Today, President Trump signed into law S. 2155, The Economic Growth, Regulatory Relief and Consumer Protection Act. In doing so, President Trump stated, “the legislation I'm signing today rolls back the crippling Dodd-Frank regulations that are crushing small banks.”
In response to the new law, community lenders across the nation rejoice. On behalf of Independent Community Bankers of America (the “ICBA”), President and CEO Rebeca Romero Rainey issued a statement that the “landmark law signed by the president today unravels many of the suffocating regulatory burdens our nation’s community banks face and puts community banks in a much better position to unleash their full economic potential to the benefit of their customers and communities.”
Some of those regulations include stringent ability-to-repay evaluations, record retention requirements, reporting to regulators, and stress-testing under the authority of the Federal Reserve to determine the ability to withstand a financial crisis. Smaller banks and credit unions reportedly found these regulations to be unduly burdensome for them, given their relative size and resources for compliance. Perhaps the best evidence of this argument is the nearly 2,000 community financial institutions that ceased operations after the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted in 2010.
Critics of the Act, however, argue that the Act goes too far in deregulation. According to some, decision to raise the “enhanced oversight” threshold from those banks with $50 billion or more in assets, to those with at least $250 billion, was too severe, and that such a large rollback in regulation could lead to the next major financial crisis in America. Indeed, the Act provides a new standard for “too big to fail” that excludes nearly two dozen banks that were previously considered to be systematically important financial institutions.
Only time will tell the impact of this new legislation, but The Economic Growth, Regulatory Relief and Consumer Protection Act is being hailed as a win for Main Street by many.BSCR previously posted about S. 2155 when it was first expected to pass in the Senate and has continued to monitor the bill’s progress. The full text of the new law may be found here.
In an en banc opinion issued yesterday, the Third Circuit Court of Appeals upheld the district court’s holding that the statute of limitations period for an alleged violation of the Fair Debt Collection Practices Act (the “FDCPA”), 15 U.S.C. § 1692, et seq., began to run on the date the alleged violation occurred, regardless of when the claimant did, or should have, discovered the violation.
This precedential holding in Rotkiske v. Klemm, et al., represents a new deviation from both the Fourth and the Ninth Circuit Courts of Appeal, who have held that the statute of limitations would not begin to run until the date of discovery of the purported violation. “In our view, the Act [FDCPA] says what it means and means what it says: the statute of limitations runs from ‘the date on which the violation occurs,’” the Court reasoned.
In Klemm, the plaintiff alleged that the defendant law firm filed a collection suit that constituted a violation of the FDCPA. Because the plaintiff had moved, and someone else had accepted service on his behalf at the former address, plaintiff claimed that he was not aware of the collection action until years later. On June 29, 2015, the plaintiff sued the defendant law firm and others, alleging that the debt collection lawsuit violated the FDCPA for various reasons. Defendants moved to dismiss Rotkiske’s FDCPA claim on the basis that the action was time-barred, and the United States District Court for the Eastern District of Pennsylvania granted dismissal of the action on that basis.
On appeal, the plaintiff argued, in line with the Fourth and Ninth Circuit positions, that the statute was tolled until he did, or reasonably should have, discovered the wrongful collection action. Adopting the district court’s textualist approach, the Third Circuit Court of Appeals upheld the dismissal, respectfully rejecting the statutory interpretation of the other two circuits on this subject. It is important to note, however, that the Court reinforced the exception of equitable tolling where the defendant’s own fraudulent or misleading conduct concealed the facts that would have permitted the plaintiff to discover the FDCPA violation.
The opinion of the Third Circuit Court of Appeals may be accessed here.
Following unsuccessful attempts to overhaul Dodd-Frank through varied iterations of the Financial CHOICE Act, the Senate is expected to vote in the immediate future on the “Economic Growth, Regulatory Relief, and Consumer Protection Act” (S. 2155).
The bill is sponsored by Idaho senator Michael Crapo (R), and it includes revisions to the Truth in Lending Act (“TILA”), the Bank Holding Company Act, the Volcker Rule, and the United States Housing Act, among others. As part of its bipartisan appeal, the proposed law also includes new protections for consumers to prevent identity theft and cybersecurity breaches, as well as relief for from private student loan debt.
If passed, this act would relieve relatively smaller banks from some of the burdens imposed by heightened regulations, such as ability-to-repay evaluations, record retention, reporting to regulators, and stress-testing. Dodd-Frank requires those banks with more than $50 million in assets, representing roughly the 40 largest banks, to follow the most stringent protocol, while the new bill would raise that tipping point to $250 billion in assets, or the top 12 banks.
Mortgage origination would be impacted as well. The bill creates somewhat of an incentive for lenders to hold on to the mortgages they originate, as it exempts them from the strict underwriting standards of Dodd-Frank if the lender continues to service and hold the loan. Furthermore, banks that originate less than 500 mortgages a year would have relaxed reporting requirements for racial and income data.
Touted as maintaining necessary protections of Dodd-Frank while providing much-needed relief to small and regional banks, the bill represents the first major bipartisan effort to reform financial regulation in recent history, with 20 co-sponsors from both major parties. Although there has been some difficulty in determining which amendments will be accepted and rejected, it is expected to pass at some point. The bill will face a challenge, however, if it proceeds to the House, as House Republicans have already indicated that, in its current form, the bill does not go far enough to undo Dodd-Frank.
The full text of S. 2155, as well as the bill’s progress, may be tracked here.
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The BSCR Financial Services Law Blog explores current events, litigation trends, regulations, and hot topics in the financial services industry. This blog will inform readers of issues affecting a wide range of financial services, including mortgage lending, auto finance, and credit card/retail transactions. Learn more about the editor, Megan Stumph, and our Financial Services practice.
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