Tennessee Bankers

This Week Newsletter

July 31, 2017 - Issue No. 1730

House Votes to Overturn CFPB's Arbitration Rule

House lawmakers last Tuesday, July 25, voted to overturn the CFPB's final arbitration rule by a vote of 231 to 190, exercising their authority under the Congressional Review Act to reject new federal regulations within 60 legislative days of publication in the Federal Register.

Leading the effort in the House were House Financial Services Committee Chairman Jeb Hensarling (R-Texas), Rep. Keith Rothfus (R-Pa.), and other members of the House Financial Services Committee, including David Kustoff (R-Tenn.). A similar measure was introduced in the Senate by Banking Committee Chairman Mike Crapo (R-Idaho).

Prior to the House vote, TBA signed a joint letter to House leaders urging them to overturn the CFPB's controversial rule.  The letter pointed out that the rule would drastically limit the use of mandatory arbitration agreements for financial services products and services to the detriment of bank customers. For example, without arbitration, consumers will face going to court over minor, non-systemic disputes that cannot be resolved through a class action suit. Read the letter.

TBA Advocates for Bipartisan Reciprocal Deposit Bill

TBA last week wrote to Tennessee Sens. Bob Corker and Lamar Alexander and Rep. David Kustoff in support of S. 1500 and H.R. 2403, bipartisan bills that would clarify that reciprocal deposits of another insured depository institution are not considered brokered deposits.
The association called the legislation a "necessary step" toward reforming Federal Deposit Insurance Act, noting that reciprocal deposits did not exist when the law was enacted and they do no act like the type of deposits the law on brokered deposits was meant to cover. Read TBA's letter.

TDFI Bulletin: Greater Flexibility in Forming De Novo Banks

Tennessee Department of Financial Institutions Commissioner Greg Gonzales last week issued a bulletin intended to provide greater regulatory flexibility by reducing the level of investment required by incorporators of a bank "in organization." As of July 25, 2017, incorporates must pay an aggregate investment amount of 5 percent of the proposed minimum capital structure of the bank "in organization", which includes a minimum investment of $25,000 per incorporator. Under a bulletin issued in 2006, the aggregate amount of investment was 10 percent of the proposed minimum capital structure of the bank. Read the TDFI bulletin.

FED, OCC Nominees Testify on Need for Reg Reform

During their confirmation hearings yesterday, Comptroller of the Currency-nominee Joseph Otting and Federal Reserve Vice Chairman-nominee Randal Quarles, spoke on the need for regulatory reform. Quarles endorsed the concept of tailored supervision and called for more transparency in the Dodd-Frank Act-mandated stress testing and capital planning processes.
Otting called for the OCC to do more to enhance access to credit for low-income and minority communities, expressing concern that excessively prescriptive and narrow government rules have artificially limited bank services to these customers, citing small-dollar loans as an example.
Both Otting and Quarles expressed concern about rising risks in student loans and the auto loan market. Quarles also said he was worried about the growing complexity of the regulatory system posing risks in itself.

Labor Department Seeks Comments on Delayed Overtime Rule

The Department of Labor has released a request for information on the Obama administration's final overtime rule, which would have doubled the salary needed for employees to be exempt from overtime pay. The rule, which was to be effective on Dec. 1, 2016, was postponed at the last moment by a preliminary injunction from a Texas federal district court that remains in place while litigation continues.

The RFI is widely seen as a first step in a possible rewrite of the rule, and it raised a number of broad issues including how a new salary level should be calculated, whether there should be multiple salary levels, and whether the duties tests should change.

Comments on the RFI are due by Sept. 25. Read the RFI.

Congressman Fleischmann Hosts Nashville Fundraiser

Congressman Chuck Fleischmann is hosting a fundraiser for his re-election campaign this Wednesday, Aug. 2, at Waller Lansden in the Nashville City Center (511 Union St., Ste. 2700). The suggested donation is $1,000 per person/couple. BankPAC will also contribute to Congressman Fleischmann, who has been a strong supporter of the banking industry. For more information about attending the event, please contact Colin Barrett.

Last Chance to Get Discounted Rate for Basic Consumer Lending, Training the Credit Analyst

Time is running out to take advantage of early registration discounts for TBA programs focused on critical issues for your lending team. The early registration deadline for Training the Credit Analyst is Tuesday, August 8, and the deadline for Basic Consumer Lending is Thursday, August 10. Join us in Nashville for these two-day programs.

Senior Retail Banking Officer Forum Begins Sept. 6

The Senior Retail Banking Officer Forum, which takes place September 6 in Nashville, will provide a platform and opportunity for retail banking officers to exchange ideas freely, examine pressing issues in today's ever-evolving regulatory, cost-conscience, and productivity-driven environment.  
The Forums meet three times annually at the TBA headquarters. The agenda for each session will flow based on feedback from participants in the forum group. As necessary, subject matter experts will come in to cover specific issues and topics based on responses from the forum members. To learn more, click here.

Financial PSI This Week: What is Lender Liability?

Lender liability is generally defined as a debtor filing a lawsuit against creditors that alleges unfair enforcement of loan covenants or violation of implied terms of a loan agreement. Lender liability also results from situations where the Lender may fail to fulfill a loan agreement or discontinue financing under an agreement.  
Lender liability coverage protects the financial institution against losses for extensions of credit, agreements, or refusals to extend credit, loan servicing, the collection, or restructuring of any extension of credit. This coverage is extended under an endorsement to either a Bankers Professional Liability Policy, or a Directors and Officers Liability.
It is important to make certain that not only are the officers, directors, and employees covered as "insureds"—but that the entity is also a covered insured. In over 95 percent of the lender liability lawsuits filed in the last 15 years, the entity was named as a defendant. It is also important wherever possible to be certain that the form includes coverage for suits brought by not only borrowers, but guarantors, and other third parties such as other financial institutions, contractors, spouses, etc.
Examples include:

  • The bank foreclosed on a house and sold it for less than the outstanding loan balance. The borrower stated that the house was sold at an unfair price and alleged that the bank's actions were not in good faith and that it was negligent in handling the repossession and subsequent sale of the property.
  • A long-term customer of a bank was in the business of buying and selling real estate properties. After deciding to relocate his business, the customer sought financing, and the loan officer assured him that the loan would be approved. Relying on this oral commitment, the customer entered into contracts for real estate in the new area. The bank then denied the loan application. The customer was unable to secure other financing and filed for bankruptcy. He sued the financial institution for promissory estoppel and violation of good faith and fair dealing.

For more information, please contact Financial PSI's Brian Mobley.

TBA On the Road

  • TBA staff and bankers attend the annual Statesmen's Dinner in Nashville.
  • Stacey Langford and Amy Heaslet travel in Middle Tennessee, visiting with bankers and state legislators.

See where TBA goes while "on the road" by following @TNBankers.

In this Issue

Past Editions