Legislation

HFSC passes bill to protect small creditors under CFPB’s “rural” definition

LegislationThe House Financial Services Committee passed legislation last Friday that would address the CFPB’s designation of “rural” areas as it relates to compliance with its qualified mortgage rule.

The legislation—H.R. 2672, the CFPB Rural Designation Petition and Correction Act, introduced by Rep. Garland “Andy” Barr (R-Ky.)—would establish a process to allow smaller creditors that offer balloon-payment features in underserved areas to apply for designation as operating in a “rural” or “underserved” area not previously designated as such by the agency.

The designation exempts certain loans and creditors from the CFPB’s qualified mortgage rule.

Supporters of the measure, including the National Association of Federal Credit Unions and American Bankers Association, maintain that the bill is necessary to ensure that smaller institutions can meet the credit needs of their communities.

In a letter to the committee, the ABA said the CFPB’s original definition was much too narrow and would have had a “dramatic, negative impact on small lenders and communities.”

“The CFPB has wide discretion in defining ‘rural and underserved,’ and it should ensure that any future definition not exclude banks from offering deserving customers access to credit,” the ABA said. “[Barr’s bill] would help to assure that whatever definition of rural is ultimately used by the CFPB, there would be an avenue to apply to the Bureau to extend the definition of rural in those inevitable cases where a county may have been inappropriately excluded.”

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