Competition & Regulation

Congress Votes to Increase the Risk of Bank Bailouts and Repeals Laws that Protect the Public from Predatory Lending

The “Bank Lobbyist Act” Does Favors for Banks

Washington DC — Late this afternoon the House of Representatives passed the “Economic Growth, Regulatory Relief, and Consumer Protection Act.” The bill had previously cleared the Senate and now heads to President Trump for his signature.

This legislation rolls back important consumer protections and repeals or weakens a number of achievements in the Dodd-Frank Act and other critical laws designed to ensure consumers, investors, and honest market participants are appropriately protected from abuses in the marketplace.

“This bill makes a future banking crisis more likely,” explained Christopher Peterson, Financial Services Director at Consumer Federation of America. “At the same time, Congress is turning its back on millions of Americans struggling to make ends meet.”

Among other problematic features in the bill:

  • Eliminates monitoring, standards, and oversight that was designed to prevent giant banks from collapsing. The bill undermines the ability of the Federal Reserve to ensure adequate oversight of large banks, including some banks that contributed to the financial crisis of 2008. The asset threshold for enhanced regulatory controls would go from $50 billion to $250 billion eliminating enhanced oversight of 25 of the largest 38 banks in the country. The bill also creates a new loophole that will allow banks to engage in speculative trading with their customers’ deposits.
  • Creates a blind-fold for the government on data and patterns in the home mortgage markets. The bill exempts 85 percent of banks from the Home Mortgage Disclosure Act’s data reporting requirements making it more difficult to spot discrimination and reckless lending patterns.
  • Opens the door to abuse of millions of vulnerable families by eliminating key protections from manufactured-home loans. The bill exempts manufactured-home retailers from the mortgage originator compensation rule that that prevents borrowers from being steered toward loans that are more expensive than those for which they qualify. This change will increase the cost of a home by thousands of dollars over the life of the loan and poses a particular threat to low-income Americans living in rural communities.
  • Weakens crucial consumer protections: the Consumer Financial Protection Bureau’s Qualified Mortgage (QM) rule and Ability-to-Repay standards for home mortgage loans. The bill expands an exemption to the QM rule for financial institutions that have less than $10 billion in assets and hold their loans in portfolio. This means that many banks will be free to avoid  the common sense rules requiring that borrowers have the ability to repay their home mortgage loans. Some lenders are likely to take advantage of this exemption to bring back exotic loans that lead to a high risk of foreclosure.

“The Bank Lobbyists Act’s elimination of protections for manufactured-home mortgage borrowers is particularly mean spirited,” said Peterson. “This change will make it more difficult for families that are struggling to find basic shelter in areas of the country where opportunities can be scarce.”

“Instead of solving pressing national problems, Congress and the Trump Administration are doing favors for their friends in the banking industry,” said Peterson.