Bipartisan Financial Reform Bill Expected to Pass in Senate

ABSTRACT: The U.S. Senate is expected to vote any day now on an expansive bipartisan bill that would have the biggest regulatory impact on the financial services market since the Dodd-Frank Act passed in 2010.

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.