CRA reform, fintech threat shift bank lobbying effort toward regulators

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With regulatory relief signed into law and the strong possibility of divided government in 2019, banking industry groups like the Consumer Bankers Association will focus their lobbying efforts over the next year mostly on federal regulators, rather than lawmakers.

During a recent interview, Todd Barnhart, the incoming chair of the association, mentioned just one policy proposal that the trade group hopes to persuade Congress to pass.

And that particular legislative priority — replacing the director of the Consumer Financial Protection Bureau with a multimember commission — is a perennial suggestion that has not drawn much Democratic support on Capitol Hill.

Meanwhile, the Federal Reserve Board, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the CFPB have all gotten new leaders in the past 10 months — Trump appointees who are generally more skeptical of regulation than their Obama-era predecessors.

“That’s where a lot of the activity is at the moment,” said Barnhart, who is head of retail distribution at PNC Bank.


At the CBA, which represents dozens of large and midsize institutions, one particular focus is the recently launched process of modernizing the Community Reinvestment Act. Last month the OCC sought public comment on how to revamp the law, which grades banks on how well they serve low-income and moderate-income communities.

“Clearly we’ve got a regulation that’s nearly four decades old, doesn’t really contemplate, nor could it have contemplated, some of the technological changes that have shown up here, certainly in the last five years,” Barnhart said.

He acknowledged that the process of updating the law will be contentious at times — since banks, regulators and community groups often have different priorities. But he argued that key stakeholders share the goal of creating thriving communities.

The Washington-based trade group is also deep in the policy weeds on the issue of financial technology firms obtaining banking charters — another area in which Congress has mostly been a bystander, but where the OCC, the FDIC and the Fed are all engaged.

Various fintech companies are poised to enter the banking industry in the next few years, but how they will be regulated hinges on what charters they pursue, and regulators have yet to make some key decisions that will set the parameters.

“As an industry, we’re used to competition,” Barnhart said. “We just think there should be a level playing field.”

Small-dollar lending to subprime consumers is another area where banks are looking for greater clarity from federal regulators.

Back in May, the OCC encouraged banks to start making small loans to borrowers with blemished credit, but Barnhart suggested that the agency’s bulletin has had little impact in the market so far.

“I know it’s a topic of much conversation,” he said in an interview Thursday. “I can’t say with certainty that it is leading to new product development at this point.”

On Monday, U.S. Bank in Minneapolis unveiled a new loan product that will allow its checking account holders to borrow up to $1,000 and make repayments over three months. U.S. Bank was one of a handful of banks making small-dollar loans before a regulatory crackdown in 2013.

But many other banks may be waiting to see whether the FDIC and the CFPB will follow the OCC’s lead in encouraging loans to borrowers who often look outside of the banking system for credit. “We’re still seeking clarity on, Will they have an aligned point of view?” Barnhart said.

Recent months have brought big changes to the landscape of banking trade groups in Washington, with The Clearing House and the Financial Services Roundtable merging to create the Bank Policy Institute, while the Financial Services Forum has brought on new leadership.

Barnhart said that the Consumer Bankers Association is maintaining its focus its retail banking, even as other lobbying groups reshuffle. “We don’t see it really changing our mission,” he said.

Barnhart succeeds Brad Conner, vice chairman of consumer banking at Citizens Financial Group, as the trade group’s chairman. His one-year term begins Wednesday.

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