Bankers got only some of the relief they sought from consumer regulations in the banking legislation enacted last week.
"The consumer activists, the White House, and congressional Democrats prevailed," said Karen M. Thomas, director of regulatory affairs and senior regulatory counsel for the Independent Bankers Association of America.
Changes the industry sought in consumer regulations, she said, "were substantially scaled back from what was originally hoped for."
But consumer activists downplayed their success, while banking interests rejoiced about the long-sought loosening of information-sharing restrictions in the Fair Credit Reporting Act.
"Everybody won something," said Michelle Meier, the Consumers Union's government affairs counsel. "The industry got a decent package of regulatory relief we'd consider to be true streamlining. Consumers avoided a catastrophic rollback of consumer protection laws."
Steven I. Zeisel, senior counsel at the Consumer Bankers Association, added: "In the end there wasn't very much regulatory simplification. Perhaps if you start out with particularly high hopes, you're disappointed in what you get."
In a change that pleases consumer advocates, the Fair Credit Reporting Act now requires banks to provide accurate information to credit bureaus. The bank must investigate any consumer complaint within 30 days.
But bank holding company affiliates now may share consumer credit information, a potential boon for marketing and cross-selling, said Nessa E. Feddis, senior federal counsel of the American Bankers Association.
Previously, bank holding companies with a centralized data base accessible to all affiliates risked being regulated as credit bureaus, Ms. Feddis said. Now, credit information on a customer who applies for an auto loan may be shared with, say, a bank's mortgage subsidiary that is seeking creditworthy prospects.
Another "very positive" provision, Ms. Feddis said, will help banks reduce their risk exposure.
Banks currently can use credit bureaus to screen prospects for pre- approved credit solicitations. But banks that do pre-screening can't deny credit to consumers who apply, even if information that surfaces later shows them to be poor credit risks.
The new law will permit banks to deny credit to these higher risks, provided the criteria for extending credit are disclosed.
Banks didn't get any simplication of the Truth-in-Savings requirements.
Mr. Zeisel said, "I'm disappointed we didn't get real reform," such as eliminating the requirement to disclose the annual percentage yield on deposit accounts.
The legislation eventually will protect banks from being sued for Truth- in-Savings violations. But the elimination of the law's civil liability provision doesn't kick in for five years.
Community activists were able to quash a bank proposal that would have exempted banks with assets of up to $50 million from the Home Mortgage Disclosure Act.
Instead, Congress agreed to adjust for inflation the $10 million cutoff, enacted in 1975, to $28 million. The limit will be reset annually according to inflation.
A $50 million floor would have exempted about 3,000 thrifts, banks, and credit unions from HMDA requirements, said Deborah Goldberg, a neighborhood reinvestment specialist for the Center for Community Change.
The inflation-adjusted limit will exempt about half that many, she said.
Banks won some victories in the Real Estate Settlement Procedures Act.
Bankers had been concerned about a recent directive from the Department of Housing and Urban Development that would have interfered with bank cross-marketing programs, said John C. Rasmus, ABA senior federal administrative counsel.
The HUD rule would have banned banks from paying incentives to certain employees for referrals to home lending subsidiaries, as when a branch manager refers his customers to his bank's mortgage unit.
The new law delays enactment of the rule from Oct. 7 until next July 31. That will help banks adjust their marketing plans while lobbying further for the rule's elimination, Mr. Rasmus said.
The new law also directs HUD and the Federal Reserve Board to make Respa and Truth-in-Lending Act disclosure requirements more uniform.
"The mortgage lending process really is paper-intensive," said Diane M. Casey, a partner and national director of financial services for Grant Thornton LLP, Washington.
She said banks will find it easier, and consumers will be less confused, if the two agencies can streamline the forms and make the two laws' disclosure definitions consistent.
Next: Clearing away some operational "underbrush"
