Industry Insights

FAST Act Provides Regulatory Relief to Community Banks

January 2016

On December 4, President Obama signed the Fixing America’s Surface Transportation (FAST) Act. Although a transportation bill on its surface, the bill also contains various provisions intended to provide regulatory relief to community banks and improve the efficiency of state financial regulation.

This bill amends the Federal Deposit Insurance Act of 1950 to increase from $500 million to $1 billion the asset size of small insured depository institutions eligible for 18-month on-site examination cycles.

Institutions also qualify for the 18-month cycle if their total assets are no more than $200 million (currently $100 million) and the most recent examination found their composite condition to be good rather than outstanding.

A federal banking agency is granted discretion to increase this assets ceiling amount from $200 million to $1 billion (currently from $100 million to $500 million) if the increased assets would be consistent with the principles of safety and soundness.

Changes to GLBA

The FAST Act provides an exception, in certain circumstances, to the requirement in the Gramm-Leach-Bliley Act (GLBA) that financial institutions send annual privacy notices to customers. The exception applies to financial institutions that do both of the following:

  • Provide nonpublic personal information only in accordance with the provisions of Subsection (b)(2) or (e) of Section 502 or regulations prescribed under Section 504(b)
  • Do not change policies and practices regarding disclosing nonpublic personal information from the policies and practices listed in the most recent disclosure sent to consumers in accordance with this section

The legislation is intended to lessen the regulatory burden on financial institutions and reduce potential confusion for customers who read online privacy notices that may not have changed over time.

Changes to Rural Area Designation

The FAST Act also makes the following changes to which areas are designated as rural for purposes of the Consumer Financial Protection Bureau (CFPB):

  • Establishes a process allowing parties, including banks and other stakeholders, to petition the CFPB for “rural” or “underserved” designation in certain areas for the purposes of the CFPB’s ability-to-repay rule
  • Expands the CFPB’s ability to exempt creditors serving rural or underserved areas from escrow requirements
  • Grants the CFPB greater flexibility when treating a balloon loan as a qualified mortgage, if a community bank or creditor operating in a rural or underserved area extended the loan

If you have questions about how these changes could affect your organization, contact your BKD advisor.

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