ABA, State Bankers Associations Call on Congress to Extend TDR Provision

ABA and 51 state bankers associations yesterday called on lawmakers to extend the troubled debt restructuring provisions in the CARES Act that allow banks to suspend generally accepted accounting principles for COVID-19 related loan modifications.

Once a loan is classified as a TDR, the groups said, it often requires twice the regulatory capital of other loans, and is ineligible for consideration as collateral at the Federal Reserve, often requiring the bank to take remedial steps against a loan, including foreclosure. The associations wrote that "[i]t is critically important that the TDR relief in the CARES Act (Section 4013) be extended before the end of 2020 so that America’s banks can continue to fulfil their role as financial first responders in the communities they serve."

The letter follows a push Tuesday from a group of 35 Republican members of Congress to extend the TDR restrictions. In a letter to congressional leadership the lawmakers noted that allowing the provision to expire "would have a drastic and adverse impact on the ability of consumers and businesses to access credit now and a TDR classification would further hurt their ability to access credit in the future." Read the letter.

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