SDBA eNews

November 18, 2021

Banking, Consumer Groups Call for Oversight Hearing on NCUA

In a joint letter with the Independent Community Bankers of America and the National Community Reinvestment Coalition yesterday, ABA urged lawmakers to schedule an oversight hearing for the National Credit Union Administration (NCUA) in light of several recent NCUA rulemakings that the groups said “would undermine important statutory guardrails designed to protect low-income consumers.” The groups noted that an NCUA-specific congressional hearing has not been held since 2015.

The letter came one day before NCUA is set to finalize a new rule that would expand the definition of “service facility” for common bond credit unions, enabling them to add groups to their fields of membership on effectively a national basis—disregarding the statutory requirement that credit unions be in “reasonable proximity” to the customers they seek to serve. The NCUA board appears likely to approve the rule even amid opposition from the current Democratic NCUA Chairman Todd Harper and former chairman Mark McWatters, a Republican. Previously, NCUA finalized another controversial rule—which Harper also opposed—expanding the range of permissible lending activities for credit union service organizations, or CUSOs.

In addition to ensuring proper oversight of NCUA, the groups also called on Congress to take “the next logical step” and subject the credit union industry to the Community Investment Act regulations to which banks must adhere.

“Credit unions are not held accountable to fulfill community reinvestment activities, creating a regulatory inconsistency between banks and credit unions, even though both take deposits and should thus have similar requirements to meet needs and conveniences of the communities where they operate,” the groups wrote. “Absent such expectations, some credit unions are not making efforts to invest in lower-income areas.” Read the letterContact Congress.

ABA Survey: Ag Borrower Profitability Increased in 2021

Photo of Nate Franzen speaking at ABA's Agricultural Bankers ConferenceA majority of ag lenders—69.7%—reported that overall farm profitability increased in the prior year, due in large part to government support, which is estimated to account for 38% of ag borrowers’ net income, according to the 2021 Agricultural Lenders Survey conducted by ABA and Farmer Mac. This marks the first time since the survey began in 2016 that a majority of ag lenders reported an increase in overall farm profitability. Lenders also said they expect that 80% of their borrowers will be profitable in 2021.

Competition with other lenders was the greatest overall concern facing ag lenders in 2021, with just more than half ranking it among their top two concerns, up 13 points from last year. The majority—82.3%—said the Farm Credit System was their number one competitor. Other top concerns included weak loan demand, interest rate volatility and credit quality and ag loan deterioration.

For the first time in more than five years, lenders reported a pullback in demand for ag production loans, though they expect demand to recover over the next 12 months. One factor that drove down demand for financing was borrowers’ reliance on government payments in 2021. Seventy percent of ag lenders report increased reliance on government payments over the past 12 months—moderately less than 87% last year. The survey also found that ag lenders played a significant role in the Paycheck Protection Program, making more than 600,000 PPP loans in 2021 worth more than $16.4 billion.

The survey was released on Tuesday during ABA’s Agricultural Bankers Conference in Cincinnati. During the conference on Monday, ABA President and CEO Rob Nichols and ABA Chair Scott Anderson discussed conditions in the ag sector and how ag banks fared during the pandemic with SDBA Board of Director Nate Franzen, president of ag banking at First Dakota National Bank in Yankton, S.D., and Shan Hanes, president and CEO of Heartland Tri-State Bank in Elkhart, Kan. Read the survey.

Omarova Takes Softer Stance on 'Relationship Banking' in Prepared Testimony

In prepared testimony submitted ahead of her nomination hearing today, Saule Omarova, President Biden’s nominee for comptroller of the currency, said her top priority if confirmed “will be to guarantee a fair and competitive market where small and midsize banks that invest in their neighbors’ homes and small businesses can thrive, and where every community—regardless of wealth, geography or history—has access to safe and affordable financial services.”

Omarova—who is currently a professor at Cornell Law—added that “a critical part of that task is preserving and fostering the relationship banking that drives economic growth and creates local jobs and prosperity.” She also raised concerns about the dwindling number of community banks in the U.S., as well as big tech companies that are becoming direct competitors with community banks.

In her prepared testimony, Omarova appeared to distance herself from policies she has previously advocated during her academic career that would transform the existing banking system bank—including those that would have community banks “pass through” their deposits to the Federal Reserve and effectively making them utilities. ABA has pointed out this would undermine the critical role community banks play as financial intermediaries in their local communities. ABA has also raised concerns about some of Omarova’s other policy positions including her support for ending the dual banking system and her opposition to regulatory tailoring.

A number of lawmakers—including Jon Tester (D-Mont.), a key Democrat on the Senate Banking Committee—have expressed reservations about Omarova’s nomination. Read Omarova’s testimonyWatch the nomination hearing.

ABA, Banking Groups Express Opposition to Proposed SBA Direct Lending Program

ABA and a coalition of financial trade groups yesterday expressed opposition to a proposed Small Business Administration direct lending program that has been included in the Biden administration’s “Build Back Better” legislation. In a letter to congressional leaders yesterday, the groups raised concerns that the proposed program will undermine existing public-private partnership SBA loan programs and potentially limit access to capital to small businesses “due to increased complexity.”

The proposed Build Back Better legislation provides only 90 days to stand up a $2 billion direct lending program, the groups wrote, adding that the complexity of setting up a lending program so quickly will lead to issues that could drive applicants away from any SBA lending program, including the popular 7(a) lending program in which many banks and credit unions participate. “The regulatory safeguards that exist for financial institutions have proven to be a much better shield to fraud and defaults as compared to SBA-run programs,” the trade groups said.

The groups urged Congress to give SBA funds to bolster the already successful 7(a) to ensure more access to capital “without undermining existing relationships between financial institutions and their customers.” Read the letter.

OSHA Suspends Work on Vaccine Mandate, ABA Issues Staff Analysis

The Occupational Safety and Health Administration said it has “suspended activities related to the implementation and enforcement” of the emergency temporary standard issued Nov. 4, pending future developments in the litigation challenging the standard. The standard is currently stayed by order of the Fifth Circuit Court of Appeals.

ABA has published a members-only staff analysis on the standard, which would require all employers with 100 or more employees to be fully vaccinated or tested weekly for COVID-19. The analysis provides a summary of the standard’s requirements, discusses implementation challenges presented by the ETS, and suggests action steps that banks may wish to take at this time. If the Fifth Circuit’s stay is lifted, covered employers would face compliance dates of Dec. 6, to impose a mask requirement on unvaccinated employees, and Jan. 4, 2022, to subject unvaccinated employees to weekly testing. Read ABA’s staff analysis . For more information, contact ABA’s Paul Benda or Jonathan Thessin.

The Sixth Circuit Court of Appeals was chosen on Tuesday to hear the complaints filed by several governors and private entities challenging the emergency temporary standard. Complaints were filed in 12 circuit courts of appeal, and the Sixth Circuit was randomly selected to hear the consolidated cases. The Sixth Circuit’s selection comes after the Fifth Circuit last Friday ordered OSHA to “take no steps to implement or enforce the [vaccine] Mandate until further court order.” OSHA is expected to ask the Sixth Circuit to issue an order allowing the standard to become effective. Any action by the Sixth Circuit likely will result in an appeal to the Supreme Court. Read the consolidation order. For more information, contact ABA’s Tom Pinder or Jonathan Thessin.

GOP Senators: USPS May Lack Legal Authority for Financial Services Pilot

A group of Republican senators led by Sen. John Boozman (R-Ark.) on Monday raised concerns about a recent effort by the U.S. Postal Service to launch a pilot program offering expanded financial services—including check-cashing services—at certain locations in four U.S. cities. Specifically, they expressed concern that USPS lacks the legal authority to initiate the program, and that the pilot “raises serious questions about whether these activities waste taxpayer resources without any commensurate benefit.”

The lawmakers asked the USPS to provide information by Dec. 3 to support that the pilot program is in compliance with applicable legal requirements. “Given substantial financial shortfalls, a mission-specific focus on mail delivery, and a history of unsuccessfully competing with private sector alternatives, we are highly skeptical that the Postal Service can safely and effectively provide financial services,” they wrote. “The unilateral action to implement the pilot program and expand into untested consumer financial services raises significant policy and legal questions, and we must ensure that the Postal Service has not exceeded the applicable statutory authority.”

More broadly, the letter pushed back against the “radical expansion of the government’s role in providing financial services,” such as through offering Federal Reserve retail bank accounts at post offices—something the senators said would be “equally unnecessary and ill-advised.” Read the letter.

GSB to Host Online Seminar on Current Employment Law Guidance on OSHA Vaccination Mandate

The Graduate School of Banking (GSB) at the University of Wisconsin will hold the hot topic online seminar Current Employment Law Guidance on the OSHA Vaccination Mandate on Dec. 2 at 10 a.m. CST.

Presented by Patricia A. Wise, attorney at law, Niehaus, Spengler & Nathanson, P.L.L., the seminar will provide information regarding the most recent OSHA and other workplace vaccination mandates resulting from President Biden’s Path Out of the Pandemic plan. Topics will include the application of ADA/ADAAA and TITLE VII as well as other requirements and guidance relating to these vaccination mandates and developing litigation. 

The target audience is any team member involved in employment law issues. The cost of the seminar is $225. Those who register will gain one connection into the live presentation, unlimited access to the recording for 90 days following completion of the seminar and all handout materials. Learn more and register

Save the Date for SDBA 2022 Agricultural Credit Conference

Mark your calendar for the SDBA's 2022 Agricultural Credit Conference on July 20-21 at the Ramkota Hotel &  Conference Center in Pierre. More information including the full agenda will be available six to eight weeks before the event date.

Happy Thanksgiving from the SDBA

May the good things of life be yours in abundance, not only at Thanksgiving but throughout the coming year. The SDBA office will be closed on Thursday and Friday, Nov. 25-26, and will reopen on Monday, Nov. 29. Wishing you and your loved ones a day full of splendor and gratitude. 

  Compliance Alliance logo

Question of the Week

Question: What is the current open-end threshold for partial exemptions? When does it change?

Answer: The partial exemption open-end threshold is currently 500 transactions in each of the two previous years and is not currently scheduled to change. There is currently a full reporting exemption, which is currently set at 500 transactions in either of the two previous years but will be decreasing to 200 transactions on Jan. 1, 2022. 

(3) insured depository institution or insured credit union that, in each of the two preceding calendar years, originated fewer than 500 open-end lines of not required to collect, record, or report optional data as defined in paragraph (d)(1)(iii) of this section for applications for open-end lines of credit that it receives, open-end lines of credit that it originates, and open-end lines of credit that it purchases.

12 CFR 1003.3(d)(3) –

The final rule sets the permanent open-end threshold at 200 open-end lines of credit effective January 1, 2022, upon expiration of the temporary threshold of 500 open-end lines of credit.

Home Mortgage Disclosure Rule, p. 3

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Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.