STATE GOVERNMENT RELATIONS
FLD Day at the Statehouse
It’s not too late to register for the FLD Day at the Statehouse on Feb. 10 at the Hilton Indianapolis Hotel & Suites! This free event provides opportunities to network and learn about grassroots advocacy and its importance to the banking industry. For questions, contact Josh Myers at 317-333-7165.
Senate Bill 350 - Central Indiana Regional Development Authority
Author: Sen. Travis Holdman, R-Markle
Summary: The bill authorizes counties and municipalities within the Indianapolis metropolitan area to establish a central Indiana regional development authority pilot that will sunset on July 1, 2025. It requires counties and municipalities that wish to establish the development authority to adopt substantially similar resolutions to adopt a preliminary strategic economic development plan (preliminary development plan). It provides that the development authority shall be governed by a strategy committee composed of members selected according to the terms of the preliminary development plan adopted to establish the development authority. It specifies the duties of the development authority, including financing authority. It requires the development authority to prepare a comprehensive strategic economic development plan. It amends the definition of “economic development projects” under the local income tax statute. Codifies the establishment and governing provisions of the Indianapolis metropolitan planning organization.
Latest Action: The bill was amended and subsequently passed by the Senate Tax and Fiscal Committee by a vote of 11-0 on Jan. 28. It is now eligible for 2nd reading amendments.
Senate Bill 327 - Reporting of Consumer Loans by Unlicensed Lenders
Author: Sen. Andy Zay, R-Huntington
Summary: The bill requires a person that: (1) is required to file an annual notice with the Department of Financial Institutions because the person is engaged in Indiana in making certain consumer credit transactions; and (2) is not required to be licensed with the department under the Uniform Consumer Credit Code; to report to a private consumer credit reporting service identified by the DFI certain information concerning each consumer loan, refinancing of a consumer loan, or consolidation of a consumer loan that is made by the person after June 30, 2020. It authorizes the DFI to adopt rules to implement these provisions.
Latest Action: The bill was amended and subsequently passed by the Senate Insurance and Financial Institutions Committee by a vote of 6-0 on Jan. 29. It is now eligible for 2nd reading amendments.
Senate Bill 395 - Uniform Consumer Credit Code
Author: Sen. Eric Bassler, R-Washington
Summary: The bill amends the statute concerning first-lien mortgage lending to specify that the statute does not apply to a mortgage transaction to the extent that, at the time of consummation, the debt created by the transaction is secured by a subordinate lien mortgage. It amends the Uniform Consumer Credit Code as follows: (1) Changes: (A) from July 1 of each even-numbered year to Jan. 1 of each odd-numbered year the effective date for the adjustment, based on changes in the Consumer Price Index, of various dollar amounts set forth in the UCCC; and (B) the corresponding date that precedes the adjustment date and by which the Department of Financial Institutions must issue an emergency rule announcing the adjustment. (2) For an agreement for a consumer credit sale entered into after June 30, 2020: (A) changes the maximum authorized credit service charge from a blended rate based on the amount financed, to a maximum rate of 36% per year on the unpaid balances of the principal; (B) authorizes a seller to contract for and receive a nonrefundable fee of not more than $150, in addition to the credit service charge and any other authorized charges and fees; and (C) prohibits precomputed consumer credit sales. (3) Repeals a provision concerning the credit service charge for revolving charge accounts and relocates the language to the provision concerning the authorized credit service charge for consumer sales. (4) For an agreement for a consumer loan entered into after June 30, 2020: (A) changes the maximum loan finance charge from 25% to 36% per year on the unpaid balances of the principal; (B) redesignates the authorized “nonrefundable prepaid finance charge” as an authorized “nonrefundable fee” and changes the amount of the authorized fee from not more than $50 to not more than $150, in the case of a consumer loan not secured by an interest in land; (C) specifies that such a loan is not considered a supervised loan; and (D) prohibits precomputed consumer loans. (5) Amends the definition of “supervised loan” to specify that the term includes only a consumer loan for which a loan agreement is entered into before July 1, 2020. (6) Specifies that a delinquency charge that: (A) is not more than $5; and (B) is subject to: (i) statutory indexing based on the Consumer Price Index; and (ii) change, if contracted for by the parties; is authorized for a consumer credit sale or consumer loan (or to a refinancing or consolidation of either) that is made before July 1, 2019. (7) Specifies that the following delinquency charges, not subject to indexing or to change by agreement of the parties, are authorized for a consumer credit sale or consumer loan (or to a refinancing or consolidation of either) that is made after June 30, 2019: (A) $5, if installments are due every 14 days or less; (B) $25, if installments are due every 15 days or more; (C) $25, in the case of a single installment due at least 30 days after the consumer credit sale or consumer loan is made. (8) Makes cross-references in the UCCC provisions concerning delinquency fees to the UCCC provisions that prohibit sellers and lenders from assessing a charge for: (A) a skip-a-payment service; or (B) an optional expedited payment service; with respect to any payment for which a delinquency charge has been assessed. (9) It makes conforming technical amendments throughout the UCCC to reflect the bill’s changes. Changes from $1.50 to $3.00 the amount of the fee that a lessor in a rental purchase agreement may impose for accepting rental payments by telephone. It makes a technical amendment to the criminal loansharking statute to update a reference in that statute to the maximum loan finance charge authorized under the UCCC, to reflect the referenced citation's redesignation by the bill’s changes to the UCCC.
Latest Action: The bill was amended and subsequently passed by the Senate Insurance and Financial Institutions Committee by a vote of 7-2 on Jan. 29. It is now eligible for 2nd reading amendments.
Senate Bill 407 - Consumer Credit Transactions
Author: Sen. Greg Walker, R-Columbus
Summary: The bill amends the Uniform Consumer Credit Code as follows: (1) Specifies that the UCCC applies to any consumer credit transaction entered into by a creditor and a resident of Indiana regardless of whether: (A) the creditor has a physical presence in any state; or (B) the transaction is conducted, in whole or in part, by means of the Internet. (2) Specifies that the licensing requirements under the UCCC apply to any person that regularly engages in making consumer loans in Indiana regardless of whether: (A) the person has a physical presence in any state; or (B) the loan transactions are conducted, in whole or in part, by means of the internet. (3) Provides that after June 30, 2020, a lender may not contract for or receive the authorized minimum finance charge upon a borrower’s prepayment of the second or any subsequent refinancing of a consumer loan made to that borrower by the lender. (4) Provides that after June 30, 2020, a lender may not assess the authorized nonrefundable prepaid finance charge on the second or any subsequent refinancing of a consumer loan made to a borrower by the lender. (5) Provides that a creditor: (A) who is licensed with the Department of Financial Institutions under the UCCC or is required to be licensed with the DFI; and (B) who violates the UCCC; commits a deceptive act that is actionable by the attorney general or a consumer under the deceptive consumer sales act.
Latest Action: The bill was heard in the Senate Insurance and Financial Institutions Committee but was held not receiving a vote. The bill is now dead due not passing the committee within the timeline required.
FEDERAL GOVERNMENT RELATIONS
Otting Defends OCC’s CRA Modernization Proposal at House Hearing
During an often-contentious hearing before the House Financial Services Committee on Wednesday, Comptroller of the Currency Joseph Otting defended his agency’s proposed changes to the Community Reinvestment Act regulations. Otting emphasized that the proposal is aimed at clarifying which activities count for CRA credit, updating where CRA performance is assessed, revising how CRA performance is measured and making CRA data reporting more transparent.
"If we’re proficient at our goal, a bank will be able to know every 90 days whether they’re in compliance with CRA," Otting said, emphasizing the important role of objectivity and transparency in the proposed assessment framework.
The comptroller pushed back against a number of common misconceptions about the proposal, including that the proposal would permit redlining and that it employs the use of a single metric to determine a bank’s CRA rating. "There is no one ratio in this proposal. That is a myth – that is inaccurate," Otting said. He added that under the proposal, examiners would be required to "use a retail lending [distribution] test for each major type of product," identical to what Federal Reserve Governor Lael Brainard called for in a recent speech.
Noting that the agency has actively sought input from industry and community industry stakeholders throughout the rulemaking process, Otting confirmed that the OCC would not extend the 60-day comment period on the proposal, and he would seek to finalize the rule within 60 to 75 days once the comment window closes. He emphasized, however, that "there will be a lot of outreach" as comments are reviewed.
FDIC Issues Advisory on Agricultural Lending Management
In a financial institution letter issued on Tuesday, the Federal Deposit Insurance Corp. advised agricultural lenders on sound practices during economic cycles. Noting that the agricultural sector has been experiencing low commodity prices, trade and tariff uncertainties, adverse weather conditions and global supply-and-demand issues, the FDIC emphasized the importance of prudent credit risk management that focuses on a borrower’s cash flow and repayment capacity.
The FDIC also advised ag lenders to manage credit concentrations; monitor key cyclical and economic factors; and work constructively with ag borrowers experiencing financial difficulties.
IRS Issues Guidance on Reporting of Mortgage Insurance Premiums
The IRS last Friday issued important guidance on how banks and other servicers of mortgage loans must report the deductibility of mortgage interest premiums. Last month’s appropriations package that was signed into law by President Trump included language extending the deduction for mortgage insurance premiums. The deduction was reinstated retroactively to calendar year 2018 and remains in effect for 2020.
The guidance addresses uncertainties that have arisen in recent years about whether and how to report mortgage insurance premiums while the deduction had lapsed. It confirms that premiums paid in 2019 should be reported on a Form 1098 and filed in a timely fashion. With respect to 2018, the guidance provides flexibility on whether and how to report the relevant 2018 mortgage insurance information to customers and the IRS.
CFPB Policy Statement Provides Clarity on ‘Abusive’ Practices Under UDAAP
The Consumer Financial Protection Bureau last Friday issued a policy statement outlining how it intends to cite and challenge "abusive" conduct in supervision or enforcement actions. The statement provides some long-awaited guidance on how the bureau views abusive conduct versus conduct which is unfair or deceptive. The policy statement is effective immediately.
When determining whether conduct meets the "abusive" standard in its supervision and enforcement activities, the CFPB indicated it will consider whether the harm to consumers outweighs the benefit to consumers. The bureau will also generally avoid "dual pleading" both abusiveness and unfairness or deception violations that stem from the same or nearly all of the same facts. Finally, the CFPB reported it generally does not intend to seek monetary relief for abusive violations in instances where there is a good-faith effort to comply with the abusiveness standard, except to address consumer injuries caused by the conduct.
"We’ve developed a policy that provides a solid framework to prevent consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future," said CFPB Director Kathy Kraninger. The CFPB did not rule out a future rulemaking to further define the abusiveness standard.
CFPB Formalizes Policy on Using ‘Compliance Aids’
As part of a broader regulatory effort to clarify the role of guidance, the CFPB last Friday issued a policy statement on how regulated entities may use official bureau "compliance aids." This kind of resource – similar to the compliance resources the bureau has issued for some time – is not regulation or official interpretation and is thus not binding.
"Where there are multiple methods of compliance that are permitted by the applicable rules and statutes, an entity can make its own business decision regarding which method to use, and this may include a method that is not specifically addressed in a Compliance Aid," the bureau indicated. "In sum, regulated entities are not required to comply with the Compliance Aids themselves."
Instead, compliance aids are designed to be useful for compliance professionals and other observers. As a result, the CFPB reported that "when exercising its enforcement and supervisory discretion, the Bureau does not intend to sanction, or ask a court to sanction, entities that reasonably rely on Compliance Aids."
CFPB Issues Updated HMDA Small Entity Compliance Guide
The Consumer Financial Protection Bureau has released an updated version of the Home Mortgage Disclosure Act Small Entity Compliance Guide. Changes to the document incorporate the content from the final HMDA rule issued on Oct. 10, 2019. Updates address, among other provisions: institutional coverage for open-end lines of credit; transactional coverage for open-end lines of credit; partial exemptions; and non-universal loan identifiers.
Updates also provide information about the CFPB’s policy guidance on disclosure of loan-level HMDA data.