In May, Congress passed legislation to roll back elements of the Dodd–Frank Wall Street Reform and Protection Act. Community banks, in particular, have lobbied over the past decade for some relief from Dodd–Frank’s increased federal oversight. The legislation was passed in 2010, primarily in response to the practices of larger banks that contributed to the country’s financial crisis in 2008. Among other changes, recent revisions increase the size at which banks are subject to enhanced regulation, raising the threshold from $50 billion to $250 billion in assets.
Business Lexington asked banking industry professionals in Central Kentucky to share their perspectives on some of the changes local customers can expect to see as a result of the new legislation, and what those changes will mean for the region’s banking community. Here’s what they had to say:
LOUIS PRICHARD, PRESIDENT AND CEO
KENTUCKY BANK
Louis Prichard
“Bill S.2155, approved and signed in May, repeals some aspects of Dodd–Frank and will require regulators such as the FDIC to update their rules. Once the amended rules go into effect, community banks like Kentucky Bank will be able to serve small businesses and individuals more effectively. More importantly, we will be better able to serve customers who do not fit into the boxes originally created by Dodd–Frank, such as self-employed individuals or W-2 employees who also operate small farms or own rental property on the side.
In addition, we are optimistic these amended rules will make it easier and faster for individuals to open accounts online or through their phones. The amended rules also allow consumers to freeze their credit at no charge, which we think will keep people more informed and attentive to their credit scores and also improve our ability to make quick lending decisions.
Overall, we believe the amended rules will result in more loan opportunities for small businesses and individuals, and we look forward to helping them meet their financial goals, like purchasing a house or expanding their business.”
TODD E. ZIEGLER, MARKET PRESIDENT
REPUBLIC BANK
Todd E. Ziegler
“For the most part, the rollback of portions of the Dodd–Frank Act doesn’t grant a lot of regulatory relief for community banks that make a large number of mortgage loans. However, providing certain relief from restrictions on banks’ own investments will help banks like Republic Bank to keep consumer loan rates low. The most significant part of the rollback for consumers is targeted to making mortgage loans easier for consumers to obtain and for banks to make. The revised rule expands aspects of a consumer’s credit that banks and the government mortgage agencies can consider for mortgage loans. For example, consideration of alternative financial information, including rent and utility bill payment history, could open approvals to more first-time homebuyers and buyers with limited credit. Additionally, the mortgage rules were amended to do away with certain required redisclosures, thus not requiring the extension of closing times. These changes should support the already robust housing market in Central Kentucky.
Another positive in the changes is to do away with the $10 fee consumers had to pay to freeze access to their credit reports. The rule now grants everyone the right to a free credit freeze, providing consumers protection against data breaches. We at Republic Bank provide significant support and educational materials to our customers and the public to prevent and help with identity theft. This free credit freeze is another tool we can use to help our clients.”
LUTHER DEATON JR., CHAIRMAN, CEO AND PRESIDENT
CENTRAL BANK
Luther Deaton Jr.
“The restrictive nature of the comprehensive regulations imposed by Dodd–Frank, designed to prevent abuses from large banks, adversely impacted community banks. For Central Bank, the impact was that it became nearly impossible to make loans to some of our customers we had previously served. The mortgage regulations essentially eliminated relationship-based home loans, in an attempt to thwart abusive lending practices.
With the rollback of some of these regulations affecting community banks, we will again be able to use our experience and judgment in more cases to assist borrowers. We just have to take responsibility for those loans, which we are more than willing to do, when appropriate.
This much-needed reform is going to be great for the people of Central Kentucky, particularly those in smaller, rural areas. Those economies are often facing special challenges that make lending harder. For larger banks, it has been easy to dismiss these communities. That is not how community banks operate and is certainly not how Central Bank operates. We believe we should serve the communities where we reside—if we take care of these consumers, we can help bring progress and prosperity to the very places that need it most. Fortunately, we now have the ability to serve these customers again.”
LAURA FRALEY, COMPLIANCE OFFICER AND VICE PRESIDENT
TRADITIONAL BANK
Laura Fraley
“From the consumer mortgage perspective, I think the qualified mortgage status for portfolio loans will have the biggest impact on our customers. The addition of qualified mortgage status for loans smaller institutions hold in their portfolio will allow more flexibility to help creditworthy borrowers who do not fit into typical income scenarios, like self-employed individuals or seasonal employees. These borrowers would have a hard time conforming to the existing requirements to qualify for a mortgage loan.”
“From the consumer mortgage perspective, I think the qualified mortgage status for portfolio loans will have the biggest impact on our customers."
BILL ALLEN, PRESIDENT
BANK OF THE BLUEGRASS & TRUST CO.
Bill Allen
“[Bank of the Bluegrass] and our clients have felt very little impact from the Dodd–Frank rollback. Our primary focus has been on serving Lexington, Fayette County and Central Kentucky for the past 46 years, and that will continue to be our primary focus. Our goal has always been to provide an outstanding client experience by delivering the technology, financial resources and individualized attention that our clients deserve and want.”
"Our clients have felt very little impact from the Dodd–Frank rollback. Our primary focus has been on serving Lexington, Fayette County and Central Kentucky for the past 46 years, and that will continue to be our primary focus."
ABBY DORITY, PHYSICIAN LOAN SPECIALIST
FIFTH THIRD BANK
Abby Dority
“The recent changes to Dodd–Frank have been analyzed, and many in our industry were surprised to find the changes relatively minimal compared with the speculation leading up to the adjustments by Congress. Most of the changes will impact bank liability, particularly smaller banks, more than it will consumers in the short term. Over time, however, the liability changes should result in increased program options and terms offered by smaller banks.
As far as the Bluegrass consumer is concerned right now, one of the most positive and impactful changes comes in response to the recent Equifax crisis. The new Dodd–Frank will now allow consumers to freeze their credit reports for free to protect their credit as a long-term credit strategy or in response to suspected fraudulent activity. With the Federal Trade Commission estimating that one in five Americans have a ‘confirmed material error’ on their credit report, this is an important protection that every consumer should indeed have access to with no cost. This will be particularly relevant for buyers whose finances are somewhat tight and therefore can’t afford ignoring even a small error, for those that don’t have the extra funds to pay for a freeze or for those that are too busy to keep a close eye on credit reports.
As a lender that works closely with many physicians working a significant number of hours serving our community, I’ve seen that the impact of a material error can mean a higher interest rate, less favorable terms or even not qualifying at all. Keep in mind that these issues are errors, not borrower financial mismanagement. This adjustment will be a great credit management tool for those who choose that take advantage of the change.”