United States: Highway To Reg Relief

Who thinks that bank regulatory relief and federal highway funding have anything in common? Apparently, the U.S. Congress does. In addition to highway funding and transportation measures, the Fixing America's Surface Transportation (FAST) Act, which was signed into law December 4, 2015, contains provisions providing limited, but welcome, regulatory relief for banks along with other miscellaneous measures, such as restoring cuts to the federal crop insurance program and changing dividends paid on Federal Reserve stock to larger Fed member banks. A summary of the banking related provisions follows, but it should be noted that further rule making by the CFPB will be needed before most of the changes can be finally implemented.

Privacy Notices. Financial institutions will no longer be required to send annual privacy notices provided two conditions are met: (1) the institution has not changed its privacy policies or practices since the last privacy notice was sent to customers, and (2) the institution only shares nonpublic personal information with non-affiliates under one of the statutory or regulatory exceptions that do not require an opt out, such as sharing with third parties that provide services to the bank and sharing with third parties under joint marketing arrangements for financial products and services. Currently, the privacy regulations still require annual notices with the one conditional exception for posting the notice on the institution's website. It is not clear whether those rules still apply in light of the statutory change, but hopefully, the CFPB will act quickly to revise the privacy rules.

18-Month Exam Cycle. The Act increases from $500 Million to $1 Billion the asset size threshold for depository institutions subject to an extended 18-month exam cycle. Insured depository institutions with total assets of less than $1 Billion with a CAMELS composite rating of 1 or 2 that are also considered to be well-managed and well-capitalized will be subject to a full scope, on-site exam once every 18 months rather than annually.

Small Creditors Serving Rural and Underserved Areas. The Act amends the Truth in Lending Act by removing the word "predominantly" from the section in TILA that creates an exception to certain of the CFPB mortgage rules for small creditors serving "predominantly" rural and underserved areas. Under current CFPB rules, as amended effective January 1, 2016, a small creditor serving predominantly rural and underserved areas is exempt from compliance with certain provisions of the 2013 mortgage rules. For example, a qualifying small creditor:

  • May originate portfolio loans with Qualified Mortgage (QM) status without complying with Appendix Q or the 43% debt to income ratio cap;
  • May originate QM loans with a balloon payment;
  • May originate high cost mortgages with a balloon payment;
  • Is exempt from escrow requirements for first lien higher priced mortgage loans;
  • May originate higher priced QM loans that qualify for a safe harbor compliance standard under the ATR/QM rules rather than a rebuttable presumption of compliance.

Under the revised CFPB rules, a lender meets the definition of a small creditor if: (1) it and all of its affiliates have total assets below $2 Billion, adjusted annually for inflation ($2.052 Billion for 2016), and (2) the lender and its affiliates originate fewer than 2,000 first lien mortgage loans, not including loans held in the lender's portfolio. A small creditor is deemed to be operating predominately in rural and underserved areas if more than 50% of its first lien covered mortgage loans originated in the preceding calendar year are secured by properties located in areas classified by the CFPB as either rural or underserved. The Bureau publishes annual lists of counties that qualify as rural or underserved, and the revised CFPB rules also allow census blocks not designated by the U.S. Census Bureau as "urban" to also be considered as rural.

The FAST Act removed the word "predominantly" from the relevant section of TILA. The change cannot be implemented until the CFPB issues revised rules, and it is not clear how the agency is going to interpret the change to the statutory language. Ideally, the Bureau will remove any rural or underserved area lending test, but that remains to be seen. The Act requires the Bureau to issue regulations within ninety days after passage which gives the Bureau until sometime in the first week in March at the latest.

This change will be particularly important to those lenders who are relying upon the temporary exception to the ATR/QM rules which allow a small creditor to originate balloon payment loans with QM status whether or not the small creditor serves rural or underserved areas. That temporary exception expires April 1, 2016. Hopefully, the Bureau will act in a timely fashion so as to not disrupt lending by small creditors.

The Act also requires the Bureau to establish an application process allowing a person who lives or does business in a state to petition the agency for designation of an area within that state as a "rural" area with respect to the mortgage rules. It sets forth the evaluation criteria to be used by the Bureau in making that determination and a timeline for publication of applications, a public comment period, and Bureau decisions on the applications. This process might allow areas to be designated as rural in addition to counties designated by the Bureau as rural and underserved and census blocks not designated as "urban" by the U.S. Census Bureau.

Federal Reserve Stock Dividends. National banks and state chartered Federal Reserve member banks with assets of more than $10 Billion will receive dividends on their Federal Reserve stock at a rate tied to the yield on the ten year treasury note and capped at 6%. The $10 Billion exemption threshold will be adjusted annually for inflation. Fed member banks with assets of less than $10 Billion are exempt from this change and will continue to be paid a dividend on their Federal Reserve stock at a rate of 6% annually. This change applies to dividends paid on or after January 1, 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.