The legislation addresses some of the unintended consequences of the Dodd-Frank Act in order to make it easier for smaller community banks and credit unions to lend to Virginia businesses and families, which is good for households and the economy.
“The Senate is on the verge of passing major bipartisan legislation aimed at providing relief for small community banks, credit unions, and the customers they serve. As someone who helped put together the Dodd-Frank legislation, I know there are areas where we can help improve access to capital for consumers, farmers, and small businesses so they can grow the economy and create jobs,” said Sen. Warner. “Virginia’s community banks and credit unions did not cause the financial crisis, and they should not be held back by regulations intended for the big banks. I look forward to seeing the Senate pass this package of bipartisan measures that will provide relief for Main Street, strengthen consumer protections, and keep Wall Street accountable.”
Following the 2008 financial meltdown, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to crack down on the worst Wall Street abuses and institute strict regulations to prevent another crisis. Sen. Warner played an important role in negotiating and drafting major portions of this legislation, which created new safeguards to protect our financial system and hold Wall Street accountable.
However, as with any major reform, the law also had some unintended consequences. Virginia has lost over a quarter of its community banks and nearly a third of its credit unions since Dodd-Frank was passed. In some cases, the law resulted in unnecessary and burdensome regulations on credit unions and small community banks that made it harder for them to lend money to help local businesses grow and create jobs.
“As a credit union, we have to adhere to the same regulations as large banks do. But we have to do it with a much smaller base – we only have 10,000 members and 20 employees – adhering to the same regulations that a behemoth like Bank of America has to adhere to,” said Lisa Lambrecht, President & CEO of Entrust Financial Credit Union in Henrico County. “I wish the federal government would understand that these one-size-fits-all regulations don’t work for credit unions. You have to remember; credit unions were formed to fill that gap that the larger established financial system was not serving.”
“In the rural areas, the larger institutions across the whole country have reduced their branches. The smaller banks have held their own, but we’re operating with 2000 less community banks a day than we were 12, 15 years ago. That’s over one fourth of community banks are gone — and I think a primary reason for that is regulatory fatigue,” said Lyn Hayth, President & CEO of the Bank of Botetourt.
“Every dollar we spend on increased compliance really doesn’t go to our capital. And if we could put that extra dollar into our capital, we could lend it back out into the community on a tenfold basis. So, our hope is that regulation can be decreased, and that we are able to take that capital that we save and invest it back into our communities,” said Alice Frazier, President & CEO of Bank of Charles Town in Middleburg.
“I think that community banks are the backbone of our country, and many of our rural markets. And not just our rural markets – but I think we serve a vital role to the growth of the economy,” said Mark Hanna, President of Farmers & Merchants Bank in Timberville.
The Economic Growth, Regulatory Relief and Consumer Protection Act (S.2155) ensures that small lenders can provide mortgage and other credit to hardworking Americans, helping them and their families grow and start businesses. The bill also institutes several important consumer protections:
- Allows consumers to get one free year of fraud alerts, which will help consumers who have been impacted by situations like the Wells Fargo scandal or whose identities or personal information has been stolen.
- Unlimited free credit freezes and unfreezes, which helps consumers impacted by data breaches like the Equifax hack that compromised the personal information of approximately 145 million Americans.
- Provides free credit monitoring for all active-duty servicemembers.
- Protects the credit ratings of veterans wrongly penalized by medical bill payment delays by the Department of Veterans Affairs (VA). This measure would prohibit medical debt from services received through the Choice Program and other VA community care programs from being reported to credit reporting agencies for one year. In addition, it would establish a dispute process for veterans seeking to remove adverse actions already on their report.
- Prevents mortgage companies from immediately kicking tenants out of their rentals if the landlord is foreclosed upon.
- Encourages banks to report suspicious behavior if seniors could be getting financially scammed.
- Allows seriously delinquent private student loan borrowers a one-time offer to remove negative reporting from their credit reports after making a series of on-time payments.
The legislation was introduced in November after years of bipartisan negotiations among Sen. Warner, Senate Banking Committee Chairman Mike Crapo (R-ID) and Banking Committee members Senators Joe Donnelly (D-IN), Heidi Heitkamp (D-ND) and Jon Tester (D-MT). It is also co-sponsored by Sen. Tim Kaine (D-VA).