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Tax Reform Bill Clears the U.S. House

On November 16th, the United States House of Representatives cleared a major hurdle by passing H.R. 1 – the Tax Cuts and Jobs Act by a vote of 227-205. All Illinois Republican members of the House voted in favor and all Illinois Democrats voted against the bill. The legislation contained several provisions which the Independent Community Bankers of America (ICBA) and CBAI support, including: the 20% corporate rate, estate tax relief, and repeal of the alternate minimum tax for individuals and corporations. Both Associations, however, have significant concerns about several provisions including the treatment of Subchapter “S” corporations and active shareholders of Subchapter “S” community banks.

Approximately one third of all community banks are organized under Subchapter “S”. Subjecting these community banks to a higher maximum tax rate exacerbates the tax disparity among financial service providers, would disrupt the corporate and tax structure of the community bank industry, and would harm community banks’ ability to serve their customers and communities. CBAI recently issued an Action Alert, in conjunction with the ICBA, urging CBAI Subchapter “S” community bankers to weigh-in with their Member of Congress to ensure meaningful relief under the tax code. This Action Alert generated more than 3,500 responses nation-wide.

On November 9th the Senate Finance Committee released its version of the Tax Cuts and Jobs Act, and as of November 17th has concluded four days of marking-up their bill. ICBA has published an Issues Brief which describes the differences between the House and Senate versions of tax relief and reform and where more attention is needed. CBAI looks forward to working with our community bank members, the Illinois congressional delegation, and the ICBA in improving the tax legislation as it moves through Congress. Read ICBA’s Issues Brief.

November 21, 2017

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CBAI Supports Senate Community Bank Regulatory Relief Legislation

The U.S. Senate banking reform proposal unveiled on November 16th represents the best opportunity in many years for long-awaited, meaningful, and well-deserved regulatory relief for community banks. CBAI supports this important legislation and will be engaging our members in a grass roots effort to advance the bill, advocating for its passage with the entire Illinois Congressional Delegation, and working with the Independent Community Bankers of America to address any concerns and to improve this legislation.

Although past attempts at bi-partisan regulatory reform have consistently fallen short, hope was revived this year under the leadership of new Senate Banking Committee Chairman Mike Crapo (R-Idaho). Throughout the year, the Committee has been holding hearings and taking testimony from community banks, regulators and the mid-sized banks. These hearings provided an important informational foundation and opportunities for further discussions among members of the Committee. Although talks with Ranking Member Senator Sherrod Brown (D-Ohio) reached an impasse, Chairman Crapo continued negotiations with other Democrats on the Committee. The two sides reached an agreement and released language last week. CBAI understands that the Chairman wants the bill marked-up in the normal course of business but is hopeful it will pass out of the Committee with strong bipartisan support and considered for passage in the Senate by early 2018.

The Economic Growth, Regulatory Relief and Consumer Protection Act has been described as right-sizing regulation for smaller financial institutions and includes important consumer protections for veterans, senior citizens and victims of fraud. Also, it will improve the nation’s financial regulatory framework for Main Street banks, and encouraging economic growth in local communities.

The bipartisan legislation is sponsored or co-sponsored by 10 Republicans, 9 Democrats, and one Independent. The proposal includes many provisions in the Independent Community Bankers of America’s Plan for Prosperity. These provisions include the following:

  • Increase exemption thresholds for Home Mortgage Disclosure Act reporting;
  • Provide “qualified mortgage” status for portfolio mortgage loans at most community banks;
  • Exempt certain community bank loans from escrow requirements;
  • Simplify community bank capital requirements;
  • Increase eligibility for a short-form call report to restore proportionality to quarterly reporting;
  • Expand eligibility for the 18-month regulatory examination cycle;
  • Ease appraisal requirements to facilitate mortgage credit in local communities;
  • Exempt most community banks from the Volcker Rule;
  • Expand access to the Federal Reserve’s Small Bank Holding Company Policy Statement to help more community banks build capital; and
  • Improve regulatory treatment of reciprocal deposits and certain municipal securities.

Although CBAI believes that the Congress can and should do more to provide real regulatory relief to the nation’s community banks, we will continue to strongly advocate and support the passage of this U.S. Senate regulatory relief bill. CBAI is urging Illinois Senators Dick Durbin and Tammy Duckworth to co-sponsor and support this meaningful reform proposal. CBAI appreciates the leadership of Chairman Crapo and all the Republican and Democrat members of the Senate Banking Committee who negotiated this common-sense proposal. See Bill. See Section-by-section Legislative Summary. See Original Announcement on the Agreement. Regulatory Relief Impact by Asset Size.

November 20, 2017

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CBAI Thanks Congressman Hultgren for Urging Delay in CECL Implementation

The Community Bankers Association of Illinois (CBAI) thanks Illinois Congressman Randy Hultgren (R-14th) for joining with 25 members of the United States House of Representatives in urging the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC) to delay the implementation of the Current Expected Credit Loss (CECL) model. The letter urged “steps be taken to address the economic risks arising from the implementation of the new standards” as the final accounting rule has the “potential to negatively affect the cost and availability of credit, add volatility to the balance sheets of banks, and impact the ability of financial institutions to continue lending in stressful economic environments.” The letter requested the reevaluation of the accounting standard “be undertaken immediately” and that there be a delay in the implementation of CECL pending this important review.

CBAI and the ICBA actively participated in commenting on FASB’s proposed CECL model. While the final Rule, which was issued in 2016, reflected input from community bankers and their associations, a reevaluation of the accounting standard is warranted. CBAI appreciates Congressman Hultgern’s continued leadership on this important issue. Read Letter to FASB and SEC.

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Senate Votes to Overturn the CFPB Arbitration Rule!

In a major victory for community banks, the United States Senate voted Tuesday evening to overturn the Consumer Financial Protection Bureau’s (CFPB) controversial Arbitration Rule (Rule) which was set to take effect in March. The United States House of Representatives voted to rescind the Rule in July. Both votes in the House and Senate were generally along party lines with Republicans voting in favor and Democrats voting against the repeal.

The Rule would have prohibited financial institutions from including a clause in their agreements which would require consumers to use binding arbitration versus litigating their grievances in class-action lawsuits. Proponents of the repeal highlighted the more than one-hundred year tradition of arbitration, which is an alternate dispute resolution process that was cited as resolving differences more quickly and with greater financial gain to consumers. The Senate vote was deadlocked with 50 voting in favor and 50 voting against; so Vice President Mike Pence cast the deciding vote to repeal the Rule.

In July of 2017, the Community Bankers Association of Illinois (CBAI) joined with forty-one state banking trade associations in a letter to the Senate urging support for the repeal of the Arbitration Rule.The letter stated that “If the rule is allowed to stand, it will encourage the filing of frivolous class action lawsuits which have the potential to devastate community banks.” The letter concluded "With your support for S.J. Res. 47 [repeal of the Rule], arbitration will be preserved as a fair, and cost effective tool of dispute resolution. This is the best outcome for consumers, community banks, and the broader economy.” Read Joint Letter to the Senate.

October 25, 2017

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CFPB Adopts CBAI Recommendations in Final Payday Lending Rule

On October 5, 2017, the Consumer Financial Protection Bureau CFPB or Bureau) finalized its payday lending rule. While the complete analysis of the 1,700 page Final Rule continues, it does include Community Bankers Association of Illinois (CBAI) and Independent Community Bankers of America (ICBA)-advocated exemptions from the onerous full-payment test and the principal-payoff option for lenders that make 2,500 or fewer covered short-term or balloon-payment loans per year and derive no more than 10 percent of their receipts from such loans. These exemptions benefit hundreds of Illinois community banks.

Exactly one year ago, in a comment letter to the CFPB, CBAI urged the Bureau to broadly exempt community banks from their proposed payday lending rules. CBAI recommended the proposed rules be directed at the unfair and abusive practices of other lenders and not community banks. CBAI expressed concern that the rules, as proposed, would harm community bank small-dollar consumer lending and provided the Bureau with numerous recommendations to mitigate the harmful impact of the proposed rules on community banks. Read Comment Letter.

CBAI is encouraged by the Bureau’s recognition in the Final Rule that community banks treat their customers honestly and with respect. The Rule will take effect 21 months after it is published in the Federal Register. Read More.

October 10, 2017