency a reasonable opportunity (which shall
not be less than a period of 30 days after the
date of receipt) to comment on the draft report
before such report is made final; and
(D) prior to issuing a final report of
examination or taking supervisory action, take
into consideration concerns, if any, raised in
the comments made by the other agency.
(2) Coordination with state bank supervisors.--The
Bureau shall pursue arrangements and agreements with
State bank supervisors to coordinate examinations,
consistent with paragraph (1).
(3) Avoidance of conflict in supervision.--
(A) Request.--If the proposed supervisory
determinations of the Bureau and a prudential
regulator (in this section referred to
collectively as the ``agencies'') are
conflicting, an insured depository institution,
insured credit union, or other covered person
described in subsection (a) may request the
agencies to coordinate and present a joint
statement of coordinated supervisory action.
(B) Joint statement.--The agencies shall
provide a joint statement under subparagraph
(A), not later than 30 days after the date of
receipt of the request of the insured
depository institution, credit union, or
covered person described in subsection (a).
(4) Appeals to governing panel.--
(A) In general.--If the agencies do not
resolve the conflict or issue a joint statement
required by subparagraph (B), or if either of
the agencies takes or attempts to take any
supervisory action relating to the request for
the joint statement without the consent of the
other agency, an insured depository
institution, insured credit union, or other
covered person described in subsection (a) may
institute an appeal to a governing panel, as
provided in this subsection, not later than 30
days after the expiration of the period during
which a joint statement is required to be filed
under paragraph (3)(B).
(B) Composition of governing panel.--The
governing panel for an appeal under this
paragraph shall be composed of--
(i) a representative from the Bureau
and a representative of the prudential
regulator, both of whom--
(I) have not participated in
the material supervisory
determinations under appeal;
and
(II) do not directly or
indirectly report to the person
who participated materially in
the supervisory determinations
under appeal; and
(ii) one individual representative,
to be determined on a rotating basis,
from among the Board of Governors, the
Corporation, the National Credit Union
Administration, and the Office of the
Comptroller of the Currency, other than
any agency involved in the subject
dispute.
(C) Conduct of appeal.--In an appeal under
this paragraph--
(i) the insured depository
institution, insured credit union, or
other covered person described in
subsection (a)--
(I) shall include in its
appeal all the facts and legal
arguments pertaining to the
matter; and
(II) may, through counsel,
employees, or representatives,
appear before the governing
panel in person or by
telephone; and
(ii) the governing panel--
(I) may request the insured
depository institution, insured
credit union, or other covered
person described in subsection
(a), the Bureau, or the
prudential regulator to produce
additional information relevant
to the appeal; and
(II) by a majority vote of
its members, shall provide a
final determination, in
writing, not later than 30 days
after the date of filing of an
informationally complete
appeal, or such longer period
as the panel and the insured
depository institution, insured
credit union, or other covered
person described in subsection
(a) may jointly agree.
(D) Public availability of determinations.--A
governing panel shall publish all information
contained in a determination by the governing
panel, with appropriate redactions of
information that would be subject to an
exemption from disclosure under section 552 of
title 5, United States Code.
(E) Prohibition against retaliation.--The
Bureau and the prudential regulators shall
prescribe rules to provide safeguards from
retaliation against the insured depository
institution, insured credit union, or other
covered person described in subsection (a)
instituting an appeal under this paragraph, as
well as their officers and employees.
(F) Limitation.--The process provided in this
paragraph shall not apply to a determination by
a prudential regulator to appoint a conservator
or receiver for an insured depository
institution or a liquidating agent for an
insured credit union, as the case may be, or a
decision to take action pursuant to section 38
of the Federal Deposit Insurance Act (12 U.S.C.
1831o) or section 212 of the Federal Credit
Union Act (112 U.S.C. 1790a), as applicable.
(G) Effect on other authority.--Nothing in
this section shall modify or limit the
authority of the Bureau to interpret, or take
enforcement action under, any Federal consumer
financial law, or the authority of a prudential
regulator to interpret or take enforcement
action under any other provision of Federal law
for safety and soundness purposes.
SEC. 1026. OTHER BANKS, SAVINGS ASSOCIATIONS, AND CREDIT UNIONS.
(a) Scope of Coverage.--This section shall apply to any
covered person that is--
(1) an insured depository institution with total
assets of [$10,000,000,000] $50,000,000,000 or less; or
(2) an insured credit union with total assets of
[$10,000,000,000] $50,000,000,000 or less.
(b) Reports.--The Director may require reports from a person
described in subsection (a), as necessary to support the role
of the Bureau in implementing Federal consumer financial law,
to support its examination activities under subsection (c), and
to assess and detect risks to consumers and consumer financial
markets.
(1) Use of existing reports.--The Bureau shall, to
the fullest extent possible, use--
(A) reports pertaining to a person described
in subsection (a) that have been provided or
required to have been provided to a Federal or
State agency; and
(B) information that has been reported
publicly.
(2) Preservation of authority.--Nothing in this
subsection may be construed as limiting the authority
of the Director from requiring from a person described
in subsection (a), as permitted under paragraph (1),
information owned or under the control of such person,
regardless of whether such information is maintained,
stored, or processed by another person.
(3) Reports of tax law noncompliance.--The Bureau
shall provide the Commissioner of Internal Revenue with
any report of examination or related information
identifying possible tax law noncompliance.
(c) Examinations.--
(1) In general.--The Bureau may, at its discretion,
include examiners on a sampling basis of the
examinations performed by the prudential regulator to
assess compliance with the requirements of Federal
consumer financial law of persons described in
subsection (a).
(2) Agency coordination.--The prudential regulator
shall--
(A) provide all reports, records, and
documentation related to the examination
process for any institution included in the
sample referred to in paragraph (1) to the
Bureau on a timely and continual basis;
(B) involve such Bureau examiner in the
entire examination process for such person; and
(C) consider input of the Bureau concerning
the scope of an examination, conduct of the
examination, the contents of the examination
report, the designation of matters requiring
attention, and examination ratings.
(d) Enforcement.--
(1) In general.--Except for requiring reports under
subsection (b), the prudential regulator is authorized
to enforce the requirements of Federal consumer
financial laws and, with respect to a covered person
described in subsection (a), shall have exclusive
authority (relative to the Bureau) to enforce such
laws.
(2) Coordination with prudential regulator.--
(A) Referral.--When the Bureau has reason to
believe that a person described in subsection
(a) has engaged in a material violation of a
Federal consumer financial law, the Bureau
shall notify the prudential regulator in
writing and recommend appropriate action to
respond.
(B) Response.--Upon receiving a
recommendation under subparagraph (A), the
prudential regulator shall provide a written
response to the Bureau not later than 60 days
thereafter.
(e) Service Providers.--A service provider to a substantial
number of persons described in subsection (a) shall be subject
to the authority of the Bureau under section 1025 to the same
extent as if the Bureau were an appropriate Federal bank agency
under section 7(c) of the Bank Service Company Act (12 U.S.C.
1867(c)). When conducting any examination or requiring any
report from a service provider subject to this subsection, the
Bureau shall coordinate with the appropriate prudential
regulator.
* * * * * * *
----------
BANK HOLDING COMPANY ACT OF 1956
* * * * * * *
SEC. 13. PROHIBITIONS ON PROPRIETARY TRADING AND CERTAIN RELATIONSHIPS
WITH HEDGE FUNDS AND PRIVATE EQUITY FUNDS.
(a) In General.--
(1) Prohibition.--Unless otherwise provided in this
section, a banking entity shall not--
(A) engage in proprietary trading; or
(B) acquire or retain any equity,
partnership, or other ownership interest in or
sponsor a hedge fund or a private equity fund.
(2) Nonbank financial companies supervised by the
board.--Any nonbank financial company supervised by the
Board that engages in proprietary trading or takes or
retains any equity, partnership, or other ownership
interest in or sponsors a hedge fund or a private
equity fund shall be subject, by rule, as provided in
subsection (b)(2), to additional capital requirements
for and additional quantitative limits with regards to
such proprietary trading and taking or retaining any
equity, partnership, or other ownership interest in or
sponsorship of a hedge fund or a private equity fund,
except that permitted activities as described in
subsection (d) shall not be subject to the additional
capital and additional quantitative limits except as
provided in subsection (d)(3), as if the nonbank
financial company supervised by the Board were a
banking entity.
(b) Study and Rulemaking.--
(1) Study.--Not later than 6 months after the date of
enactment of this section, the Financial Stability
Oversight Council shall study and make recommendations
on implementing the provisions of this section so as
to--
(A) promote and enhance the safety and
soundness of banking entities;
(B) protect taxpayers and consumers and
enhance financial stability by minimizing the
risk that insured depository institutions and
the affiliates of insured depository
institutions will engage in unsafe and unsound
activities;
(C) limit the inappropriate transfer of
Federal subsidies from institutions that
benefit from deposit insurance and liquidity
facilities of the Federal Government to
unregulated entities;
(D) reduce conflicts of interest between the
self-interest of banking entities and nonbank
financial companies supervised by the Board,
and the interests of the customers of such
entities and companies;
(E) limit activities that have caused undue
risk or loss in banking entities and nonbank
financial companies supervised by the Board, or
that might reasonably be expected to create
undue risk or loss in such banking entities and
nonbank financial companies supervised by the
Board;
(F) appropriately accommodate the business of
insurance within an insurance company, subject
to regulation in accordance with the relevant
insurance company investment laws, while
protecting the safety and soundness of any
banking entity with which such insurance
company is affiliated and of the United States
financial system; and
(G) appropriately time the divestiture of
illiquid assets that are affected by the
implementation of the prohibitions under
subsection (a).
(2) Rulemaking.--
(A) In general.--Unless otherwise provided in
this section, not later than 9 months after the
completion of the study under paragraph (1),
the appropriate Federal banking agencies, the
Securities and Exchange Commission, and the
Commodity Futures Trading Commission, shall
consider the findings of the study under
paragraph (1) and adopt rules to carry out this
section, as provided in subparagraph (B).
(B) Coordinated rulemaking.--
(i) Regulatory authority.--The
regulations issued under this paragraph
shall be issued by--
(I) the appropriate Federal
banking agencies, jointly, with
respect to insured depository
institutions;
(II) the Board, with respect
to any company that controls an
insured depository institution,
or that is treated as a bank
holding company for purposes of
section 8 of the International
Banking Act, any nonbank
financial company supervised by
the Board, and any subsidiary
of any of the foregoing (other
than a subsidiary for which an
agency described in subclause
(I), (III), or (IV) is the
primary financial regulatory
agency);
(III) the Commodity Futures
Trading Commission, with
respect to any entity for which
the Commodity Futures Trading
Commission is the primary
financial regulatory agency, as
defined in section 2 of the
Dodd-Frank Wall Street Reform
and Consumer Protection Act;
and
(IV) the Securities and
Exchange Commission, with
respect to any entity for which
the Securities and Exchange
Commission is the primary
financial regulatory agency, as
defined in section 2 of the
Dodd-Frank Wall Street Reform
and Consumer Protection Act.
(ii) Coordination, consistency, and
comparability.--In developing and
issuing regulations pursuant to this
section, the appropriate Federal
banking agencies, the Securities and
Exchange Commission, and the Commodity
Futures Trading Commission shall
consult and coordinate with each other,
as appropriate, for the purposes of
assuring, to the extent possible, that
such regulations are comparable and
provide for consistent application and
implementation of the applicable
provisions of this section to avoid
providing advantages or imposing
disadvantages to the companies affected
by this subsection and to protect the
safety and soundness of banking
entities and nonbank financial
companies supervised by the Board.
(iii) Council role.--The Chairperson
of the Financial Stability Oversight
Council shall be responsible for
coordination of the regulations issued
under this section.
(c) Effective Date.--
(1) In general.--Except as provided in paragraphs (2)
and (3), this section shall take effect on the earlier
of--
(A) 12 months after the date of the issuance
of final rules under subsection (b); or
(B) 2 years after the date of enactment of
this section.
(2) Conformance period for divestiture.--A banking
entity or nonbank financial company supervised by the
Board shall bring its activities and investments into
compliance with the requirements of this section not
later than 2 years after the date on which the
requirements become effective pursuant to this section
or 2 years after the date on which the entity or
company becomes a nonbank financial company supervised
by the Board. The Board may, by rule or order, extend
this two-year period for not more than one year at a
time, if, in the judgment of the Board, such an
extension is consistent with the purposes of this
section and would not be detrimental to the public
interest. The extensions made by the Board under the
preceding sentence may not exceed an aggregate of 3
years.
(3) Extended transition for illiquid funds.--
(A) Application.--The Board may, upon the
application of a banking entity, extend the
period during which the banking entity, to the
extent necessary to fulfill a contractual
obligation that was in effect on May 1, 2010,
may take or retain its equity, partnership, or
other ownership interest in, or otherwise
provide additional capital to, an illiquid
fund.
(B) Time limit on approval.--The Board may
grant 1 extension under subparagraph (A), which
may not exceed 5 years.
(4) Divestiture required.--Except as otherwise
provided in subsection (d)(1)(G), a banking entity may
not engage in any activity prohibited under subsection
(a)(1)(B) after the earlier of--
(A) the date on which the contractual
obligation to invest in the illiquid fund
terminates; and
(B) the date on which any extensions granted
by the Board under paragraph (3) expire.
(5) Additional capital during transition period.--
Notwithstanding paragraph (2), on the date on which the
rules are issued under subsection (b)(2), the
appropriate Federal banking agencies, the Securities
and Exchange Commission, and the Commodity Futures
Trading Commission shall issue rules, as provided in
subsection (b)(2), to impose additional capital
requirements, and any other restrictions, as
appropriate, on any equity, partnership, or ownership
interest in or sponsorship of a hedge fund or private
equity fund by a banking entity.
(6) Special rulemaking.--Not later than 6 months
after the date of enactment of this section, the Board
shall issues rules to implement paragraphs (2) and (3).
(d) Permitted Activities.--
(1) In general.--Notwithstanding the restrictions
under subsection (a), to the extent permitted by any
other provision of Federal or State law, and subject to
the limitations under paragraph (2) and any
restrictions or limitations that the appropriate
Federal banking agencies, the Securities and Exchange
Commission, and the Commodity Futures Trading
Commission, may determine, the following activities (in
this section referred to as ``permitted activities'')
are permitted:
(A) The purchase, sale, acquisition, or
disposition of obligations of the United States
or any agency thereof, obligations,
participations, or other instruments of or
issued by the Government National Mortgage
Association, the Federal National Mortgage
Association, the Federal Home Loan Mortgage
Corporation, a Federal Home Loan Bank, the
Federal Agricultural Mortgage Corporation, or a
Farm Credit System institution chartered under
and subject to the provisions of the Farm
Credit Act of 1971 (12 U.S.C. 2001 et seq.),
and obligations of any State or of any
political subdivision thereof.
(B) The purchase, sale, acquisition, or
disposition of securities and other instruments
described in subsection (h)(4) in connection
with underwriting or market-making-related
activities, to the extent that any such
activities permitted by this subparagraph are
designed not to exceed the reasonably expected
near term demands of clients, customers, or
counterparties.
(C) Risk-mitigating hedging activities in
connection with and related to individual or
aggregated positions, contracts, or other
holdings of a banking entity that are designed
to reduce the specific risks to the banking
entity in connection with and related to such
positions, contracts, or other holdings.
(D) The purchase, sale, acquisition, or
disposition of securities and other instruments
described in subsection (h)(4) on behalf of
customers.
(E) Investments in one or more small business
investment companies, as defined in section 102
of the Small Business Investment Act of 1958
(15 U.S.C. 662), investments designed primarily
to promote the public welfare, of the type
permitted under paragraph (11) of section 5136
of the Revised Statutes of the United States
(12 U.S.C. 24), or investments that are
qualified rehabilitation expenditures with
respect to a qualified rehabilitated building
or certified historic structure, as such terms
are defined in section 47 of the Internal
Revenue Code of 1986 or a similar State
historic tax credit program.
(F) The purchase, sale, acquisition, or
disposition of securities and other instruments
described in subsection (h)(4) by a regulated
insurance company directly engaged in the
business of insurance for the general account
of the company and by any affiliate of such
regulated insurance company, provided that such
activities by any affiliate are solely for the
general account of the regulated insurance
company, if--
(i) the purchase, sale, acquisition,
or disposition is conducted in
compliance with, and subject to, the
insurance company investment laws,
regulations, and written guidance of
the State or jurisdiction in which each
such insurance company is domiciled;
and
(ii) the appropriate Federal banking
agencies, after consultation with the
Financial Stability Oversight Council
and the relevant insurance
commissioners of the States and
territories of the United States, have
not jointly determined, after notice
and comment, that a particular law,
regulation, or written guidance
described in clause (i) is insufficient
to protect the safety and soundness of
the banking entity, or of the financial
stability of the United States.
(G) Organizing and offering a private equity
or hedge fund, including serving as a general
partner, managing member, or trustee of the
fund and in any manner selecting or controlling
(or having employees, officers, directors, or
agents who constitute) a majority of the
directors, trustees, or management of the fund,
including any necessary expenses for the
foregoing, only if--
(i) the banking entity provides bona
fide trust, fiduciary, or investment
advisory services;
(ii) the fund is organized and
offered only in connection with the
provision of bona fide trust,
fiduciary, or investment advisory
services and only to persons that are
customers of such services of the
banking entity;
(iii) the banking entity does not
acquire or retain an equity interest,
partnership interest, or other
ownership interest in the funds except
for a de minimis investment subject to
and in compliance with paragraph (4);
(iv) the banking entity complies with
the restrictions under paragraphs (1)
and (2) of subparagraph (f);
(v) the banking entity does not,
directly or indirectly, guarantee,
assume, or otherwise insure the
obligations or performance of the hedge
fund or private equity fund or of any
hedge fund or private equity fund in
which such hedge fund or private equity
fund invests;
(vi) the banking entity does not
share with the hedge fund or private
equity fund, for corporate, marketing,
promotional, or other purposes, the
same name or a variation of the same
name, except that the hedge fund or
private equity fund may share the same
name or a variation of the same name as
a banking entity that is an investment
adviser to the hedge fund or private
equity fund, if--
(I) such investment adviser
is not an insured depository
institution, a company that
controls an insured depository
institution, or a company that
is treated as a bank holding
company for purposes of section
8 of the International Banking
Act of 1978 (12 U.S.C. 3106);
(II) such investment adviser
does not share the same name or
a variation of the same name as
an insured depository
institution, any company that
controls an insured depository
institution, or any company
that is treated as a bank
holding company for purposes of
section 8 of the International
Banking Act of 1978 (12 U.S.C.
3106); and
(III) such name does not
contain the word ``bank'';
(vii) no director or employee of the
banking entity takes or retains an
equity interest, partnership interest,
or other ownership interest in the
hedge fund or private equity fund,
except for any director or employee of
the banking entity who is directly
engaged in providing investment
advisory or other services to the hedge
fund or private equity fund; and
(viii) the banking entity discloses
to prospective and actual investors in
the fund, in writing, that any losses
in such hedge fund or private equity
fund are borne solely by investors in
the fund and not by the banking entity,
and otherwise complies with any
additional rules of the appropriate
Federal banking agencies, the
Securities and Exchange Commission, or
the Commodity Futures Trading
Commission, as provided in subsection
(b)(2), designed to ensure that losses
in such hedge fund or private equity
fund are borne solely by investors in
the fund and not by the banking entity.
(H) Proprietary trading conducted by a
banking entity pursuant to paragraph (9) or
(13) of section 4(c), provided that the trading
occurs solely outside of the United States and
that the banking entity is not directly or
indirectly controlled by a banking entity that
is organized under the laws of the United
States or of one or more States.
(I) The acquisition or retention of any
equity, partnership, or other ownership
interest in, or the sponsorship of, a hedge
fund or a private equity fund by a banking
entity pursuant to paragraph (9) or (13) of
section 4(c) solely outside of the United
States, provided that no ownership interest in
such hedge fund or private equity fund is
offered for sale or sold to a resident of the
United States and that the banking entity is
not directly or indirectly controlled by a
banking entity that is organized under the laws
of the United States or of one or more States.
(J) Such other activity as the appropriate
Federal banking agencies, the Securities and
Exchange Commission, and the Commodity Futures
Trading Commission determine, by rule, as
provided in subsection (b)(2), would promote
and protect the safety and soundness of the
banking entity and the financial stability of
the United States.
(2) Limitation on permitted activities.--
(A) In general.--No transaction, class of
transactions, or activity may be deemed a
permitted activity under paragraph (1) if the
transaction, class of transactions, or
activity--
(i) would involve or result in a
material conflict of interest (as such
term shall be defined by rule as
provided in subsection (b)(2)) between
the banking entity and its clients,
customers, or counterparties;
(ii) would result, directly or
indirectly, in a material exposure by
the banking entity to high-risk assets
or high-risk trading strategies (as
such terms shall be defined by rule as
provided in subsection (b)(2));
(iii) would pose a threat to the
safety and soundness of such banking
entity; or
(iv) would pose a threat to the
financial stability of the United
States.
(B) Rulemaking.--The appropriate Federal
banking agencies, the Securities and Exchange
Commission, and the Commodity Futures Trading
Commission shall issue regulations to implement
subparagraph (A), as part of the regulations
issued under subsection (b)(2).
(3) Capital and quantitative limitations.--The
appropriate Federal banking agencies, the Securities
and Exchange Commission, and the Commodity Futures
Trading Commission shall, as provided in subsection
(b)(2), adopt rules imposing additional capital
requirements and quantitative limitations, including
diversification requirements, regarding the activities
permitted under this section if the appropriate Federal
banking agencies, the Securities and Exchange
Commission, and the Commodity Futures Trading
Commission determine that additional capital and
quantitative limitations are appropriate to protect the
safety and soundness of banking entities engaged in
such activities.
(4) De minimis investment.--
(A) In general.--A banking entity may make
and retain an investment in a hedge fund or
private equity fund that the banking entity
organizes and offers, subject to the
limitations and restrictions in subparagraph
(B) for the purposes of--
(i) establishing the fund and
providing the fund with sufficient
initial equity for investment to permit
the fund to attract unaffiliated
investors; or
(ii) making a de minimis investment.
(B) Limitations and restrictions on
investments.--
(i) Requirement to seek other
investors.--A banking entity shall
actively seek unaffiliated investors to
reduce or dilute the investment of the
banking entity to the amount permitted
under clause (ii).
(ii) Limitations on size of
investments.--Notwithstanding any other
provision of law, investments by a
banking entity in a hedge fund or
private equity fund shall--
(I) not later than 1 year
after the date of establishment
of the fund, be reduced through
redemption, sale, or dilution
to an amount that is not more
than 3 percent of the total
ownership interests of the
fund;
(II) be immaterial to the
banking entity, as defined, by
rule, pursuant to subsection
(b)(2), but in no case may the
aggregate of all of the
interests of the banking entity
in all such funds exceed 3
percent of the Tier 1 capital
of the banking entity.
(iii) Capital.--For purposes of
determining compliance with applicable
capital standards under paragraph (3),
the aggregate amount of the outstanding
investments by a banking entity under
this paragraph, including retained
earnings, shall be deducted from the
assets and tangible equity of the
banking entity, and the amount of the
deduction shall increase commensurate
with the leverage of the hedge fund or
private equity fund.
(C) Extension.--Upon an application by a
banking entity, the Board may extend the period
of time to meet the requirements under
subparagraph (B)(ii)(I) for 2 additional years,
if the Board finds that an extension would be
consistent with safety and soundness and in the
public interest.
(e) Anti-evasion.--
(1) Rulemaking.--The appropriate Federal banking
agencies, the Securities and Exchange Commission, and
the Commodity Futures Trading Commission shall issue
regulations, as part of the rulemaking provided for in
subsection (b)(2), regarding internal controls and
recordkeeping, in order to insure compliance with this
section.
(2) Termination of activities or investment.--
Notwithstanding any other provision of law, whenever an
appropriate Federal banking agency, the Securities and
Exchange Commission, or the Commodity Futures Trading
Commission, as appropriate, has reasonable cause to
believe that a banking entity or nonbank financial
company supervised by the Board under the respective
agency's jurisdiction has made an investment or engaged
in an activity in a manner that functions as an evasion
of the requirements of this section (including through
an abuse of any permitted activity) or otherwise
violates the restrictions under this section, the
appropriate Federal banking agency, the Securities and
Exchange Commission, or the Commodity Futures Trading
Commission, as appropriate, shall order, after due
notice and opportunity for hearing, the banking entity
or nonbank financial company supervised by the Board to
terminate the activity and, as relevant, dispose of the
investment. Nothing in this paragraph shall be
construed to limit the inherent authority of any
Federal agency or State regulatory authority to further
restrict any investments or activities under otherwise
applicable provisions of law.
(f) Limitations on Relationships With Hedge Funds and Private
Equity Funds.--
(1) In general.--No banking entity that serves,
directly or indirectly, as the investment manager,
investment adviser, or sponsor to a hedge fund or
private equity fund, or that organizes and offers a
hedge fund or private equity fund pursuant to paragraph
(d)(1)(G), and no affiliate of such entity, may enter
into a transaction with the fund, or with any other
hedge fund or private equity fund that is controlled by
such fund, that would be a covered transaction, as
defined in section 23A of the Federal Reserve Act (12
U.S.C. 371c), with the hedge fund or private equity
fund, as if such banking entity and the affiliate
thereof were a member bank and the hedge fund or
private equity fund were an affiliate thereof.
(2) Treatment as member bank.--A banking entity that
serves, directly or indirectly, as the investment
manager, investment adviser, or sponsor to a hedge fund
or private equity fund, or that organizes and offers a
hedge fund or private equity fund pursuant to paragraph
(d)(1)(G), shall be subject to section 23B of the
Federal Reserve Act (12 U.S.C. 371c-1), as if such
banking entity were a member bank and such hedge fund
or private equity fund were an affiliate thereof.
(3) Permitted services.--
(A) In general.--Notwithstanding paragraph
(1), the Board may permit a banking entity to
enter into any prime brokerage transaction with
any hedge fund or private equity fund in which
a hedge fund or private equity fund managed,
sponsored, or advised by such banking entity
has taken an equity, partnership, or other
ownership interest, if--
(i) the banking entity is in
compliance with each of the limitations
set forth in subsection (d)(1)(G) with
regard to a hedge fund or private
equity fund organized and offered by
such banking entity;
(ii) the chief executive officer (or
equivalent officer) of the banking
entity certifies in writing annually
(with a duty to update the
certification if the information in the
certification materially changes) that
the conditions specified in subsection
(d)(1)(g)(v) are satisfied; and
(iii) the Board has determined that
such transaction is consistent with the
safe and sound operation and condition
of the banking entity.
(B) Treatment of prime brokerage
transactions.--For purposes of subparagraph
(A), a prime brokerage transaction described in
subparagraph (A) shall be subject to section
23B of the Federal Reserve Act (12 U.S.C. 371c-
1) as if the counterparty were an affiliate of
the banking entity.
(4) Application to nonbank financial companies
supervised by the board.--The appropriate Federal
banking agencies, the Securities and Exchange
Commission, and the Commodity Futures Trading
Commission shall adopt rules, as provided in subsection
(b)(2), imposing additional capital charges or other
restrictions for nonbank financial companies supervised
by the Board to address the risks to and conflicts of
interest of banking entities described in paragraphs
(1), (2), and (3) of this subsection.
(g) Rules of Construction.--
(1) Limitation on contrary authority.--Except as
provided in this section, notwithstanding any other
provision of law, the prohibitions and restrictions
under this section shall apply to activities of a
banking entity or nonbank financial company supervised
by the Board, even if such activities are authorized
for a banking entity or nonbank financial company
supervised by the Board.
(2) Sale or securitization of loans.--Nothing in this
section shall be construed to limit or restrict the
ability of a banking entity or nonbank financial
company supervised by the Board to sell or securitize
loans in a manner otherwise permitted by law.
(3) Authority of federal agencies and state
regulatory authorities.--Nothing in this section shall
be construed to limit the inherent authority of any
Federal agency or State regulatory authority under
otherwise applicable provisions of law.
(h) Definitions.--In this section, the following definitions
shall apply:
(1) Banking entity.--The term ``banking entity''
means any insured depository institution (as defined in
section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813)), any company that controls an insured
depository institution, or that is treated as a bank
holding company for purposes of section 8 of the
International Banking Act of 1978, and any affiliate or
subsidiary of any such entity. For purposes of this
paragraph, the term ``insured depository institution''
does not include an institution--
(A) that functions solely in a trust or
fiduciarycapacity, if--
(i) all or substantially all of the
deposits of such institution are in
trust funds and are received in a bona
fide fiduciary capacity;
(ii) no deposits of such institution
which are insured by the Federal
Deposit Insurance Corporation are
offered or marketed by or through an
affiliate of such institution;
(iii) such institution does not
accept demand deposits or deposits that
the depositor may withdraw by check or
similar means for payment to third
parties or others or make commercial
loans; and
(iv) such institution does not--
(I) obtain payment or payment
related services from any
Federal Reserve bank, including
any service referred to in
section 11A of the Federal
Reserve Act (12 U.S.C. 248a);
or
(II) exercise discount or
borrowing privileges pursuant
to section 19(b)(7) of the
Federal Reserve Act (12 U.S.C.
461(b)(7)); or
(B) that does not have and is not controlled
by a company that has--
(i) more than [$10,000,000,000]
$50,000,000,000 in total consolidated
assets; and
(ii) total trading assets and trading
liabilities, as reported on the most
recent applicable regulatory filing
filed by the institution, that are more
than 5 percent of total consolidated
assets.
(2) Hedge fund; private equity fund.--The terms
``hedge fund'' and ``private equity fund'' mean an
issuer that would be an investment company, as defined
in the Investment Company Act of 1940 (15 U.S.C. 80a-1
et seq.), but for section 3(c)(1) or 3(c)(7) of that
Act, or such similar funds as the appropriate Federal
banking agencies, the Securities and Exchange
Commission, and the Commodity Futures Trading
Commission may, by rule, as provided in subsection
(b)(2), determine.
(3) Nonbank financial company supervised by the
board.--The term ``nonbank financial company supervised
by the Board'' means a nonbank financial company
supervised by the Board of Governors, as defined in
section 102 of the Financial Stability Act of 2010.
(4) Proprietary trading.--The term ``proprietary
trading'', when used with respect to a banking entity
or nonbank financial company supervised by the Board,
means engaging as a principal for the trading account
of the banking entity or nonbank financial company
supervised by the Board in any transaction to purchase
or sell, or otherwise acquire or dispose of, any
security, any derivative, any contract of sale of a
commodity for future delivery, any option on any such
security, derivative, or contract, or any other
security or financial instrument that the appropriate
Federal banking agencies, the Securities and Exchange
Commission, and the Commodity Futures Trading
Commission may, by rule as provided in subsection
(b)(2), determine.
(5) Sponsor.--The term to ``sponsor'' a fund means--
(A) to serve as a general partner, managing
member, or trustee of a fund;
(B) in any manner to select or to control (or
to have employees, officers, or directors, or
agents who constitute) a majority of the
directors, trustees, or management of a fund;
or
(C) to share with a fund, for corporate,
marketing, promotional, or other purposes, the
same name or a variation of the same name,
except as permitted under subsection
(d)(1)(G)(vi).
(6) Trading account.--The term ``trading account''
means any account used for acquiring or taking
positions in the securities and instruments described
in paragraph (4) principally for the purpose of selling
in the near term (or otherwise with the intent to
resell in order to profit from short-term price
movements), and any such other accounts as the
appropriate Federal banking agencies, the Securities
and Exchange Commission, and the Commodity Futures
Trading Commission may, by rule as provided in
subsection (b)(2), determine.
(7) Illiquid fund.--
(A) In general.--The term ``illiquid fund''
means a hedge fund or private equity fund
that--
(i) as of May 1, 2010, was
principally invested in, or was
invested and contractually committed to
principally invest in, illiquid assets,
such as portfolio companies, real
estate investments, and venture capital
investments; and
(ii) makes all investments pursuant
to, and consistent with, an investment
strategy to principally invest in
illiquid assets. In issuing rules
regarding this subparagraph, the Board
shall take into consideration the terms
of investment for the hedge fund or
private equity fund, including
contractual obligations, the ability of
the fund to divest of assets held by
the fund, and any other factors that
the Board determines are appropriate.
(B) Hedge fund.--For the purposes of this
paragraph, the term ``hedge fund'' means any
fund identified under subsection (h)(2), and
does not include a private equity fund, as such
term is used in section 203(m) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-
3(m)).
* * * * * * *
----------
TRUTH IN LENDING ACT
TITLE I--CONSUMER CREDIT COST DISCLOSURE
* * * * * * *
CHAPTER 2--CREDIT TRANSACTIONS
* * * * * * *
Sec. 129C. Minimum standards for residential mortgage loans
(a) Ability To Repay.--
(1) In general.--In accordance with regulations
prescribed by the Board, no creditor may make a
residential mortgage loan unless the creditor makes a
reasonable and good faith determination based on
verified and documented information that, at the time
the loan is consummated, the consumer has a reasonable
ability to repay the loan, according to its terms, and
all applicable taxes, insurance (including mortgage
guarantee insurance), and assessments.
(2) Multiple loans.--If the creditor knows, or has
reason to know, that 1 or more residential mortgage
loans secured by the same dwelling will be made to the
same consumer, the creditor shall make a reasonable and
good faith determination, based on verified and
documented information, that the consumer has a
reasonable ability to repay the combined payments of
all loans on the same dwelling according to the terms
of those loans and all applicable taxes, insurance
(including mortgage guarantee insurance), and
assessments.
(3) Basis for determination.--A determination under
this subsection of a consumer's ability to repay a
residential mortgage loan shall include consideration
of the consumer's credit history, current income,
expected income the consumer is reasonably assured of
receiving, current obligations, debt-to-income ratio or
the residual income the consumer will have after paying
non-mortgage debt and mortgage-related obligations,
employment status, and other financial resources other
than the consumer's equity in the dwelling or real
property that secures repayment of the loan. A creditor
shall determine the ability of the consumer to repay
using a payment schedule that fully amortizes the loan
over the term of the loan.
(4) Income verification.--A creditor making a
residential mortgage loan shall verify amounts of
income or assets that such creditor relies on to
determine repayment ability, including expected income
or assets, by reviewing the consumer's Internal Revenue
Service Form W-2, tax returns, payroll receipts,
financial institution records, or other third-party
documents that provide reasonably reliable evidence of
the consumer's income or assets. In order to safeguard
against fraudulent reporting, any consideration of a
consumer's income history in making a determination
under this subsection shall include the verification of
such income by the use of--
(A) Internal Revenue Service transcripts of
tax returns; or
(B) a method that quickly and effectively
verifies income documentation by a third party
subject to rules prescribed by the Board.
(5) Exemption.--With respect to loans made,
guaranteed, or insured by Federal departments or
agencies identified in subsection (b)(3)(B)(ii), such
departments or agencies may exempt refinancings under a
streamlined refinancing from this income verification
requirement as long as the following conditions are
met:
(A) The consumer is not 30 days or more past
due on the prior existing residential mortgage
loan.
(B) The refinancing does not increase the
principal balance outstanding on the prior
existing residential mortgage loan, except to
the extent of fees and charges allowed by the
department or agency making, guaranteeing, or
insuring the refinancing.
(C) Total points and fees (as defined in
section 103(aa)(4), other than bona fide third
party charges not retained by the mortgage
originator, creditor, or an affiliate of the
creditor or mortgage originator) payable in
connection with the refinancing do not exceed 3
percent of the total new loan amount.
(D) The interest rate on the refinanced loan
is lower than the interest rate of the original
loan, unless the borrower is refinancing from
an adjustable rate to a fixed-rate loan, under
guidelines that the department or agency shall
establish for loans they make, guarantee, or
issue.
(E) The refinancing is subject to a payment
schedule that will fully amortize the
refinancing in accordance with the regulations
prescribed by the department or agency making,
guaranteeing, or insuring the refinancing.
(F) The terms of the refinancing do not
result in a balloon payment, as defined in
subsection (b)(2)(A)(ii).
(G) Both the residential mortgage loan being
refinanced and the refinancing satisfy all
requirements of the department or agency
making, guaranteeing, or insuring the
refinancing.
(6) Nonstandard loans.--
(A) Variable rate loans that defer repayment
of any principal or interest.--For purposes of
determining, under this subsection, a
consumer's ability to repay a variable rate
residential mortgage loan that allows or
requires the consumer to defer the repayment of
any principal or interest, the creditor shall
use a fully amortizing repayment schedule.
(B) Interest-only loans.--For purposes of
determining, under this subsection, a
consumer's ability to repay a residential
mortgage loan that permits or requires the
payment of interest only, the creditor shall
use the payment amount required to amortize the
loan by its final maturity.
(C) Calculation for negative amortization.--
In making any determination under this
subsection, a creditor shall also take into
consideration any balance increase that may
accrue from any negative amortization
provision.
(D) Calculation process.--For purposes of
making any determination under this subsection,
a creditor shall calculate the monthly payment
amount for principal and interest on any
residential mortgage loan by assuming--
(i) the loan proceeds are fully
disbursed on the date of the
consummation of the loan;
(ii) the loan is to be repaid in
substantially equal monthly amortizing
payments for principal and interest
over the entire term of the loan with
no balloon payment, unless the loan
contract requires more rapid repayment
(including balloon payment), in which
case the calculation shall be made (I)
in accordance with regulations
prescribed by the Board, with respect
to any loan which has an annual
percentage rate that does not exceed
the average prime offer rate for a
comparable transaction, as of the date
the interest rate is set, by 1.5 or
more percentage points for a first lien
residential mortgage loan; and by 3.5
or more percentage points for a
subordinate lien residential mortgage
loan; or (II) using the contract's
repayment schedule, with respect to a
loan which has an annual percentage
rate, as of the date the interest rate
is set, that is at least 1.5 percentage
points above the average prime offer
rate for a first lien residential
mortgage loan; and 3.5 percentage
points above the average prime offer
rate for a subordinate lien residential
mortgage loan; and
(iii) the interest rate over the
entire term of the loan is a fixed rate
equal to the fully indexed rate at the
time of the loan closing, without
considering the introductory rate.
(E) Refinance of hybrid loans with current
lender.--In considering any application for
refinancing an existing hybrid loan by the
creditor into a standard loan to be made by the
same creditor in any case in which there would
be a reduction in monthly payment and the
mortgagor has not been delinquent on any
payment on the existing hybrid loan, the
creditor may--
(i) consider the mortgagor's good
standing on the existing mortgage;
(ii) consider if the extension of new
credit would prevent a likely default
should the original mortgage reset and
give such concerns a higher priority as
an acceptable underwriting practice;
and
(iii) offer rate discounts and other
favorable terms to such mortgagor that
would be available to new customers
with high credit ratings based on such
underwriting practice.
(7) Fully-indexed rate defined.--For purposes of this
subsection, the term ``fully indexed rate'' means the
index rate prevailing on a residential mortgage loan at
the time the loan is made plus the margin that will
apply after the expiration of any introductory interest
rates.
(8) Reverse mortgages and bridge loans.--This
subsection shall not apply with respect to any reverse
mortgage or temporary or bridge loan with a term of 12
months or less, including to any loan to purchase a new
dwelling where the consumer plans to sell a different
dwelling within 12 months.
(9) Seasonal income.--If documented income, including
income from a small business, is a repayment source for
a residential mortgage loan, a creditor may consider
the seasonality and irregularity of such income in the
underwriting of and scheduling of payments for such
credit.
(b) Presumption of Ability To Repay.--
(1) In general.--Any creditor with respect to any
residential mortgage loan, and any assignee of such
loan subject to liability under this title, may presume
that the loan has met the requirements of subsection
(a), if the loan is a qualified mortgage.
(2) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Qualified mortgage.--The term ``qualified
mortgage'' means any residential mortgage
loan--
(i) for which the regular periodic
payments for the loan may not--
(I) result in an increase of
the principal balance; or
(II) except as provided in
subparagraph (E), allow the
consumer to defer repayment of
principal;
(ii) except as provided in
subparagraph (E), the terms of which do
not result in a balloon payment, where
a ``balloon payment'' is a scheduled
payment that is more than twice as
large as the average of earlier
scheduled payments;
(iii) for which the income and
financial resources relied upon to
qualify the obligors on the loan are
verified and documented;
(iv) in the case of a fixed rate
loan, for which the underwriting
process is based on a payment schedule
that fully amortizes the loan over the
loan term and takes into account all
applicable taxes, insurance, and
assessments;
(v) in the case of an adjustable rate
loan, for which the underwriting is
based on the maximum rate permitted
under the loan during the first 5
years, and a payment schedule that
fully amortizes the loan over the loan
term and takes into account all
applicable taxes, insurance, and
assessments;
(vi) that complies with any
guidelines or regulations established
by the Board relating to ratios of
total monthly debt to monthly income or
alternative measures of ability to pay
regular expenses after payment of total
monthly debt, taking into account the
income levels of the borrower and such
other factors as the Board may
determine relevant and consistent with
the purposes described in paragraph
(3)(B)(i);
(vii) for which the total points and
fees (as defined in subparagraph (C))
payable in connection with the loan do
not exceed 3 percent of the total loan
amount;
(viii) for which the term of the loan
does not exceed 30 years, except as
such term may be extended under
paragraph (3), such as in high-cost
areas; and
(ix) in the case of a reverse
mortgage (except for the purposes of
subsection (a) of section 129C, to the
extent that such mortgages are exempt
altogether from those requirements), a
reverse mortgage which meets the
standards for a qualified mortgage, as
set by the Board in rules that are
consistent with the purposes of this
subsection.
(B) Average prime offer rate.--The term
``average prime offer rate'' means the average
prime offer rate for a comparable transaction
as of the date on which the interest rate for
the transaction is set, as published by the
Board..
(C) Points and fees.--
(i) In general.--For purposes of
subparagraph (A), the term ``points and
fees'' means points and fees as defined
by section 103(aa)(4) (other than bona
fide third party charges not retained
by the mortgage originator, creditor,
or an affiliate of the creditor or
mortgage originator).
(ii) Computation.--For purposes of
computing the total points and fees
under this subparagraph, the total
points and fees shall exclude either of
the amounts described in the following
subclauses, but not both:
(I) Up to and including 2
bona fide discount points
payable by the consumer in
connection with the mortgage,
but only if the interest rate
from which the mortgage's
interest rate will be
discounted does not exceed by
more than 1 percentage point
the average prime offer rate.
(II) Unless 2 bona fide
discount points have been
excluded under subclause (I),
up to and including 1 bona fide
discount point payable by the
consumer in connection with the
mortgage, but only if the
interest rate from which the
mortgage's interest rate will
be discounted does not exceed
by more than 2 percentage
points the average prime offer
rate.
(iii) Bona fide discount points
defined.--For purposes of clause (ii),
the term ``bona fide discount points''
means loan discount points which are
knowingly paid by the consumer for the
purpose of reducing, and which in fact
result in a bona fide reduction of, the
interest rate or time-price
differential applicable to the
mortgage.
(iv) Interest rate reduction.--
Subclauses (I) and (II) of clause (ii)
shall not apply to discount points used
to purchase an interest rate reduction
unless the amount of the interest rate
reduction purchased is reasonably
consistent with established industry
norms and practices for secondary
mortgage market transactions.
(D) Smaller loans.--The Board shall prescribe
rules adjusting the criteria under subparagraph
(A)(vii) in order to permit lenders that extend
smaller loans to meet the requirements of the
presumption of compliance under paragraph (1).
In prescribing such rules, the Board shall
consider the potential impact of such rules on
rural areas and other areas where home values
are lower.
(E) Balloon loans.--The Board may, by
regulation, provide that the term ``qualified
mortgage'' includes a balloon loan--
(i) that meets all of the criteria
for a qualified mortgage under
subparagraph (A) (except clauses
(i)(II), (ii), (iv), and (v) of such
subparagraph);
(ii) for which the creditor makes a
determination that the consumer is able
to make all scheduled payments, except
the balloon payment, out of income or
assets other than the collateral;
(iii) for which the underwriting is
based on a payment schedule that fully
amortizes the loan over a period of not
more than 30 years and takes into
account all applicable taxes,
insurance, and assessments; and
(iv) that is extended by a creditor
that--
(I) operates in rural or
underserved areas;
(II) together with all
affiliates, has total annual
residential mortgage loan
originations that do not exceed
a limit set by the Board;
(III) retains the balloon
loans in portfolio; and
(IV) meets any asset size
threshold and any other
criteria as the Board may
establish, consistent with the
purposes of this subtitle.
(F) Safe harbor.--
(i) Definitions.--In this
subparagraph--
(I) the term ``covered
institution'' means an insured
depository institution or an
insured credit union that,
together with its affiliates,
has less than [$10,000,000,000]
$50,000,000,000 in total
consolidated assets;
(II) the term ``insured
credit union'' has the meaning
given the term in section 101
of the Federal Credit Union Act
(12 U.S.C. 1752);
(III) the term ``insured
depository institution'' has
the meaning given the term in
section 3 of the Federal
Deposit Insurance Act (12
U.S.C. 1813);
(IV) the term ``interest-
only'' means that, under the
terms of the legal obligation,
one or more of the periodic
payments may be applied solely
to accrued interest and not to
loan principal; and
(V) the term ``negative
amortization'' means payment of
periodic payments that will
result in an increase in the
principal balance under the
terms of the legal obligation.
(ii) Safe harbor.--In this section--
(I) the term``qualified
mortgage'' includes any
residential mortgage loan--
(aa) that is
originated and retained
in portfolio by a
covered institution;
(bb) that is in
compliance with the
limitations with
respect to prepayment
penalties described in
subsections (c)(1) and
(c)(3);
(cc) that is in
compliance with the
requirements of clause
(vii) of subparagraph
(A);
(dd) that does not
have negative
amortization or
interest-only features;
and
(ee) for which the
covered institution
considers and documents
the debt, income, and
financial resources of
the consumer in
accordance with clause
(iv); and
(II) a residential mortgage
loan described in subclause (I)
shall be deemed to meet the
requirements of subsection (a).
(iii) Exception for certain
transfers.--A residential mortgage loan
described in clause (ii)(I) shall not
qualify for the safe harbor under
clause (ii) if the legal title to the
residential mortgage loan is sold,
assigned, or otherwise transferred to
another person unless the residential
mortgage loan is sold, assigned, or
otherwise transferred--
(I) to another person by
reason of the bankruptcy or
failure of a covered
institution;
(II) to a covered institution
so long as the loan is retained
in portfolio by the covered
institution to which the loan
is sold, assigned, or otherwise
transferred;
(III) pursuant to a merger of
a covered institution with
another person or the
acquisition of a covered
institution by another person
or of another person by a
covered institution, so long as
the loan is retained in
portfolio by the person to whom
the loan is sold, assigned, or
otherwise transferred; or
(IV) to a wholly owned
subsidiary of a covered
institution, provided that,
after the sale, assignment, or
transfer, the residential
mortgage loan is considered to
be an asset of the covered
institution for regulatory
accounting purposes.
(iv) Consideration and documentation
requirements.--The consideration and
documentation requirements described in
clause (ii)(I)(ee) shall--
(I) not be construed to
require compliance with, or
documentation in accordance
with, appendix Q to part 1026
of title 12, Code of Federal
Regulations, or any successor
regulation; and
(II) be construed to permit
multiple methods of
documentation.
(3) Regulations.--
(A) In general.--The Board shall prescribe
regulations to carry out the purposes of this
subsection.
(B) Revision of safe harbor criteria.--
(i) In general.--The Board may
prescribe regulations that revise, add
to, or subtract from the criteria that
define a qualified mortgage upon a
finding that such regulations are
necessary or proper to ensure that
responsible, affordable mortgage credit
remains available to consumers in a
manner consistent with the purposes of
this section, necessary and appropriate
to effectuate the purposes of this
section and section 129B, to prevent
circumvention or evasion thereof, or to
facilitate compliance with such
sections.
(ii) Loan definition.--The following
agencies shall, in consultation with
the Board, prescribe rules defining the
types of loans they insure, guarantee,
or administer, as the case may be, that
are qualified mortgages for purposes of
paragraph (2)(A), and such rules may
revise, add to, or subtract from the
criteria used to define a qualified
mortgage under paragraph (2)(A), upon a
finding that such rules are consistent
with the purposes of this section and
section 129B, to prevent circumvention
or evasion thereof, or to facilitate
compliance with such sections:
(I) The Department of Housing
and Urban Development, with
regard to mortgages insured
under the National Housing Act
(12 U.S.C. 1707 et seq.).
(II) The Department of
Veterans Affairs, with regard
to a loan made or guaranteed by
the Secretary of Veterans
Affairs.
(III) The Department of
Agriculture, with regard loans
guaranteed by the Secretary of
Agriculture pursuant to 42
U.S.C. 1472(h).
(IV) The Rural Housing
Service, with regard to loans
insured by the Rural Housing
Service.
(C) Consideration of underwriting
requirements for property assessed clean energy
financing.--
(i) Definition.--In this
subparagraph, the term ``Property
Assessed Clean Energy financing'' means
financing to cover the costs of home
improvements that results in a tax
assessment on the real property of the
consumer.
(ii) Regulations.--The Bureau shall
prescribe regulations that carry out
the purposes of subsection (a) and
apply section 130 with respect to
violations under subsection (a) of this
section with respect to Property
Assessed Clean Energy financing, which
shall account for the unique nature of
Property Assessed Clean Energy
financing.
(iii) Collection of information and
consultation.--In prescribing the
regulations under this subparagraph,
the Bureau--
(I) may collect such
information and data that the
Bureau determines is necessary;
and
(II) shall consult with State
and local governments and bond-
issuing authorities.
(c) Prohibition on Certain Prepayment Penalties.--
(1) Prohibited on certain loans.--
(A) In general.--A residential mortgage loan
that is not a ``qualified mortgage'', as
defined under subsection (b)(2), may not
contain terms under which a consumer must pay a
prepayment penalty for paying all or part of
the principal after the loan is consummated.
(B) Exclusions.--For purposes of this
subsection, a ``qualified mortgage'' may not
include a residential mortgage loan that--
(i) has an adjustable rate; or
(ii) has an annual percentage rate
that exceeds the average prime offer
rate for a comparable transaction, as
of the date the interest rate is set--
(I) by 1.5 or more percentage
points, in the case of a first
lien residential mortgage loan
having a original principal
obligation amount that is equal
to or less than the amount of
the maximum limitation on the
original principal obligation
of mortgage in effect for a
residence of the applicable
size, as of the date of such
interest rate set, pursuant to
the 6th sentence of section
305(a)(2) the Federal Home Loan
Mortgage Corporation Act (12
U.S.C. 1454(a)(2));
(II) by 2.5 or more
percentage points, in the case
of a first lien residential
mortgage loan having a original
principal obligation amount
that is more than the amount of
the maximum limitation on the
original principal obligation
of mortgage in effect for a
residence of the applicable
size, as of the date of such
interest rate set, pursuant to
the 6th sentence of section
305(a)(2) the Federal Home Loan
Mortgage Corporation Act (12
U.S.C. 1454(a)(2)); and
(III) by 3.5 or more
percentage points, in the case
of a subordinate lien
residential mortgage loan.
(2) Publication of average prime offer rate and apr
thresholds.--The Board--
(A) shall publish, and update at least
weekly, average prime offer rates;
(B) may publish multiple rates based on
varying types of mortgage transactions; and
(C) shall adjust the thresholds established
under subclause (I), (II), and (III) of
paragraph (1)(B)(ii) as necessary to reflect
significant changes in market conditions and to
effectuate the purposes of the Mortgage Reform
and Anti-Predatory Lending Act.
(3) Phased-out penalties on qualified mortgages.--A
qualified mortgage (as defined in subsection (b)(2))
may not contain terms under which a consumer must pay a
prepayment penalty for paying all or part of the
principal after the loan is consummated in excess of
the following limitations:
(A) During the 1-year period beginning on the
date the loan is consummated, the prepayment
penalty shall not exceed an amount equal to 3
percent of the outstanding balance on the loan.
(B) During the 1-year period beginning after
the period described in subparagraph (A), the
prepayment penalty shall not exceed an amount
equal to 2 percent of the outstanding balance
on the loan.
(C) During the 1-year period beginning after
the 1-year period described in subparagraph
(B), the prepayment penalty shall not exceed an
amount equal to 1 percent of the outstanding
balance on the loan.
(D) After the end of the 3-year period
beginning on the date the loan is consummated,
no prepayment penalty may be imposed on a
qualified mortgage.
(4) Option for no prepayment penalty required.--A
creditor may not offer a consumer a residential
mortgage loan product that has a prepayment penalty for
paying all or part of the principal after the loan is
consummated as a term of the loan without offering the
consumer a residential mortgage loan product that does
not have a prepayment penalty as a term of the loan.
(d) Single Premium Credit Insurance Prohibited.--No creditor
may finance, directly or indirectly, in connection with any
residential mortgage loan or with any extension of credit under
an open end consumer credit plan secured by the principal
dwelling of the consumer, any credit life, credit disability,
credit unemployment, or credit property insurance, or any other
accident, loss-of-income, life, or health insurance, or any
payments directly or indirectly for any debt cancellation or
suspension agreement or contract, except that--
(1) insurance premiums or debt cancellation or
suspension fees calculated and paid in full on a
monthly basis shall not be considered financed by the
creditor; and
(2) this subsection shall not apply to credit
unemployment insurance for which the unemployment
insurance premiums are reasonable, the creditor
receives no direct or indirect compensation in
connection with the unemployment insurance premiums,
and the unemployment insurance premiums are paid
pursuant to another insurance contract and not paid to
an affiliate of the creditor.
(e) Arbitration.--
(1) In general.--No residential mortgage loan and no
extension of credit under an open end consumer credit
plan secured by the principal dwelling of the consumer
may include terms which require arbitration or any
other nonjudicial procedure as the method for resolving
any controversy or settling any claims arising out of
the transaction.
(2) Post-controversy agreements.--Subject to
paragraph (3), paragraph (1) shall not be construed as
limiting the right of the consumer and the creditor or
any assignee to agree to arbitration or any other
nonjudicial procedure as the method for resolving any
controversy at any time after a dispute or claim under
the transaction arises.
(3) No waiver of statutory cause of action.--No
provision of any residential mortgage loan or of any
extension of credit under an open end consumer credit
plan secured by the principal dwelling of the consumer,
and no other agreement between the consumer and the
creditor relating to the residential mortgage loan or
extension of credit referred to in paragraph (1), shall
be applied or interpreted so as to bar a consumer from
bringing an action in an appropriate district court of
the United States, or any other court of competent
jurisdiction, pursuant to section 130 or any other
provision of law, for damages or other relief in
connection with any alleged violation of this section,
any other provision of this title, or any other Federal
law.
(f) Mortgages With Negative Amortization.--No creditor may
extend credit to a borrower in connection with a consumer
credit transaction under an open or closed end consumer credit
plan secured by a dwelling or residential real property that
includes a dwelling, other than a reverse mortgage, that
provides or permits a payment plan that may, at any time over
the term of the extension of credit, result in negative
amortization unless, before such transaction is consummated--
(1) the creditor provides the consumer with a
statement that--
(A) the pending transaction will or may, as
the case may be, result in negative
amortization;
(B) describes negative amortization in such
manner as the Board shall prescribe;
(C) negative amortization increases the
outstanding principal balance of the account;
and
(D) negative amortization reduces the
consumer's equity in the dwelling or real
property; and
(2) in the case of a first-time borrower with respect
to a residential mortgage loan that is not a qualified
mortgage, the first-time borrower provides the creditor
with sufficient documentation to demonstrate that the
consumer received homeownership counseling from
organizations or counselors certified by the Secretary
of Housing and Urban Development as competent to
provide such counseling.
(g) Protection Against Loss of Anti-deficiency Protection.--
(1) Definition.--For purposes of this subsection, the
term ``anti-deficiency law'' means the law of any State
which provides that, in the event of foreclosure on the
residential property of a consumer securing a mortgage,
the consumer is not liable, in accordance with the
terms and limitations of such State law, for any
deficiency between the sale price obtained on such
property through foreclosure and the outstanding
balance of the mortgage.
(2) Notice at time of consummation.--In the case of
any residential mortgage loan that is, or upon
consummation will be, subject to protection under an
anti-deficiency law, the creditor or mortgage
originator shall provide a written notice to the
consumer describing the protection provided by the
anti-deficiency law and the significance for the
consumer of the loss of such protection before such
loan is consummated.
(3) Notice before refinancing that would cause loss
of protection.--In the case of any residential mortgage
loan that is subject to protection under an anti-
deficiency law, if a creditor or mortgage originator
provides an application to a consumer, or receives an
application from a consumer, for any type of
refinancing for such loan that would cause the loan to
lose the protection of such anti-deficiency law, the
creditor or mortgage originator shall provide a written
notice to the consumer describing the protection
provided by the anti-deficiency law and the
significance for the consumer of the loss of such
protection before any agreement for any such
refinancing is consummated.
(h) Policy Regarding Acceptance of Partial Payment.--In the
case of any residential mortgage loan, a creditor shall
disclose prior to settlement or, in the case of a person
becoming a creditor with respect to an existing residential
mortgage loan, at the time such person becomes a creditor--
(1) the creditor's policy regarding the acceptance of
partial payments; and
(2) if partial payments are accepted, how such
payments will be applied to such mortgage and if such
payments will be placed in escrow.
(i) Timeshare Plans.--This section and any regulations
promulgated under this section do not apply to an extension of
credit relating to a plan described in section 101(53D) of
title 11, United States Code.
* * * * * * *
----------
ECONOMIC GROWTH, REGULATORY RELIEF, AND
CONSUMER PROTECTION ACT
* * * * * * *
TITLE II--REGULATORY RELIEF AND
PROTECTING CONSUMER ACCESS TO
CREDIT
SEC. 201. CAPITAL SIMPLIFICATION FOR QUALIFYING COMMUNITY BANKS.
(a) Definitions.--In this section:
(1) Community bank leverage ratio.--The term
``Community Bank Leverage Ratio'' means the ratio of
the tangible equity capital of a qualifying community
bank, as reported on the qualifying community bank's
applicable regulatory filing with the qualifying
community bank's appropriate Federal banking agency, to
the average total consolidated assets of the qualifying
community bank, as reported on the qualifying community
bank's applicable regulatory filing with the qualifying
community bank's appropriate Federal banking agency.
(2) Generally applicable leverage capital
requirements; generally applicable risk-based capital
requirements.--The terms ``generally applicable
leverage capital requirements'' and ``generally
applicable risk-based capital requirements'' have the
meanings given those terms in section 171(a) of the
Financial Stability Act of 2010 (12 U.S.C. 5371(a)).
(3) Qualifying community bank.--
(A) Asset threshold.--The term ``qualifying
community bank'' means a depository institution
or depository institution holding company with
total consolidated assets of less than
[$10,000,000,000] $50,000,000,000.
(B) Risk profile.--The appropriate Federal
banking agencies may determine that a
depository institution or depository
institution holding company (or a class of
depository institutions or depository
institution holding companies) described in
subparagraph (A) is not a qualifying community
bank based on the depository institution's or
depository institution holding company's risk
profile, which shall be based on consideration
of--
(i) off-balance sheet exposures;
(ii) trading assets and liabilities;
(iii) total notional derivatives
exposures; and
(iv) such other factors as the
appropriate Federal banking agencies
determine appropriate.
(b) Community Bank Leverage Ratio.--The appropriate Federal
banking agencies shall, through notice and comment rule making
under section 553 of title 5, United States Code--
(1) develop a Community Bank Leverage Ratio of not
less than 8 percent and not more than 10 percent for
qualifying community banks; and
(2) establish procedures for treatment of a
qualifying community bank that has a Community Bank
Leverage Ratio that falls below the percentage
developed under paragraph (1) after exceeding the
percentage developed under paragraph (1).
(c) Capital Compliance.--
(1) In general.--Any qualifying community bank that
exceeds the Community Bank Leverage Ratio developed
under subsection (b)(1) shall be considered to have
met--
(A) the generally applicable leverage capital
requirements and the generally applicable risk-
based capital requirements;
(B) in the case of a qualifying community
bank that is a depository institution, the
capital ratio requirements that are required in
order to be considered well capitalized under
section 38 of the Federal Deposit Insurance Act
(12 U.S.C. 1831o) and any regulation
implementing that section; and
(C) any other capital or leverage
requirements to which the qualifying community
bank is subject.
(2) Existing authorities.--Nothing in paragraph (1)
shall limit the authority of the appropriate Federal
banking agencies as in effect on the date of enactment
of this Act.
(d) Consultation.--The appropriate Federal banking agencies
shall--
(1) consult with the applicable State bank
supervisors in carrying out this section; and
(2) notify the applicable State bank supervisor of
any qualifying community bank that it supervises that
exceeds, or does not exceed after previously exceeding,
the Community Bank Leverage ratio developed under
subsection (b)(1).
* * * * * * *
MINORITY VIEWS
This bill would raise the minimum threshold from $10
billion to $50 billion in total assets for depository
institutions to be exempt from CFPB supervision, Qualified
Mortgage (QM) requirements, and the Volcker Rule's prohibition
on proprietary trading. It would also expand the Community Bank
Leverage Ratio (CBLR), allowing banks with up to $50 billion to
be exempt from other risk-based and leverage ratio requirements
if they meet the CBLR, currently set at 9%. This bill would
exempt 70% of the largest banks from these requirements.
According to the latest data, simply adjusting for inflation
would suggest those thresholds should only increase to about
$14.7 billion, not quintupling those thresholds.
Of the 8,942 banks and credit unions in the country, only
179 (2%) have more than $10 billion in assets.\1\ It is unclear
what the justification is to dramatically raise these $10
billion thresholds by 500% to $50 billion. Many of these
thresholds were set in July 2010, when Congress passed the
Dodd-Frank Wall Street Reform and Consumer Protection Act into
law. According to the latest data, simply adjusting for
inflation would suggest those thresholds should only increase
to about $14.7 billion,\2\ not quintupling those thresholds.
The CBLR threshold was established by Congress in May 2018,
which in today's dollars would be about $12.75 billion.\3\ For
comparison, of the 179 depository institutions with more than
$10 billion in assets, there are 41 depository institutions
(23%) with between $10 billion and $15 billion in assets, and
there are 127 depository institutions (70%) with between $10
billion and $50 billion in assets.\4\
---------------------------------------------------------------------------
\1\FDIC, Quarterly Banking Profile (Dec. 31, 2024); NCUA, Quarterly
Data Summary Reports (Dec. 31, 2024); CFPB, Institutions subject to
CFPB supervisory authority (Dec. 2024).
\2\See BLS, CPI Inflation Calculator, July 2010 to April 2025
(accessed May 16, 2025).
\3\See BLS, CPI Inflation Calculator, May 2018 to April 2025
(accessed May 16, 2025).
\4\CFPB, Institutions subject to CFPB supervisory authority (Dec.
2024).
---------------------------------------------------------------------------
Consumer groups like Americans for Financial Reform (AFR)
and Public Citizen oppose the bill. When a similar bill was
considered by the Committee last year, AFR wrote, ``Safety and
soundness and consumer protection oversight will suffer
substantially from these changes. The banking agencies have
acknowledged that clusters of midsize banks with similar
concentrations are vulnerable to contagion. This may include
some firms' overreliance on uninsured deposits on the liability
side, and vulnerable or opaque loans or securities
concentrations on the asset side of the balance sheet. This
also includes weakened CRE portfolios and rising loan exposures
to non- bank financial institutions.''\5\
---------------------------------------------------------------------------
\5\AFR, Letter to FSC (May 16, 2024).
---------------------------------------------------------------------------
During the debate, Ranking Member Waters offered an
amendment to stipulate that the bill would not take effect
unless CFPB certifies they have at least the average number of
supervisory and examination staff that are performing their
supervisory and examination duties, including conducting at
least the average frequency of exams for CFPB's supervised
entities during Mick Mulvaney and Kathy Kraninger's tenure
leading the CFPB during Trump's first term, when they felt
compelled to follow the law and still had at least 1,400
employees on staff carrying out the CFPB's mission. This
amendment was rejected by Republicans.
For these reasons, we oppose H.R. 3320.
Sincerely,
Maxine Waters,
Ranking Member.
Nydia M. Velazquez,
Al Green,
Bill Foster,
Juan Vargas,
Stephen F. Lynch,
Emanuel Cleaver, II,
Joyce Beatty,
Rashida Tlaib,
Sylvia R. Garcia,
Nikema Williams,
Members of Congress.
[all]