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USA - The new financial reform bill has been passed and made public (all 2,000 plus pages)

ECRC global partner NCRC has released its comments on the new Financial Regulatory Reform Bill which the Conference Committee has passed today. Below are the press releases.

Financial Regulatory Reform Bill Passed by the Conference Committee

Washington, DC- Early this morning, 28th June 2010, the Conference Committee passed the Financial Regulatory Reform Bill. John Taylor, NCRC’s President and CEO, made this statement regarding its passing:

“NCRC is very pleased to see some major steps being taken to overhaul the banking system. The bill offers major consumer protections that did not exist prior to President Obama’s and Barney Frank’s call for reform. The creation of the Consumer Finance Protection Bureau (CFPB) as a independent agency should be able to create rules and regulations and protect consumers from future abuses. It is critical however that this independence not be undermined by the fact that the Federal Reserve Bank will house, pay for and be part of the oversight agency that has the authority to veto decisions of the CFPB. Only time will tell as to how much influence the banking regulators and others have over this new important agency.”

Major components of the bill include:

Consumer Agency:

  • A strong consumer agency was created to protect consumers and enforce regulations on mortgages, credit cards and other financial products.
  • Independent Funding.
  • Director appointed by the President and Confirmed by the Senate.
  • Enforcement of pay day lenders, and check cashiers.

Help for Homeowners:

  • Assistance to unemployed borrowers facing foreclosure.
  • Money provided for the neighborhood stabilization fund which helps with assistance to borrowers for foreclosed or abandoned properties.
  • Funds provided for counseling (legal Aid).

Anti Predatory Provisions:

  • A new minimum underwriting standard would be enforced that will make lenders verify that borrowers can repay the loan.
  • Ban payments to mortgage originators who steer borrowers into high-priced loans.
  • Protection against prepayment penalties and abusive loan fees.

Data Enhancements:

  • Data enhancements on HMDA (Home Mortgage Disclosure Data) which include loan terms and conditions & age of borrower.
  • Data on the gender and race of the small business borrower so that we know whether woman and minority-owned small business are receiving loans and can start or expand their businesses.
  • A default and foreclosure database that would be an early warning system enabling stakeholders to take action if the data shows a spike in foreclosures.
  • A database of individual loan records in the Home Affordable Modification Program (HAMP) program. This will increase the accountability of the industry for modifying distressed loans.


NCRC Summary Analysis

Dodd-Frank Bill of 2010 (Financial Reform Bill)
Passed by the Congress on June, 2010

This analysis looks at the portion of the bill that creates a Consumer Financial Protection Bureau (“the Bureau of Consumer Financial Protection,” hereafter, the CFPB) and that addresses “Too Big to Fail.”

1)     Consumer Financial Protection Bureau


  • Creates a Consumer Financial Protection Bureau (CFPB) at the Federal Reserve, not a standalone agency.
  • Appoints a single Director of the CFPB, selected by the President, and confirmed by the Senate.
  • Creates no formal oversight board, but the rules issued by the CFPB are subject to veto by the Financial Oversight Stability Board in some cases.
  • Includes offices and functions of the Consumer Advisory Council, Community Affairs (study and provide technical assistance regarding provision of financial products and services to underserved communities), consumer complaints, Office of Fair Lending and Equal Opportunity, and the Office of Financial Literacy, and the Office of Financial Protection of Older Americans at the CFPB. As applicable, enforcement, research and data reporting are included in these offices.
  • Consumer protection functions are transferred from existing agencies to the CFPB twelve to eighteen months after enactment of the Dodd-Frank bill.


  • Gives the CFPB authority over most consumer protection laws, but not the Community Reinvestment Act (CRA), which would remain with the existing bank regulatory agencies.
  • Purpose of the CFPB is to “ensure that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent and competitive.” The CFPB is to ensure that consumers have access to understandable and transparent information about products, consumers are protected from unfair, discriminatory, and deceptive practices, markets operate efficiently and “transparently” to facilitate access and innovation, and reduce regulatory burden.
  • Perpetuates a form of federal preemption of state law; allows the Office of the Comptroller of the Currency (OCC) to decide preemption on a case-by-case basis. State laws can be preempted if they “discriminate” against nationally-charted banks and significantly interfere with their ability to conduct business. The OCC has historically opted for broad scale preemption. Also, the OCC does not have to certify that a preempted state law is replaced by a federal law with “substantive” standard that regulates the activity that would have been covered by the preempted state law.
  • State consumer protection law applies to affiliates and subsidiaries of national banks.
  • Allows state Attorneys General to sue to enforce federal rules promulgated by the CFPB. State Attorney Generals, however, cannot pursue class action law suits.
  • Gives the Director of the CFPB the power to exempt classes of institutions from the rules and enforcement authority of the bureau.


  • Gives the CFPB primary authority to enforce consumer protections against less than 125 banks. Banks under $10 billion in assets will be under the bank regulatory agencies that have repeatedly failed in their consumer protection responsibilities. This includes multi-billion dollar banks (up to $9.9 Billion), regional banks, intermediate–sized banks and small banks.
  • Gives the CFPB examination and enforcement authority for non-bank mortgage lenders, institutions providing loan modifications and foreclosure relief, institutions making student loans, and payday lenders.
  • Suggests the CFPB would have examination and enforcement authority for large non-bank consumer lenders. However, the bill leaves to the CFPB to consult with the Federal Trade Commission and issue a rule determining what constitutes “large” and which non-bank lenders offering non-mortgage consumer are finally covered by the CFPB (payday lenders, however, are automatically covered by the CFPB).
  • An amendment offered by Senator Snowe exempts from oversight of the CFPB a merchant or retailer that meets the definition of a small business.   Exempts automobile dealers from CFPB authority, but automobile dealers subject to the authority of the Federal Trade Commission.
  • Gives the Director the power to exempt classes of institutions from the rules and enforcement authority of the CFPB.
  • Allows the CFPB to assess fines and penalties for violations of rules; the legislation creates a Civil Penalty Fund to compensate consumers using fines collected from institutions violating CFPB rules.

Independence of the Bureau

  • Gives the Financial Oversight Stability Board the power to veto the rules of the CFPB with a 2/3rds vote if it poses a safety and soundness concern or risks the stability of the financial system.
  • An amendment offered by Senator Snowe requires the CFPB to consult with small entities including small lenders while developing a consumer protection rule. Often these consultations with stakeholders occur while an agency is developing a rule, but codifying this procedure may cause delays in proposing rules.
  • Requires the CFPB to confer with the prudential regulators (OCC, FDIC, Federal Reserve, NCUA) prior to issuing a rule. The CFPB must make public these concerns by publishing them in the Federal Register.
  • Gives banks and credit unions an appeals process; if supervisory actions of the CFPB are believed to conflict with the directions of a prudential regulator, banks or credit unions may appeal the ruling to an interagency council, made up of the CFPB and two of the existing bank regulatory agencies.
  • Mandates funding for the CFPB, drawing from the Federal Reserve Board (FRB); the FRB transfers to the CFPB the amount the Director of the CFPB believes “to be reasonably necessary to carry out the authorities of the Bureau.” While the FRB is required to fund the CFPB, the ceiling for this level of funding is defined as 12 percent of the expenses of the FRB, but the level of adequate funding is not. This gives the FRB influence over the budget. If the Director of the CFPB determines that the funding level from the FRB is not sufficient, the Director can request that Congress appropriates to the CFPB $200 million annually for the years 2010 through 2014.

New Requirements

  • Requires the CFPB to conduct a study of mandatory arbitration in the marketplace and issue a rule on whether mandatory arbitration is to be allowed. After conducting a study, the CFPB can also establish regulations over reverse mortgages.
  • Incorporates elements of the Community Reinvestment Modernization Act of 2009 (H.R. 1479). The bill increases transparency in lending by enhancing the Home Mortgage Disclosure Act to collect loan information on the creditworthiness and age of the borrower, total fees and points, presence of teaser rates or prepayment penalties and the use of a mortgage broker or other retail agent. Lenders will be required to report race and gender for small business loans, the census tract location of the business, action taken with respect to the application (approved or rejected), and revenue of the business.
  • A loan level database of modifications executed under the federal Home Affordable Modification Program, including approvals and rejections of applications for modifications.
  • A default and foreclosure database that provides data on at the census tract level of delinquency, defaults, properties that are real estate-owned, and properties for which the outstanding amount owed is greater than the value of the property.

New Funding for Foreclosure Prevention

  • $1 billion for a loan program for homeowners at risk of foreclosure experiencing unemployment or other adverse economic conditions.
  • $ 1 billion for the Neighborhood Stabilization Program that funds the reclamation of abandoned and foreclosed homes.

Oversight and Regulation of Risk (this will be revised)

The bill:

  • Creates a Financial Stability Oversight Council to identify and address systemic risks before they threaten the economy's stability. It will be composed of eight federal financial regulators (including the Director of the CFPB) and one independent member appointed by the President.
  • The bill creates a process for liquidating failed financial firms and imposes new capital and leverage requirements that make it undesirable to get too big. The bill would require regulators to adopt the Volcker Rule and prohibit proprietary trading.
  • Banks must spin-off risky derivatives activities to an affiliate that does not have access to the deposit insurance fund. Plain vanilla derivatives activities can be conducted by a bank.
  • Creates new rules on credit-rating agencies.  It will create an Office of Credit Ratings at the SEC and will require the SEC to examine NRSROs annually. In addition, investors could bring private rights of action against ratings agencies for a knowing or reckless failure to conduct a reasonable investigation of the facts or to obtain analysis from an independent source. Finally, a new mechanism is established for assigning credit ratings agencies in order to eliminate the conflict of interest which arises when issuers of securities select credit rating agencies. An amendment offered by Senator Franken created a credit rating agency board, a self-regulatory organization, which would develop a system in which the board assigns a rating agency to provide a product’s initial rating. The final bill mandates a study, and if the study cannot determine a more effective mechanism, the Franken amendment mechanism is to be enacted.


About the National Community Reinvestment Coalition (NCRC):
The National Community Reinvestment Coalition is an association of more than 600 community-based organizations that promote access to basic banking services, including credit and savings, to create and sustain affordable housing, job development, and vibrant communities for America's working families.

ID: 45678
Publication date: 28/06/10

Created: 29/06/10. Last changed: 05/07/10.
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