Dodd-Frank Rollback Clears Congress, Goes to President

Chris Gaetano
Published Date:
May 23, 2018

With a 258-159 vote in the House of Representatives last night, Congress passed a bill rolling back many of the protections installed by the Dodd-Frank Act in the immediate aftermath of the 2008 economic crisis; the bill now goes to the president's desk for final signature, according to the New York Times. The Senate passed the bill, called the Economic Growth, Regulatory Relief, and Consumer Protection Act, in March, by a 67-31 vote. The legislation has many different features, but chief among them is the exemption of many financial institutions from many of the more stringent regulations previously placed upon them. Specifically: 

* The asset threshold at which enhanced prudential standards will apply has increased from $50 billion to $250 billion, though the bill allows the Federal Reserve Bank discretion in determining that a financial institution with assets equal or greater than $100 billion be subject to these standards. 

* The asset threshold at which company-run stress tests are required has been increased from $10 billion to $250 billion. 

* The asset threshold for a mandatory risk committee has increased from $10 billion to $50 billion. 

The Times noted that, with these changes, there are now fewer than 10 banks subject to the strictest level of oversight, giving thousands of others that had previously been under the same standards a freer hand in the financial arena. 

Other notable features include the following: 

* Banks that have assets of less than $10 billion and that trade assets and liabilities comprising not more than 5 percent of total assets are exempt from the Volcker Rule, which had prohibited banking agencies from engaging in proprietary trading or entering into certain relationships with hedge funds and private equity funds. 

* Banks that are not engaged in significant nonbanking activity, do not conduct significant off-balance sheet activities and do not have a material amount of debt or equity securities excluding outstanding trust-preferred securities have a new consolidated asset threshold of $3 billion (up from $1 billion). 

* Credit reporting agencies must provide free credit freezes and notify consumers of their availability. 

* Fanny Mae and Freddy Mac can consider a borrower's credit score when purchasing a residential mortgage only if certain procedural requirements are met with respect to validation and approval of credit-scoring models. The Federal Housing Finance Agency will be required to establish standards and criteria for this process. 

* Any securities qualified for national trading by the Securities and Exchange Commission (SEC) and authorized to be listed on a national securities exchange are exempt from state-level registration requirements; this is a change from current law, under which only certain securities specified by statute or SEC rule are exempt. 

* Venture capital funds with no more than 250 investors and less than $10 million in aggregate capital contributions and uncalled committed capital are exempt from being defined as "investment companies." 

* The 12-month sales threshold at which an issuer must provide investors with additional disclosures related to compensatory benefit plans has increased from $5 million to $10 million. 

* The bill expands the number of issuers that can take advantage of Regulation A+, which exempts smaller offerings from securities registration requirements. 

* People can request the removal of a previously reported student loan default from their report if the lender chooses to offer a loan-rehabilitation program that requires a number of consecutive on-time monthly payments demonstrating renewed ability and willingness to repay the loan, and the consumer meets those requirements. A consumer may obtain such rehabilitation benefits only once per loan.

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