One of the more compelling, but sometimes unheeded, arguments against heavy banking regulations is the plight of the community bank. The expense and practicality of adhering to stringent reporting requirements, fee limits, and timelines place a heavier burden on small, local banks, particularly those in rural areas, than on large financial institutions. Accordingly, organizations for community banks and local credit unions have been created in order to give a voice to those smaller entities that are often overlooked in the course of financial regulation.
At a recent convention attended by nearly 3,000 community bankers, Camden R. Fine, the President and CEO of Independent Community Bankers of America (“ICBA”) called community banks to action in order to drive continued regulation reform for local banking communities. The ICBA intends, at an upcoming summit in Washington D.C., to address Congress in order to ensure that proposed regulatory relief legislation for community banks is signed into law.
In its “Plan for Prosperity” outlining the relief the ICBA will seek at the Summit, the ICBA proposes that the CFPB should be granted increased authority to exempt or tier regulatory requirements for community banks and to restructure the CFPB to create a diverse panel rather than a single decision-maker, which the ICBA hopes would increase the likelihood that at least one decision maker has a background in community bank lending practices.
The ICBA also seeks to eliminate the filing of capricious “disparate impact” fair lending lawsuits by requiring the petitioner to demonstrate discriminatory intent in order to succeed on a claim under the Equal Credit Opportunity Act and the Fair Housing Act. This change would ensure that lenders, particularly small, local lenders with limited pools of applicants, who apply uniform and neutral lending standards, are not subjected to frivolous or unfounded claims under those Acts.
Additional reforms proposed by the ICBA would impose a cost-benefit analysis for new regulations, raise the currency transaction report threshold under the Bank Secrecy Act, eliminate the small business data collection requirements under Dodd-Frank, and would reform the reporting requirements and closing processes for community banks and other small servicers.
By reforming and lessening regulation for smaller financial institutions, it is hoped that local lenders will thrive and compete with those servicers deemed “Too Big to Fail.”