Legislative Update

NEW LEGISLATION

Rodash Reversal

Rep. Bill McCollum, R-Fla., is sponsoring a bill to make it harder for borrowers to back out of mortgage contracts based on minor violations of Truth-in-Lending rules.

aims to clear up problems that home lenders face after the Rodash court decision, which allowed a Florida woman to walk away from a home loan refinancing after the lender mislabeled a shipping fee and a Florida intangibles tax.

Under the bill, class actions that had not been "certified" as of Oct. 1, 1994, would be nullified. A class action is certified when a court decides that a complaint applies to a group of people.

The McCollum bill also would increase the dollar level at which disclosure errors are deemed "material" - from the current flat $10 limit prescribed by Truth-in-Lending to 1/16 of the amount of the loan.

Regulatory Relief

Major regulatory relief measures were introduced this week in both houses of Congress. The Senate measure was introduced by Sen. Richard C. Shelby, R-Ala., and the House companion bill was forwarded by Rep. Doug Bereuter, R-Neb.

Both seek to pare the Community Reinvestment Act, allowing exemptions or simplified exams for banks with assets under $250 million, and "safe harbors" from community group protests for larger institutions.

The legislation also would move responsibility for implementing the Real Estate Settlement Procedures Act to the Federal Reserve from the Department of Housing and Urban Development, which the banking industry has complained takes too long to write rules.

The Truth-in-Savings Act would be cut back, leaving only the interest calculation disclosures that were the original intent of the law. Truth-in- Lending and the Electronic Funds Transfer Act would be amended to place more responsibility on customers for the unauthorized use of credit or debit cards.

Lender Liability

The Asset Conservation, Lender Liability, and Deposit Insurance Protection Act would limit lenders' liability for contaminated property. Introduced by Senate Banking Committee Chairman Alfonse M. D'Amato, S 394 is a high priority for the banking industry.

Rather than directing the Environmental Protection Agency to issue rigid rules mandating how lenders must evaluate environmental risks before they extend credit, the bill calls for guidelines, which are not subject to the same enforcement as rules.

In the House, Rep. Frederick S. Upton, R-Mich., and Rep. Billy Tauzin, D-La., introduced a similar measure.

this will be a separate section

Glass-Steagall Reform

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UPDATE ON PENDING BILLS

House Banking Committee Chairman Jim Leach altered his Financial Services Competitiveness Act slightly last month. The new bill still aims to repeal sections of the Glass-Steagall Act that separate investment and commercial banking.

However, HR 1062 would now expedite the Federal Reserve's procedures for authorizing nonbanking activities for bank holding companies. Among other things, it also would modify firewall provisions to improve banks' abilities to underwrite debt instruments and securitize assets.

Unitary thrift holding companies would be fully exempted, or "grandfathered," from future banking and commerce limitations under the renovated measure.

The administration unveiled its plans for repealing the Glass-Steagall Act on Feb. 27. The plan tracks Rep. Leach's proposal, but adds an extra step by permitting insurance companies to affiliate with banks.

Financial Industry Diversification

Sen. D'Amato's Depository Institution Affiliation Act would break down the barriers between banking and commerce, permitting commercial and industrial companies to own banks and thrifts. S 337 also would allow an expanded range of cross-marketing and other activities involving banks and nonbank affiliates under a new "financial services holding company" structure. A companion bill, HR 814, was introduced in the House by Rep. Richard Baker, R-La.

Direct Loan Cap

Rep. William F. Goodling, chairman of the House Economic and Educational Opportunities Committee, introduced legislation to limit the federal government's share of the student loan market to 40%. Industry sources said the Republican-sponsored measure, HR 530, would enable the banking industry to stave off competition from the government. Electronic Funds Transfers: S 131 Sen. Joseph Lieberman, D-Conn.

This bill would overturn a decision by the Federal Reserve Board that subjects electronic benefit transfers to Regulation E. It would reverse a ruling subjecting EBT cards issued by states to the same liability limits as ATM or credit cards. Regulatory Consolidation: HR 17 Rep. Jim Leach, R-Iowa

This bill would create a new Federal Banking Agency by merging the Office of Thrift Supervision and the Office of the Comptroller of the Currency. It would give jurisdiction for all free-standing state-chartered banks to the FDIC and would give the Federal Reserve oversight of large bank holding companies.

*** OTHER BILLS IRA Expansion: S 12

Sens. William V. Roth, R-Del., and Sen. John Breaux, D-La.

Rep. Bill Thomas, R-Calif.

Contributions to individual retirement accounts would become fully deductible once again under the Super IRA bill. It would expand the traditional IRA by allowing penalty-free early withdrawals of IRA savings for college expenses, first-time home purchases, catastrophic medical expenses, and certain unemployment emergencies.

Growth Caps: S 445

Sen. Alfonse M. D'Amato, R-N.Y.

This bill would eliminate the 7% growth cap on nonbank-bank subsidiaries of commercial firms.

End of HUD: S 435

Sen. Lauch Faircloth, R-N.C.

This bill would abolish the Department of Housing and Urban Development.

Native American Lenders: S 436

Sen. Ben Nighthorse Campbell, R-Colo.

This bill aims to create an organization that would charter Native American Community Lending Institutions.

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