Credit Union, Bank, And Thrift Regulatory Relief Act Of 2008
I thank my friend, Mr. Kanjorski, for yielding me time. I also want to congratulate Mr. Kanjorski and Mr. Royce on their hard work in crafting a bipartisan bill to provide reg relief to credit unions. As you know, the legislation before us…
I thank my friend, Mr. Kanjorski, for yielding me time.
I also want to congratulate Mr. Kanjorski and Mr. Royce on their hard work in crafting a bipartisan bill to provide reg relief to credit unions.
As you know, the legislation before us today combines important provisions from credit union regulatory relief legislation previously introduced by Mr. Kanjorski and Mr. Royce with provisions from my legislation H.R. 5841, the Bank and Thrift Regulatory Relief Act of 2008.
At a time when many businesses are having difficulty obtaining access to credit, H.R. 5841 will provide important credit opportunities for small- and medium-sized businesses. Among other
provisions, this legislation would remove the existing limits on small business lending for thrifts, thereby enhancing the role of savings associations as community leaders. The Homeowners Loan Act currently caps the aggregate amount of commercial loans other than small business loans at 10 percent of a savings association's assets, and it permits commercial lending, including small business lending, of up to 20 percent of assets.
According to the Small Business Administration's Office of Advocacy, smaller businesses have experienced difficulty in obtaining relatively small loans from large commercial banks that set minimum loan amounts relatively high. Savings associations are increasingly important providers of small business credit and communities throughout the country.
This change, Mr. Chairman, will allow savings associations to continue to serve their small business customers and to further diversify their assets while also providing businesses with greater choice and flexibility to meet their credit needs.
Additionally, this proposal will significantly reduce the amount of time financial institutions spend filling out paperwork, and it will free up resources for the thousands of institutions on the front lines of community lending.
For example, the legislation would provide relief to community banks and financial institutions from requirements under the Gramm-Leach- Bliley Act to provide annual privacy notices to their customers, detailing their privacy policies and the way they share information.
While I have consistently advocated for increased protection of sensitive financial information, there should be targeted exemptions from this requirement to relieve the burden from small banks that do not share information with their affiliates and that have not otherwise changed their privacy policies.
This change, Mr. Speaker, will save small businesses millions of dollars in compliance costs while also protecting consumers from unnecessary and duplicative notices.
The legislation also contains important provisions that would repeal the prohibition against the payment of interest on business checking. This prohibition was enacted during the Depression as part of the Banking Act of 1933, to protect banks in the heat of competition from offering interest levels on deposit balances that might be sustained through risky investments.
In their 1996 report ``Streamlining of Regulatory Requirements,'' the Federal banking regulators concluded, however, that the statutory prohibition against paying interest on business accounts no longer serves a valid public purposes. For example, large financial services companies have devised products, such as ``sweep accounts'' that, in effect, provide interest on deposit accounts, giving them a competitive advantage over small community banks that may not have the capability to offer such accounts.
In addition, most small business owners don't have the minimum balances necessary to maintain a sweep account so they are forced to keep vital cash in zero-interest checking accounts. Making this small change would make a huge difference for small businesses.
Furthermore, every provision in this bill providing regulatory relief for banks and thrifts has been approved previously by Congress in one form or another. The bipartisan support for this bill shows just how important it is for both businesses and consumers that Congress pass this meaningful legislation.
America's financial services industry is the most effective and competitive in the world and my proposal will help us stay out in front. Reducing regulatory burdens on businesses and consumers is simply the right thing to.
Mr. Speaker, I thank Chairman Kanjorski and the staff, and I look forward to passage of this legislation today.
As one of the cosponsors of this legislation, I would like to engage its primary sponsor, you, Mr. Kanjorski, in a colloquy on two questions related to section 111. This section concerns the encouragement of small business development in underserved urban and rural communities.
First, I have a question about the meaning of the provision that exempts business loans made by credit unions in underserved areas from the existing cap on member business lending. Is it the intent of this provision that the proceeds from exempt loans will be used to support business operations inside underserved areas?
Thank you, Mr. Kanjorski, for that clarification.
Section 111 of the bill also includes language that member business loans in an underserved area underwritten by a credit union for a business, or a local outlet of a business, operating on a nationwide basis, shall not be eligible from exemption from the business lending cap.
It is the phrase ``operating on a nationwide basis'' where I have a question. For the purpose of this section, it would seem that a business located in an underserved area that meets the other criteria, like a small family-owned business but which has a Web site that sells their goods to anyone who visits it, would not be treated as a business operated on a nationwide basis for the purpose of this section, as the economic benefit from those sales is going to that business in the underserved area.
Have I correctly characterized the intent of this section?
Thank you for this clarification, Mr. Kanjorski. I agree with your assessments.