To the surprise of many, Congress passed a number of financial services bills in 2015, including six that amended the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
A large part of that success centered around a five-year highway bill signed by President Obama last month which contained a package of about 20 regulatory relief provisions, including a change to annual privacy notice rules; requiring banks to send out new disclosures only when their privacy standards have changed; and an extension to bank exam cycles from a year to 18 months for banks with assets of $500 million to $1 billion. The package also included a measure establishing an appeals process for the designation of rural areas under the Consumer Financial Protection Bureau's (CFPB’s) "qualified mortgage" rule.
All of these provisions had been thoroughly vetted, and at least 15 measures had previously passed the U.S. House of Representatives as stand-alone measures with strong bipartisan support. Those bills included:
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H.R. 2064, the Improving Access to Capital for Emerging Growth Companies Act, to simplifies the SEC registration process for Emerging Growth Companies in order to accelerate a company’s ability to enter into an Initial Public Offering.
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H.R. 1525, the Disclosure Modernization and Simplifications Act of 2015, directing the SEC to simplify its disclosure regime for issuers and investors.
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H.R. 1698, the Bullion and Collectible Coin Production Efficiency and Cost Savings Act, amending design and content requirements for certain gold and silver coins produced by the United States Mint.
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H.R. 432, the SBIC Advisers Relief Act of 2015, amending the Investment Advisers Act of 1940 to reduce unnecessary regulatory costs and eliminate duplicative regulation of advisers to Small Business Investment Companies.
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H.R. 601, the Eliminate Privacy Notice Confusion Act, to reduce confusion among consumers by clarifying that they will receive privacy notices after opening a new account when their financial institution’s privacy policies change rather than an annual notice.
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H.R. 1839, the Reforming Access for Investments in Startup Enterprises Act, codifying an established legal framework for secondary markets of restricted securities to enhance market liquidity, thereby promoting growth for investors and entrepreneurs.
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H.R. 2482, the Preservation Enhancement and Savings Opportunity Act, amending the Low-Income Housing Preservation and Resident Homeownership Act of 1990 to allow owners (including nonprofits) of HUD federally-subsidized multifamily developments access to remaining profits after all operating expenses and maintenance costs.
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H.R. 233, the Tenant Income Verification Relief Act, allowing tenants on a fixed income to have their income certified and/or verified once every three years rather than annually to reduce the burdens placed on tenants for purposes of determining their eligibility for certain Federal assistance housing programs.
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H.R. 1047, the Housing Assistance Efficiency Act, to amend the McKinney-Vento Homeless Assistance Act to allow a private nonprofit organization to administer permanent housing rental assistance provided through the Continuum of Care Program under the Act.
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H.R. 2091, the Child Support Assistance Act of 2015, to help state and local support enforcement agencies aid families in collecting child support payments.
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H.R. 2997, the Private Investment in Housing Act, to provide the Department of Housing and Urban Development (HUD) the authority to establish a demonstration program and enter into budget-neutral, performance-based agreements that result in the reduction in energy or water costs for multi-family housing.
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H.R. 299, the Capital Access for Small Community Financial Institutions Act, allowing privately insured state chartered credit unions to apply for membership in the Federal Home Loan Bank System, which would help them better serve the financial needs of consumers.
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H.R. 1553, the Small Bank Exam Cycle Reform Act of 2015, to provide regulatory relief for community financial institutions suffering under the regulatory red tape regime of the Dodd-Frank Act by allowing well-managed institutions to qualify for modified exam cycles.
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H.R. 1723, the Small Business Freedom and Growth Act, to simplify the registration process for new securities offerings, and
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H.R. 1334, the Holding Company Registration Threshold Equalization Act of 2015, that applied the shareholder registration and deregistration thresholds contained in the JOBS Act to savings and loan holding companies.
In addition to the highway bill, Congress passed in December, and the President signed into law, a $1.1 trillion budget deal to fund the government through the end of the fiscal year that included several financial services provisions. In particular, the budget deal contained language regarding the sharing of cybersecurity threat information between the private sector and government, and a provision to ensure the Treasury Department cannot sell its stake in Fannie Mae and Freddie Mac until at least 2018.
In addition, lawmakers included language that any executive order from the White House for the rest of fiscal year must be accompanied by a cost-benefit analysis from the Office of Management and Budget (OMB), and requested a report by the OMB detailing the total federal costs related to the implementation of the Dodd-Frank Act through 2018. Under the final budget package, the CFPB is also required to comply with the Federal Advisory Committee Act, which sets transparency rules for agency advisory groups.
Separately, at least two financial services-related provisions were tucked in to the tax extenders bill signed by the President last month. The legislation contains a two-year tax extension for several key mortgage items, including the mortgage interest deduction and the Mortgage Forgiveness Debt Relief Act, which shields homebuyers going through a foreclosure or mortgage modification from paying taxes on the forgiven debt.
While Senate Banking Committee chairman Richard Shelby (R-AL) continued to advocate for adoption of all or part of his regulatory reform package in the final budget deal, that effort was ultimately unsuccessful due to lack of bipartisan support in Congress as well as outright opposition from the Administration. The Shelby legislation included numerous changes for small and medium-sized banks, as well as reforms to the Federal Reserve, the Federal Stability Oversight Council and the insurance industry. In particular, the bill contained a much-discussed measure to raise a $50 billion Dodd-Frank threshold for heightened capital rules and regulations.
While there remains at least some bipartisan support for providing relief to small banks and for raising the $50 billion threshold for regional banks, the political climate is likely to grow increasingly less hospitable as the year progresses, making such changes difficult. Moreover, there is a narrow legislative window given that both the Republican and Democratic national conventions will take place in July, and Congress is scheduled to out for much of August and October, as well as the first part of November going into the election.
That said, prudential banking regulators at the Federal Reserve, OCC and FDIC are expected to take up the so-called Net Stable Funding Ratio rule at some point in 2016, which would force banks to hold sufficient assets that can be quickly turned into cash to cover their potential losses over the course of a year. Furthermore, the CFPB is likely to step up its efforts to regulate payday lending, debt collection, and potentially bitcoin and other virtual currencies through pending rules for prepaid cards.
