TBA Texas Legislative Update

I had the privilege of attending the Texas Bankers Association’s 2017 Legislative Update at the Brook Hollow Country Club in Dallas this morning. This very informative presentation on recent Texas and federal banking legislation was led by Celeste Embrey, John Heasley, and Eric Sandberg of TBA. For those who were not able to attend, below is a brief recap of some of the highlights.

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Texas Bankers Hall of Fame and Bank Executives’ & Directors’ Seminar

On April 27 and 28, I had the privilege of attending the Texas Bankers Hall of Fame and Bank Executives’ & Directors’ Seminar hosted by Sam Houston State University. I would like to congratulate the five Hall of Fame honorees: B.A. Donelson, Jack Griggs, George Martinez, Milton McGee, Jr., and the late Milton Payne. I enjoyed hearing about all of their incredible accomplishments and contributions to community banking in Texas. Congratulations on the well-deserved recognition!

Just like last year, the Seminar provided valuable information to the community bankers in attendance. As an attorney representing community banks, I was most interested in the bank regulatory panel. The panel was again moderated by Sam Golden, formerly with the OCC and now a bank consultant with Alvarez & Marsal. The panelists were Bobby Davenport (Texas Department of Banking), Nathan Heizer (FDIC), Bernadette Hernandez (OCC), and Robert Triplett (Federal Reserve). For those who were not able to make it to the Seminar, I have recapped some of the most helpful information that the regulators shared:

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Court of appeals affirms decision limiting CFPB’s UDAAP authority

The Dodd-Frank Act vested the CFPB with extremely broad authority, particularly the power to regulate unfair, deceptive, or abusive acts or practices (UDAAP). The CFPB has wielded this power broadly and arguably strayed into areas beyond what Congress intended in passing Dodd-Frank. Although courts have allowed the CFPB broad discretion, a recent decision from the Court of Appeals for the DC Circuit suggests that the CFPB’s authority is not limitless. In CFPB v. Accrediting Council for Independent Colleges and Schools (ACICS), the DC court rejected the CFPB’s civil investigative demand (CID) for information relating to the accreditation of for-profit colleges, concluding that the CFPB failed to comply with statutory requirements in issuing the CID.

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Federal court opens the door for banks to sue regulators over CAMELS rating

A federal appeals court in Chicago recently ruled that Builders Bank could move forward with a lawsuit against the FDIC challenging the bank’s CAMELS rating. Although the decision noted the uphill battle of challenging regulators’ CAMELS ratings in court, it opens the door to such suits by finding that banks may have the right to challenge all but the capital portion of the CAMELS rating.

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Credit risk trends for community banks

With lending driving revenue and profitability for most community banks, it comes as no surprise that credit risk problems are at the heart of most matters requiring attention issued by bank regulators. Although credit risk issues are specific to each bank’s particular lending activities, the OCC and FDIC have noted recent trends in credit risk. This post discusses the trends that may be important to community banks and provides guidance for avoiding an MRA related to credit risk.

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The future of Dodd-Frank and the CFPB for community banks

With the new presidential administration and Republican majorities in both houses of Congress, major changes to the Dodd-Frank Act are widely expected. There has been extensive coverage of what these impending changes mean for consumers and for the banking industry in general. This post examines potential changes from the perspective of community banks.

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DOJ files fair lending lawsuit against community bank

Last month, the Department of Justice (DOJ) filed a civil rights lawsuit accusing KleinBank, a Minnesota-based community bank, of violating fair lending laws by engaging in the practice of “redlining” by denying mortgage loans to predominantly minority neighborhoods. The DOJ’s complaint alleges that KleinBank “engaged in a pattern or practice of unlawful redlining by structuring its residential mortgage lending business so as to avoid serving the credit needs of neighborhoods where a majority of residents are individuals of racial and ethnic minorities, in violation of the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA).”

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