ROSE v. BANK OF AMERICA (Mauro, J., assigned justice pro tempore; Chin, J., not participating)Respondent’s Exhibits in Support of Request for Judicial NoticeCal.July 17, 2012CC No. §199074 In the Supreme Court of the State of California HAROLD ROSE AND KIMBERLY LANE, Plaintiffs and Appellants, SUPREME COURT FILED Vs. JUL 17 2012 BANK OF AMERICA, N.A., Defendant and Respondent. © Frank A. McGuire Clerk Deputy EXHIBITS IN SUPPORT OF MOTION FOR JUDICIAL NOTICE (VOL. 1 OF 1, PAGES 1-371) After A Decision By The Court Of Appeal, Second Appellate District, Division Two, Case No. B230859 On Appeal From A Judgment Of Dismissal Los Angeles County Superior Court, Case No. BC433460 Honorable Jane L. Johnson Service On The Los Angeles District Attorney And The California Attorney General Required By Cal. Bus. & Prof. Code § 17209 and Cal. R. Ct. 8.29(b) Margaret M. Grignon (SBN 76621) Scott H. Jacobs (SBN 81980) Zareh A. Jaltorossian (SBN 205347) REED SMITH Lip 355 S. Grand Avenue, Suite 2900 Los Angeles, CA 90071-1514 Telephone: 213.457.8000 Facsimile: 213.457.8080 Attorneys for Defendant and Respondent Bank ofAmerica, N.A. EXHIBIT A Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1362 - CRS Summary - TH... Page 1 of 7 The Library of Congress > THOMAS Home> Bills, Resolutions > Search Results Bill Summary & Status 104th Congress (1995 - 1996) H.R.1362 CRS Summary ABOUT SUMMARIES NEW SEARCH | HOME| HELP| & Back to Bill Summary and Status _ Print Subscribe Share/Save H.R.1362 Latest Title: Financial Institutions Regulatory Relief Act of 1995 Sponsor: Rep Bereuter, Doug [NE-1] (introduced 3/30/1995) Cosponsors (63) Related Bills: H.R.1858 Latest Major Action: 6/15/1995 House committee/subcommittee actions, Status: Forwarded by Subcommittee to Full Committee (Amended) by the Yeas and Nays: 13 - 6... SUMMARYAS OF: 3/30/1995--Introduced. TABLE OF CONTENTS: Title I: Reductions in Government Overregulation Subtitle A: The Home Mortgage Process Subtitle B: Community Reinvestment Act Amendments Subtitle C: Consumer Banking Reforms Subtitle D: Equal Credit Opportunity Act Amendments Subtitle E: Consumer Leasing Act Amendments Subtitle F: Federal Home Loan Bank Amendments Title II: Streamlining Government Regulations Subtitle A: Regulatory Approval Issues Subtitle B: Streamlining of Government Regulations; Miscellaneous Provisions Title IIT: Lender Liability http://thomas.loc.gov/cgi-bin/bdquery/z?d104:HR01362:@@@D&summ2=m& T/LA/2012 001 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1362 - CRS Summary - VH... Page Zot / Financial Institutions Regulatory Relief Act of 1995 - Title Tf: Reductions in Government Overregulation - Subtitle A: The Home Mortgage Process - Am ends” the Real Estate Settlement Procedures Act (RESPA) to transfer regulatory autho rity to the Raard af Governors of the Federal Reserve Svstem (the Board) from the Secretary of Housing and Urban Development. Eliminates redundant regulators by adding certain administrative enforcement provisions. (Sec. 102) Amends the Truth in Lending Act (TILA) and RESPA to provide for comparability of terms. (Sec. 103) Provides for increased regulatory flexibility and exemptive authority for the (Sec. 104) Provides for reductions in RESPA regulatory burdens with respect to: (1) lenders’ disclosures to federally related mortgage loan applicants relating to assignment, sale, or transfer of loan servicing; (2) second mortgages; and (3) consistency of RESPA and TILA exemption of business loans. (Sec. 105) Provides for alternative disclosures for adjustable rate mortgages underTILA . (Sec. 106) Amends TILA with respect to treatmentof certain charges, including third party fees, taxes on security instruments or evidences of indebtedness, preparation o f loan documents, and fees relating to pest infestations, inspections, and hazards. (Sec. 107) Exempts from rescission, under TILA, certain transactions (other spec ified types of mortgages) which constitute refinancings or consolidations of existin g extensions of credit and which are secured bya firstlien. (Sec. 108) Adds to TILA provisionsrelating to tolerances for accuracy and to the basis o f disciusure ful per dicing invErest. (Sec. 109) Amends TILAto establish certain limitations on liability, including: (1) limitations on liability for disclosures relating to certain fees and charges other than finance charges; and (2) an exemption from liability for finance charge disclosures with in tolerancelimits. (Sec. 111) Sets forth a limitation on the rescission period under TILA. (Sec. 112) Revises TILA provisions for the calculation of actual damages. (Sec. 113) Makes assigneesliable, under specified TILA provisions, only if violations are apparent on the face of transaction documents. Provides that a servicer of a consumer credit transaction shall not be treated as: (1) an assigneeforliability purposes unless the servicer is the ownerof the obligation; or (2) the owner on the basis of an assignmentfor administrative convenience. (Sec. 114) Revises certain TILA provisions for recovery of fees. (Sec. 115) Repeals a provision of the Housing and Urban Development Act of 1968 for homeownership debt counseling notification. (Sec. 116) Amends the Home Mortgage Disclosure Act of 1975 to revise exemption provisions. Exempts from coverage under such Act specified types of institutions with total assets, in their fast full fiscal year, of $50 million or less (currently $10 million or http://thomas.loc.gov/cgi-bin/bdquery/z?d104:HROL 362:@@@D&summ2=m& 7/11/2012 a ) N O Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1362 - CRS Summary - TH... Page 3 of 7 less). Authorizes the Board to exempt those with greater assets where the burden of compliance outweighs the usefulness of the information required to be disclosed. Provides that a depository institution satisfies certain public availability of information requirements if: (1) such information is kept at the home office; (2) notice that such information is available through request to the homeoffice is posted at the specified branch locations; and (3) the information is supplied to the requester in a paper copyor, if acceptable to the requester, via a form of electronic medium. Subtitle B: Community Reinvestment Act Amendments - Amends the Community Reinvestment Act of 1977 (CRA) to revise the expression of congressional intent. (Sec. 122) Exempts a regulated financial institution from the examination requirements of, or any regulations issued under, CRA if: (1) its main office (and each branch) is located in a local government unit with a population of not more than 30,000, whichis not part of a metropolitan statistical area; and (2) the institution and its parent bank holding company have aggregate assets of not more than $100 million (to be adjusted annually by the annual percentage increase in the consumerprice index for urban wage earners and clerical workers). (Sec. 123) Provides for self-certification of CRA compliance by qualifying financial institutions, with certain public notice requirements. (Sec. 124) Adds provisions for community input and conclusive rating, including requirements for publication of exam schedule, opportunity for comment, evaluation by the appropriate Federal financial supervisory agency, and procedures for requests for reconsideration of rating. (Sec. 125) Directs Federal financial supervisory agencies, in conducting certain CRA assessments, to develop compliance standards consistent with the specific nature of special purpose banks (which do not generally accept retail deposits, such as credit card banks and trust banks). (Sec. 126) Givesinstitutions credit, for purposes of satisfying CRA requirements, for investments in, and loans, to: (1) minority or women's depository institutions; and (2) joint ventures or other entities or projects providing benefits to distressed communities (whether suchinstitutions or communities are located within or outside of the regulated financial institution's service area. (Sec. 127) Prohibits regulations requiring certain additional recordkeeping and reporting under CRA. (Sec. 128) Applies a requirement of metropolitan area distinctions only to institutions that maintain domestic branches in two or more States. (Sec. 129) Amends the Federal Home Loan Bank Act to make certain reporting requirements inapplicable to members receiving an outstanding or satisfactory grade under specified CRA provisions. Subtitle C: Consumer Banking Reforms - Amends the Truth in Savings Act (TISA) to prohibit depository institutions or deposit broker from making misleading or inaccurate advertisements or disclosures. Repeals TISA provisions relating to disclosure of interest rates and terms of accounts, account schedules, disclosure requirements for certain http://thomas.loc.gov/cgi-bin/bdquery/z?d104:HR0O1362:@@@D&summ2=m& 7/11/2012 003 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1362 - CRS Summary - 1H... Page 4 or / accounts, distribution of schedules, periodic statements, civil liability, and effect on State law. Revises provisions for regulations and definitions. (Sec. 132) Amends the Electronic Fund Transfer Act (EFTA) to revise provisions relating to unauthorized electronic fund transfers. (Sec. 133) AmendsTILA to add provisions relating to cardholderl iability for unauthorized use of credit cards. (Sec. 134) Amends the Federal Deposit Insurance Act to revise p rovisions for regulations governing insured banks to allow depository institutions or their affiliates or subsidiaries to transfer information among themselves without any restrictio n or limitation if such possible information sharing is disclosed and the consumeris giv en the opportunity to direct that such information not be so communicated, prior to i nitial communication. (Sec. 135) Revises EFTA definitions of: (1) accepted card or othe r means of access; and (2) account. Subtitle D: Equal Credit Opportunity Act Amendments- Equal C redit Opportunity Act Amendments of 1995 - Combines and simplifies the adverse action notific ation requirements of the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA). (Sec. 143) Revises ECOA requirements for written notifications of, an d statements of reasons for, adverse actions to be given to credit applicants. Exempts f rom liability for a violation of such requirements any persons who show by a preponde rance of the evidence that at the time of the alleged violation they maintained r easonable procedures to assure compliance with such requirements. rm 22 28 meleneeREA TOMA eAretien (DEL, L44) KCVISSS Specie beans requirements eliminate coverage of credit deniais and of a other than consumer reporting agencies. c L < @ 4 (Sec. 145) Amends ECOA and the Fair Housing Act to add incentives for self-testing. (Sec. 146) Provides that creditors shall be deemed in compliance with ECOA nondiscrimination requirements with respect to any credit decisio n based solely on the use of an empirically derived, demonstrably and statistically sound, c redit scoring system if such system does not use: (1) any protected category; or (2) any cr iterion so directly associated as to be a functional equivalent of such a category. (Does n ot preclude using age as a factor in such a system as otherwise permitted under ECOA .) Subtitle E: Consumer Leasing Act Amendments - ConsumerLeasing A ct Amendments of 1995 - Amends the Consumer Credit Protection Ac t (CCPA) to direct the Board to: (1) write regulations or staff commentary to update and clari fy requirements and definitions for lease disclosures, contracts, and other issues related to consumer leasing which wouid carry out the purposes of the Consumer Leasing Act; a nd (2) publish model disclosure forms and clauses to facilitate compliance with such disclosure requirements and aid the consumerin understanding the transaction. (Sec. 154) Revises CCPA provisions for consumer lease disclosures to requ ire prior separate leasing disclosures of specified items in a tabular format. (Sec. 155) Revises CCPA provisions relating to consumerlease advertising. http://thomas. loc.gov/cgi-bin/bdquery/z?d104:HRO1362:@@@D&summ2=m& 7/11/ 2012 | Q S Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1362 - CRS Summary - TH... Page 5 of 7 Subtitle F: Federal Home Loan Bank Amendments- Amends the Federal Home Loan Bank Act (FHLBA) to revise an FHLB system membership eligibility location requirement to allow institutions to apply for membership in an adjoining district, for the institution's convenience, with Federal Housing Finance Board (FHFB) approval. (Sec. 162) Revises FHLBA audit provisions to: (1) prohibit the FHFB from participating in the hiring of external auditors by banks; (2) permit the FHFB to establish requirements for external audit contracts and accounting standards; and (3) require all 12 banks to contract for an annual audit with a single provider. Title II: Streamlining Government Regulations - Subtitle A: Regulatory Approval Issues - Amends the Bank Holding Company Act (BHCA) to revise and streamline notice and other requirements relating to both nonbanking and bank acquisitions by well- capitalized and well-managed banking organizations. (Sec. 203) Amends the Federal Deposit Insurance Act to eliminate: (1) Bank Merger Act filing and approval requirements for insured depository institutions already controlled by the same holding company; and (2) redundant approval requirements for “Oakar" transactions (generally, conversion, by acquisition or similar means, of a Bank Insurance Fund member to a Savings Association Insurance Fund member, or vice versa). (Sec. 205) Amends the Home Owners’ Loan Act to eliminate duplicative requirements imposed on bank holding companies. (Sec. 206) Eliminates a BHCA requirement that approval be obtained for divestitures. (Sec. 207) Eliminates specified requirements for certain branch applications by: (1) national banking associations, under the Revised Statutes relating to banks and banking; (2) State member banks, under the Federal Reserve Act (FRA); and (3) State nonmember banks, under the Federal Deposit Insurance Act (FDIA). (Sec. 208) Eliminates branch applications and requirements for automatic teller machines (ATMs) and similar facilities, under the Revised Statutes and FDIA. (Sec. 209) Eliminates a requirement for approval of investments in bank premisesfor well-capitalized and well-managed banks. (Sec. 210) Eliminates specified filing requirements under FDIAforofficer and director appointments. (Sec. 211) Streamlines the BHCA process for determining new nonbanking activities. Subtitle B: Streamlining of Government Regulations; Miscellaneous Provisions- Eliminates the per-branch capital requirement for national banks and State member banks under the Revised Statutes. (Sec. 222) Revises FDIA requirements relating to notification of branch closures to exempt specified entities under certain conditions. (Sec. 223) Amends the Depository Institutions Management Interlocks Act to exempt managementofficials of depository institutions or holding companies with small market shares from prohibitions against dual service with unaffiliated institutions or companies in the same area, town, or village. Revises provisions relating to dual service among http://thomas.loc.gov/cgi-bin/bdquery/z?d104:HR01362:@@@D&summ2=m& 7/11/2012 005 Bill Summary& Status - 104th Congress (1995 - 1996) - H.R.1362 - CRS Summary - 1H... Page 6 oft / larger organizations. Extends a specified grandfather exemption which allows certain managementofficials to continue to serve despite interlocks prohibitions. (Sec. 224) Abolishes the Appraisal Subcommittee established under the Federal Financial Institutions Council Act of 1978, and consolidates its TUNCTIONS Into tne rindtcial Institutions Examination Council. Amendsthe Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) to revise provisions relating to rosters of State certified or licensed appraisers, Provides for reduction of assessments on appraisers. (Sec. 225) Eliminates certain recordkeeping and reporting requirements relating to loans to executive officers under FRA and BHCA. Permits extensions of credit made under certain FRA provisions pursuant to a benefit or compensation program widely available to employees of the member bank. (Sec. 226) Amends FDIA to provide for expanded regulatory discretion for small bank examinations. (Sec. 227) Amendsthe Right to Financial Privacy Act to revise cost reimbursement provisions to specifically include corporate customers under referencesto customer records. (Sec. 228) Amends specified Federal law relating to money and finance to eliminate certain provisions requiring depository institutions to identify their nonbank financial institution customers. (Sec. 229) Requires each appropriate Federal banking agency to conduct a paperwork reduction review. fOnAn 322NN DP 1(Sec. 230) Repeals certain o uirements under the Federal Deposit Insurance Corporation Improvement Act of 1991. (Sec. 231) Directs the Secretary of the Treasury to revise a specified regulation under the Securities Exchange Act of 1934 to provide for daily confirmations for hold-in- custody repurchase transactions. (Sec. 232) Requires the Financial Institutions Examining Council to carry out, and report to the Congress on, a regulatory review of regulations. (Sec. 233) Amendsthe International Lending Supervision Actto: (1) grant Federal banking agencies discretion In imposing certain country risk requirements with respect to reserves; and (2) repeal certain additional country risk reserve requirements. (Sec. 234) Revises specified FDIA audit provisions with respect to exemptions due to costs. Authorizes the Federal Deposit Insurance Corporation and the appropriate Federal banking agency to designate certain information in such audits as privileged, confidential, and not available to the public. (Sec. 235) Sets forth certain due process protections under FDIA and the Federal Credit Union Act. (Sec. 236) Revises FDIA provisions relating to: (1) culpability standards for outside directors; and (2) rules on deposit taking. http://thomas.loc.gov/cgi-bin/bdquery/z?d104:HR01362:@@@D&summ2=m& 7/11/2012 C S } m a Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1362 - CRS Summary - TH... Page 7 of 7 Act of 1994 to revise the transition period for new regulations. foreign bank applications and examinations. (Sec. 241) Amends TILAto revise provisions relating to second mortgages. Title III: Lender Liability - Amends FDIA to add provisions relating to lender, fiduciary, and Government agency environmental liabilities. Stay Connectedwith the LibraryAll ways to connect » (Sec. 238) Amends the Riegle Community Development and Regulatory Improvement (Sec. 239) Amends the International Banking Act of 1978 to revise provisions relating to Find us on Subscribe & Comment Download & Play tcl Ge) s« RSS & E-Mail Blogs Podcasts Webcasts iTunes U About | Press | Site Map | Contact | Accessibility | Legal | External Link Disclaimer | USA.gov Enabled "43! http://thomas.loc.gow/cgi-bin/bdquery/z?d104:HR0O1362:@@@D&summ2=m& Speech 7/11/2012 007 EXHIBIT B 492 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1858 - All Information - THOMAS(Library ... TheLibraryofCongress > THOMAS Home> Bills, Resolutions > Search Results Bill Summary & Status 104th Congress (1995 - 1996) H.R.1858 All Information NEW SEARCH | HOME | HELP @ Back to Bill Summary and Status Print Subscribe Share/Save H.R.1858 Latest Title: Financial Institutions Regulatory Relief Act of 1995 Sponsor: Rep Leach, James A.[IA-1] (introduced 6/15/1995) Cosponsors (None) Related Bills: H.R.1362, H.R.2520 Latest Major Action: 6/18/1996 Supplemental report filed by the Committee on Banking and Financial Services, H. Rept. 104-193, Part II, House Reports: 104-193, 104-193 Part 2 Jump to: Summary, Major Actions, All Actions, Titles, Cosponsors, Committees, Related Bill Details, Amendments SUMMARYAS OF: 7/18/1995--Reported to House amended. (There is 1 other summary) TABLE OF CONTENTS: Title I: Reductions in Government Overregulation Subtitle A: The Home Mortgage Process Subtitle B: Community Reinvestment Act Amendments Subtitle C: Consumer Banking Reforms Subtitle D: Equal Credit Opportunity Act Amendments Subtitle E:Consumer Leasing Act Amendments . Subtitle F: Federal Home Loan Bank Amendments Title II: Streamlining Government Regulations Subtitle A: Regulatory Approval Issues Subtitle B: Streamlining of Government Regulations; Miscellaneous Provisions Title III: Lender Liability Title IV: Annual Study and Report on Impact on Lending to . Smal! Business Financial Institutions Regulatory Relief Act of 1995 - Title I: Reductions in Government Overregulation- Subtitle A: The Home Mortgage Process - Amends the Real Estate Settlement Procedures Act (RESPA) to: (1) transfer certain rulemaking authority over disclosure requirements from the Secretary of Housing and Urban Development (HUD) to the Board of Governors of the Federal Reserve System (the Board); and (2) declare that the purposeofthe Actis to eliminate kickbacks or referrals without directly regulating thomas.loc.gov/cgi-bin/bdquery/z?d104:HRO1858:@@@L&summ2=m& 1/10 008 49112 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1 858 - All Information - THOMAS (Llbrary... settlement services prices or wages to bona fide employees tha t are not designed as a subterfuge to facilitate kickbacks among affillated companies. (Sec, 101) Precludes the Secretary of HUD from publishing a pro posed or final reguiauon UeSS LIG Secretary has used a certain negotiated rulemaking procedure t o attempt to negotiate and develop the rule. Distributes administrative enforcement authority regarding kickbacks and referrals among HUD,the Federal banking agencies, the Nationa! Credit Union Administration, the Board, and the Director of the Office of Thrift Supervision. Mandates that such agencies cooperate with one another in developing enforcement guidelines. Declares a statutory preference for administrative enforcement over c riminal enforcement, except in appropriate cases. Restricts criminal sanctions to willful violations of law (current law penalizes unwillful and unintentional violations as well). Redesignates "a controlled b usiness arrangement" as "an affiliated business arrangement.” Repeals mandatesfor projects demonstrating: (1) a land parcel re cordation system; and (2) preparation of statements of settlement costsfor insertion into special inform ation booklets. (Sec, 102) Sets a deadline by which the Board must take action unde r RESPA and the Truth in Lending Act (TILA) to simplify and provide a single format for credit transaction discl osures. (Sec. 103) Exempts from TILA disclosure requirements any transactions t hat the Board determines: (1) are not necessary to effectuate the Act's purposes; or (2) do not provi de a measurable benefit in the form of useful information or consumerprotection. (Sec. 104) Amends RESPAto repeal requirements that for-certain fed erally related mortgage loans the lender disclose: (1) that it has previously assigned, sold, or transfer red the servicing of such loans, or, during the most recent three-year period, a specified percentage of them; and (2) in the case of a lender whe does not service federally related loans, a present intent to ass ign, sell or transfer them. Repeals the Wig & CE Treece mandate for model disclosure statements. Excises from the definition of "federally related mortgage loan" any loan secured by a subordinatelien on residential real property (thereby removing second mortgages fr om RESPA requirements). Directs the Board to ensure that reguiations pesianuiy to the busines s cradk oxem 1. etot Sunn TTI A jurisdiction include aii business credit exempted from TILA. an fram BECDA (Sec. 105) Revises disclosure requirements to permit alternative dis closures for adjustable rate home mortgages which state that a monthly payment may increase or decre ase significantly due to annual percentage rate increases. (Current law requiresillustrations how a rate increase or decrease affects monthiy payments.) Grants creditors the option of disclosing, in any variable interest rat e residential mortgage transaction secured by the consumer'sprincipal! dwelling with greater than a o ne-year term, either a statement that the monthly payment may change substantially, or an historical exa mple illustrating the effects of interest rate changes implemented according to the loan program. Mandates additional disclosures pertaining to note rates and points for residential mortgage transactions, and a statement that the terms are subject to change. (Sec, 106) Excludes from the determination of finance charge for any consumer credit transaction fees imposed by third party closing agents (including settlement agents , attorneys, escrow andtitle companies) that are neither expressly required nor retained by the c reditor (thereby exempting them from TILA disclosure requirements). Modifies the determinationof finance chargeto: (1) include mortgag e broker fees; and (2) exclude specified property andliability Insurance charges or premiums If the creditor furnishes a separate res statement about such charges. Exempts from the required computation of finance charge: (1) c ertain taxes on security instruments or evidences of indebtedness(if they are otherwise itemized and disc losed); and (2) fees for preparation of loan documents, as well as appraisal fees related to pest infest ations, premises and structural inspections, and flood hazards. Instructs the Board to report to the Congress on statutory or regulatory changes necessary to: (1) thomas.loc.gov/cgi-bin/bdquery/z7d104:HRO1 858:@@@L&summ2= m& 2/10 009 492 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1858 - All Information - THOMAS(Library ... ensure that finance charges more accurately reflect the cost of credit; and (2) address abusiverefinancing practices intended to avoid rescission. (Sec. 107) Denies the right of rescission to certain refinancings or debt consolidations secured by lien on a consumer's principal dwelling. (Sec. 108) Permits finance charge disclosures to vary within specified accuracy tolerance limits for certain consumer credit transactions secured by real property or a dwelling. Sets disclosure accuracy guidelines for per diem interest rate disclosures on consumercredit transactions. (Sec. 109) Amends TILA to shield a creditor or assignee from liability in connection with disclosures of: (1) certain fees and charges; and (2) finance charges that fall within certain statutory tolerancelimits. (Sec. 110) Restricts rescission liability arising from the form of written notice used by the creditor. (Sec. 111) Provides for damages ranging from $250 to $2,500 for an individual consumer credit transaction not under an open end credit plan that is secured by real property ora dwelling. (Sec. 112) Modifies assignee liability guidelines to: (1) apply them to consumer credit transactions secured by real property; and (2) provide that a violation is apparent on the face of the disclosure statementif the disclosure does not use the format required by law. States that the servicer of a consumer obligation arising froma consumer credit transaction shall not be treated as an assignee of an obligation unless the servicer ownsit. (Sec. 113) Identifies circumstances under which a consumer has a right to rescind a consumer credit transaction upon a creditor's action to foreclose on the consumer's primary dwelling securing the debt. (Sec. 114) Revises certain TILA provisions for recovery of fees. (Sec. 115) Amends the Housing and Urban DevelopmentAct of 1968 to repeal the mandate for homeownership debt counseling availability notification. _ (Sec. 116) Amends the Home Mortgage Disclosure Act of 1975 to increase the maximum asset-size of institutions exempt from its purview from $10 million to $50 million. Authorizes the Board to exempt from the Act's disclosure requirements institutions whose asset-size is over $50 million if the burden of compliance outweighs the usefulness of the requisite information, unless it is reasonable to believe that the institution is not fulfilling its obligations to serve the housing needs of the communities and neighborhoodsin whichit fs located, Declares that a depository institution shall be deemed to havesatisfied the public availability notification requirements for its mortgage loan transactionsif its branch offices provide notice of the availability upon requestof the information from the homeoffice. Subtitle B: Community Reinvestment Act Amendments - Amends the Community ReinvestmentAct of 1977 (CRA) to revise the expression of congressional Intent to prohibit a supervisory agency from imposing additional burden, recordkeeping, or reporting when examining financial institutions, (Sec. 122) Exempts a regulated financial institution from CRA examination requirements if the institution and its parent bank holding company have aggregate assets of not more than $100 million. (Sec. 123) Provides for self-certification of CRA compliance by certain "satisfactory" or "outstanding" financial institutions with assets of $250 million or less, subject to certain public notice requirements. Prohibits a Federal regulatory agency from imposing additional self-certification requirements. (Sec. 124) Sets forth community input and conclusive rating requirements, including requirements for publication of exam schedule, opportunity for comment, evaluation by the appropriate Federal financial supervisory agency of how theinstitution meets community needs, and procedures for requests for reconsideration of the resulting rating. (Sec. 125) Mandates that, in conducting assessments of financial institutions, the appropriate Federal regulatory agency: (1) consider the nature of the business of special purpose financial institutions; (2) assess and take into accountthe institution's record commensurate with the amountof deposits it has received; and (3) develop standards under which they may be deemed to comply with CRA requirements consistent with the specific nature of such businesses. Defines a "special purpose institution" as one that does not generally accept retail deposits from the thomas.loc.gov/cgi-bin/bdquery/z7d104:HRO1858:@@@L&summ2=m& 3/10 010 492 Bill Summary & Status - 104th Congress (1995 - 1996)- H.R.1858 - All Information - THOMAS(Library ... public in amounts of less than $100,000, such as wholesale, c redit card, and trust institution. (Sec. 126) Requires the appropriate Federal financial superv isory agency, in assessing and taking into _ account the records of a reguiateu litidiiciat WipuituLiun t ur purpuses ve cre complionce, tc caneider aca positive factor the institution's investments and loans to: (1) any minority or wornen's depository institution or low-incomecredit union; (2) any joint venture s, entities, or projects providing benefits to distressed communities (regardless of whetheror notthe recipient institutions or communities are located within the regulated financial institution's chartered service area); and (3) targeted low- and moderate- income communities, including real property loans to such communities. Specifies other related positive factors to be considered. (Sec, 127) Prohibits regulations requiring additional CRA rec ordkeeping and loan data collection. (Sec, 128) Applies a requirement of metrepolitan area distin ctions, with respect to the public section of written Institution evaluations, only to institutions that main tain domestic branches in two or more States. (Sec. 129} Amends the Federal Home Loan Bank Act to exem pt from certain community Investment or service reporting requirements members who receive a CRA r ating of outstanding or satisfactory. (Sec, 130) Expresses the sense of the Congress that the ap propriate congressional committees shouid exercise aggressive oversight of the adoption and implement ation of any CRA regulation by a Federal supervisory agency after the date of enactment of this Act. R equires such an agency to report to the Congress on the implementation of all CRA regulations. (Sec. 131) Amends the Federal Deposit Insurance Act (FDIA) to direct each Federal banking agency to ensure that its banking examiners consult on examination act ivities and resolve any inconsistent recommendations given to a depository institution. (Sec. 132) Amends the CRA to prohibit a Federa! agency fro m prescribing any regulation which would: (1} require a financial institution to make any loan or enter into any agreement on the basis of any discriminatory criteria prohibited under Federal law; (2) make any loan to, or enter into any other agreement with, an uncreditworthy person that would jeop ardize the Institution's safety and soundness; or (3) hinderthe institution's full responsibility to provide cr edit to all community segments. Subtitle C: Consumer Banking Reforms - Amends the T ruth in Savings Act (TISA) to: (1) repeal the finding of the Congressthat uniformity in the disclosure o f terms and conditions on which interestis pald ana fees are assesseu wuuild sirenginen consumer sony t t varity danneit accounts and make informed decisions; and (2) replace the current purpose requiring clear, unlform disclosure of interest rates and fees, with one requiring depository institutions to pay inte rest on the daily full amount of principal in interest-bearing consumer deposit accounts at the agr eed-uponrate of interest. (Sec. 141) Repeals TISA disclosure requirements pertaining to interest rates and terms of accounts, including: (1) Board authority to prescribe regulations rega rding account schedule information; (2) the mandate for readily understandable account terminology; (3) Board authority to prescribe annual percentageyield disclosures; (4) schedule distribution guidel ines; (5) the mandate for clear, conspicuous disclosure of earned interest, yield, and chargesin periodic s tatements; (6) civil liability for depository institution non-compliance with disclosure requirements; (7) non-preemption of State law with regard to disclosure requirements; and (9) definitions of annual percen tage yield, annual rate of simple interest, and multiple rate account. (Sec. 142) Amends the FDIA to allow depository institut ions (Including affiliates and subsidlarles) to exchange information withoutlimitation if such informatio n sharing is disclosed and the consumer has opportunity beforehand to direct that the information no t be communicated. (Sec. 143) Revises the Electronic Fund Transfer Act (EFTA) d efinitions of: (1) accepted card or other means of access; and (2) account. (Sec. 144) Amends TILA to permit full creditor restitution pa yments of adjusted finance charges to a person over an extended period if the enforcing agency de termines that this is necessary to avoid causing the creditor to become undercapitalized. Subtitle D: Equal Credit Opportunity Act Amendments ~ Eq ual Credit Opportunity Act Amendments of 1995 - States that the purpose ofthis Act is to combine th e adverse action notification requirements of the Equal Credit Opportunity Act (ECOA) and the Fair Cred it Reporting Act (FCRA) with respect to consumer credit applications, and to make the information which must be furnished more understandable. (Sec. 153) Revises ECOA notification requirements regarding adverse actions against credit applicants. thomas.lac.govicgi-bin/bdquery/z?d1 04:HRO1853:@@@L&su mm2=m& 4/10 011 4192 . Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1858 - Alll Information - THOMAS(Library ... Shields from liability for non-compliance persons who show by a preponderance of the evidence that they maintained reasonable procedures to ensure compliance at the time of the alleged violation. (Sec. 154) Revises specified FCRA disclosure requirements for users of consumerreports to eliminate such requirements for credit denials and adverse actions based on reports of persons other than consumer reporting agencies. (Sec. 155) Amends ECOA andtheFair Housing Act (the Acts) to add incentives for creditor self-testing and voluntary corrective action by prohibiting review, examination, or acquisition by an applicant in any legal proceeding of a creditor or other person's self-procured test or review of its lending activities, including residential real estate lending, if the self-test has identified discriminatory practices and the creditor or other person has taken oris taking appropriate corrective action to address the discrimination. Specifies circumstances in which an applicant or Government department or agency may obtain and usethe results of a self-test in a proceeding or civil action. (Sec. 156) States that creditors shall be deemed in compliance with ECOA nondiscrimination requirements with respect to any credit decision based solely on the use of an empirically derived, demonstrably and statistically sound credit scoring system if it does not use: (1) any protected category of applicant; (2) any criterion so directly associated as to be a functional equivalent of such a category; and (3) any criterion that has a disparate impact on a protected category unless such useis justified by business necessity and there is no less discriminatory alternative available. (Does not preclude using age as a factor in such a system to the extent otherwise permitted under ECOA.) (Sec. 157) Requires the Attorney General to consult with the appropriate agency before bringing a civil action in connection with creditor self-testing under the Acts. Subtitle E: Consumer Leasing Act Amendments - Consumer Leasing Act Amendments of 1995 - Amends the Consumer Credit Protection Act (CCPA) to direct the Board to: (1) write regulations or staff commentary to update and clarify requirements and definitions for lease disclosures, contracts, and other issues related to consumerleasing which would carry out the purposes of the ConsumerLeasing Act; and (2) publish model disclosure forms and clausesto facilitate compliance with such disclosure requirements and aid the consumer in understanding the transaction. (Sec. 164) Revises CCPA provisions relating to consumerlease advertising, repealing special requirements for radio advertisements. (Sec. 165) Limits creditor liability for statutory penalties for failure to provide specified consumerlease disclosures. Subtitle F: Federal Home Loan Bank Amendments - Amends the Federal Home Loan BankAct (FHLBA) to revise an FHLB system membershipeligibility location requirement. (Sec. 172) Revises FHLBA audit provisions to: (1) prohibit the Federal Housing Finance Board (FHFB) from participating in the hiring of external auditors by banks; (2) permit the FHFB to establish requirements for external audit contracts and accounting standards; and (3) require all 12 banks to contract for an annual audit with a single provider. Title II: StreamliningGovernment Regulations - Subtitle A: Regulatory Approval Issues - Amends the Bank Holding Company Act (BHCA)to identify criteria for a well-capitalized and well-managed banking organization under which an acquisition of shares in a nonbanking or another banking organization by a bank holding company, ora merger or consolidation between registered bank holding companies, shall be deemed to be approved. (Current law requires prior Board approval.) (Sec. 203) Amends the FDIA and the National Bank Consolidation and Merger Act to cite conditions under which prior approval is not required for any merger, consolidation, asset acquisition, or liabilities assumption involving only insured depository institution subsidiaries of the same depository Institution holding company. (Sec. 204) Permits any insured depository institution to participate in optional conversion transactions between members of the Bank Insurance Fund and the Savings Association Insurance Fund (Oakar transactions) without the prior written approval of the responsible agency. Repeals guidelines for agency approval of such transactions (but retains the proscription against transactions which result in the. transfer of any insured depository institution's Federal deposit insurance from one Federal deposit insurance fund to the other). (Sec. 205) Amends the Home Owners' Loan Act (HOLA) to remove from its regulatory purview a bank holding company subject to the BHCA, and exclude it from the definition of “savings and loan holding thamas.loc.gov/cgi-bin/bdquery/z?d104:HR01858:@@@L&summ2=mé& 5/10 012 4/19/12 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1858 - All Information - THOMAS( Library ... company.” Amends the BHCA of1956 to mandate cooperation betweenthe Board and the Director of the Office of Thott Siimamininn eaaneding cunansicinn and anfareamant aver hank hoidina camoanies that control sew wep me eee: savings associations. Amends HOLA to provide that any savings association which meets specified Internal Revenue Code requirements shall be deemed to be a qualified thrift lender. (Sec. 206) Amends the BHCAto repeal the provision that shares transferred by a bank holding company to a transferee under its control are deemed to be under such holding company's control un less the Board determines otherwise and approvesthe divestiture. (Sec. 207) Amends the Revised Statutes, the Federal Reserve Act (FRA), and the FDIA to deline ate conditions under which prior approvai is not required for weli-capitaiized and well-managed banks to establish and operate a branch or seasonal agency. (Sec. 208) Amends the Revised Statutes and the FDIA to exclude from the definition of "branch " an automated teller machine or remote service unit (thus exempting those entities from approval requirements of such Acts). (Sec. 209) Amends the FRA to exempt well-capitalized and well-managed banks from the appro val requirementfor investments in bank premises. (Sec, 210) Amends the FDIA to authorize the appropriate Federal banking agency towaive, on a case-by- case basis, prior notice requirements pertaining to new officer or director appointmentsof c ertain undercapltalized or troubled institutions. (Sec. 211) Repeals the requirement for a hearing in the determination of new nonbanking activ ities. Permits bank holding companies to own insuranceaffiliates in accordance with State insur ance laws. Directs the Board to prescribe regulations concerning insurance affiliations that provide equivalent treatmentfor stock and mutual fund insurance companies that control cr. are affiliated with a bank. (Sec. 212} Authorizes the Board to extend from five years to ten years the period durin g which a bank holding company mayretain shares acquired in a loan foreclosure. ‘ (Sec. 213) Amends the Federal Credit Union Act to increase from $10,000 to $50,000 the aggr egate amount of loans to Credit Union ofticials that may De made withuul appruval uf tis Duara o F aweaars. Subtitie B: Streamiining of Government Regulations; Miscellaneous Provisions - Amendsthe Revised Statutes to repeal the aggregate minimum per-branch capital requirements imposed upon a nati onal banking association and its branches. (Sec. 222) Amends the FOIA to exclude automated teller machines and bank branchesin specif ied merger or relocation situations from the definition of "bank branch" (thus exempting them fro m Federa! bank closure notification requirements). Makes such exemption retroactive to the enactmentof t he Federal Deposit Insurance Corporation Improvement Act of 1991. (Sec. 223) Amends the Depository Institutions Management Interlocks Act to exempt managementofficials of depository institutions or noiding companies with smaif (under 20 percent) mark et shares from prohibitions against dual service with unaffiliated institutions or companies in the sa me geographic banking market. Raises from $1 billion to $2.5 billion the asset-size ceiling beneath which a depository institution or depository holding company mayretain directors and management officials performing du al service for PEs, nonaffiliated Institutions whose total assets do not exceed $1.5 billion (currently $500 million), Authorizes Federal requiatory agencies to adjust such ceiling annually for cost-of-living increas es. Extends a specified grandfather exemption which allows certain managementofficials to continue dual service despite interlocks prohibitions (thus permitting them to continue their dual! servi ce permanently). (Sec. 224) Directs the Appraisal Subcommittee of the Financial Institutions Examinatio n Council to accelerate repaymentof specified funds to the Treasury. (Sec. 225) Amends the FRA to permit loans to executive officers, directors, or pr incipal shareholders (insider lending) made pursuantto a benefit or compensation program widely avai lable to employees of the member bank. : / thomas.loc.gow/egi-bin/bdquery/z?d104:HRO1 858:@@@L&summ2=m& 6/10 013 4/19/12 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1858 - All Information - THOMAS(Library ... Expands the Board's authority to exempt specified executive officers and directors from the proscription against preferential lending terms. Repeals the requirement that: (1) an executive officer indebted to a bank over a certaln lawful amount submit a written report of such debt to the board of directors; and (2) a member bank include inits condition of report all loans to executive officers made since its previous report. Amends the FDIA to repeal Federal banking agency authority to require banks to disclose loans made to their executive officers or principal shareholders. Amends the Bank Holding Company Act Amendments of 1970 to repeal the requirement that bank executive officers and stockholders who own more than a ten percent controlling interest report to the bank's board of directors those loans made to them by a bank maintaining a correspondent account. Amends the FRA to permit a member bank to make available to its executive officers: (1) home equity lines of credit of up to $100,000; and (2) loans secured by readily marketable assets. (Sec. 226) Amends the FDIA to allow the appropriate Federal banking agency to increase from $175 million to $250 million the asset-size ceiling on certain small depository Institutions whose mandatory periodic on-site examinations make take place every 18 monthsinstead of annually. Requires the Federal banking agencies to report semiannually to the Congress regarding implementation of a coordinated Federal! bank examination system until itis In place and provides full coordination of examinations of State depository institutions with State bank supervisors. (Sec, 227) Amendsthe Right to Financial Privacy Act to require a Government authority to reimburse a financial institution for assembling or providing the financial records of corporate customers. (Sec. 228) Amends specified Federal monetary law to repeal the requirement that depository institutions identify domestic nonbankfinancial institution customers. (Sec. 229) Requires each appropriate Federal banking agency and the National Credit Union Administration to conduct a paperwork reduction review, and eliminate any requirements for unnecessary internal written policies. (Sec. 230) Instructs the Secretary of the Treasury to revise thedaily confirmation requirement under the Securities Exchange Act of 1934 concerning hold-in custody repurchase agreements to permit the counterparty to the agreementto waive such confirmation upon receipt of certain disclosures, (Sec. 231) Requires the Financial Institutions Examination Council and each Federal banking agency represented on it to review and Identify unnecessary regulations every ten years and report thereon to the Congress. (Sec, 232) Amends the International Lending Supervision Act to change from mandatory to discretionary the duty of each appropriate Fed: | banking agencyto: (1) require a banking institution to maintain a special reserve wheneverthe quality of its assets has been impaired by protractedinability of debtors in a foreign country to make payments; (2) analyze the results of foreign loan rescheduling negotiations and attendant loan risks; and (3) ensure that bank capital and reserve positions are adequateto accommodate potential losses on foreign loans. (Sec. 233) Amends FDIA financial management accountability guidelines to: (1) repeal! certain internal control evajuation and reporting attestation requirements for independent public accountants; (2) permit Federal agencies to designate certain required reports of financial condition as privileged and confidential and not available to the public; and (3) exempt well-capitalized and well-managed insured depository institutions from mandatory financial management status reports (although not from the requirement of independentfinancial audits). (Sec. 234) Amends the FDIA to exclude outside directors from the primary definition of an "institution- affiliated party" but include them In such definition as independent contractors if they have knowingly or recklessly participated in certain prohibited activities. (Sec. 235) Amends the International Banking Act of 1978 to: (1) prescribe guidelines under which the Board may approvea foreign bank application to establish a U.S. presence even thoughIt is not subject to comprehensive supervision on a consolidated basis in its home country; and (2) authorize termination ofa foreign bank office if the appropriate authorities in its home country are not making progressin establishing arrangements for such supervision. thomas.loc.gov/cgi-bin/bdquery/z?d104:HRO1858:@@@L&summ2=m& THO 014 4119/12 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1858 - All Inform ation - THOMAS(Library ... (Sec. 236) Directs the Board to avoid unnecessary duplication of foreign bank examinations. Su bjects foreign banks te the same on-site examination schedule and examination fee collections as ap ply to domestic banks. (Sec. 237) Amendsthe TILA to redefine "mortgage" as a consumer credit transaction secured b ya subordinate mortgage on the consumer's principal dwelling. Repeals the exclusion of a re sidential mortgage transaction from such definition (thus permitting its inclusion). Dismisses all TILA administrative enforcement proceedings regarding high-cost, non-subordinate residential mortgage transacti ons pending upon the date of enactmentofthis Act. (Sec, 238) Revises FDIA guidelines to approve new activities of a State bank andits su bsidiaries if the FDIC has not disapproved the bank's prior 60-day written notice of intent to engage in suc h activities. (Sec. 239) Amends the Revised Statutes to repeal the requirement that three bank directors, i n addition to the officer making the declaration, attest in writing the correctness of reports of condition. (Sec. 240) Amends the Revised Statutes to prescribe parameters for State regulation of national bank insurance activities. States that neither the Revised Statutes nor the FRA restrict State a uthority to regulate such activitles. Prohibits State insurance regulations from discriminating agains t national banks. Restricts the interpretive authority of the Comptroller of the Currency with respect to act ivities incidental to banking. (Sec. 241) Prescribes parameters within which the Comptroller of the Currency may approve a national bank's application to conduct insurance activitles in an economically distressed community (empo werment zone). (Sec. 242) Retitles the Bank Service Corporation Act the "Bank Service Company Act" and amend sit to authorize banks underthe Act to own limited liability companies. (Sec. 243) Amends the FRA to increase from ten percent to 25 percent the amount of capital an d surplus that a national! bank mayinvest in the stock of Edge Act subsidiaries and certain financial service corporations held by a member bank's non-U.S. branches. (Sec. 244) Requires each appropriate Federal banking agency to report to certain cong ressional committees on its actions to reconcile Regulatory Accounting Principles and Generally Accepted Accounting Principles, thereby eliminating inconsistent or duplicative accounting and reporting req uirements dppliuauic to mandatory Mepons Med Sy Insured denositorn: inctitutiqnne. . (Sec. 245) Permits the Comptroller of the Currency to walve the residency requirementfor na tional bank directors. Title INI: Lender Liability - Amends the FDIA to prescribe guidelines for lende r, fiduciary, and Federal banking and lending agency environmental liabilities. Title IV: Annual Study and Report on Impact on Lending to Smaii Business - Directs the foll owing agencies to submit a joint annual report to the Congress on the extent to which the regula tory reductions under this Act have resulted in increased lending to small businesses: (1) the Federal Reserve Board; (2) the Director of the Office of Thrift Supervision; (3) the Comptroller of the Currency; and (4) the FDIC Board of Directors. MAJOR ACTIONS: 6/15/1995 Introduced in House 7/18/1995 Reported (Amended) by the Committee on Banking and Financial Services . H. Rept. 104- 193, Part I. 6/18/1996 Supplemental report filed bythe Committee on Banking and Financia! Serv ices, H. Rept. 6/15/1995: Referred to the House Committee on Banking and Financial Services. 6/15/1995: For Previous Action See H,.R.1362. 6/15/1995: For Previous Action See H.R.1362. thamas.loc.gov/cgi-bin/odquery/z?d104:HRO1 858:@@@L&summ2=mé& 8/10 015 492 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.4858 - All Information - THOMAS(Library ... 6/21/1995: Committee Consideration and Mark-up Session Held. 6/22/1995: ; Committee Consideration and Mark-up Session Held. 6/27/1995: Committee Consideration and Mark-up Session Held. 6/28/1995: Committee Consideration and Mark-up Session Held. 6/28/1995: Ordered to be Reported in the Nature of a Substitute by the Yeas and Nays: 27 - 23. 7/18/1995 6:27pm: Reported (Amended) by the Committee on Banking and Financial Services. H. Rept. 104-193, Part I. 7/18/1995 6:28pm: Placed on the Union Calendar, Calendar No. 98. 6/18/1996 6:21pm: Mr. Leach asked unanimous consent that the Committee on Banking and Financial Services be permitted to file a supplemental report on thebill. Agreed to without objection, 6/18/1996 6:45pm: Supplemental report filed by the Committee on Banking and Financial Services, H. Rept. 104-193, Part II. TITLE(S): (italics indicate a title for a portion ofa bill) e SHORT TITLE(S) AS INTRODUCED: Financial Institutions Regulatory Relief Act of 1995 Consumer Leasing Act Amendments of 1995 Equal Credit Opportunity Act Amendments of 1995 e SHORT TITLE(S) AS REPORTED TO HOUSE: Financial Institutions Regulatory Relief Act of 1995 Consumer Leasing Act Amendments of 1995 Equal Credit Opportunity Act Amendments of 1995 e OFFICIAL TITLE AS INTRODUCED: To reduce paperwork and additional regulatory burdens for depository institutions. COSPONSOR(S): eXNONEX** COMMITTEE(S): Committee/Subcommittee: Activity: House Banking and Financial Servi Referral, Markup, Reporting RELATED BILL DETAILS: (additional related bills may be indentified in Status) Bill: Relationship: H,R.1362 Related bill as identified by House committee H.R.2520 Related bill as identified by House committee AMENDMENT(S): KE KNONEX** Stay Connected with the Library All ways to connect » Find us on Subscribe & Comment Download & Play thomas.loc.gov/cgl-bin/bdquery/z?d104:HRO1858:@@@L&summ2=m& 9/10 016 492 Bill Summary & Status - 104th Congress (1995 - 1996) - H.R.1858- All Information - THOMAS(Library ... Ei [&) fe] RSS & E-Mail Blogs Podcasts Webcasts iTunes U About| Press | Site Map | Contact | Accessibility | Legal | External Link Disclaimer | USA.gov Speecn Enapiea "¥ thomas.loc.gov/cgl-bin/odquery/z?d104:HRO1 858:@@@L&summ2=m& 40/10 017 EXHIBIT C AUTHENTIC ATED. US. GOVERNMENT INFORMATION GPO, 104TH CONGRESS REPORT Ist Session HOUSE OF REPRESENTATIVES 104-193 FINANCIAL INSTITUTIONS REGULATORY RELIEF ACT OF 1995 JULY 18, 1995.—Committed to the Committee of the Whole House on the State of the Union and ordered to be printed Mr. LEACH, from the Committee on Banking and Financial Services, submitted the following REPORT together with MINORITY AND ADDITIONAL VIEWS {To accompany H.R. 1858] [Including cost estimate of the Congressional Budget Office] The Committee on Banking and Financial Services, to whom was referred the bill (H.R. 1858) to reduce paperwork and additional regulatory burdens for depository institutions, having considered the same, report favorably thereon with an amendment and rec- ommendthat the bill as amended do pass. The amendmentis as follows: Strike out all after the enacting clause and insert in lieu thereof the following: SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) SHORT TITLE.—This Act may becited as the “Financial Institutions Regulatory Relief Act of 1995”. (b) TABLE OF CONTENTS.—The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. TITLE I--REDUCTIONS IN GOVERNMENT OVERREGULATION Subtitle A—The Home Mortgage Process Sec. 101. Regulatory authority over disclosures and escrow accounts under RESPA transferred to Federal Re- serve Board. Sec. 102. Simplification and unification of disclosures required under RESPA and TILA for mortgage trans- actions. Sec. 103. Increased regulatory flexibility under the Truth in Lending Act. Sec. 104. Reductions in RESPA regulatory burdens; clarifying amendments. Sec. 105. Disclosures for adjustable rate mortgages. Sec. 106. Certain charges. Sec. 107, Exemptions from rescission. Sec. 108. Tolerances; basis of disclosures. Sec. 109. Limitation on liability. Sec. 110. Limitation on rescission liability. 92-275 018 Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec, Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec, Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. . Short title. Cc . Expanded regulatory . Cost reimbursement. ” Tdentification of foreign nonbank financial institution customers. . Paperwork reduction review. . Daily confirmations for hold-in-custody repurchase transactions. . Required regulatory review of regulations. . Country risk requirements. . Audit costs. . Standards for director and officer lability. . Calculation of damages. . Assignee Hability. . Rescission rights in foreclosure. . Recovery offees. . Home ownership debt counseling notification. . Home Mortgage Disclosure Act. . Applicability Subtitle B—Community Reinvestment Act Amendments . Expression of congressional intent. . Community Reinvestment Act exemption. . Self-certificatlon of CRA compliance. . Community input and conclusive rating. . Special purpose financlal institutions. ” Increased incentives for lending to Jow- and moderate-income communities. ’ Prohibition on additional reporting under CRA. . Technical amendment. . Duplicative reporting. . CRA congressionaloversight. . Consultation among examlners. . Limitation on regulations. Subtitle C--Consumer Banking Reforms . Truth tn Savings: . Information sharing. . Electronic Fund Transfer Act clarification. 4 Limit on restitution for Truth in Lending violations if safety and soundness of violator would beaf- fected. Subtitle D--Equal Credit Opportunity Act Amendments . Shorttitle. . Findings and purpese. . Equal Credit § . Faic Credit Reporting Act amendments. . Incentives for self-testing. . Credit scoring systems. . Consultation by Attorney General required in nonreferral cases. . Effective date. pportunity Act amendments. Subtitle E—Consumer Leasing Act Amendments ssionalfindings and dectaration of purpose. . Consumerlease advertising. 6. Statutory penalties. Subtitle F—Federal Home Loan Bank Amendments . Application for membership in the FHLBSystem. ’ Federal hometoan bank external auditors. TITLE Il--STREAMLINING GOVERNMENT REGULA TIONS Subtitle A—Regulatory Approval Issues . Streamlined nonbanking acquisitions by well capitaliz ed and well managed banking organizations. ” Streamlined bank acquisitions by well capitalized and we ll managed banking organizations. . Eliminate filing and approval requirements for Insu red depository institutions already controlled by the sameholding company. . Eliminate redundant approval requirementfor Oaka rtransactions. " Elimination of duplicative requirements imposed upon bank holding companies and other regulatory relief under the Hame Owners’ Loan Act. . Eliminate requirement that approval be obtained for d ivestitures. . Eliminate unnecess branch applications. . Eliminate branch applications and requirements for ATM s and similar facilities. . Eliminate requirement for approval of investments in b ank premises for well capitalized and well managed banks. . Eliminate unnecessary Giltng for officer and director appoi ntments. . Streamlining process for detétmining new nonbanking a ctivities. . Disposition of foreclosed assets. ’ Increase in certain credit union loanceilings. Subtitle B—Streamlining of Government Regulations, M iscellaneous Provisions . Eliminate the per-branch capital requirement for n ational banks and State member banks. . Branch closures. - Amendments to the Depository Institutions Managem ent Interlocks Act. . Acceleration of repayment to Treasury. ’ Eliminate unnecessary and duplicative recordkeepi ng and reporting requirements relating to loans to executive officers andpermit participation in employee benefit plans. iscretion for small bank examinations. 019 Sec. 235. Foreign bank applications. Sec. 236. Duplicate examinationof forelgn banks. Sec. 237. Second mortgages. Sec. 238. Streamlinin, DIC approval of new State bank powers. Sec. 239. Repeal ofcall report attestation requirement. Sec. 240. Authority of the Comptroller of the Currency. Sec. 241. National bank community development insuranceactivities. Sec. 242. Authorizing bank service companies to organize as limited liability partnerships. Sec. 243. Bank investments In Edge Act and agreementcorporations. : Sec. 244. Report on the reconciliation of differences between regulatory accounting principles and generally ac- cepted accounting principles. Sec. 245. Waivers authorizedfor residency requirementfor national bank directors. TITLE IN]—LENDERLIABILITY Sec. 301. Lender liability. TITLE IV—ANNUAL STUDY AND REPORT ON IMPACT ON LENDING TO SMALL BUSINESS Sec. 401. Annual study and report. TITLE I—REDUCTIONS IN GOVERNMENT OVERREGULATION Subtitle A—The Home Mortgage Process SEC. 101. REGULATORY AUTHORITY OVER DISCLOSURES AND ESCROW ACCOUNTS UNDER RESPA TRANSFERRED TO FEDERAL RESERVE BOARD. (a) IN GENERAL.—Sections 4, 5, 6, and 10(d) of the Real Estate Settlement Proce- dures Act of 1974 (12 U.S.C. 2601 et seq.) are amendedbystriking “Secretary” each place such term appears and inserting “Board”. (b) CLARIFICATION OF PURPOSE.—Section 2(b)(2) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601(b){2)) is amended by inserting the following before the semicolon at the end: “without-— “{B} directly regulating settlement services prices; or * directly regulating wages to bona fide employees that are not de- . signed as a subterfuge to facilitate kickbacks amongaffiliated companies”. (c) BOARD DEFINED.—Section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602) is amended— (1) by striking “and” at the end of paragraph(7); 2) by striking the period at the end of paragraph (8) and inserting “; and”, an (3) by adding at the end the following new paragraph: “(9) the term ‘Board’ means the Board of Governors of the Federal Reserve System.”. (d) NEGOTIATED REGULATIONS UNDER SECTIONS 8 AND 9.—Section 8 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2607) is amended by adding at the end the following new subsection: “(e) NEGOTIATED REGULATIONS.— “(1) IN GENERAL.—The Secretary may not publish a proposed or final regula- tion under this section and section 9 after the date of the enactmentof the Fi- nancial Institutions Regulatory Relief Act of 1995 unless the Secretary has used the negotiated rulemaking procedure established under subchapterIII of chap- ter 5 of title 5, United States Code, to attempt to negotiate and develop the rule, “(2) CONSISTENCY WITH PURPOSE.—Any regulation prescribed in accordance with paragraph (1) shall be consistent with the purposesof this title as set forth in section 2.”. (e) ADMINISTRATIVE ENFORCEMENT OF PROHIBITION AGAINST KICKBACKS AND UN- EARNED FEES.—Section 8 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2607) is amended by adding after subsection (e) (as added by subsection (d) of this section) the following new subsection: “(f) ADMINISTRATIVE ENFORCEMENT.— “(1) IN GENERAL.—Compliance with the requirements of this section and sec- tions 9 and 12 shall be enforced under this Act— “(A) in the case of an insured depository institution (as defined in section 3 of the Federal Deposit Insurance Act), by the appropriate Federal banking agency(as defined in suchsection); “(B) in the case of an insured credit union (as defined in section 101(7) of the Federal Credit Union Act), by the National Credit Union Administra- tion; 020 4 “(C) in the case of a bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956) and anyaffiliate of any s uch holding company (other than an insured depository institution), by the Board; “(D) in the case of a savings and loan holding company {as define d in sec- tion 10 of the Home Owners’ Loan Act) and any affiliate of an y such hold- ing company (other than an insured depository institution), by the Director of the Office-of Thrift Supervision; and “(E) in the case of any other person, by the Secretary. “(2) SPECIAL RULES RELATING TO DETERMINATION OF APPROPRIATE REGU- LATOR.— “(A) CASES OF MORE THAN 1 APPROPRIATE REGULATOR.— If, under para- graph (1), a company may be regulated by more than | agency, th e Board shall determine which agency shall be the responsible agency, notwith- standing paragraph(1). “(B) CASES INVOLVING JOINT VENTURES, PARTNERSHIPS, A ND OTHER AFFILI- ATED BUSINESS ARRANGEMENTS.—If any insured depository institut ion is in- volved in a joint venture, partnership, or other affiliated business arrange- ment with any person who is not an insured depository inst itution, the agency responsible for enforcing this section and sections 9 and 12 with re- spect to such insured depository institution shall be the agenc y with such responsibility with respect to such joint venture, partnership, or other a ffili- ated business arrangement. “(3) INTERAGENCY COOPERATION AND ENFORCEMENT GUIDELINES.—AIl_ the agencies referred to in any subparagraph of paragraph (1) shall co operate with each other to develop enforcement guidelines and other means for achieving ef- fective compliance with this section and sections 9 and 12. “(4) PREFERENCE FOR CIVIL ENFORCEMENT OVER CRIMINA L ENFORCEMENT,—As art of the cooperative efforts required under paragraph (3), the agencies re- erred to in paragraph (1) shall consider means for achieving com pliance with this section and section 9 through the exercise of administrative enforcement authority under this subsection without resorting to criminal enf orcement ac- tions under subsection (d) except in appropriate cases. “(5) EFFECTIVE DATE.—Paragraphs Gh) and (2) shall not take effect until joint interagency cooperation and enforcement guidelines are ado pted by all the agencies to whicn paragrapns (1) aud (2) appiy aint iw enor commen toauthorttsy of the Secretary with respect to this section and sections 9 a nd 12 shall con- tinue until such paragraphs takeeffect.”. (f) INCREASED SCIENTER REQUIREMENT FOR CRIMINA L PENALTY.—Section 8(d) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2607(d)) is amended— (1) in paragraph (1), by inserting “willfully” after “persons who"; and (2) in paragraph (3), by striking “was not intentional and”. (g) REDESIGNATION OF CONTROLLED BUSINESS ARRAN GEMENTS AS AFFILIATED BUSINESS ARRANGEMENTS.—The Real Estate Settlement Procedure s Act of 1974 (12 U.S.C. 2601 et seq.) is amended— (1) in section 3(7), by striking “controlled business arrang ement” and insert- ing “affiliated business arrangement”, and 2) in subsections (c)(4) and (d)(6) of section 8, by striking “controlled business arrangements”andinserting “affiliated business arrangements”. (h) TECHNICAL AND CONFORMING AMENDMENTS.— (1) Section 4(a) of the Real Estate Settlement Proced ures Act of 1974 (12 U.S.C. 2603(a)) is amended by striking “Federai Home Loa n Bank Board” an inserting “Director of the Office of Thrift Supervision”. (2) Section 8(d)(4) of the Reali Estate Settlement Proce dures Act of 1974 (12 U.S.C. 2607(d)(4)) is amended by inserting “any other agency desc ribed in sub- section (f)(1),” after “the Secretary,”. (3) Section 10(c)(1)(C) of the Real Estate Settlement Proce dures Act of 1974 G2 U.S.C. 2609(c}{1)(C)) is amended bystriking “Not later than t he expiration of the 90-day period beginning on the date of the enactment of t he Cranston- Gonzalez National Affordable Housing Act, the” and inserting “The”. (4) Section 16 of the Real Estate Settlement Procedu res Act of 1974 (12 U.S.C. 2614) is amended bystriking “Secretary,” and inserting “Boa rd, an agen- cy referred to in any subparagraphofsection 8(H(1).”. (5) Section 18 of the Real Estate Settlement Procedu res Act of 1974 (12 U.S.C. 2616) is amended— (A) by striking “Secretary is authorized to” and inserting “Board and Sec- retary may jointly”, (B) by striking “Secretary” each place such term appears other than the Ist place and inserting “Board and Secretary”; and 021 5 (C) by striking “determines that such laws” and inserting “determine that such laws”. (6) Section 19(a) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2617(a)) is amended to read as follows: “(a) REGULATIONS.—~ “(1) IN GENERAL.—Subject to paragraph (2), the Secretary and the Board may prescribe such regulations, make such interpretations, and grant such reason- able exemptions for classes of transactions, as may be necessary to achieve the purposes of this Act. “(2) APPLICATION.— “(A) Boarp.—The authority of the Board under paragraph (1) shall apply with respect to— “O sections 4, 5, 6, 10, and 12; and “(ii) sections 3, 7, 17, and 18 to the extent such sections are applica- ble with respect to the sections described in clause(i). “(B) SECRETARY.—The authority of the Secretary under paragraph (1) shall apply with respect to— 10 sections 8 and 9; and “(ii) sections 3, 7, 17, and 18 to the extent such sections are applica- ble with respect to the sections described in clause(i). ”. (7) Section 19(b) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2617(b)) is amended by inserting “, the Board,” after “the Secretary”. (8) Section 19(c) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2617(c)) is amended— (A) in paragraph (1) (i) by striking “Secretary” the Ist place such term appears andinsert- ing “Board, with respect to any action to enforce section 4, 5, 6, or 10, and each agency referred to in any subparagraphofsection 8(f)(1), with respect to any action to enforce section 8, 9, or 12,”; and (ii) by striking “Secretary” each place such term appears other than the ist place and inserting “Board or such other agency”; and (B) in paragraph (2), by striking “Secretary” and inserting “Board or an agencyreferred to in any subparagraphof section 8(f)(1)”. (9) The heading for section 19 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2617) is amended to read as follows: “AUTHORITY OF THE SECRETARY AND THE FEDERAL RESERVE BOARD”. (i) REPEAL OF OBSOLETE PROVISIONS.—The Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 et seq.) is amended by striking sections 13, 14, and 15. SEC. 102. SIMPLIFICATION AND UNIFICATION OF DISCLOSURES REQUIRED UNDER RESPA AND TILA FOR MORTGAGE TRANSACTIONS. (a) IN GENERAL.-——With respect to credit transactions which are subject to the Real Estate Settlement Procedures Act of 1974 and the Truth in Lending Act, the Board of Governors of the Federal Reserve System shall take such action as may be nec- essary before the end of the 3-month period beginning on the date of the enactment of this Act— (1) to simplify the disclosures applicable to such transactions under such Acts, including the timing of the disclosures; and (2) to provide a single format for such disclosures which will satisfy the re- quirements of each such Act with respect to such transactions. (b) RECULATIONS.—To the extent that it is necessary to prescribe any regulation in order to effect any changes required to be made under subsection ta), the pro- posed regulation shall be published in the Federal Register before the end of the 3-monthperiod referred to in subsection (a). (c) RECOMMENDATIONS FOR LEGISLATION.—If the Board of Governors of the Fed- eral Reserve System finds that legislative action may be necessary or appropriate in order to simplify and unify the disclosure requirements under the Real Estate Settlement Procedures Act of 1974 and the Truth in Lending Act, the Board shall submit a report containing recommendations to the Congress concerning such ac- tion. SEC. 103. INCREASED REGULATORY FLEXIBILITY UNDER THE TRUTH IN LENDING ACT. (a) REGULATORY FLEXIBILITY.—Section 104 of the Truth in Lending Act (15 U.S.C. 1603) is amended by adding at the end the following new paragraph: “(7) Transactions for which the Board, by regulation, determines that cov- erage underthe Act is not needed to carry out the purposesof the Act.”. 022 6 (b) EXEMPTIVE AuTHoRITY.—Section 105 of the Truth in Lending Act (15 U.S.C. 1604) is amended— (1) by redesignating subsections (b), (©), and (d) as subs ections (c), d), and (e), respectively; and (2) by inserting after subsection (a) the following new su bsection: “(b) EXEMPTIVE AUTHORITY.— “(1) IN GENERAL.—The Board: shall exempt from all.or parts. of this title any class of transactions for which, in the Board's judgment , coverage underall or part of this title does not provide a measurable benefit t o consumers in the form of useful information or protection. “(2) FACTORS TO BE CONSIDERED.—In determin ing which classes of trans- actions to exempt in whole or in part, the Board sh all consider, among other factors, the following: “(A) The amountof the loan or closing costs an d whetherthe disclosures, right of rescission, and other provisions are necessary, particularly for small loans. “(B) Whether the requirements of this title complicat e, hinder, or make more expensive the credit process for the class of trans actions. “(C) The status of the borrower, including, th e borrowers’ related finan- cial arrangements, the financial sophistication of the borrowerrelative to the type of transaction, and the importance of the c redit and related sup- porting property to the borrower.”. SEC. 104, REDUCTIONS IN RESPA REGULATORY BURDENS;CLA RIFYING AMENDMENTS. (a) UNNECESSARY DISCLOSURE.—Section 6(a) of the R eal Estate Settlement Proce- dures Act of 1974 (12 U.S.C. 2605) is amended to read as follows: “(a) DISCLOSURE TO APPLICANT RELATING TO AS SIGNMENT, SALE, OR TRANSFER OF LOAN SERVICING.— “(1) IN GENERAL.—Each person who makes a federally related mortgage loan shall disclose to each person who applies for any such loan, at the time of appli- cation for the loan, whether the servicing of any su ch loan may be assigned, sold, or transferred to any other person at any time wh ile such loan is outstand- ing. fio) SIGNATURE OF APPLICANT.—-Any disclosure of the i nformation required under paragraph (1) shall not be effective tor putpuses ui Unis oeviiess UFICOS St disciosure is accompanied by a written statement, in s uch form as the Secretary shall develop before the expiration of the 180-day per iod beginning on the date of the enactment of the Financial Institutions Regulat ory Relief Act of 1995, that the applicant has read and understood the disclo sure and that is evidenced by the signature of the applicant at the place wher e such statement appears in the application.”. (b) EFFECTIVE DATE.—The amendments made by subs ection (a) shall take effect 180 days after the date of the enactment of this Act. (c) SECOND MorTGAGES.-—Section 3(1)(A) of the Real Estate Settlement Proce- dures Act of 1974 (12 U.S.C. 2602(1)(A)) is amende d by striking “or subordinate”. (d) CONSISTENCY OF RESPA AND TRUTH IN LEN DING ACT EXEMPTION OF BUSINESS LoANS.—Section 7 of the Real Estate Settleme nt Procedures Act of 1974 (12 U.S.C. 2606) is amended— (1) by inserting “{a) IN GENERAL.—”before “This Act”; and (2) by inserting at the end the following new subsection: “(b) INTERPRETATION.—In issuing regulations pursuant to section 19(a) of this Act, the Board shall ensure that, with regard to su section (a), the exemption for busi- ness credit includes all business credit which is exempt from the Truth in Lending Act in accordance with section 226.3(a) of the regulatio ns prescribed by the Board known as‘regulation Z' (12 C.F.R. 226.3{a)), as in effect on the date of enactment of the Financial Institutions Regulatory Relief Act of 19 95.”. SEC. 105. DISCLOSURES FOR ADJUSTABLE RATE MORTGAGES. (a) IN GENERAL.—Section 127A(a)(2)(G) of the Truth in Lending Act (i5 U.S.C. 1637a(a)(2)(G)) is amended by inserting before the semicolon “, or a statement that the monthly payment may increase or decrease significa ntly due to increases in the annual percentage rate”. (b) TECHNICAL AND CONFORMING AMENDMENT.—S ection 127A(b)(3} of the Truth in Lending Act (15 U.S.C. 1637a(b)(3)) is amended by striking “required under” and inserting “referred to in”. (c) ALTERNATIVE TO HISTORICAL ExXaMPLE.—Sec tion 128(a) of the Truth in Lend- ing Act (15 U.S.C. 1638(a)) is amended by inse rting at the end the following new paragraph: 023 7 “(14) In any variable rate transaction secured by the consumer's principal dwelling with a term greater than 1 year, at the creditors’ option, a statement that the monthly payment may increase or decrease substantially, or a histori- cal exampleillustrating the effects of interest rate changes implemented accord- ing to the loan program.”. (d) ENSURING HONORING OF LOCK-IN PROMISES.—Section 128(b) of the Truth in Lending Act (15 U.S.C. 1638(b)) is amended by adding at the end the following new paragraph: “(3) In the case of a residential mortgage transaction, the disclosures under sub- section (a) shall include the following: “(A) The note rate and points, and a statement, if applicable, that these terms are subject to change. “(B) A statement that the creditor must include the disclosed note rate and points in the credit agreement unless, in relation to either or both of those terms— “(i) the disclosure clearly and conspicuously indicates that the term is subject to change, or Gi) in the case of any term to which clause(i) does not apply— “() the creditor has clearly and conspicuously indicated that the term is conditioned on closing the transaction within a prescribed time; “(I) the creditor has promptly and clearly communicated to the consumerthe information and documentation that the consumeris re- quired to provide to the creditor; and “(Ithe consumer has failed to provide such information and docu- mentation within a reasonable time after receiving that communica- tion.”. SEC. 106. CERTAIN CHARGES. (a) THIRD Party FEES.-—-Section 106(a) of the Truth in Lending Act (15 U.S.C. 1605(a)) is amended by adding after the 2d sentence the following new sentence: “The finance charge shall not include fees and amounts imposed by third party clos- ing agents (including settlement agents, attorneys, and escrow andtitle companies) if the creditor does not expressly require the imposition of the charges or the serv- ices provided and does not retain the charges.”. (b) MORTGAGE BROKER FEES.—Section 106(a) of the Truth in Lending Act (15 U.S.C. 1605(a)) is amended by adding at the end the following new paragraph: (6) Mortgage brokerfees.”. (c) TREATMENT OF CERTAIN DEBT CANCELLATION AND DEFICIENCY WAIVER CON- TRACTS.-—Section 106(c) of the Truth in Lending Act (15 U.S.C. 1605(c)) is amended . to read as follows: “(c) TREATMENT OF CERTAIN DEBT CANCELLATION AND DEFICIENCY WAIVER CON- TRACTS.--Charges or premiums for any insurance or for any voluntary noninsurance product, written in connection with any consumercredit transaction, that provides protections against loss of or damage to property or against part or all of the debt- or's liability for amounts in excess of the value of the collateral securing the debtor's obligation, or against liability arising out of the ownership or use of property, shall be included in the finance charge unless a clear and specific statement in writing is furnished by the creditor to the person to whom thecredit is extended, setting forth the cost of the insurance or product if obtained from or through the creditor, and stating that the person to whom credit is extended may choose the person through which the insurance or product is to be obtained.”. (d) TAXES ON SECURITY INSTRUMENTS OR EVIDENCES OF INDEBTEDNESS.—-Section 106(d) of the Truth in Lending Act (15 U.S.C. 1605(d)) is amended by adding at the end the following new paragraph: “(3) Any tax levied on security instruments or on documents evidencing in- debtedness if the payment of such taxes is a precondition for recording the in- strument securing the evidence of indebtedness.”. (e) PREPARATION OF LOAN DOCUMENTS.—Section 106(e)(2) of the Truth in Lending Act (15 U.S.C. 1605{e)(2)) is amended to read as follows: “(2) Fees for preparation of loan-related documents and for attending or con- ducting settlement.”. (f) FEES RELATING TO PEST INFESTATIONS, INSPECTIONS, AND HAZARDS.—Section 106(e)(5) of the Truth in Lending Act (15 U.S.C. 1605(e)(5)} is amended by inserting “| including fees related to pest infestations, premises and structural inspections, and flood hazards” before the period. (g) ENSURING FINANCE CHARGES REFLECT COST OF CREDIT.— (1) REPORT.— 024 8 (A) IN GENERAL.—Not later than 6 months after the date of the en act- ment of this Act, the Board of Governors of the Federal Reserve System shall submit to the Congress a report containing recommendations on any regulatory or statutory changes necessary— (i) to ensure that finance charges imposed in connection with consumer credit transactions more accurately reflect the cost of provid- ing credit; and ii} to address abusive refinancing practices engaged in solely for the urpose of avoiding rescission. wy REPORT REQUIREMENTS.—In preparing the report under this p ara- graph, the Board shall— (i) consider the extent to which it is feasible to include in finance charges all charges payable directly or indirectly by the consumer to whom credit is extended, and imposed directly or indirectly by the cred- itor as an incident to the extension of credit (especially those char ges excluded from finance charges under section 106 of the Truth in Lend- ing Act as of the date of the enactment of this Act), excepting only those charges which are payable in a comparable cash transaction; and (ii)~consult with and consider the views of affected indust ries and consumer groups. (2) REGULATIONSThe Board of Governors of the Federa l Reserve System shall prescribe any appropriate regulation in orderto effect any change included in the report under paragraph (1), and shali publish the regulation in the Fed- eral Register before the end of the I-year period beginning on the date of en act- ment of this Act. SEC. 107. EXEMPTIONS FROM RESCISSION. (a) CERTAIN REFINANCING.—Section 125(e} 1635(e)) is amended— 0 by striking “or” at the end of paragraph (3); 2) by striking the period at the end of paragraph (4) and inserting “; or”: and (3) by adding at the end the following new paragraph: “(5) ‘a transaction, other than a mortgage referred to in section 103(aa), which— "fA) te a refinancing of the orincioal balance then due and any accrued and unpaid finance chargesof a residential mortgage transaction as derinea in section 103(w), or is any subsequent refinancing of such a transaction; and “(B) does not provide any new consolidation or new advance.”. (b) TECHNICAL AND CONFORMING AMENDMENT.—Section 125(e)(2) of the Truth in Lending Act (15 U.S.C. 1635(e)(2)) is amended by inserting “, other than a trans- action described in subsection (e)(5),” after “a refinancing or consolidation (with no new advances)”. SEC. 108. TOLERANCES; BASIS OF DISCLOSURES. (a) TOLERANCES FOR ACCURACY.—Section 106 of the Truth in Lending Act (15 U.S.C. 1605) is amended by adding at the endthe following new subsection: “(f} TOLERANCES FOR ACCURACY.—In connection with credit transactions not under an open-end credit plan that are secured. by real property or a dwelling, the disclosure of the finance charge and other disclosures affected by any finance charge— 8 “(1) except as provided in paragraph (2), shall be treated as being accurate for purposesof this title if the amount disclosed as the finance charge— “(A) does not vary from the actual finance charge by more than an amount equal to '4 of the numerical tolerance corresponding to, and gen- erated by, the tolerance provided by section 107(c) with respect to the an- nual percentage rate, but in no case may the tolerance under this para- graph be less than $25 or greater than $200; or “fB) is greater than the amount required to be disclosed underthis title; and “(2) shall be treated as being accurate for purposes of section 125 if the amount disclosed as the finance charge does not vary from the actual finance charge by more than an amount equal to 0.5 percent of the total amount of credit extended.”. (b) BASIS OF DISCLOSURE FOR PER DIEM INTEREST.—Section 121(c) of the Truth in Lending Act (15 U.S.C. 1631(c)) is amended by adding at the end the following new sentence: “In the case of any consumercredit transaction a portion of the inter- est on which is determined on a per diem basis andis to be collected upon the con- summation of such transaction, any disclosure with respect to such portio n of inter- 025 9 est shall be deemed to be accurate for purposesof thistitle if the disclosure is based on information actually known to the creditor at the time that the disclosure docu- ments are being prepared for the consummation of the transaction.”. SEC. 109. LIMITATION ON LIABILITY. (a) IN GENERAL.—Chapter 2 of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended by adding at the end the following new section: “SEC. 139. CERTAIN LIMITATIONSON LIABILITY. “(a) LIMITATIONS ON LIABILITY.—-For any consumer credit transaction subject to this title that is consummated before the date of the enactment of the Financial In- stitutions Regulatory Relief Act of 1995, a creditor or any assignee of a creditor shall have no civil, administrative, or criminal liability under this title for, and a consumer shall have no extended rescission rights under section 125(f) with respect to— “(1) the creditor's treatment, for disclosure purposes, of-— "(A) taxes described in section 106(d)(3): “(B) fees and amounts described in section 106{e) (2) and (5); “(C) fees and amounts referred to in the 3rd sentence of section 106(a); or “(D) mortgage brokerfees referred to in section 106(a) (6); “(2) the form of written notice used by the creditor to inform the obligor of the rights of the obligor under section 125 if the creditor provided the obligor with a properly dated form of written notice published and adopted by the Board or a comparable written notice; or “(3) any disclosure relating to the finance charge imposed with respect to the transaction if the amountor percentage actually disclosed— “(A) may be treated as accurate pursuantto section 106(f), or "(B) is greater than the amount or percentage required to be disclosed underthistitle. : “(b) EXCEPTIONS.—Subsection (a) shall not apply to— “(1) any individual action or counterclaim brought underthis title which was filed before June 1, 1995; “(2) any class action brought underthis title for which a final order certifying a class was entered before January 1, 1995; “(3) the named individual plaintiffs in any class action brought under this title which wasfiled before June 1, 1995; or “(4) any consumercredit transaction with respect to which a timely notice of rescission wassentto the creditor before June 1, 1995.”. (b) CLERICAL AMENDMENT.—The table of sections for chapter 2 of the Truth in Lending Act is amended by inserting after the item relating to section 138 the fol- lowing new item: “139. Certaln limitations on liability.”. SEC. 110. LIMITATION ON RESCISSIONLIABILITY. Section 125 of the Truth in Lending Act (15 U.S.C. 1635) is further amended by adding at the end the following new subsection: “(h) LIMITATION ON RESCISSION.—An obligor shall have no rescission rights aris- ing from the form of written notice used by the creditor to inform the obligor of the rights of the obligor under this section, if the creditor provided the obligor the ap- propriate form of written notice published and adopted by the Board, or a com- parable written notice of the rights of the obligor, that was properly completed by the creditor.”. SEC. 111. CALCULATION OF DAMAGES. Section 130(a)(2)(A) of the Truth in Lending Act (15 U.S.C. 1640({a){2)(A)) is amended— (1) by striking “or (ii)” and inserting “(ii)”: and (2) by inserting before the semicolon at the end the following: “, or (iii) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $250 or greater than $2,500". SEC. 112. ASSIGNEE LIABILITY. (a) VIOLATIONS APPARENT ON THE FACE OF TRANSACTION DOCUMENTS.—Section 131 of the Truth in Lending Act (15 U.S.C. 1641) is amended by adding at the end the following new subsection: “(e) LIABILITY OF ASSIGNEE FOR CONSUMER CREDIT TRANSACTIONS SECURED BY REAL PROPERTY.— 026 10 “(1) IN GENERAL.—Except as otherwise specifically provided in this t itle, any civil action against a creditor for-a violation of this title, and any pr oceeding under section 108 against a creditor, with respect to a consumer cred it trans- action secured by real property may be maintained against any assigne e of such creditor only if— “(A) the violation for which such action or proceedingis brought is app ar- ent on the face of the disclosure statement provided in connection with s uch transaction pursuantto this title; and “(B) the assignmentto the assignee was voluntary. “(2) VIOLATION APPARENT ON THE FACE OF THE DISCLOSURE DE SCRIBED.—For the purpose of this section, a violation is apparent on the face of the discl osure statement if— “(A) the disclosure can be determined to be incomplete or in accurate from the face of the disclosure statement, any itemization of the amount fi- nanced, or any other disclosure of disbursement; or : “(B) the disclosure statement does not use the terms or format required to be used by thistitle.”. (b) SERVICER Not TREATED AS ASSICNEE.—Section 131 of the Truth in Lending Act (15 U.S.C: 1641) is amended by inserting after subsectio n (e) (as added.by sub- - section (a) of this section) the following new subsection: “(f) TREATMENT OF SERVICER.— “() IN GENERAL.—A servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as an assignee of su ch obliga- : \ tion for purposes of this section unless the servicer is the owner of the obl iga- tion. - : “(2) SERVICER NOT TREATED AS OWNER ON BASIS OF ASSIGNMEN T FOR ADMINIS- TRATIVE CONVENIENCE.—A servicer of a consumer obligation arising fro m a consumer credit transaction shall not be treated as the ownerof the o bligation for purposesof this section on the basis of an assignmentof the obligation f rom the creditor or another assignee to the servicer solely for the administra tive con- venience of the servicer in servicing the obligation. Upon written request by the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone numberof the owner o f the ob- lication or the masterservicer of the obligation. “(3) SERVICER DEFINED.—For purposes of [nis suosecuon, Wie eau sea view” has the same meaning as in section 6{(i)(2) of the Real Estate Settlement. Pr ace- dures Act of 1974.”. SEC. 113. RESCISSION RIGHTS IN FORECLOSURE. Section 125 of the Truth in Lending Act (15 U.S.C. 1635) is amended by i nserting after subsection (h) (as added by section 110) the following new subsectio n: “@) RESCISSION RIGHTS IN FORECLOSURE.— “(1) IN GENERAL.-—Notwithstanding section 139, and subject to the time pe- riod provided in subsection (f), in addition to any other right of rescissio n avail- able under this section for a transaction, upon an action of a creditor to execute foreclosure on the primary dwelling of an obligor securing an extension of cr ed- it, the obligor shall have a right to rescind the transaction equivalent to other rescission. rights provided by this.section, if— “(A) a mortgage brokers fee is not included in the finance charge in ac- cordance with the laws and regulations in effect at the time the consum er credit transaction was consummated; or “(B) the form of notice of rescission for the transaction is not the appro- priate form of written notice published and adopted by the Board or a co m- arable written notice, or was not properly completed by the creditor. “(2) TOLERANCE FOR DISCLOSURES.——Notwithstanding section 106(f), a nd sub- ject to the time period provided in subsection (f), for the purposes of ex ercising any rescission rights following an action by a crediter te foreclose on the pr in- cipal dwelling of the obligor securing an extension of credit, the disclosure of the finance charge and other disclosures affected by any finance charge sh aii be treated as being accurate for purposes of this section if the amount d isclosed as the finance charge does not vary from the actual finance charge by mo re than $35 or is greater than the amount required to be disclosed und er this title.”. SEC. 114. RECOVERY OF FEES. Section 125(b) of the Truth in Lending Act (15 U.S.C. 1635) is a mended— (1) in the Ist sentence, by inserting “, except any charge for an appraisal re- port or credit report” after “other charge”, and 027 11 (2) in the 2d sentence, by striking “otherwise” and inserting “as otherwise re- quired under this subsection”. SEC. 115. HOME OWNERSHIP DEBT COUNSELING NOTIFICATION. Section 106(c) of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x(c)) is amendedby striking paragraph (5). SEC. 116. HOME MORTGAGE DISCLOSUREACT. (a) Section 309 of the Home Mortgage Disclosure Act. of 1975 (12 U.S.C. 2808) is amended— (1) in the 2d sentence, by striking “$10,000,000” and inserting “$50,000,000”; and (2) by inserting at the end the following new sentences: “The Board mayalso, by regulation, exempt from the provisions of this Act institutions specified in section 303(2)(A}) which have total assets as of their last full fiscal year of $50,000,000 or greater where the burden of complying with this Act on such in- stitutions outweighs the usefulness of the information required to be disclosed. The exemptions provided under this section shall not be applicable to an insti- tution which the Board, by order, has found a reasonable basis to believe is not fulfilling its obligations to serve the housing needs of the communities and neighborhoods in which it located. An institution subject to such an order shall be required to comply with the requirements of this Act for loans made after the time that the order is issued at such time and for such period as the Board deems appropriate. The dollar amountin this section shall be adjusted annually after December 31, 1994, by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published by the Bu- reau of Labor Statistics.”. (b) Section 304 of the Home Mortgage Disclosure Act of 1975 (12 U.S.C. 2803) is amendedby adding at the end the following new subsection: “(m) OPPORTUNITY TO REDUCE COMPLIANCE BURDEN.— “(1) A depository institution shall be considered to have satisfied the public availability requirements of subsection (a) if such institution keeps the informa- tion required under that subsection at its homeoffice and provides notice at the branch locations specified in such subsection that such information is available upon request from the homeoffice of the institution. A homeoffice of the deposi- tory institution receiving a request for such information pursuant to this sub- section shall provide the information pertinent to the location of the branch in question within fifteen days of the receipt of the written request. “(2) In complying with paragraph (1), a depository institution may provide the individual requesting such information, at the institution's choice, with— “(A) a paper copy of the information requested; or “(B) if acceptable to the individual, the information through a form of electronic medium, such as computerdisc.”. SEC. 117. APPLICABILITY. (a) IN GENERAL.—The amendments made by subsections(a), (d), (e), and (f) of sec- tion 106 and sections 108, 112, and 113 shall apply to all consumer credit trans- actions in existence or consummated on or after the date of enactment of this Act. (b) ExCEPTION.—-Notwithstanding subsection (a), in the case of— (1) an individual action or a counterclaim referred to in section 139(b)(1) of the Truth in Lending Act, as amended by section 109(a) of this Act; (2) a class action referred to in section 139(b)(2) of that Act; (3) a claim of an individual as a named individual plaintiff in a class action referred to in section 139(b)(3) of that Act; or (4) a claim relating to a consumer credit transaction referred to in section 139(b)(4) of that Act; the Truth in Lending Act shall apply as in effect on the date of the consummation of the consumercredit transaction that is the subject of the individual action, coun- terclaim, class action, or claim, respectively. Subtitle B—Community Reinvestment Act Amendments SEC. 121. EXPRESSION OF CONGRESSIONAL INTENT. Subsection (b) of section 802 of the Community Reinvestment Act of 1977 (12 U.S.C. 2901) is amended to read as follows: 028 12 “(b) It is the purpose of this title to require each appropriate Fed eral financial su- pervisory agency to use its authority, when examining financial i nstitutions, to en- courage such institutions to help meet the credit needs of the loca l communities in which they are chartered consistent with the safe and sound opera tion of suchinsti- tutions. When examining financial institutions, a supervisory age ncy shall not im- pose additional burden, recordkeeping, or reporting upon such i nstitutions.”. SEC. 122. COMMUNITY REINVESTMENT ACT EXEMPTION. The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) is amended by adding at the end the following newsection: “SEC. 809. EXAMINATION EXEMPTION. “(a) IN GENERAL.—A regulated financial institution shall not be subject to the ex- amination requirements ofthis title or any regulations issued under this section if the institution and any bank holding company which controls such institution have aggregate assets of not more than $100,000,000. “(b) ANNUAL ADJUSTMENT.—The dollar amount in subsection (a) shall be adjusted annually after December 31, 1994, by the annual percentage increase in the ConsumerPrice Index for Urban Wage Earners and Clerical Workers published by the Bureau of Labor Statistics.”. . SEC. 123. SELF-CERTIFICATION OF CRA COMPLIANCE. Section 804 of the Community Reinvestment Act of 1977 (12 U.S.C. 2903) is amended by adding at the end the following new subsection (c): “(c) SELF-CERTIFICATION OF CRA COMPLIANCE.— “(1) CERTIFICATION.—In lieu of being evaluated under sec tion 806A and re- ceiving a written evaluation under section 807, a qualifying financial i nstitution mayelect.to self-certify to the appropriate Federal financial su pervisory agency that such institution is in compliance with the goals of thistitle. “(2) QUALIFYING INSTITUTION.— “(A) IN GENERAL.—For purposes of paragraph (1), the. term ‘quali fying in- stitution’ means a financial institution which— “(i) has not more than $250 million in assets; “(ii) has not been found to have engaged in a pattern or pra ctice of illegal discrimination under the Fair Housing Act or the Equal Cr edit Aenertunity Act for the nreceding 5-vear calendar period: an “(iii) received rating under section 807(b)(Z) of ‘satista ctory or out- standing’ in the most recent evaluation of such institution und er t title. “(B) ANNUAL ADJUSTMENT.—The dollar amount in subpa ragraph (A) shall be adjusted annually after December 31, 1994, by the annual perce ntage in- crease in the Consumer Price Index for Urban Wage Earners and Clerical Workers published by the Bureau of Labor Statistics. “(3) PUBLIC NOTICE.— “(A) IN GENERAL.—A qualifying institution shall maintain in ever y branch a public notice stating that— “(i) the institution has self-certified that the institutio n is satisfac- torily helping to meetthe credit needs of its community; “(i) the institution maintains— “() at the main office of such institution, a public file w hich con- tains a copy of theself-certification to the appropriate Federa l fi- nancial supervisory agency, and “(I1) a map delineating the community served by the institut ion; “(iii) a list of the types of credit and services that the in stitution pro- vides to the community served by theinstitution, “(iv) such other information that the institution belie ves dem- onstrates the institution's record of helping to meet the credit need s of its community, and “(v) every public comment or letter to the institution (and any re- sponse by the institution) received within the previous 2-year perio about the record of the institution of helping to meet the credit n eeds of its community. “(B) PUBLIC FILE.—A qualifying institution shall maintain a public file containing the contents described in this paragraph at the institut ion's main office “(4) RATING.— “(A) IN GENERAL.—A qualifying institution shall be deemed to have a rat- ing of a ‘satisfactory record of meetin community credit needs’ for the pur- poses of this section and section 806A c). 029 13 “(B) PUBLICATION.—Each Federal financial supervisory agency shall pub- lish in the Federal Register once each montha list of institutions that have self-certified during the previous month. “(C) PUBLICATION CONSTITUTES DISCLOSURE.—Publication of the name of the institution in the Federal Register as having self-certified shall con- stitute disclosure of the rating of the institution to the public for purposes of sections 806A and 807. “(5) REGULATORY REVIEW.— “(A) ASSESSMENT.—-During each examination for safety and soundness, a qualifying institution's supervisory agency shall, as part of the agency's re- view of the institution's loans, assess whetherthe institution's basis for its self-certification is reasonable based on the public notice and the informa- tion contained in the public file pursuant to paragraph(3). “(B) EXAMINATION IF SELF-CERTIFICATION IS NOT REASONABLE.—If the agency determines that the institution’s basis for the institution's self-cer- tification is not reasonable, the agency shall schedule an examination of the institution for the purpose of assessing the institution's record of helping to meet the credit needs of its community. "(C) REVOCATION OF SELF-CERTIFICATION.—-If an assessment pursuant to subparagraph (B) results in a less than ‘satisfactory’ rating, the agency shall revoke the institution’s self-certification and substitute a written eval- uation as provided undersection 807. “(D) PERIOD OF INELIGIBILITY FOR SELF-CERTIFICATION.—An institution whose self-certification has been revoked may not self-certify pursuant to this subsection during the 5 years succeeding the year in which theself- certification is revoked. “(E) SUBSEQUENTELIGIBILITY.—After the end of the period ofineligibility described in subparagraph (D), an institution which meets the require- mentsforself-certification may elect to self-certify. “(6) PROHIBITION ON ADDITIONAL REQUIREMENTS.—No appropriate Federal fi- nancial supervisory agency may impose any additional requirements, whether by regulation or otherwise, relating to the self-certification procedure under this subsection.”. SEC, 124. COMMUNITY INPUT AND CONCLUSIVE RATING. (a) CONFORMING AMENDMENT.—Section 804(a) of the Community Reinvestment Act of 1977 (12 U.S.C. 2903) is amended by inserting “conducted in accordance with section 806A,” after “financial institution,”. (b) COMMUNITY INPUT AND CONCLUSIVE RATING.—The Community Reinvestment Act of 1977 (12 U.S.C. 2901 et seq.) is amended by inserting after section 806 the following new section: “SEC. 806A. COMMUNITY INPUT AND CONCLUSIVE RATING. “(a) PUBLICATION OF EXAM SCHEDULE AND OPPORTUNITY FOR COMMENT.— “(1) PUBLICATION OF NOTICE.—Each appropriate Federal financial supervisory agency shall— “(A) publish in the Federal Register, 30 days before the beginning of a calendar quarter, a listing of institutions scheduled for evaluation for com- pliance with this title during such calendar quarter; and “(B) provide opportunity for written comments from the community on the performance, underthis title, of each institution scheduled for evalua- tion. “(2) COMMENT PERIOD.—Written comments may not be submitted to an appro- priate Federalfinancial supervisory agency pursuant to paragraph (1) after the end of the 30-day period beginning on the first day of the calendar quarter. (3) COPY OF COMMENTS.—Theagency shall provide a copy of such comments to the institution. “(b) EVALUATION.—The appropriate Federal financial supervisory agency shali— “(1) evaluate the institution in accordance with the standards contained in section 804; and “(2) prepare and publish a written evaluation of the institution as required undersection 807. “(c) RECONSIDERATION OF RATING.— “(1) REQUEST FOR RECONSIDERATION.—A reconsideration of an institution's rating referred to in section 807(b)(1)(C), may be requested within 30 days of the rating's disclosure to the public. “(2) PROCEDURES FOR REQUEST.—Any such request shall be made in writing and filed with the appropriate Federal financial supervisory agency, and may be filed by the institution or a member of the community. 030 14 “(3) BASIS FOR REQUES T.—-Any request for re consideration under th is sub- section shall be based o n significant issues of a substantive nature whic h are relevant to the delineat ed community of the ins titution and,in the case ofa re- quest by a member of the community. shall b e limited to issues pre viously raised in comments s ubmitted pursuant to subsection (a). “(4) COMPLETION OF RE VIEW.—The appropriate Federal financial superv isory agency shall complete an y requested reconsiderat ion within 30 days ofthe filing of the request. “(d) CONCLUSIVE RaTING. — “(1) IN GENERAL.—A n institution's rating shall become conclus ive on the later “(A) 30 days after the ra ting is disclosed to the p ublic; or “(B) the completion of any requested reconside ration by the Federal fi- nancial supervisory agenc y. “(2) RATING CONCLUSIVE OF MEETING COMMUNITY CREDI T NEEDS.—An institu- tion’s rating shall be t he conclusive assessmen t of the institution's re cord of meeting the credit needs of its community for pur poses of section 804 unti l the institution's next rating, developed pursuant to a n examination, becomes con- clusive. 7 “(3) SAFE HARBOR.—Inst itutions which have r eceived a ‘satisfactory’ or ‘out- standing’ rating shall be deemed to have met the purposesof section 804. “(4) RULE OF ‘CONSTRUC TION.—Notwithstanding any other provision of l aw, no provision of this section shall be construed as gr anting a cause of action to any person.”. (c) OVERALL EVALUAT ION OF INSTITUTION .—Paragraph (2) of s ection 804(a) of the Community Reinvestme nt Act of 1977 (12 U.S.C . 2903{a)) is amended t o read as fol- lows: “(2) take such recor d inte account_in th e overall evaluation of the condition of the institution by the appropriate Federal fina ncial supervisory agency. ”. SEC. 125. SPECIAL PURP OSE FINANCIAL INSTIT UTIONS. (a) IN GENERAL.—Sec tion 804 of the Com munity Reinvestme nt Act of 1977 (12 U.S.C. 2903) is amende d by inserting after sub section (c) (as added by section 123 of this title! the fallow ine new subsection: “(@) SPECIAL PURPOSE INST ITUTIONS.— “Q) In GENERAL.—In conducting assessme nts pursuant to this section at any special purpose institut ion, the appropriate Fed eral financial superviso ry agen cy shall— “(A) consider the na ture of business suc h institution is invo lved in; and “(B) assess and take int o account the record of t he institution commmensu - rate with the amoun t of deposits (as def ined in section 3(1) of the Federal Deposit Insurance Act) received by such institut ion. “(2) STANDARDS.—Each appropriate Federal fina ncial supervisory agenc y shall develop standards unde r which special purpose institutions may be dee med to have complied. with the requirements of this tit le which are consistent with the specific nature of such b usinesses.”. (b) SPECIAL PURPOSE IN STITUTION DEFINED.—Sec tion 803 of the Commun ity Rein- vestment Act of 1977 (1 2 U.S.C. 2902): is amend ed by adding at the end the follow- ing new paragraph: "(5) SPECIAL PURPOSE INSTITUTIONS.—The ter m ‘special purpose insti tution’ means a financial insti tution that does not gen erally accept deposits f rom the public in amounts of le ss than $100,000, such as wholesale, credit car d, and trust institutions.”. SEC. 126. INCREASED INCE NTIVES FOR LENDING TO LOW- AND MODERATE-INC OME COMMU- NITIES. (a) IN GENERAL.—Se ction g04(b} of the C ommunity Reinvestm ent Act of 1977 (12 U.S.C. 2903(b)) is amend ed to read as follows: “(b) POSITIVE CONSID ERATION OF CERTAIN LOANS AND INVESTM ENTS.—In assessing and taking into account the records of a regulat ed financial institution under sub- section (a), the appropri ate Federal financial su pervisory agency shall-— — “(1) consider as a positiv e factor, consistent with the safe and sound opera tion of the institution, the in stitution's investment i n or joan to—- “(A) any minority deposi tory institution or wome n’s depository instituti on {as such terms are defined in section 8 08(b)) or any low-i ncome credit union: “(B) any joint venture or other entity or project w hich promotes the publi c welfare in any distr essed community {as defined by such agen cy) whether 031 15 or not the distressed community is located in the local community in which the regulated financial institution is chartered to do business, and “(C) targeted low- and moderate-income communities, including real prop- erty loans to such communities; and “(2) consider equally with other factors capital investment, loan participation, and other ventures undertaken by the institution in cooperation with— “(A) minority- and women-owned financial institutions and low-income credit unions to the extent that these activities help meet the credit needs of the local communities in which such institutions are chartered; and “(B) community development corporations in extending credit and other financial services principally to low- and moderate-income persons and small businesses to the extent that such community development corpora- tions help meet the credit needs of the local communities served by the ma- jority-ownedinstitution.”. (b) AMENDMENT TO DEFINITIONS.—Section 803 of the Community Reinvestment Act of 1977 (12 U.S.C. 2902) is amended by inserting after paragraph (5) (as added by section 125(b) of this subtitle) the following new paragraph: “(6) STATE BANK SUPERVISOR.—The term ‘State bank supervisor’ has the same meaning as in section 3(r) of the Federal Deposit Insurance Act.”. (c) TECHNICAL CORRECTION.—The Ist of the 2 paragraphs designated as para- graph (2) of section 803 of the Community Reinvestment Act of 1977 (i2 U.S.C. 2902) is amendedto read asfollows: “(D) the Director of the Office of Thrift Supervision with respect to any savings association (the deposits of which are insured by the Federal De- posit Insurance Corporation) and any savings and loan holding company (other than a company which is a bank helding company);”. SEC. 127. PROHIBITION ON ADDITIONAL REPORTING UNDER CRA. Section 806 of the Community Reinvestment Act of 1977 (12 U.S.C. 2905) is amended to read as follows: “SEC. 806. REGULATIONS. “(a) IN GENERAL.— “(1) PUBLICATION REQUIREMENT.—Regulations to carry out the purposes of this title shall be published by each appropriate Federal financial supervisory agency. “(2) PROHIBITION ON ADDITIONAL RECORDKEEPING.—Regulations prescribed and policy statements, commentary, examiner guidance, or other supervisory material issued under this title shall not impose any additional recordkeeping on a financial institution. “(3) PROHIBITION ON LOAN DATA COLLECTION.—No loan data may be required to be collected and reported by a financial institution and no such data may be made public by any Federal financial supervisory agency underthistitle.”. SEC. 128. TECHNICAL AMENDMENT. Section 807(b)(1)(B) of the Community Reinvestment Act (12 U.S.C. 2906) is amended by striking “The information” and inserting “In the case of a regulated fi- nancial institution that maintains domestic branches in 2 or more States, the infor- mation”. SEC. 129. DUPLICATIVE REPORTING. Section 10(g) of the Federal Home Loan Bank Act (12 U.S.C. 1430(g)) is amended by adding at the end the following new paragraph(3): “(3) SPECIAL RULE.-—This subsection shall not apply to members receiving a grade of ‘outstanding’or ‘satisfactory’ undersection 807 of the Community Rein- vestment Act of 1977.". SEC. 130. CRA CONGRESSIONAL OVERSIGHT. (a) SENSE OF CONGRESS RELATING TO AGGRESSIVE OVERSIGHT.—It is the sense of the Congress that the appropriate committees of the House of Representatives and the Senate should exercise aggressive oversight of the adoption and implementation of any regulation by any appropriate Federal financial supervisory agency under the Community Reinvestment Act of 1977 after the date of the enactmentof this Act. (b) AGENCY REPORTS REQUIRED.— (1) IN GENERAL.--Each appropriate Federal financial supervisory agency shall submit a report to the Congress by December 31, 1996, and by December 31, 1997, on the implementation of all regulations prescribed by such agency under the Community Reinvestment Act of 1977 after the date of the enactment of this Act. 032 16 (2) REQUIREMENTS RELATING TO PREPARATION OF REPORTS.—In preparing each report required under paragraph (1), each appropriate Fede ral financial super- visory agency shall (A) solicit and include comments from regulated f inancial institutions with respect to the regulations which are the subject of the report; and (B) include quantifiable measures of the cost savings achieve d under the regulations which are the subject of the report and the effec tiveness of such regulations in achieving the purposes of the Community Re investment Act of 1977. (3) DEFINITIONS.—For purposes of this section, the terms “a ppropriate Federal financial supervisory agency” and “regulated financial in stitution” have the same meanings as in section 803 of the Community Reinve stment Act of 1977. SEC. 131. CONSULTATION AMONG EXAMINERS. Section 10 of the Federal Deposit Insurance Act (12 U.S.C. 1820) is amended by adding at the end the following new subsection: “(j) CONSULTATION AMONG EXAMINERS.— “(1) IN GENERAL.—Each appropriate Federal banking a gency shall take such action as may be necessary to ensure that examiners employ ed by the agency— “(A) consult on examination activities with respect to any depository in- stitution; and “(B) achieve an agreement and resolve any inconsistencies on the rec- ommendations to be given to such institution as a consequ ence of any ex- aminations. “(2) EXAMINER-IN-CHARGE.—Each agency shall consider ap pointing an exam- iner-in-charge with respect to a depository institution to ens ure consultation on examination activities amongall of the agency's examiner s involved in examina- of such institution.”.4ions Cr SUCH INSTT:ct SEC. 132. LIMITATION ON REGULATIONS. Section 806 of the Community Reinvestment Act of 1977 (12 U.S.C. 2905) {as amended by section 127) is amended by adding at the e nd the following new sub- sections: “(b) LIMITATION ON REGULATIONS.—Noregulation may be prescribed under this title by any Federal agency which would— U1) require any Leguiatcd fuiauiad aot “(A) make any loan or enter inte any other agreement on the b asis of any any discriminatory criteria prohibited under any law of the United States; or “(B) make any loan to, or enter into any other agreement with, any uncreditworthy person that would jeopardize the safety and soundness of such institution; or “(2) prevent or hinder in any way a financial institution's full responsibility to provide credit to all segments of the community. “(c) ENCOURAGE LOANS TO CREDITWORTHY BorRROWERS.—Regulations prescribed under this title shall encourage regulated financial institutions to make loans and extend credit to all creditworthy persons, consistent with safety and soundness.”. Subtitle C—Consumer Banking Reforms SEC.141. TRUTH IN SAVINGS. (a) PURPOSE.—Section 262 of the Truth in Savings Act (12 U.S.C. 4301) is amend- ed to read as follows: “SEC. 262. PURPOSE. “It is the purpose of this subtitle to ensure that consumers can make a meaning- ful comparison between the competing claims of depository institutions with regard to deposit accounts by requiring that institutions offering interest-bearing accourits payinterest on the full amount of principal each day in a consumer deposit account at the rate agreed to be paid by the institution.”. (b) PROHIBITION ON MISLEADING OR INACCURATE ADVERTISEMENTS AND DISCLO- SURES.—Section 263 is amended to read asfollows: “SEC. 263. PROHIBITION ON MISLEADING OR INACCURATE ADVERTISEMENTS AND DISCLO- SURES. “No depository institution or deposit broker shall make any advertisement, an- nouncement, solicitation or disclosure relating to a deposit account that is inac- curate or misleading, including any inaccurate or misleading description of a free or no-cost account, or that misrepresents its deposit contracts. ”. 033 17 (c) ACCOUNT INFORMATION UPON OPENING AN ACCOUNT.—Section 264 of the Truth in Savings Act (12 U.S.C. 4304) is amendedto read asfollows: “SEC. 264. ACCOUNT INFORMATION. “(a) IN GENERAL.—Each depository institution shall disclose fees, charges, pen- alties, and interest rates applicable to each class of accounts offered by the institu- tion in accordance with this section. “(b) INFORMATION ON FEES AND CHARGES.—Each depository institution shall dis- close the following information with respect to any account to a consumer at the time the account is opened, or at such earlier time as a consumer may request (and no additional information may be required to be disclosed under this subtitle by reg- ulation or otherwise with respect to such account): “(1) A description of all fees, periodic service charges, penalties, and interest rates which may be charged or assessed against the account (or against the ac- count holders in connection with such account), the amount of any such fees, charges, or penalties (or the method by which such amountwill be calculated), and the conditions under which any such amountwill be assessed. “(2) All minimum balance requirements that affect fees, charges, and pen- alties, including a clear description of how each such minimum balanceis cal- culated. “(3) Any minimum amount required with respect to the initial deposit in order to open the account. “(c) INFORMATION ON INTEREST RATES.—The disclosures required under sub- sections (a) and (b) with respect to any account shall include the following informa- tion: “(1) Any annual rate of simple interest. “(2) The frequency with which interest will be compounded andcredited. “(d) No REGULATIONS AUTHORIZED.—Noregulations may be prescribed with re- spect to this section by the Board or any agency referredto in this title, including any regulation to define any terms usedin this section.”. ta) DISCLOSURE OF CHANGE IN TERMS.—Section 265 of the Truth in Savings Act (12 U.S.C. 4304) is amended to read as follows: “SEC. 265. DISCLOSURE OF CHANGEIN TERMS. “If any change is made in any item required to be disclosed under section 264, all account holders who may be affected by such change shall be notified by mail and provided with a description of such change at least 30 days before the effective date of the change.”. (e) REPEAL OF SECTIONS.—Sections 266, 268, 271, and 273 of the Truth in Savings Act (12 U.S.C. 4304, 4305, 4307, 4310, and 4312, respectively) are hereby repealed. (f) REDESIGNATION OF SECTIONS.—Section 267, 270, 272 of the Truth in Savings Act (12 U.S.C. 4306, 4309, and 4311) are redesignated as sections 266, 268, and 269, respectively. ) REDESIGNATION AND AMENDMENT OF SECTION 269.—Section 269 of the Truth in Savings Act (12 U.S.C. 4308) (as determined before the redesignation made by subsection (f) of this section) is amended to read as follows: “SEC. 267. REGULATIONS. “(a) IN GENERAL.—The Board, after consultation with each agency referred to in section 268{a) and public notice and opportunity for comment, shall prescribe regu- lations to carry out the purpose and provisions of this subtitle. “(b) EFFECTIVE DATE OF REGULATIONS.—Theprovisions of this subtitle shall not apply with respect to any depository institution before the effective date of regula- tions prescribed by the Board under this subsection.” (h) REDESIGNATION AND AMENDMENT OF SECTION 274.—Section 274 of the Truth in Savings Act (12 U.S.C. 4313) is amended to read as follows: “SEC. 270. DEFINITIONS. “For the purposesof this subtitle, the following definitions shall apply: “(1) ACCOUNTS.—The term ‘account’ means any account intended for use by and generally used by a consumer primarily for personal, family, or household purposes thatis offered by a depository institution. “by DEPOSIT BROKER.—The term ‘deposit broker’— "(A) has the meaning given to such term in section 29(f)(1) of the Federal Deposit Insurance Act; and “(B) includes any person whosolicits any amount from any other person for deposit in an insured depository institution. “(3) DEPOSITORY INSTITUTION.—The term ‘depository institution’— 034 18 “(A) means an institution described in clause ( i), (ii), (iii), (iv), (vy), or (vi) of section 19(b)(1)(A) of the Federal Reserve Act; and “(B) does not include nonautomated credit unions whic h were not re- quired to comply with the requirements of this title as of the date of the enactment of the Financial Institutions Regulatory Reli ef Act of 1995 pur- suant to the determination of the National Credit Uni on Administration oard. “(4) INTEREST.—The term ‘interest’ includes dividends pa id with respect to share accounts which are accounts within the meaning of pa ragraph(1). “(5) BoaRD.—The term ‘Board’ means the Board of Governors of the Federal Reserve System.”. (i) EFFECTIVE DATE.— (1) IN GENERAL.—The amendments made by this section shall take effect on the effective date of regulations prescribed by the Board of Governors of the Federal Reserve System to implement such amendments. (2) AUTHORITY TO ISSUE REGULATIONS.—Notwit hstanding paragraph (1), the Board of Governors of the Federal Reserve System shal l Fescribe regulations in accordance with the amendment made by subsection (g). (3) CONTINUED APPLICABILITY OF. PROVISIONS UNTIL EF FECTIVE DATE OF NEW REGULATIONS.—The Truth in Savings Act, as in effect on the day before the date of the enactmentof this Act, shall continue to apply on and after such date until the effective date of the amendments to such Act underth is section. SEC. 142, INFORMATION SHARING. Section 18 of the Federal Deposit Insurance Act (12 U.S.C. 1828) is amended by adding at the end the following new subsection: “(s) CUSTOMER ACCESS TO PRODUCTS.— “(1) IN GENERAL.—Notwithstanding any ether provision of law, any depository institution, or any affiliate or subsidiary of any depository institution, may share or exchange information or otherwise transfer information between or among themselves without any restriction or limitation if it is clearly and con- spicuously disclosed that the information may be communicated among such persons and the consumeris given the opportunity, before the time that the in- formation is initially communicated,to direct that such information not be com- ™ tal amang such nersons. “(2) DEFINITION.—For purposes of this subsection, the term “Wiutinacivas means any and aii data, records, or other information and material obtained or maintained by any depository institution or any affiliate or subsidiary thereof in the ordinary course of its business that relates in any way to a person fas such term is defined in section 603(b) of the Fair Credit Reporting Act) who ap- plies for, maintains, or has maintained an account or credit relationship with or applied for, purchased or obtained other products or services from any depos- itory institution or any affiliate or subsidiary of any depository institution, re- gardless of the source or manner in which the information is obtained or fur- nished. “(3) RULE OF CONSTRUCTION.—Any depository institution, or any affiliate or subsidiary of any depository institution, relying on this subsection shall not be deemed to be a consumerreporting agency, user, or third party, and the infor- mation itself shall not constitute a consumer report, within the meaning of the Fair Credit Reporting Act or other similar law.”. SEC. 143. ELECTRONIC FUND TRANSFERACT CLARIFICATION. (a) DEFINITION OF ACCEPTED CARD OR OTHER MEANS OF ACCESS.—Section 903(1) of the Electronic Fund Transfer Act (15 U.S.C. 1693a(1)) is amended by inserting before the semicolon at the end the following: “, but such term does not include a card, device, or computer that a person may use to pay for transactions through use of value stored on, or assigned to, the card, device, or computer itself, except for those transactions where such card, device, or computer is actually used to access an account te effect such transaction”. (b) DEFINITION OF ACCOUNT.—Section 903(2) of the Electronic Fund Transfer Act (15 U.S.C. 1693a(2)) is amended by inserting before the semicolon at the end the following: “and does not include any value which is stored on,or assigned to, a card, device, or computer itself that enables a person to pay for transactions through use of that stored value”. SEC. 144, LIMIT ON RESTITUTION FOR TRUTH IN LENDING VIOLATIONS IF SAFETY AND SOUNDNESS OF VIOLATOR WOULD BE AFFECTED. Section 108(e)(3)(A) of the Truth in Lending Act (15 U.S.C. 1607(e)(3)(A)) is amended— 035 19 (1) by striking “in any such case, the agency may require” and inserting “in any such case, the agency may (i) require”; 0) by striking “, except that with respect to any transaction consummated after the effective date of section 608 of the Truth in Lending Simplification and Reform Act, the agency shall” and inserting “; or (ii}”; and (3) by striking “reasonable,” and inserting “reasonable if, in the case of an agency referred to in paragraph (1), (2), or (3) of subsection (a), the agency de- termines that a partial adjustment or the making of partial payments over an extended period is necessary to avoid causing the creditor to become undercapitalized (as determined in accordance with regulations prescribed by such agency undersection 38 of the Federal Deposit Insurance Act);”. Subtitle D—Equal Credit Opportunity Act Amendments SEC. 151. SHORT TITLE. This subtitle may be cited as the “Equal Credit Opportunity Act Amendments of 1995” SEC. 152. FINDINGS AND PURPOSE. (a) FINDINGS.—The Congressfinds that both the Equal Credit Opportunity Act (15 U.S.C. 1691, et seq.) and the Fair Credit Reporting Act (15 U.S.C. 1681, et seq.) con- tain requirements that applicants for consumercredit be given certain information in the event that adverse action is taken on the application. These requirements dif- fer in both scope and content and for that reason are confusing to both the consumer who receives the information and the party required to furnish the information. (b) PURPosE.—It is the purpose of this subtitle to combine and simplify the ad- verse action notification requirements of the Equal Credit Opportunity Act and the Fair Credit Reporting Act regarding applications for consumer credit and to make the information that is required to be furnished more understandable. SEC. 153. EQUAL CREDIT OPPORTUNITY ACT AMENDMENTS. (a) NoTICE OF ADVERSE ACTION.—-Section 701(d)(2)(B) of the Equal Credit Oppor- tunity Act (15 U.S.C. 1691 (d){2)(B)) is amended to read as follows: “B) givin, written notification of adverse action which discloses— “i the applicant's right to a statement of reasons within 30 days after receipt by the creditor of a request made within 60 days after such notification; “(ii) if credit is denied or the charge for such credit is increased either wholly or partly because of information contained in a consumerreport from a consumer reporting agency— “(I) that fact and the name, address, and telephone number of the consumer reporting agency making the report; “(I the consumer's right to obtain, under section 612, a free copy of a consumer report on the consumer, from the consumerre- porting agency referred to in subclause (I) within the 30-day period provided under such section; and “(III) the consumer's right to dispute, under section 611, with a consumer reporting agency the accuracy or completeness of any in- formation in a consumerreport furnished by the agency. “(iti) if credit is denied or the charge for credit is increased either wholly or partly because of information obtained from a person other than ‘a consumer reporting agency bearing upon the consumer'scredit worthiness, credit standing, credit capacity, character, general reputa- tion, personal characteristics or mode of living, that fact and the right to receive disclosure of the nature of the information so received, within a reasonable period of time, upon the consumer's written request for in- formation within 60 days after learning of such adverse action; and “(v) the identity of the person or office from which such notification may be obtained. Such statement of reasons may be given orally if the written notification advises the applicant of his right to have the statement of reasons con- firmed in writing on written request.”. (b) TECHNICAL AND CONFORMING AMENDMENT.—Section 701(d)(3) of the Equal Credit Opportunity Act (15 U.S.C. 1691(d)(3)) is amended by striking the period at the end and adding the following: “and, to the extent applicable, the name, address, and telephone number of the consumer reporting agency identified in accordance 036 20 with the requirements of subsection (d)(3)(ii) and a statement of the right to obtain disclosure of the nature of the information upon which advers e action was taken as required by such subsection.”. ia) REASONABLE PROCEDURES TO ASSURE COMPLIANCE.—Sectio n 706 of the Equal Credit Opportunity Act (15 U.S.C. 1691e) is amended by adding at the end thefol- lowing new subsection: “(I. REASONABLE PROCEDURES TO ASSURE COMPLIANCE.—Noper son shall be held liable for any violation of subsection 701 (d) if such person show sby a preponderance of the evidence that at the time of the alleged violation the pers on maintained rea- sonable procedures to assure compliance with the provisions of t he subsection.”. SEC. 154. FAIR CREDIT REPORTING ACT AMENDMENTS. (a) Section 615(a) of the Fair Credit Reporting Act (15 U.S.C. 1 681m(a)) is amend- ed by striking “credit or” each place such term appears. (b) Section 615 of the Fair Credit Reporting Act (15 U.S.C. 1681 m) is amended by striking subsection (b) and redesignating subsection (©) a s subsection (b). (c) Section 615(b) (as redesignated by this section) of the Fair Cr edit Reporting Act (15 U.S.C. 168im(b)) is amended by striking “subsections (a) a nd (b)" and in- serting “subsection (a)”. : . SEC. 155. INCENTIVES FOR SELF-TESTING. (a) EQUAL CREDIT OPPORTUNITY.— (1) IN GENERAL.—The Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.) is amended by inserting after section 704 the following new sect ion: “SEC. 704A. INCENTIVES FOR SELF-TESTING AND SELF-C ORRECTION. “(a) IN GENERAL.—If a creditor— “(1) conducts, or authorizes an independent third party to conduct, a self-test of the creditor's lending or any part of the creditor's lending operations in order to determinethe level or effectiveness of compliance with this title by the credi- tor; and “(2) has identified discriminatory practices and has taken or is taking appro- priate corrective actions to address the discrimination, any report or results of such a self-test may not be obtained or used by any appli- rant denartment. or agency in anv proceeding or civil action brought under this title. “(b) RESULTS OF SELF-TESTING.—No provision of this section shall be construed as preventing an applicant, department, or agency from obtaining and using the re- sults of any self-testing in any proceeding or civil action brought underthis title if— “(1) the creditor or any other entity conducted such activity at the request of a department or agency; “(2) the creditor or any other entity, or any person acting on behalf of the creditor or other entity— “(A) voluntarily releases or discloses all, or any part of, such results; or “(B) refers to or describes such results as a defense to charges of unlawful discrimination against such creditor, person,or entity, or “(3) the results are sought by the applicant, department, or agency by means of a discovery request for the purposes of determining an appropriate penalty or remedy for a violation ofthis title. “(c) REGULATIONS.—The appropriate Federal department or agency shall prescribe regulations, after notice and opportunity for comment, which determine what types of ‘self-tests’ are sufficiently extensive so as to constitute a determination of the level or effectiveness of a creditor's compliance with this title.”. (2) REFERRALS TO THE ATTORNEY GENERAL.—-Section 706(g) of the Equal Cred- it Opportunity Act (15 U.S.C. 1691e(g)) is amended— (A) by striking “(g) The agencies” and inserting “(g) REFERRALS TO THE ATTORNEY GENERAL.— “(1) IN GENERAL.—The agencies"; and (B) by adding at the end the following new paragraphs: “(2) LIMITATION ON REFERRALS OF SELF-TESTING RESULTS.— “(A) IN GENERAL.—Noagencyshall be required to refer any report or re- sults of a self-test relating to any creditor to the Attorney General if the creditor— “(i) has already identified discriminatory practices as the result of self-testing instituted by the creditor to determine compliance with this title; and “(i) has taken or is taking appropriate corrective actions ta address the discrimination. 037 21 “(3) ENFORCEMENT UNDER OTHER LAWS.—Noprovision of this section shall be construed as limiting the authority of the agency to enforce the provisions of this title under any other provision of law.”. (3) REFERRALS TO HUD.—Section 706(k) of the Equal Credit Opportunity Act (15 U.S.C. 1691e(k)) is amended by adding at the end the following: “No such agency shall be required to notify the Secretary of Housing and Urban Develop- ment or the applicant that the agency has reason to believe that a violation of this title or the Fair Housing Act occurred if the reason is based on a result of self-testing instituted by the creditor to determine compliance with this title, and the creditor has already identified the possible violation and has taken or is taking appropriate corrective actions to address the possible violation. No pro- visions of this section shall be construed as limiting the authority of the agency to enforce the provisions of this title under any other provision of law.”. (4) CLERICAL AMENDMENT.~-Thetable of sections for title VII of the Consumer Credit Protection Act is amended by inserting after the item relating to section 704 the following new item: “704A. Incentives for self-testing and self-correction.”. (b) Farr Housinc.—The Fair Housing Act (42 U.S.C. 3601 et seq.) is amended by inserting after section 814 the following new section: “SEC, 814A. SELF-TESTING ENHANCEMENT. “(a) IN GENERAL.—If any person— “(1) conducts, or authorizes an independentthird party to conduct, a self-test of that person's residential real estate related lending activities, or any part of such activities, in order to determine the level or effectiveness of compliance with this title by the person; and “(2) has identified discriminatory practices and has taken or is taking appro- priate corrective actions to address the discrimination, any report or results of such a self-test may not be obtained or used by any ag- grieved person, complainant, department, or agency in any proceedingorcivil action brought underthis title. “(b) RESULTS OF SELF-TESTING.—No provision of this section shall be construed as preventing an aggrieved person, complainant, department, or agency from obtain- ing and using the results of any self-testing as described in subsection (a) in any proceedingorcivil action brought underthistitle if— . “(1) the creditor or any other entity conducted such activity at the request of a departmentor agency: “(2) the creditor or any other entity, or any person acting on behalf of the creditor or other entity— “(A) voluntarily releases or discloses all, or any part of, such results; or "(B) refers to or describes such results as a defense to charges of unlawful discrimination against such creditor, person, or entity; or “(3) the results are sought by the aggrieved person, complainant, department, or agency by meansof a discovery request for the purposes of determining an appropriate penalty or remedy for a violation of thistitle. “(c) REGULATIONS.—The appropriate Federal department or agency shall prescribe regulations, after notice and opportunity for comment, which determine what types of ‘self-tests’ are sufficiently extensive so as to constitute a determination of the level or effectiveness of a creditor's compliance with thistitle.”. SEC. 156. CREDIT SCORING SYSTEMS. Section 701 of the Equal Credit Opportunity Act (15 U.S.C. 1691) is amended by adding at the end the following new subsection: “(f) CREDIT SCORING SYSTEM.— “() IN GENERAL.—A creditor shall be deemed to be in compliance with sub- section (a) with respect to any credit decision made by the creditor which is based solely on the use of an empirically derived, demonstrably andstatistically sound, credit scoring system (as defined by the Board in regulations prescribed underthis title) if such system— “(A) does not utilize any category protected under subsection (a); “(B) does not use as a factor in such system any criterion which is so di- rectly associated with such a category as to be the functional equivalent of such a category; and “(C) does not use as a factor in such system any criterion that has a dis- parate impact on a category protected under subsection (a) unless use of the criterion is justified by business necessity and there is no less discrimina- tory alternative available. 038 22 “(2) AGE AS A FACTOR.-—-No provision of this subsection shall be construed as precluding a creditor from using age as a factor in a credit scoring s ystem under paragraph (1) to the extent otherwise permitted underthistitle.”. SEC. 157, CONSULTATION BY ATTORNEY GENERAL REQUIRED IN NONREFE RRALCASES. (a) EQUAL CREDIT OPPORTUNITY.—Section 706(h) of the Equal Credit Opportunity Act (15 U.S.C. 1691e(h)) is amended by adding at the e nd the following new sen- tence: "Before bringing a civil action against any creditor described in paragraph(1), (2), or (3) of section 704 (a), the Attorney General shall consult with th e appropriate agency under such paragraph.”. (b) ‘Farr HousINc Act.—Section 814(a) of the Fair Housing Ac t (42 U.S.C. 3614(a)) is amended by adding at the end the following new sentence: “Before bring- ing a civil action under the preceding sentence against any person or group of per- sons described in paragraph (1), (2), or (3) of section 704(a) of the Equal Credit Op- portunity Act with respect to a violation of 805(a) of this title, the Attorney General shall consult with the appropriate agency under such paragraph.”. SEC. 158. EFFECTIVE DATE. (a) IN GENERAL.—Except with respect to the requirements of subsec tion (b), this Act shall take effect at the end°of the 270-day period beginning on th e date of the enactmentof this Act. (b) IMPLEMENTING REGULATIONS.—The Board of Governors of the Federal Reserve System shall prescribe regulations to implement this Act and such reg ulations shall be published in final form before the end of the 180-day period beg inning on the date of the enactmentof this Act. Subtitle E~--Consumer Leasing Act Amendments SEC. 161. SHORT TITLE. This subtitle may be cited as the “Consumer Leasing Act Amendments of 1995". SEC. 162. CONGRESSIONAL FINDINGS AND DECLARATION OF PURPOSE. (a) FINDINGS.—The Congressfinds the following: () Camnerition amang the various financial institutions and other firms en- gaged in the business of consumerleasing is greatest when there 1s intormeu use of leasing. The informed use of ieasing results from an awareness of the cost of leasing by consumers. (2) There has been a continued trend toward leasing automobiles and other durable goods for consumeruse as an alternative to installment credit sales and that leasing product advances have occurred such that lessors have been unable to provide consistent industry-wide disclosures to fully account for the competi- tive progress that has occurred. (b) PURPOSES.— (1) It is the purpose ofthis subtitle to assure a simple, meaningful disclosure of leasing terms so that the consumerwill be able to compare more readily the various leasing terms available to the consumer and avoid the uninformed use of leasing, and to protect the consumer against inaccurate and unfair leasing practices. (2) To provide for adequate cost disclosures that reflect the marketplace with- out impairing competition and the development of new leasing products, it is the purpose of this subtitle to provide the Board with the regulatory authority to assure a simplified, meaningful definition and disclosure of the termsof cer- tain leases of personal property for personal, family, or household purposes so as to enable the lessee to compare more readily the various lease terms avail- able to the lessee, enable comparison oflease terms with credit terms where ap- propriate and to assure meaningful and accurate disclosures of lease terms in advertisements. SEC, 163. REGULATIONS. (a) IN GENERAL.—Chapter 5 of title I of the Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is amended by adding at the end the following new section: “SEC. 187, REGULATIONS. “(a) REGULATIONS AUTHORIZED.-— “(1) IN GENERAL.—The Board shall write regulations or staff commentary, if appropriate, to update and clarify the requirements and definitions for lease disclosures, contracts, and any other specific issues related to consumer leasing which would carry out the purposes of this chapter, to prevent any circumven- 039 23 tion of the chapter, and to facilitate compliance with the requirements of the chapter. (2) CLASSIFICATIONS, ADJUSTMENTS.—The regulations prescribed under para- graph (1) may contain classifications and differentiations and may provide for adjustments and exceptions for any class of transaction. “(b) MODEL DISCLOSURES.—The Board shall publish model disclosure forms and clauses to facilitate compliance with the disclosure requirements and to aid the consumerin understanding the transaction. In designing forms, the Board shall con- sider the use by lessors of data processing or similar automated equipment. Use of the models shall be optional. A lessor who properly uses the material aspects of the models shall be deemed to be in compliance with the disclosure requirements. “(c) EFFECTIVE DATES.— “(1) IN GENERAL.—Anyregulation of the Board, or any amendmentor inter- pretation of any regulation of the Board, that requires a disclosure different from the disclosures previously required shall have an effective date of the Octo- ber 1 that follows the date of promulgation by at least 6 months. “(2) LONGER PERIOD.—The Board may,in the Board's discretion, lengthen the period of time referred te in paragraph (1) to permit lessors to adjust their forms to accommodate new requirements. “(3) SHORTER PERIOD.--The Board may also shorten the period of time re- ferred to in paragraph (1) if the Board makes a specific finding that such action is necessary to comply with the findings of a court or to prevent unfair or decep- tive practices. “(4) COMPLIANCE BEFORE EFFECTIVE DATE.—Lessors may comply with any newly promulgated disclosure requirement before the effective date of such re- quirement.”. (b) CLERICAL AMENDMENT.—Thetable of sections for chapter 5 of title I of the Consumer Credit Protection Act (15 U.S.C. 1601 et seq.) is amended by inserting after the item relating to section 186 the following new item: “187. Regulations.”. SEC. 164. CONSUMER LEASE ADVERTISING. Section 184 of the Consumer Credit Protection Act (15 U.S.C. 1667c} is amended to read as follows: “SEC. 184. CONSUMER LEASE ADVERTISING. “(a) IN GENERAL.—If an advertisement for a consumerlease states the amount of any paymentor states that any or no initial payment is required, the advertisement mustalso clearly and conspicuously state the following terms, as applicable: “(1) That the transaction advertised is a lease. "(2) The total of initial payments required at or before consummation of the lease or delivery of the property, whicheveris later. "“(3) That a security deposit is required. “(4) The number, amounts, and timing of scheduled payments. “(5) For a lease in which the consumer'sliability at the end of the lease term is based on the anticipated residual value of the property, that an extra charge may be imposed at the endof the lease term. “(b) ADVERTISING MEDIUM NoT LIaBLE.-—-Any owner or personnel of any medium in which an advertisement appears or through which it is disseminated shall not be liable under this section.”. SEC. 165. STATUTORY PENALTIES. Section 185(a) of the Consumer Credit Protection Act (15 U.S.C. 1667d{a)) is amended by adding at the end the following new sentence: “Notwithstanding the preceding sentence, a creditor shall only have liability determined under section 130(a)(2) for failing to comply with the requirements of paragraph (2), (8), (9), or (10) of section 182 or for failing to comply with disclosure requirements under State law for any term which the Board has determined to be substantially the same in meaning undersection 186 as any of the terms referred to in section 182.”. Subtitle F—Federal Home Loan Bank Amendments SEC. 171. APPLICATION FOR MEMBERSHIPIN THE FHLB SYSTEM. Section 4(b) of the Federal Home Loan Bank Act (12 U.S.C. 1424) is amended to read as follows: 040 24 “(b) MEMBERSHIP BASED ON CONVENIENCY.—-An institution eli gible to become a member of a Federal home loan bank under this section may become a mem ber by submitting the institution's application for membership to the bank in the district where the applicant's principal place of business is located. An application f or mem- bership shall be approved by the bank if, in the judgmentof the bank, the applic ant meets the criteria for eligibility contained in this section. An institution eligibl e to become a-member under this section may apply for membership in an adjoi ning dis- trict, if appropriate for the convenience of the institution and then only w ith the approval of the Board.”. SEC. 172. FEDERAL HOME LOAN BANK EXTERNAL AUDITORS. Section 11{j) of the Federat Home Loan Bank Act (12 U.S.C. 14 31(j)) is amended to read as follows: “(j) AUDITS.— “(t) Notwithstanding any other provision of law, audits by the Comptroll er General of the United States of the financial transactions of a Federa l home loan bank shall not be limited to periods during which Governmentcapital h as been invested in the bank. The provisions of section 9107(c)(2) and 9108(d) (1) of title 31, of such Code, shall not apply to any Federal home loan bank. “(2) Notwithstanding any other provision of law, the Board shall not partic ti- pate in the hiring of an external auditor by the banks: except, that the Boa rd may establish requirements for external audit contracts and, that all 12 banks shall contract for an annual audit with a single provider.”. TITLE II—STREAMLINING GOVERNMENT REGULATIONS Subtitle A—Regulatory Approval Issues SEC. 201, STREAMLINED NONBANKING ACQUISITIONS BY WE LL CAPITALIZED AND WELL MAN- AGED BANKING ORGANIZATIONS. (a) NoTICE RROQUIREMENTS.—Section 4(j) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843()) is amended— (i) in para, fIVfAN dane ikiing “Ne” and insertingraph(1)(A), by str Except as provided in paragraph (3), no”; and (2) by adding at the end the following new paragraphs: "(3) No NOTICE REQUIRED FOR CERTAIN TRANSACTIONS.—-No notice under para- graph (1) or subsections (c)(8) or (a)(2)(B) is required for a proposal by a bank holding company to engage in any activity or acquire the shares or assets of any companyif the proposal qualifies under paragraph (4). “(4) CRITERIA FOR STATUTORY APPROVAL.—A proposal qualifies under this paragraph ifall of the following criteria are met: “(A) FINANCIAL CRITERIA.—Both before and immediately after the pro- posed transaction— “(i) the acquiring bank holding company is well capitalized; “(ii) the lead insured. depository institution of such holding company is well capitalized: “(iii) well capitalized insured depository institutions control at least 80 percent of the aggregate total risk-weighted assets of insured deposi- tory institutions controlled by such holding company: and “(v) no insured depository institution controlled by such holding com- pen is undercapitalized. “(B) MANAGERIAL CRITERIA.— “(?) WELL MANAGED.—At the time of the transaction, the acquiring bank holding company, its lead insured depository institution, and in- sured depository institutions that control at least 90 percent of the ag- gregate total risk-weighted assets of insured depository institutions controlled by such holding company are well managed. “(i) LIMITATION ON POORLY MANAGED INSTITUTIONS.—Except with re- spect to insured depository institutions described in paragraph (6), no insured depository institution controlled by the acquiring bank holding company has received 1 of the 2 lowest composite ratings at the later of the institution's most recent examination or subsequent review. “(C) ACTIVITIES PERMISSIBLE.—Following consummation of the proposal, the bank holding company engages directly or through a subsidiary solely in— 041 25 “(i) activities that are permissible under subsection (c)(8), as deter- mined by the Board by regulation or order thereunder, subject to all of the restrictions, terms and conditions of such subsection and such regulation or order; and "(ii) such other activities as are otherwise permissible under this sec- tion, subject to the restrictions, terms and conditions, including any Brit notice or approval requirements, provided in this section. “(D) SIZE OF ACQUISITION.— “(i) ASSET SIZE.—The book value of the total assets to be acquired does not exceed 10 percent of the consolidated total risk-weighted as- sets of the acquiring bank holding company; and “(ii) CONSIDERATION.—The gross consideration to be paid for the se- curities or assets does not exceed 15 percent of the consolidated Tier 1 capital of the acquiring bank holding company. “(E) NOTICE NOT OTHERWISE WARRANTED.—-For proposals described in paragraph (5)(B), the Board has not, before the conclusion of the period pro- vided in paragraph (5)(B), advised the bank holding company that a notice under paragraph(1) is required. “(F) COMPLIANCE CRITERION.—During the 12-month period ending on the date on which the bank holding company proposes to commenceanactivit or acquisition, no administrative enforcement action has been commenced, and no cease and desist order has been issued pursuant to section 8 of the Federal Deposit Insurance Act, against the bank holding company or any depository institution subsidiary of the holding company and no such en- forcement action, order, or other administrative enforcement proceeding is ending as of such date. “ NOTIFICATION.— "(A) COMMENCEMENT OFACTIVITIES APPROVED BY RULE.—A bank holding company that qualifies under paragraph (4) and that proposes to engage de novo, directly or through a subsidiary, in any activity that is permissible under subsection (c)(8), as determined by the Board by regulation, may commence that activity without prior notice to the Board and must provide written notification to the Board no later than ten business days after com- mencing the activity. “(B) ACTIVITIES PERMITTED BY ORDER AND ACQUISITIONS.— “@) IN GENERAL.—At least 12 business days before commencing any activity pursuant to paragraph (3) (other than an activity described in subparagraph(A)) or acquiring shares or assets of any company pursu- ant to paragraph (3), the bank holding company shall provide written notice of the proposal to the Board, unless the Board determines that no notice or a shorter notice period is appropriate. “Gi) DESCRIPTION OF ACTIVITIES AND TERMS.—A notification under this subparagraph shall include a description of the proposed activities and the termsof any proposed acquisition. “(6) RECENTLY ACQUIRED INSTITUTIONS.—Insured depository institutions which have been acquired by a bank holding company during the 12-month pe- riod preceding the date on which the company proposes to commenceanactivity or acquisition pursuant to paragraph (3) may be excluded for purposes of para- graph (4)(B) (ii) if— “(A) the bank holding company has developed a plan for the institution to restore the capital and managementof the institution which is accept- able to the appropriate Federal banking agency; and “(B) all such insured depository institutions represent, in the aggregate, less than 10 percent of the aggregate total risk-weighted assets of all in- sured depository institutions controlled by the bank holding company. “(7) ADJUSTMENT OF PERCENTAGES.—The Board may, by regulation, adjust the percentages and the mannerin which the percentages of insured depository in- stitutions are calculated under paragraph (4)(B){i), (4)(D), or paragraph (6)(B) if the Board determines that any such adjustment is consistent with safety and soundness and the purposesofthis Act.”. (b) DEFINITIONS.—Section 2(0) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(0)) is amended— (1) by striking paragraph (1) and inserting the following new paragraph: “(1) CAPITAL TERMS.— “(A) INSURED DEPOSITORY INSTITUTIONS.—With respect to insured deposi- tory institutions, the terms ‘well-capitalized’, ‘adequately capitalized’, and ‘uncapitalized’ have the meaning given those terms in section 38(b) of the Federal Deposit Insurance Act. 042 26 “(B) BANK HOLDING COMPANY.— “(i) ADEQUATELY CAPITALIZED.—The term ‘adequately capitalized’ means a level of capitalization which meets or exceeds all applicable Federal regulatory capital standards. “(ii) WELL CAPITALIZED.—A bank holding companyis ‘well capitalized’ if it meets the required capital levels for well capitalized bank holding companies established by the Board. ~ “(C) OTHER CAPITAL TERMS.—The terms ‘Tier 1' and ‘risk-weighted assets’ have the meaning given those terms in the capital guidelines or regulations established by the Board for bank holding companies.”; and (2) by adding at the end the following new paragraphs: “(8) LEAD INSURED DEPOSITORY INSTITUTIONS.— “(A) IN GENERAL.—The term ‘lead insured depository institution’ means the largest insured depository institution controlled by the bank holding company at any time, based on a comparison of the average total risk- weighted assets controlled by each insured depository institution during the previous 12-month period. “(B) BRANCH OR AGENCY.—For purposes of this paragraph and section 4(j)(4), the term ‘insured “depository institution” shall also~include any branch or agency operated in the United States by a foreign bank. “(9) WELL MANAGED.—Theterm ‘well managed’ means— “(A) in the case of any company or depository institution which receives examinations, the achievement of— “(j) a CAMEL composite rating of 1 or 2 (or an equivalent rating under an equivalent rating system) in connection with the most recent examination or subsequent review of such companyor institution; and “(i) at least a satisfactory rating for management. if such rating is iven, or . “(B) in the case of a company or depository institution that has not re- ceived an examination rating, the existence and use of managerial re- sources which the Board determinesare satisfactory.”. SEC. 202. STREAMLINED BANK ACQUISITIONS BY WELL CAPITALIZED AND W ELL MANAGED BANKING ORGANIZATIONS. Section 4 of tne Dank Hundiing Cumpany Ove G2 U.S.C, 1242) ing at the end the following new subsection: “(h) No APPROVAL REQUIRED: FOR CERTAIN TRANSACTIONS.— “(1) IN GENERAL.—Notwithstanding paragraph (3) or (5) of subsectio n (a) and subject to paragraphs (5) and (6), an acquisition of shares by a regist ered bank holding company, or a merger or consolidation between registered ban k holding companies, shall be deemed approved at the conclusion of the period specified in subparagraph (G)if all of the following conditions have been met: “(A) FINANCIAL AND MANAGERIAL CRITERIA.— “(i) WELL CAPITALIZED BANK HOLDING COMPANY.—Both at t he time of and immediately after the proposed transaction, the acquiring bank holding companyis well capitalized. “(ii) WELL CAPITALIZED LEAD INSURED DEPOSITORY INSTITUTION.— Both at the time of and immediately after the. proposed transaction,the lead insured depository institution of the acquiring bank holding com- pany is well capitalized. “(iii) CAPITAL OF OTHER INSURED DEPOSITORY INSTITUTIONS.— At the time of the transaction, well capitalized insured depository institution s control at least 80 percent of the aggregate total risk-weighted assets of insured depository institutions controlled by the acquiring bank hold - ing company. “(iv) NO UNDERCAPITALIZED INSURED DEPOSITORY INSTITUTIO NS.—At the tire of the transaction, no insured depository institution controlle d by the acquiring bank holding company is undercapitalized. “(v) WELL MANAGED.— “(2 IN GENERAL.—At the time of the transaction, the acquiri ng bank holding company,its lead insured depository institution, and insured depository institutions that control at least 90 percent of the aggregate total risk-weighted assets of insured depository insti- tutions controlled by such holding company are well managed. “(IT No POORLY MANAGED INSTITUTIONS.—Except with respect t o insured depository institutions described in paragraph (2), no in- sured depository institution controlled by the acquiring bank hold- ing companyhasreceived 1 of the 2 lowest composite ratings at the Ind her 2A ned 043 27 later of the institution’s most recent examination or subsequentre- view. “(B) NO UNSATISFACTORY CRA RATINGS.—Except with respect to insured depository institutions described in paragraph (3), no insured depository in- stitution controlled by the acquiring bank holding company has received a ‘needs to improve’ or ‘substantial noncompliance’ composite rating as a re- sult of the institution's most recent examination under the Community Re- investment Act of 1977. “(C) COMPETITIVE CRITERIA.—Consummation of the proposal complies with guidelines established by the Board by regulation, after consultation with the Attorney General, that identify proposals that are not likely to have a significantly adverse effect on competition in any relevant market. “(D) SIZE OF ACQUISITION.— “(i} ASSET SIZE.—The book value of the total assets to be acquired does not exceed 10 percent of the consolidated total risk weighted as- sets of the acquiring bank holding company. “(ii) CONSIDERATION.—The gross consideration to be paid for the se- curities or assets does not exceed 15 percent of the consolidated Tier 1 capital of the acquiring bank holding company. “(E) INTERSTATE ACQUISITIONS.—Board approval of the transaction is not prohibited under subsection (d). “(F) COMPLIANCE CRITERION.—During the 12-month period ending on the date of the transaction, no administrative enforcement action has been com- menced, and no cease and desist order has been issued pursuant to section 8 of the Federal Deposit Insurance Act, against any bank holding company involved in the transaction or any depository institution subsidiary of any such holding company and no such enforcementaction, order, or other ad- ministrative enforcement proceeding is pending as of such date. “(G) OTHER CONSIDERATIONS.—Board approval of the transaction is not prohibited under subsection (c) (3). “(H) NOTIFICATION.—The acquiring bank holding company provides writ- ten notice of the transaction, including a description of the terms of the transaction, to the Board and the Attorney General, simultaneously, at least 15 business days (or such shorter period as permitted by the Board) before the transaction is consummated. “(I) No BOARD DISAPPROVAL.—Before the end of the 15-day period (or the shorter period) referred to in subparagraph (H), the Board has not required an application under subsection (a). “(2) SPECIAL RULE RELATING TO THE REQUIREMENT FOR WELL MANAGEDINSTI- TUTIONS.—Insured depository institutions which have been acquired by a bank holding company during the 12-month period preceding the date of the trans- action may be excluded for purposes of paragraph (Aye) (ID if— “(A) the bank holding company has developed a plan for the institution to restore the capital and managementof the institution which is accept- able to the appropriate Federal banking agency: and “(B) all such insured depository institutions represent, in the aggregate, less than 10 percent of the aggregate total risk-weighted assets of all in- sured depository institutions controlled by the holding company. “(3) SPECIAL RULE RELATING TO THE REQUIREMENT FOR COMMUNITY INVEST- MENT.—Insured depository institutions acquired during the 12-month period preceding the date of the transaction may be excluded for purposes of para- graph (1)(B) if the bank helding company has developed a plan to restore the performanceof the institution to at least a ‘satisfactory’ rating under the Com- munity Reinvestment Act of 1977 which is acceptable to the appropriate Federal banking agency. “(4) ADJUSTMENT OF PERCENTAGES.—The Board may by regulation adjust the percentages and the mannerin which the percentages of insured depository in- stitutions are calculated under subparagraph (Aya) or (D) of paragraph (1) or paragraph (2)(B) if the Board determines that such adjustment is consistent with safety and soundness and the purposes of this Act. “(5) ADVICE OF ATTORNEY GENERAL.—The Attorney General shall advise the Board during the period referred to in paragraph (1y(H) in writing if any com- petitive concerns exist with respect to the transaction. “(6) WAIVER OF POSTAPPROVAL WAITING PERIOD.—If the Attorney General ad- vises the Board that no competitive concerns exist with respect to the trans- action, the provisions of section 11(b) relating to a postapproval waiting shall not apply with respect to such transaction.”. 044 28 SEC. 203, ELIMINATE FILING AND APPROVAL REQUIREMENTS FOR INSURED DEPOSITORYIN- STITUTIONS ALREADY CONTROLLED BY THE SAME HOLDING COMPANY. (a) BANK MERGER AcT.—Section 18(c) of the Federal Dep osit Insurance Act (12 U.S.C. 1828(c)) is amended by adding at the end the following new p aragraph: “(12) The provisions of this subsection shall not apply to any merger,con soli- dation, acquisition of assets or assumption of liabilities involving on ly insured depository institutions that are subsidiaries of the same depository institution holding company if— (A) the responsible agency would not be prohibited from approving th e transaction undersection 44,if applicable: “(B) the acquiring, assuming, or resulting institution complies with al l applicable provisions of section 44, if any, as if the merger, consolid ation, or acquisition were approved under this subsection; “(C) the acquiring, assuming, or resulting institution provides writte n no- tification of the transaction to the appropriate Federal banking agenc y for the institution at least 10 days prior to consummation of the transaction; and “(D) after receiving such notice, the agency does not require the institu - tion to submit an-application with respect to such transaction and so noti- fies the institution.”. (b) NATIONAL BANK CONSOLIDATION AND MERGER ACT.— (1) CoNSOLIDATIONS.—Section 2 of the National Bank Consolida tion and Merger Act (12 U.S.C, 215) is amended— (A) in subsection (a), by adding at the end thefollowing new sent ence: “No approval by the Comptroller of the Currency is required under this subsection for a transaction which involves the consolidation of banksthat, at the time of the consolidation, are all subsidiaries (as defined in section 3 of the Fede ral Deposit In- surance Act) of the same company.”; and (B) in subsection (b)— (i) by striking ") and thereafter the consolidation shall be approved by the Comptroller”; and w by striking “when such consolidation is approved by the Comp- troller”. (2) MERGERS.---Section 3 of the National Bank Consolidation and Merge r Act (12 U.S.C. Zida) is amendea— (A) in subsection (a), by adding at the end the following new sentence: “No approval by the Comptroller of the Currency is required und er this subsection for a transaction which involves the mergerof banks that, at the time of the merger, are all subsidiaries (as defined in section 3 of the Federal Deposit Insurance ct) of the same company.”; and (B) in subsection (b)— (i) by striking “, and thereafter the merger shall be approved by the Comptroller”; and (i) by striking “when such merger shall be approved by the C omp- troller”. SEC. 204, ELIMINATE REDUNDANT APPROVAL REQUIRE MENT FOR OAKAR TRANSACTIONS. (a) IN GENERAL.—Section 5(d)(3) of the Federal Deposit Insurance Ac t (12 U.S.C. 1815(d)(3)) is amended— (1) in subparagraph (A), by striking “with the prior written approva l of the responsible agency under section i8(02)": (2) in subparagraph (E)— (A) by striking clause (iv) andinserting the following new clause: “(iv) A transaction shall not be authorized under this paragraph un- less the acquiring, assuming, or resulting depository institution w ill meet all applicable capital requirements upon consummation of the transactien."; (B) by striking clauses (i). and (ii); and (C) by redesignating ciauses (iii) and (iv) (as armended by subpar agraph (A) of this paragraph) as clauses(i) and (ii), respectively; and (3) by striking subparagraph (G) and redesignating the subsequen t subpara- graphs accordingly. (b) TECHNICAL AND CONFORMING AMENDMENT.—Section 5 156A(b)(1) of the Re- vised Statutes of the United States (12 U.S.C. 215c(b)(1) ) is amended by striking “section 5(d)(3) of the Federal Deposit Insurance Act or”. (c) CLERICAL AMENDMENT.—The heading for section 5(d)(3) (E) of the Federal De- posit Insurance Act (12 U.S.C. 1815(d)(3)(E)) is amended by striking “FOR APPROVAL, GENERALLY”. 045 29 SEC. 205. ELIMINATION OF DUPLICATIVE REQUIREMENTS IMPOSED UPON BANK HOLDING COMPANIES AND OTHER REGULATORY RELIEF UNDER THE HOME OWNERS’ LOAN ACT. (a) EXEMPTION FOR BANK HOLDING COMPANIES.—Section 10 of the Home Owners’ Loan Act (12 U.S.C. 1467a) is amended by adding at the end the following new sub- section: “{t) EXEMPTION .FOR BANK HOLDING COMPANIES.—This section shall not apply to a bank holding companythat is subject to the Bank Holding Company Act of 1956 or any company controlled by such bank holding company (other than a savings as- sociation).”. (b) DEFINITION OF SAVINGS AND LOAN HOLDING CoMPANY.—-Section 10(a)(1)(D) of the Home Owners’ Loan Act (12 U.S.C. 1467a(a)(1)(D)) is amended to read as fol- lows: “(D) SAVINGS AND LOAN HOLDING COMPANY.— “(i) IN GENERAL.—Except as provided in clause {ii}, the term ‘savings and loan holding company’ means any company which directly or indi- rectly controls a savings association or controls any other company which is a savings and loan holding company. “(ii) EXCEPTION FOR BANK HOLDING COMPANY.-—The term ‘savings and loan holding company’ does not include any company which is reg- istered under, and subject to, the provisions of the Bank Holding Com- pany Act of 1956, or any company directly or indirectly controlled by such company.”. (c) AMENDMENTS TO THE BANK HOLDING COMPANY ACT OF 1956.—Section 4{i) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(i)) is amended by adding at the end the following new paragraphs: “(4) SOLICITATION OF VIEWS.-— “(A) NoTICE TO DIRECTOR.--Upon receiving any application or notice by a bank holding company to acquire directly or indirectly a savings associa- tion under subsection (o (8), the Board shall solicit the Director's comments and recommendations with respect to such acquisition. “(B) COMMENT PERIOD.—The comments and views of the Director under subparagraph (A) with respect to any acquisition subject to such subpara- graph shall be transmitted to the Board within 30 days of the receipt by the Director of the notice relating to such acquisition (or such shorter pe- riod as the Board may specify if the Board advises the Director that an emergency exists which requires expeditious action). “(5) EXAMINATION.— “(A) ScopeE.—The Board shall consult with the Director, as appropriate, in establishing the scope of an examination by the Board of a bank holding companythat controls directly or indirectly a savings association. “(B) ACCESS TO INSPECTION REPORTS.Upon the request of the Director, the Board shall furnish the Director with a copy of any inspection report, additional examination materials, or supervisory information relating to any bank holding company which directly or indirectly controls a savings association. “(6) COORDINATION OF ENFORCEMENT EFFORTS.—The Board and the Director shall cooperate in any enforcement action against any bank holding company which controls a savings association, if the relevant conduct involves such asso- ciation. “(7) DIRECTOR DEFINED.—For purposes of this section, the term ‘Director’ means the Director of the Office of Thrift Supervision.”. (d) ALTERNATIVE TEST.—Section 10(m) of the Home Owners’ Loan Act (12 U.S.C. 1467a(m)) is amended— (1) in paragraph (1), by striking “(2) and (7)” and inserting “(2), (7), and (8): and (2) by adding at the end the following new paragraph: “(8) ALTERNATIVE TEST.—Any savings association which meets the require- ments set forth in section 7701{a}(19)(C) of the Internal Revenue Code of 1986 shall be deemed to be a qualified thrift lender and any qualified thrift lender shall be deemed to meet the requirements of such section.”. SEC. 206. ELIMINATE REQUIREMENT THAT APPROVAL BE OBTAINED FOR DIVESTITURES. Section 2(g) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(g)) is amended— (1) by striking paragraph (3); (2) by inserting “and” after the semicolon at the end of paragraph (1); and (3) by striking “; and” at the end of paragraph (2) and inserting a period. 046 30 SEC. 207. ELIMINATE UNNECESSARY BRANCH APP LICATIONS. (a) NATIONAL BANK BRANCH APPLICATIONS.—Section 5155(i) of the Revised Stat- utes (12 U.S.C. 36()) is amended— (1) by striking “(i) No branch” andinserting “@) RELOCATION.— “() APPROVAL REQUIRED.—Except as provided in pa ragraph (2), no branch”; and (2) by adding at the end the following new paragraphs: : “(2) No APPROVAL REQUIRED FOR CERTAIN BRANCHES.—Notwithstanding this subsection or subsection (b) or (c), the consent and approval of the Comptroller of the Currency shall not be required for a national bank to establish and oper- ate, or to retain and operate, a branch or seasonal agency if— “(A) the bank is well capitalized (as defined in section 38 of the Federal Deposit Insurance Act and regulations prescribed by the Comptroller of the Currency under such section); “(B) the bank received a composite CAMELrating of ‘1’ or ‘2’ under the Uniform Financial Institutions Rating System (or an equ ivalent rating _ under a comparable rating system) as of its most rec ent examination; "(C) the bank did not receive a ‘needs to improv e’ or ‘substantial non- compliance’ composite rating at its most recent examination under the Community Reinvestment Act of 1977: and “(D) the Comptroller of the Currency is otherwise authorized to grant ap- proval underthis section to such bank to establish and opera te, or to retain and operate, a branch or seasonal agency at the proposed locat ion. “(3) CERTAIN BRANCHES DEEMED TO HAVE "APPROVE D APPLICATIONS.—A branch or seasonal agency established by a national bank under pa ragraph (2) shall be deemed to have been established and operated pursuant to an application ap- proved underthis section.”. (b) STATE MEMBER BANK BRANCH APPLICATIONS.—The thi rd undesignated para- graph of section 9-of the Federal Reserve Act.(12 U.S.C. 3 21) is amended by adding at the end the following: “Notwithstanding the preceding 2 sentences, the approval of the Board shall not be required for a State member ban k to establish and operate a branch or seasonal agency if— “(A) the State member bank is well-capitalized (a of the Federal Depusic iuowane Act and rogutst Board under such section): “(B) the State member bank received a composite CAME Lrating of ‘1’ or 2" under the Uniform Financial Institutions Rating System (or an equiva- lent rating under a comparable rating system); “(C) the State member bank did not receive a ‘ne eds to improve’ or ‘sub- stantial noncompliance’ composite rating at its most rece nt examination under the Community Reinvestment Act of 1977; and “(D) the Board is otherwise authorized to grant approval und er this sec- tion to such State member bank to establish and operate a branch or sea- sonal agency at the proposed location. A branch or seasonal agency established by a State mem ber bank under the pre- vious sentence shall be deemed to have been established an d operated pursuant to an application approved underthis section.”. (c) STATE NONMEMBER BANK BRANCH APPLICATIONS.—Sectio n 18(d) of the Federal Deposit Insurance Act (12 U.S.C. 1828(d)) is amended by adding at the end the fol- lowing new paragraphs: “(5) APPLICATION EXEMPTION FOR CERTAIN BANKS.—Notwi thstanding para- graph (1), the consent of the Corporation shall not be required for a State nonmember insured bankto establish and operate any domes tic branch if— “(A) the bank is well-capitalized (as defined in section 38 and regulations prescribed by the Corporation under such section); “(B) the bank received a composite CAMEL ratin g of ‘l’ or ‘2’ under the Uniform Financial Institutions Rating System (or an eq uivalent rating under a comparable rating system) as of its most recent exami nation, "(C) the bank did not receive a ‘needs to improve’ or ‘substantial non- compliance’ composite rating as result of the bank's most r ecent examina- tion under the Community Reinvestment Act of 1977; and “(D) the Corporation is otherwise authorized to give cons ent under this section to such bank to establish and operate a domestic br anch at the pro- posedlocation. “(6) APPROVAL GRANTED.—A branch established by a St ate member bank under paragraph (5) shall be deemed to have been establ ished and operated pursuant to an application approved underthis section.”. defined in section 38 riheA hy the 047 31 SEC. 208. ELIMINATE BRANCH APPLICATIONS AND REQUIREMENTS FOR ATMs AND SIMILAR FACILITIES. (a) DEFINITION OF BRANCH UNDER NATIONAL BANK ACT.—Section 5155(j) of the Revised Statutes (12 U.S.C. 36(j)) is amended— (1) by striking “(j) The term” and inserting “(j) BRANCH.— “() IN GENERAL.—The term”; and (2) by adding at the end the following new paragraph: “(2) CERTAIN PROPRIETARY ATMS AND REMOTE SERVICING UNITS.—The term ‘branch’ does not include any automatedteller machine or remote service unit which is owned and operated by a depository institution— “(A) primarily for the benefit of the institution and the affiliates of the institution, and “(B) which could operate a branch at the location of such machine or unit.”. (b) DEFINITION OF BRANCH UNDER FEDERAL DEposiT INSURANCE ActT.—Section 3(c) of the Federal Deposit Insurance Act (12 U.S.C. 1813(0)) is amended— (1) by striking “(0) The term” and inserting “(o) DEFINITIONS RELATING TO BRANCHES.— “(1) DOMESTIC BRANCH.— “(A) IN GENERAL.—The term”; and (2) by striking “lent; and the term” andinserting “lent. “(B) CERTAIN PROPRIETARY ATMS AND REMOTE SERVICING UNITS.—The term ‘domestic branch’ does not include any automated teller machine or remote service unit which is owned and operated by a depository institu- tion— “(i) primarily for the benefit of the institution andthe affiliates of the institution; and “(ii) which could operate a branch at the location of such machine or unit. “(2) FOREIGN BRANCH.—The term”. SEC. 209. ELIMINATE REQUIREMENT FOR APPROVAL OF INVESTMENTS IN BANK PREMISES FOR WELL CAPITALIZED AND WELL MANAGED BANKS. Section 24A of the Federal Reserve Act (12 U.S.C. 371d) is amended by inserting before the period in that section the following: “or, in the case of a bank which re- ceived a composite CAMELrating of ‘1’ or ‘2’ under the Uniform Financial Institu- tions Rating System (or an equivalent rating under a comparable rating system) as of its most recent examination and, both before and immediately following the in- vestment or loan, is well capitalized (as defined under section 38 of the Federal De- posit Insurance Act), the amount which is equal to 150 percent of the capital stock and surplus of such bank”. SEC. 210. ELIMINATE UNNECESSARYFILING FOR OFFICER AND DIRECTOR APPOINTMENTS. Section 32(d) of the Federal Deposit Insurance Act (12 U.S.C. 1831i(d)) is amend- ed to read as follows: “(d) ADDITIONAL INFORMATION.— “(1) IN GENERAL.Any notice submitted to an appropriate Federal banking agency with respect to an individual by any insured depository institution or depository institution holding company pursuant to subsection (a) shall in- clude— “(A) the information described in section 7(j}(6)(A) about the indi¥idual: d “(B) such other information as the agency may prescribe by regulation. “(2) WaIvER.—An appropriate Federal banking agency may waive the require- ment of this section by regulation or on a case-by-case basis consistent with safety and soundness.”. SEC. 211. STREAMLINING PROCESS FOR DETERMINING NEW NONBANKING ACTIVITIES. Section 4(c)(8) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(c)(8)) is amended— (1) by striking “and opportunity for hearing”; and (2) by striking “approval by the Board prior to January 1, 1971.” and insert- ing the following: “approval by the Board prior to January 1, 1971, except that, after March 30, 1997, it shall be closely related to banking or managing or con- trolling banks and a proper incident thereto to provide insurance as a principal, agent, or broker in any State, in full compliance with the laws and regulations of such State that apply uniformly to each type of insurance license or author- ization in that State, including laws that restrict a bank in that State from hav- ing an affiliate, agent, or employee in that State licensed to provide insurance 048 32 as principal, agent, or broker. The Board shall prescribe regulations concerning insurance affiliations that provide equivalent treatmentfor all stock and mu- tual fund insurance companies that control or are affiliated with a bank, and fully accommodate andare consistent with State law.”. SEC. 212. DISPOSITION OF FORECLOSED ASSETS. Section 4(c)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(c)(2)) is amended— (1) by striking “for not more than one year at a time”, and (2) by striking “but no such extensions shall extend beyond a date five years” and inserting “and, in the case of a bank holding company which has not dis- posed of such shares within 5 years of the date such shares were acquired, the Board may, upon the application of such company, grant additional exemptions if, in the Board's judgment, such extension would not be detrimentalto the pub- lic interest and either the bank holding company has made a goodfaith attempt to dispose of such shares during such 5-year period or the disposal of such shares during such 5-year period would have been detrimental to the company, but the aggregate duration of such extensions shall not extend 10 years”. SEC. 213. INCREASE IN CERTAIN CREDIT UNION LOAN CEILINGS. Section 107(5)(A) of the Federal Credit Union Act (12 U.S.C. 1757(5)(A)) is amend- ed— (1) in clause (iv), by striking “$10,000” andinserting “$50,000”; and (2) in clause (v), by striking “$10,000” and inserting “$50,000”. Subtitle B—Streamlining of Government Regulations; Miscellaneous Provisions SEC. 221, ELIMINATE THE PER-BRANCH CAPITAL REQUIREMENT FOR NATIONAL BANKS AND STATE MEMBER BANKS. Section 5155 of the Revised Statutes (12 U.S.C. 36) is amended— (1) by striking subsection (h); and (2) by redesignating subsections(i) (as amended by section cU/\a) or tnis Act, G) (as amended by section 208{a) of this Act), &), and @) as subsections th), @, j), and (k), respectively. SEC, 222. BRANCH CLOSURES. (a) IN GENERAL.—Section 42 of the Federal Deposit Insurance Act (12 U.S.C. 183ir-1) is amended by adding at the endthe following new subsection: "(e) SCOPE OF APPLICATION.— “(1) IN GENERAL.—This section shall not apply with respect to— “(A) an automated teller machine; “(B) a branch which— “(j) has been acquired through merger, consolidation, purchase, as- sumption, or other method; and “di) is located— € “() within 2.5 miles of another branch of the acquiring institu- tion; or “(II) within a neighborhood currently being served by another branch of the acquiring institution, if such other branch of the acquiring institution is expected to continue to provide banking services to substantially all of the customers currently served by the branch acquired; “(C) a branch which is closing and reopening at a location which is— “() within 2.5 miles of the location of the branch being closed; or “(ii) within the same neighborhood as the branch beingclosed, if the branch at the new location is expected to continue to provide banking services to substantially all of the customers served by the branch at the former location; “(D) a branchthatis closed in connection with— “G) an emergency acquisition under— “(D section 11{n); or “(ID subsections (f) or (k) of section 13; or “(ii) any assistance provided by the Corporation under section 13(c); and 33 “(E) any other branch closure whose exemption from the notice require- ments of this section would not produce a result inconsistent with the pur- oses of this section. “B REGULATIONS.—The appropriate Federal banking agency shall, by regula- tion, determine the circumstances under which any exemption under paragraph(1)(E) may be granted.”. (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply as if such amendment had been included in section 42 of the Federal Deposit [nsurance Act as of the date of the enactment of the Federal Deposit Insurance Corporation Improvement Act of 1991. SEC. 223. AMENDMENTS TO THE DEPOSITORY INSTITUTIONS MANAGEMENT INTERLOCKS ACT. (a) DUAL SERVICE IN SAME AREA, TOWN, OR VILLAGE.—Section 203 of the Deposi- tory Institution ManagementInterlocks Act (12 U.S.C. 3202) is amended— (1) by inserting “(a) PROHIBITIONS.—”before “A managementofficial”; and (2) by adding after subsection (a) the following new subsection: “(b) SMALL MARKET SHARE EXEMPTION.— “(1) IN GENERAL.—This section shall not be construed as prohibiting a man- agement official of a depository institution or depository holding company from serving as a managementofficial of another depository institution or depository holding company notaffiliated with such institution or holding company if the depository institutions or depository holding companies with which the manage- mentofficial serves hold, together with all the affiliates of such institutions or holding companies, in the aggregate no more that 20 percent of the deposits in each relevant geographic banking market whereoffices of the depository institu- tions or depository holding companiesortheiraffiliates are located. "(2) RELEVANT GEOGRAPHIC BANKING MARKET DEFINED.—For purposesof para- graph (1), the term ‘relevant geographic banking market’ means— “(A) the area defined by the boundaries identified by the Board of Gov- ernors of the Federal Reserve System; “(B) if the Board has not defined such boundaries, the area defined by the boundaries of the Ranally Metropolitan Area in which the office of the depository institution or the depository institution holding companyis lo- cated; and “(C) if the office of such institution or company is not located within a Ranally Metropolitan Area, the area defined by the county (or an equivalent area of general local government) in which suchoffice is located.” (b) DUAL SERVICE AMONG LARGER ORGANIZATIONS.—Section 204 of the Deposito: Institution Management Interlocks Act (12 U.S.C. 3203) is amended to read as fol- lows: “SEC. 204. DUAL SERVICE AMONG LARGER ORGANIZATIONS. “(a) IN GENERAL.—If a depository institution, depository institution holding com- pany, or depository institution affiliate of any such institution or company hastotal assets exceeding $2,500,000,000, a managementofficial of such institution, com- pany, or affiliate may not serve as a managementofficial of any other depository institution, depository institution holding company, or depository institutionaffiliate of any such institution or company which— “(1) is not an affiliate of the institution, company, or affiliate of which such person is a managementofficial; and "(2) has total assets exceeding $1,500,000,000. “(b) CPI ADJUSTMENTS.—The dollar amounts in this section shall be adjusted an- nually after December 31, 1994, by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published by the Bureau of Labor Statistics.”. (c) EXTENSION OF GRANDFATHER EXEMPTION.—Section 206 of the Depository Insti- tution ManagementInterlocks Act (12 U.S.C. 3205) is amended— (1) in subsection (a), by striking “for a period of, subject to the requirements of subsection (c), 20 years after the date of enactmentof this title”: (2) in subsection (6), by striking the 2d sentence; and (3) by striking subsection (c). (d) RULES oR REGULATIONS.—Section 209 of the Depository Institution Manage- ment Interlocks Act (12 U.S.C. 3207) is amended— (1) by striking “(a) IN GENERAL.——Rules” and inserting “Rules”; (2) by inserting “, including rules or regulations which permit service by a managementofficial which would otherwise be prohibited by section 203 or sec- tion 204,” after “title”; and (3) by striking subsections (b) and (c). 050 34 SEC. 224. ACCELERATION OF REPAYMENT TO TREASURY . The Appraisal Subcommittee of the Financial Institutions Exam ination Council shall repay to the Secretary of the Treasury the funds specified i n section 1108 of Financial Institutions Reform, Recovery, and Enforcement Act of 1989 by not later than September 30, 1998, and the Secretary shall deposit such fun ds in the general fund of the Treasury. SEC. 225. ELIMINATE UNNECESSARY AND DUPLICATIVE RECORDKEEPING AND R EPORTING REQUIREMENTS RELATING TO LOANS TO EXECUTIVE OFFICERS AND PERMIT PAR- TICIPATION IN EMPLOYEE BENEFIT PLANS. (a) AMENDMENTS TO SECTION 22(h) OF THE FEDERAL RESERVE A CT.— (1) EMPLOYEE BENEFIT PLANS.—Section 22(h)(2) of the Federal Res erve Act (12 U.S.C. 375b(2)) is amended— (A) by redesignating subparagraphs (A), (B), and (C) as clauses (i), (ii), and (iii), respectively, and moving the left margins of such clauses 2 ems to the right: (B) by striking “(2) PREFERENTIAL TERMS PROHIBITED.—-A member bank” and inserting “(2) PREFERENTIAL TERMS PROHIBITED.— “(A) IN GENERAL.--A member. bank”; and ; (C) by adding at the end the following new subparagraph: “@B) EXCEPTION.—No provision of this paragraph shall be construed as prohibiting extensions of credit that constitute a benefit or compensation program that is widely available to and used by employees of the member bank, including employees who are not executiveofficers of the bank.”. (2) EXCEPTION FOR EXTENSIONS OF CREDIT TO EXECUTIVE OFFICERS AND DI REC TORS OF NONBANK AFFILIATES.—Section 22(h)(8)(B) of the Federal Reserve Act (12 U.S.C. 375b(8)(B)) is amended to read as follows: "(B) EXCEPTION.—The Board may, by regulation, make exceptio ns to sub- paragraph (A) for an executive officer or director of a subsidiary of a com- pany that controls the member bank if— "(i) the executive officer or director does not have authority to partici- pate, and does not participate, in major policymaking functions of the member bank; and “(ii) the assets of such sub idiary do not exceed 10 percentof the con- that santenle thn member hank and such subsidiary (and is not controlled by any other company).”. (3) RECORDKEEPING REQUIREMENTS.—Section 22(h)(10) of the Federai R eserve Act (12 U.S.C. 375b(10)) is amended by adding at the end the foll owing: “The Board shall specify by regulation the recordkeeping required of mem ber banks to ensure compliance withthis section.”. (b) REPORTING REQUIREMENTS.-—— (1) UNNECESSARY REPORTS.—-Section 22(g) of the Federal Reserv e Act (12 U.S.C. 375a) is amended— (A) by striking paragraphs(6) and (9); and (B) by redesignating paragraphs (7), (8), and (10) as paragraphs ( 8), (9), and (10), respectively. (2) UNNECESSARY REPORTS.—Section 7 of the Federal Deposi t Insurance Act (12 U.S.C..1817) is amended by striking subsection (k). . (3) UNNECESSARY REPORTS REGARDING LOANS FROM CORRESPONDENT BA NKS.—— Section 106(b)(2) of the Bank Holding Company Act Amendments of 1 970 (12 U.S.C. 1972(2)) is amended— (A) by striking subparagraph (G); and (B) by redesignating subparagraphs (H) and (1) as subparagraphs (G) an d (H), respectively. (c) AMENDMENTS RELATING TO LOANS TO EXECUTIVE OFFICERS.—Sect ion 22(g) of the Federal Reserve Act (12 U.S.C. 375a) (as amended by subsection (a) of this sec- tion) is amended— (1) in paragraph(1)(D), by striking “of any one of the three categories respec- tively referred to in paragraphs (2), (3), and (4)" and inserting “of any c ategory referred to in paragraph(2), (3), (4), (5). or (6)"; @ by redesignating paragraphs (4) and (5) as paragraphs (6) and(7), respec- tively; (3) byinserting after paragraph (3) the following new paragraph: “(4) HOME EQUITY LINES OF CREDIT.-A member bank may makea re volving open-end extension of credit to any executive officer of the bank if the c redit— “(A) does not exceed $100,000; and “(B) is secured by a dwelling that is owned by such officer and used by the officer as a residence. O51 35 “(5) LOANS SECURED BY MARKETABLE ASSETS.—A member bank may extend credit to any executive officer of the bank if the credit is secured by readily mar- ketable assets of a value not exceeding such amount as the Board mayestablish by regulation.”; and (4) in paragraph (7) (as so redesignated by paragraph (2) of this subsection) by striking “(4)" each place such term appears and inserting “(6)”. SEC. 226. EXPANDED REGULATORYDISCRETION FOR SMALL BANK EXAMINATIONS. (a) SMALL BANK SIZE DISCRETION.—Section 10(d) of the Federal Deposit Insurance Act (12 U.S.C. 1820(d)) is amended— (1) by redesignating paragraph (9) as paragraph (10); (2) by redesignating the 2d of the 2 paragraphs designated as paragraph (8) as paragraph (9); and (3) in paragraph (9) (as so redesignated), by striking “$175,000,000" and in- serting $950,000.00", (b) INFLATION ADJUSTMENT.—Section 10(d) of the Federal Deposit Insurance Act (12 U.S.C. 1820(d)) is amended by inserting after paragraph (10) (as so redesignated in subsection (a)(1) of this section) the following new paragraph: “(11) ANNUAL CPI ADJUSTMENT.—The dollar amount in this section shall be adjusted annually after December 31, 1994, by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published by the Bureau of LaborStatistics.”. (c) COORDINATED FEDERAL AND STATE EXAMINATIONS.—The Federal banking agencies (as defined in section 3 of the Federal Deposit Insurance Act) shall submit semiannual reports to the Congress on the progress made by such agencies in imple- menting the requirements of section 10(d)(6) of the Federal Deposit Insurance Act until such agencies submit a final report that— (1) the examination system provided for in such section is in place; and (2) such system provides for full coordination of examinations of State deposi- tory institutions with State bank supervisors. SEC. 227. COST REIMBURSEMENT. Section 1115 of the Right to Financial Privacy Act (12 U.S.C. 3415) is amended by inserting “(including corporate customers)”after “pertaining to a customer”. SEC. 228. IDENTIFICATION OF FOREIGN NONBANKFINANCIAL INSTITUTION CUSTOMERS. (a) IN GENERAL.—Section 5327(a)(1) of title 31, United States Code, is amended to read as follows: “(1) is a financial institution (other than a foreign bank (as defined in section 101(b) of the International Banking Act of 1978)) which is a foreign person; and”, (b) TECHNICAL AND CONFORMING AMENDMENT.—The heading for section 5327 of title 31, United States Code, is amended by inserting “freign nonbank” after “of”, (c) CLERICAL AMENDMENT.—Thetable of sections for chapter 53 of title 31, United States Code, is amended by striking the item relating to section 5327 and inserting the following new item: “$327. Identification of foreign nonbankfinancial institutions.”. SEC. 229, PAPERWORK REDUCTION REVIEW. Not later than 180 days after the date of enactment of this Act, each appropriate Federal banking agency and the National Credit Union Administration, in consulta- tion with insured depository institutions, insured credit unions, and other interested parties, shall— (1) review the extent to which current regulations require insured depository institutions and insured credit unions to produce unnecessary internal written policies; and (2) eliminate such requirements, where appropriate. For purposes of this section, the terms “insured depository institution” and “appro- priate Federal banking agency” have the same meanings as in section 3 of the Fed- eral Deposit Insurance Act and the term “insured credit union” has the same mean- ing as in section 101(7) of the Federal Credit Union Act. SEC. 230. DAILY CONFIRMATIONS FOR HOLD-IN-CUSTODY REPURCHASE TRANSACTIONS. Before the end of the 1-year period beginning on the date of the enactment of this Act, the Secretary of the Treasury shall revise the regulation under section 15C of the Securities Exchange Act of 1934 relating to the obligations of financial institu- tions and of brokers and dealer registered under such Act holding custody of securi- ties subject to a repurchase agreement to confirm, daily and in writing, the securi- ties that are subject to such repurchase agreement. Such revision shall permit the 052 36 counterparty to such agreement to waive in writing the right to obtain such daily written confirmation if the counterparty hasreceived a cle ar and conspicuous disclo- sure before entering into any side agreement,in a form presc ribed by the Secretary, that adequately informs the counterparty of the benefit s of receiving such daily written confirmations. SEC. 231. REQUIRED REGULATORY REVIEW OF REGULATIONS. (a) IN GENERAL.—Notless frequently than once every 10 y ears, the Financial In- stitutions Examination Council thereafter in this se ction referred to as the “Coun- cil”) and each appropriate Federal banking agenc (as defin ed in section 3{q) of the Federal Deposit Insurance Act) represented on the Counc il shall conduct a review of all regulations prescribed by the Council or by any suc h agency, respectively, in order to identify outdated or otherwise unnecessary regula tory requirements im- posed upon insured depository institutions. (b) PRocEsS.—In conducting the review under sub section (a), the Council or the appropriate Federal banking agency shall— (1) categorize the regulations by type (such as consume r regulations, safety and soundness regulations, or such other designations as determined by the Council); and. : . (2) at regular intervals, provide notice and solicit publi c comment on a par- ticular category or categories of regulations, requesting c ommentatorsto iden- tify areas of the regulations that are outdated, unnecessar y, or unduly burden- some. () COMPLETE Review.—The Council or the appropriate Fe deral banking agency shall ensure that the notice and comment period d escribed in subsection wre) is conducted with respect to all regulations describ ed in subsection fa) not less fre- quently than once every 10 years. (d) REGULATORY RESPONSE.—The Council or the appropr iate Federal banking agency shall— (1) publish in the Federal Register a summary of th e comments received under this section, identifying significant issues raised an d providing comment on such issues; and (2) eliminate unnecessary regulations to the extent that such action is appro- i> Roront To Comepres Net later than 30 davs after carrying out subsectio n (d)(1), the Council shall provide to the Congress a r eport, which shall include— (1) a summaryof any significant issues raised by public comments reccived by the Council and the appropriate Federal banking agencies underthis section and therelative merits of such issues; and (2) an analysis of whether the appropriate Federal banking agency involved is able to address the regulatory burdens associated with su ch issues by regula- tion, or whether such burdens must be addressed by legislative action. SEC. 232. COUNTRY RISK REQUIREMENTS. Subsections (a)(1) and (b) of section 905 of the Inter national Lending Supervision Act of 1983 (12 U.S.C. 3904) are amended by striking “s hall” and inserting “may”. SEC. 233. AUDIT COSTS. (a) IN GENERAL.— (1) AUDITOR ATTESTATIONS.—Section. 36 of the Federal Deposit Insurance At (12 U.S.C. 1831m) is amended— (A) in subsection (a)(2)(A)(ii), by striking “subsections (c} and (d)" and in- serting “subsection (c)”; (B) by striking subsections (c) and (e); and (C) by redesignating subsections (d), (. (g). (h), (i), and (j) as subsections (©. @(6). (), @. and (h), respectively. (2) PUBLIC AVAILABILITY.--Section 36(a)(3) of the Federal De posit Insurance Act (12 U.S.C. 183im{a){(3)) is amended by inserti ng at the end the following new sentence: “Notwithstanding the preceding sentence, the Corporation and the appropriate Federal banking agencies may designate ce rtain information as privileged and confidential and not available to the public.”. (b) EXEMPTION FOR WELL-CAPITALIZED AND WELL-MANAGED I NSURED DEPOSITORY INSTITUTIONS.--Section 36 of the Federal Deposit Ins urance Act (12 U.S.C. 183im) (as amended by subsection {a) of this section) is amended by a dding at the end the following new subsection: “(@) EXEMPTION FOR WELL-CAPITALIZED AND WELL-MA NAGED INSURED DEPOSITORY INSTITUTIONS.—No provision of this section other than su bsection (c) shall apply with respect to any insured depository institution which is w ell-capitalized and well- managed.”. 053 37 (c) TECHNICAL AND CONFORMING AMENDMENTS.— (1) Paragraph (1)(B) of section 36(e) of the Federal Deposit Insurance Act (as so redesignated by subsection (a)(1)(C) of this section) is amended by striking “(b) (2), io and (d)" and inserting “(b)(2) and (c)”. (2) Paragraph (1) of section 36(g) of the Federal Deposit Insurance Act (as so redesignated by subsection (a)(1}(C) of this section) is amended by striking “(d)” andinserting “(c)”. SEC, 234. STANDARDS FOR DIRECTOR AND OFFICERLIABILITY. Section 3(u) of the Federal Deposit Insurance Act (12 U.S.C. 1813(u)) is amend- ed-— (1) in paragraph (1), by inserting “(other than an outside director)” after “di- rector”; (2) in paragraph (3), by inserting “(other than an outside director)” after “any other person”; and (3) in paragraph (4), by inserting “or outside director” after “or accountant)”. SEC. 235. FOREIGN BANK APPLICATIONS. (a) PROVISIONS RELATING TO ESTABLISHMENT OF BANK OFFICES.—Section 7(d) of the International Banking Act of 1978 (12 U.S.C. 3105(d)) is amended— (1) in paragraph (2), by striking “The” and inserting “Except as provided in paragraph (6), the”; (2) in paragraph (5), by striking “Consistent with the standards for approval in paragraph (2), the” and inserting “The”; and 6) by adding at the end the following new paragraphs: “(6) EXCEPTION.— “(A) IN GENERAL.—If the Board is unable to find under paragraph (2) that a foreign bank is subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in its home country, the Board may nevertheless approve an application under paragraph Ul) by such foreign bank if— “() the appropriate authorities in the home country of such foreign ‘bank are working to establish arrangements for the consolidated super- vision of such bank; and “(ii) all other factors are consistent with approval. “(B) ADDITIONAL CONDITIONS.—The Board, after requesting and consider- ing the views of the appropriate State bank supervisor or the Comptroller of the Currency, as the case may be, may impose such conditionsorrestric- tions relating to activities or business operations of the proposed branch, agency, or commercial lending company subsidiary, including restrictions on sources of funding, as are considered appropriate in the public interest. “(C) MODIFICATION OF CONDITIONS.—Any condition or restriction imposed by the Board under this subsection in connection with the approval of an application may be varied or withdrawn where such modification is consist- ent with the public interest. “(7) TIME PERIOD FOR BOARD ACTION.— “(A) FINAL ACTION.—The Board shall take final action on any application under paragraph (1) within 180 days of receipt of the application, except that the Board may extend for an additional 180 days the period within which to take final action on such application, after providing notice of, and the reasons for, the extension to the applicant foreign bank and any appro- priate State bank supervisor or the Comptroller of the Currency, as the case may be. “(B) FAILURE TO SUBMIT INFORMATION.—The Board may deny any appli- cation if it has not received information requested from the applicant for- eign bank or appropriate authorities in the home country in sufficient time te permit the Board to evaluate such information adequately within the time periods for final action set forth in subparagraph (A). “(C) Walver.—-A foreign bank may waive the applicability of subpara- graph (A) with respect to any such application.”. (b) PROVISION RELATING TO TERMINATION OF BANK OFFICES.—Section 7(e)(1)(A) of the International Banking Act of 1978 (12 U.S.C. 3105(e)(1)(A)) is amended— (1) by striking “(A)” and inserting “(A)(i)"; (2) by striking “; or” and inserting “; and”; and (3) by inserting at the end the following new clause: “(ii) the appropriate authorities in the home country are not making progress in establishing arrangements for the comprehensive supervision or regulation of such foreign bank on a consolidated basis; or’. 054 38 (c) UNIFORM TERMINATIONS OF FOREIGN BANK OFFICES, AGENCIES, BRANCHES, AND SUBSIDIARIES BY THE FEDERAL RESERVE SYSTEM.— (1) IN GENERAL.—Section 7(e)(i) of the International Banking Act of 1978 (12 U.S.C. 3105(e)(1)) is amended— (A) by inserting “or the Comptroller of the Currency” after “State bank supervisor”; (B) by inserting “or a Federal branch or agency” after “commercial lend- ing company subsidiary” the ist place such term appears. and (C) in the last sentence, by inserting “or a Federal branch or agency” after “commercial lending company subsidiary”. (2) TECHNICAL AND CONFORMING AMENDMENT.—Section 7(e) of the Inter- national Banking Act of 1978 (12 U.S.C. 3105(e)) is amended— (A) by striking paragraph (5); and (B) by redesignating paragraphs(6) and (7) as paragraphs(5) and (6), re- spectively. SEC. 236. DUPLICATE EXAMINATION OF FOREIGN BANKS. Section 7(c)(1) of the International Banking Act of 1978 (12 U.S.C. 3105(c)(1)) is amended— : (1) by adding after clause (ii) of subparagraph (B) the following new clause: “(iii) AVOIDANCE OF DUPLICATION.—In exercising its authority under this paragraph, the Board shall take all reasonable measures to reduce burden and avoid unnecessary duplication of examinations.”; (2) by striking subparagraph (C) and inserting the following:- “(C) ON-SITE EXAMINATION.—Each Federal branch or agency, and each State branch or agency, of a foreign bank shall be subject to on-site exam- ination by a Federal banking agency or State bank supervisor as frequentl y as would a national bank or State bank, respectively, by its appropriate Federal banking agency.”; and (3) by amending subparagraph (D)to read asfollows: *(D) COST OF EXAMINATIONS.—The cost of any examination undertaken pursuant to subparagraph (A) shall be assessed against and collected fro m the foreign bank or the foreign company that controls the foreign bank, a s + that fn 2 eallosted hu the Gite vase tay Uc, YUL only to Board for examination of any State member insured bank.”. SEC, 237. SECOND MORTGAGES. (a) IN GENERAL.—Section 103(aa)(1) of the Truth in Lending Act (15 U.S.C. 1602(aa)(1)) is amended— (1) by inserting “a subordinate mortgage on”after “secured by”; and (2) by striking “a residential mortgage transaction”. (b) EFFECT ON PENDING CasEs.—Any administrative enforcement proce eding or other action which— (1) is pending on the date of the enactmentof this Act; and (2) is based on regulations in effect as of such date under th e Truth in Lend- ing Act with respect to high-cost residential mortgage transactions which are not subordinate mortgages, shall be dismissed as of such date. SEC. 238. STREAMLINING FDIC APPROVAL OF NEW STATE B ANK POWERS. (a) IN GENERAL.—Section 24(a) of the Federal Deposit Insurance Act (12 U.S.C. 1831a(a)) is amendedto read as follows: “(a) ACTIVITIES GENERALLY.— “(1) IN GENERAL.—An insured State bank may not engage as principal in a ny type of activity that is not permissible for a national bank unless— “(A) the bank has given the Corporation written notice of the bank's i n- tention to engage in such activity at least 60 days before commencing to engage in the activity and within such 60-day period (or within the e x- tended period provided under paragraph (2)) the Corporation has not d is- approved the activity; and “(B) the State bank is, and continues to be, in compliance with applicab le capital standards prescribed by the appropriate Federal banking agency. “(2) EXTENSION OF PERIOD.—The Corporation may extend the 60-day peri od referred to in paragraph (1) for issuing a notice of disapproval with res pect to anyactivity for an additional 30 days. *(3) CONTENTS OF NOTICE.—Anynotice submitted by a State bank under par a- graph (1)(A) shall contain such information as the Corporation may requir e. 055 "39 “(4) BASIS FOR DISAPPROVAL.—The Corporation may disapprove an activity for a State bank under this subsection unless the Corporation determines that the activity would pose no significant risk to the appropriate insurance fund.”. (b) SUBSIDIARIES OF INSURED STATE BANKS.-—-Section 24(d)(1) of the Federal De- posit Insurance Act (12 U.S.C. 1831a(d)(1)) is amended to read as follows: “(1) ACTIVITIES GENERALLY.— “(A) IN GENERAL.—A subsidiary of an insured State bank may not engage as principal in any type of activity that is not permissible for a subsidiary of a national bank unless— “(@i) the subsidiary has given the Corporation written notice of the subsidiary's intention to engage in such activity at least 60 days before commencing to engage in the activity and within such 60-day period (or within the extended period provided under paragraph (2)) the Corpora- tion has not disapproved the activity; and “(ii) the bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agen- cy. “(B) EXTENSION OF PERIOD.—The Corporation may extend the 60-day pe- riod referred to in subparagraph (A) for issuing a notice of disapproval with respect to any activity for an additional 30 days. “(C) CONTENTS OF NOTICE.—Any notice submitted by a subsidiary of an insured State bank under subparagraph (A){i) shall contain such informa- tion as the Corporation may require. “(D) BasIS FOR DISAPPROVAL.~The Corporation may disapprove an activ- ity for a subsidiary of an insured State bank under this paragraph unless the Corporation determines that the activity would pose no significant risk to the appropriate insurance fund.”. SEC. 239. REPEAL OF CALL REPORT ATTESTATION REQUIREMENT. Section 5211(a) of the Revised Statutes (12 U.S.C. 161(a)) is amended by striking the 4th sentence. SEC. 240. AUTHORITY OF THE COMPTROLLER OF THE CURRENCY. (a) STATE SUPERVISION.—Chapter 1 of Title LXII of the Revised Statutes of the United States (12 U.S.C. 21 et seq.) is amended— (1) by redesignating section 5136A as section 5136C; and (2) by inserting after section 5136 (12 U.S.C. 24) the following new section: “SEC. 5136A. STATE SUPERVISION OF INSURANCE. “(a) STATE LICENSING OF INSURANCE ACTIVITIES.— “(1) IN GENERAL.—Subject to paragraph (2), no provision of section 5136, any other section of this title, or section 13 of the Federal Reserve Act may be con- strued as limiting or otherwise impairing the authority of any State to regu- late— “(A) the extent to which, and the mannerin which, a national bank may engage within the State in insurance activities pursuant to section 5136B of this chapter or section 13 of the Federal Reserve Act; “(B) the mannerin which a national bank may engage within the State in insurance activities pursuant to section 5136(b)(2)(B) of the Revised Stat- utes of the United States; or “(C) the mannerin which a national bank may engage within the State in insurance activities pursuant to section 5136(b}(2)( ) of the Revised Stat- utes of the United States through, and limited to, consumer disclosure re- quirementsor licensing requirements, procedures, and qualifications as de- scribed in paragraph 3 (C). “(2) PROHIBITION ON STATE DISCRIMINATION AGAINST NATIONAL BANKS.—Not- withstanding paragraph (1)— “(A) PROVIDING INSURANCE AS AGENT OR BROKER.—NoState may impose any insurance regulatory requirement relating to providing insurance as an agent or broker that treats a national bank differently than all other per- sons who are authorized to provide insurance as agents or brokers in such State, unless there is a legitimate and reasonable State regulatory purpose for the requirement for which there is no less restrictive alternative. “(B) PROVIDING INSURANCE AS PRINCIPAL, AGENT, OR BROKER.— “(J No State may impose on a national bank any insurance regu- latory requirement relating to providing insurance as principal, agent, or broker that treats the national bank more restrictively than any other depository institution (as defined in section 3(c)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(c)(1)) operating in the State. 056 40 “(ii) Nothing in this subparagraph shall affect the validity of a State law that-— “() prevents a national bank from engaging in insurance act ivi- ties within the State to as great an extent as a savings associa tion (as defined in section 3(b){1) of the Federal Deposit Insurance Act, i2 U.S.C. 1813(b)(1)) may engage in such activities within the State; and “(I1) was in effect on June 1, 1995. “(C) LICENSING QUALIFICATIONS AND PROCEDURES.—-N o State may dis- criminate against a national bank with respect to the fo llowing require- ments, procedures, and qualifications as such requirements, procedures, and qualifications relate to the authority of the national ban k to provide in- surance in such State as an agent or broker: “(i) License application and processing procedures. “(ii) Character, experience, and educational qualifications for licenses. “(iit) Testing and examination requirementsfor licenses. “(iv) Fee requirements for licenses. “(v) Continuing education requirements. “(vi) Types of licenses required. “(vii) Standards and requirements for renewalof licenses. “(b) AUTHORITY OF THE COMPTROLLER OF THE CURREN CY.—A national bank may not provide insurance as a principal, agent, or broker except as specifically rovided in this section, the paragraph designated as the ‘Seventh’ of se ction 513 id of this chapter. section 5136(b) or 5136B of this chapter, or section 13 of the Federal Re- serve Act. “(c) PRESERVATION OF FEDERALLY AUTHORIZED BANK ACTIVITIES IN PERMISSIVE STATES.—-No provision of this section may be construed as aff ecting the authority, pursuantto section 5136B of this chapter or section 13 of t he Federal Reserve Act, of a national bank to act as insurance agent or broker con sistent with State law. “(d) PRESERVATION OF NATIONAL BANK AUTHORITY CO NSISTENT WITH STATE BANK AUTHORITY.—Except as provided in subsection (a)(2)(B), no pro vision of this section or section 5136(b)(1) shall have the effect of enabling a St ate to deny a national bank authority that the bank otherwise possesses to rovid e a product in a State, including as agent, broker, or principal, where the bank is not p roviding the product in the State other than vo an eacent aed ia u isanncr (n ot State hank fae defined in section 3fa)(2) of the Federal Deposit Insurance A ct, 12 U.S.C. 1813(a)(2)) is per- mitted by the law of the State to provide such product, exc ept that nothing in this subsection shall be construed as granting any new authorit y to a national bank to provide any product because the law of the State has authori zed State banksto pro- vide such product. “(e) DEFINITIONS.—For purposesof this section, sections 51 36 and 5136B, and sec- tion 13 of the Federal Reserve Act, the following definitions shall apply: “(1) INSURANCE.—The term ‘insurance’ means any produc t defined or regu- lated as insurance, consistent with the relevant State insuranc e law, by the in- surance regulatory authority of the State in which such produ ct is sold, solic- ited, or underwritten, including any annuity contract the incom e on which is tax deferred undersection 72 of the Internal Revenue Codeof 1986. “(2) STATE.—The term ‘State’ has the same meaning as in section 3(a)(3) of the Federal Deposit Insurance Act. “(f) GRANDFATHER PROVISION.— “(1) IN GENERAL.—Any national bank which, before January 1, 19 95, was pro- viding insurance as agent or broker under section 13 of the Fed eral Reserve Act may provide insurance as an agent or broker under such secti on, to no less ex- tent and in a no morerestrictive manner as such bank was pro viding insurance as agent or broker under such section on January 1, 1995, notw ithstanding con- trary State law, subject to final, controlling judgment in a pendin g action. (2) TERMINATION.—This subsection shall cease to apply with respect te any national bank described in paragraph (1) if-— “(A) the bank is subject to an acquisition, merger, conso lidation, or changein control. other than a transaction to which section 18(c)( 12) of the Federal Deposit Insurance Act applies; or “(B) any bank holding company which directly or indirectly c ontrols such bank is subject to an acquisition, merger, consolidation, or ch ange in con- trol, other than a transaction in which the beneficial ownership of such bank holding company or of a bank holding company which c ontrols such company does not change as a result of the transaction. “(g) PRESERVATION OF BANKING PRODUCTS.—Nothing in this sec tion shall be con- strued as affecting the ability of a national bank,or a subsidiary o f a national bank, 41 to engage in any activity, including any activity authorized pursuant to the para- graph designated the “Seventh” of section 5136(a), that is part of, and not merely incidental to, the business of banking.”. (b) INTERPRETIVE AUTHORITY OF THE COMPTROLLER OF THE CURRENCY.—Section 5136 of the Revised Statutes of the United States (12 U.S.C. 24) is amended— (1) by striking “Upon duly making andfiling articles of association” and in- serting “(a) IN GENERAL.—Upon duly making and filing articles of association”; an (2) by adding at the end the following new subsection: “(b) INTERPRETIVE AUTHORITY OF THE COMPTROLLER OF THE CURRENCY.— “(1) IN GENERAL.—Subject to paragraph (2), it shall not be incidental to bank- ing for a national bank to provide insurance as a principal, agent, or broker. “(2) SCOPE OF APPLICATION.—Notwithstanding paragraph(1), it shall be inci- dental to banking for a national bank to engagein the following activities: “(A) Providing, as an agent or broker, any annuity contract the income onwhich is tax deferred under section 72 of the Internal Revenue Code of “(B) Providing, as a principal, agent, or broker, any type of insurance, other than an annuity or title insurance, which the Comptroller of the Cur- rency specifically determined, before May 1, 1995, to be incidental to bank- ing with respect to national banks.”. (c) TECHNICAL AND CONFORMING AMENDMENTS.— (1) The 11th undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 92) is amended by inserting ", and subject to section 5136A_ of the Revised Statutes of the United States,” after “the laws of the United States”. (2) The paragraph designated the “Seventh” of section 5136 of the Revised Statutes of the United States (12 U.S.C. “a is amended by striking “subject to law,” and inserting “subject to subsection (b), section 5136A, and any: other pro- vision of law,”. (3) Section 1306 of title 18, United States Code, is amended by striking “9136A” and inserting “5136C”. (d) CLERICAL AMENDMENT.—Thetable of sections for chapter 1 of title LXII of the Revised Statutes of the United States is amended— (1) by redesignating the item relating to section 5136A as section 5136C; and (2) by inserting after the item relating to section 5136 the following new item: “5136A. State supervision of insurance.”. (e) PRESERVATION OF BANK HOLDING COMPANY INSURANCE AUTHORITY.—No provi- sion of this section, and no amendment madeby this section to any other provision of law, may be construed as affecting the authority of a bank holding company to engage in insurance agency activity pursuant to section 4(c) of the Bank Holding Company Actof 1956 (12 U.S.C. 18 30). SEC, 241, NATIONAL BANK COMMUNITY DEVELOPMENTINSURANCEACTIVITIES. (a) IN GENERAL.—Chapter 1 of Title LXII of the Revised Statutes of the United States (12 U.S.C. 21 et seq.) is amended by inserting after section 5136A (as added by section 240(a) of this Act) the following new section: “SEC. 5136B. INSURANCE SALES IN EMPOWERMENTZONES. “(a} AUTHORITY TO SELL INSURANCE AS AGENT FROM EMPOWERMENT ZONES.—The Comptroller of the Currency may approve an application by a national bank main- taining a main office or full-service branch in an empowerment zone to act as an agent or broker from such office or branch for anyfire, life, or other insurance com- pany authorized to do business in the State in which the customer is located if— “(1) the bank provides sufficient evidence that the availability of competitively priced insurance in the empowermentzone is inadequate; and “(2) the insuranceis sold only in the empowermentzone. “(b) APPLICATION OF STATE LAwW.—State laws which regulate conducting the busi- ness of insurance shali apply to national banks and their employees that sell insur- ance as agent or broker under this section to the same extent as such laws apply to other entities and persons notaffiliated with depository institutions except— “(1) in any case in which the Comptroller of the Currency determines, after notice to and comment by the appropriate State insurance officials, that the ap- plication of a State law would have an unreasonably discriminatory effect upon the sale of insurance by national banks or their employees in comparison with the effect the application of the State law would have with respect to sale of insurance by other entities; or “(2) when State law by its own terms does not apply to national banks or em- ployees of such banks. 058 42 “(c) AUTHORITY OF COMPTROLLER OF THE CURRENCY. — “(1) IN GENERAL.— The Comptroller of the Currency may pre scribe regula- tions governing sales of insurance by national banks pursua nt to this section. “(2) ENFORCEMENT OF STATE LAW.—The provisions of any State law to which a national bank is subject under this section shall be enforc ed with respect to such bank by the Comptroller of the Currency. “(d) DEFINITIONS.— : “(1) EMPOWERMENT ZONE.—The term ‘empowerment zone’ means an area that meets the standards for designation as an empowerment z one or enterprise community under section 1392 of the Internal Revenue Co de of 1986 or an In- dian reservation. “(2) FULL-SERVICE BRANCH.—The term ‘full-service branch’ me ansa staffed fa- cility which has been approved as a branch and offers loan an d deposit services. “@) INDIAN RESERVATION.—The term ‘Indian reser vation’ has the meaning given such term bysection 168(j}(6) of the Internal Revenu e Code of 1986.”. (b) CLERICAL AMENDMENT.—The table of sections for chapter 1 of title LXII of the Revised Statutes of the United States is amended by insertin g after the item relat- ing to-section 5136A (as added by.section 240(d) of this title ) the following new item: “5 136B. Insurance sales in empowerment zones.”. SEC. 242, AUTHORIZING BANK SERVICE COMPANIES TO ORGAN IZE AS LIMITED LIABILITY PARTNERSHIPS. (a) AMENDMENT TO SHORT TITLE.—Section 1 of the Bank Serv ice Corporation Act (12 U.S.C. 1861 a)) is amended by striking subsection (a) and inserting the following new subsection: “(a) SHORT TITLE.—This Act may be cited as the ‘Bank S ervice Company Act’.”; (b) AMENDMENTS TO DEFINITIONS.--Section 1(b) of the Ban k Service Cerporation Act (12 U.S.C. 1861(b)) is amended— (1) by striking paragraph(2) andinserting the following new paragraph: “(2) the term ‘bank service company’ means— “(A) any corporation— “() which is organized to perform services authorized by th is Act; and “(ii) all of the capital stock of which is owned by 1 or mo re insured "“(B) any limited liability company— “(i) which is organized to perform services authorized by this Act; and “(ii) all of the members of which are 1 or more insured banks.”; (2) in paragraph (6)— (A) by striking “corporation” and inserting “company”; and (B) by striking “and” after the semicolon, (3) by redesignating paragraph (7) as paragraph (8) and inserting after para- graph 4) the following new paragraph: “t7) the term ‘limited liability company’ means any company organized under the law of a State (as defined in section 3 of the Federal Deposit Insurance Act) which provides that a member or manager of such company is not personally liable for a debt, obligation, or liability of the company solely by reason ofbeing, or acting as, a member or manager of such company; and”; and (4) in paragraph (8) (as so redesignated)— (A) by striking “corporation” each place such term appears and inserting “company”; and (B) by striking “capital stock” and inserting sequity’. ()) AMENDMENTS TO SECTION 2.—-Section 2 of the Bank Service Corporation Act (12 U.S.C. 1862) is amended— (1) by striking “corporation” and inserting “company”; (2) by striking “corporations” and inserting “companies”; and (3) in the heading for such section, by striking “CORPORATION” and insertin, “COMPANY”. (d) AMENDMENTS TO SECTION 3.—Section 3 of the Bank Service Corporation Act (12 U.S.C. 1863) is amended— (1) by striking “corporation” each place such term appears and inserting “com- pany”; and (2) in the heading for such section, by striking “CORPORATION” and inserting “COMPANY”. (e) AMENDMENTS TO SECTION 4.—Section 4 of the Bank Service Corporation Act (12 U.S.C, 1864) is amended— (1) by striking “corporation” each place such term appears and inserting “com- pany”; 0 9 43 (2) in subsection (b), by inserting “or members" after “shareholders” each place such term appears; (3) in subsections (c) and (d), by inserting “or member” after “shareholder” each place such term appears; (4) in subsection (e}— (A) by inserting “or members”after “national bank and State bank share- holders”; (B) by striking “its national bank shareholder or shareholders” and in- serting “any shareholder or member of the company which is a national bank"; (C) by striking “its State bank shareholder or shareholders” and inserting “any shareholder or member of the company which is a State bank”; (D) by striking “such State bank or banks” and inserting “any such State bank”; and (E) by inserting “or members”after “State bank and national bank share- holders”; (5) in subsection (f}, by inserting “or providing insurance as principal, agent, or broker (except to the extent permitted under subparagraph (A) or (E)of sec- tion 4(c)(8) of the Bank Holding Company Act of 1956)" after “or deposit tak- ing”; an 6) in the heading for such section, by striking “CORPORATION” and inserting “COMPANY”. ()) AMENDMENTS TO SECTION 5.—Section 5 of the Bank Service Corporation Act (12 U.S.C. 1865) is amended— (1) by striking “corporation” each place such term appears and inserting “com- pany”; and (2) in the heading for such section, by striking “CORPORATIONS” and inserting “COMPANIES”. (g) AMENDMENTS TO SECTION 6.—Section 6 of the Bank Service Corporation Act (12 U.S.C. 1866) is amended— (1) by striking “corporation” each place such term appears and inserting “com- pany”; oN by inserting “or is not a memberof” after “does not own stock in”; (3) by striking “the nonstockholding institution” and inserting “such deposi- tory institution"; 2 by inserting “or is a memberof" after “that owns stock in”; (5) in paragraphs (1) and (2), by inserting “or nonmember” after “nonstockholding”; an (6) in the heading for such section by inserting “OR NONMEMBERS” after “NONSTOCKHOLDERS”. (h) AMENDMENTS TO SECTION 7.—Section 7 of the Bank Service Corporation Act (12 U.S.C. 1867) is amended— (1) by striking “corporation” each place such term appears and inserting “com- pany”; (2) in subsection (a)— (A) by inserting “or principal member” after “principal shareholder”; and (B) by inserting “or member”after “other shareholder”; an (3) in the heading for such section, by striking “CORPORATIONS” and inserting “COMPANIES”. SEC. 243. BANK INVESTMENTSIN EDGE ACT AND AGREEMENT CORPORATIONS. The 10th undesignated paragraph of section 25A of the Federal Reserve Act (12 U.S.C. 618) is amended by striking the last sentence and inserting the following: “Any national bank may invest in the stock of any corporation organized underthis section. The aggregate amountof stock held by any national bankin all corporations engaged in business of the kind described in this section or section 25 shall not ex- ceed an amount equal to 10 percent of the capital and surplus of such bank unless the Board determines that the investment of an additional amount by the bank would not be unsafe or unsound and,in any case, shall not exceed an amount equal to 25 percent of the capital and surplus of such bank.”. SEC. 244. REPORT ON THE RECONCILIATION OF DIFFERENCES BETWEEN REGULATORY AC- COUNTINGPRINCIPLES AND GENERALLY ACCEPTED ACCOUNTINGPRINCIPLES. Before the end of the 180-day period beginning on the date of the enactment of this Act, each appropriate Federal banking agency (as defined in section 3 of the Federal Deposit Insurance Act) shall submit to the Committee on Banking and Fi- nancial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate a report on the actions taken and to be taken by the agency to eliminate or conform inconsistent or duplicative accounting 060 44 and reporting requirements applicable to reports or statements filed with any such agency by insured depository institutions, as required by section 121 of the Federa l Deposit Insurance Corporation ImprovementAct of 1991. SEC. 245. WAIVERS AUTHORIZED FOR RESIDENCY REQUIREMENT FOR NATIONAL BANK DI- RECTORS. The ist sentence of section 5146 of the Revised Statutes of the United S tates (12 U.S.C. 72) is amended by inserting “(1) the Comptroller of the Currency may, in the Comptroller's discretion, waive the residency requirement in the case of any director of a national bank to whom the requirement would otherwise apply, and (2)” af ter “except that”. TITLE INI—LENDERLIABILITY SEC. 301. LENDER LIABILITY. (a) IN GENERAL.—The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended by addingafter section 44, the following new section: “SEC. 45. LENDER, FIDUCIARY, AND GOVERNMENT AGENCY ENVIRONM ENTALLIABILITIES. “(a) LENDER ENVIRONMENTAL LIABILITY.— “(1) IN GENERAL. Notwithstanding any other provision or rule of Federal law, no lender, acting as defined in this section, shall be liable pursuant to a Federal environmental law, except as provided in this section. “(2) ACTUAL PARTICIPATION REQUIRED.—A lender shall only be liable pursuant to a Federal environmental law when the lender actually participates in man- agement of another person's activities which create liability under the same Federal environmental law. “(3) DEFINITIONS.—The following definitions shall apply for purposes of this section: “(A) PARTICIPATE IN MANAGEMENT.—The term ‘participate in manage- ment’ means actually participating in the management or operational af- fairs of other persons’ activities, and does not include merely having the ca- narity to influence. or the unexercised right to control such activities; “(B) PARTICIPATE IN MANAGEMENT.—A person Shall be considered to par- ticipate in management’ while a borrower is still in possession of property, only if such person— “(i) exercises decisionmaking control over the environmental compli - ance of a borrower, such that the person has undertaken responsibility for the hazardous substance handling or disposal practices of the bor- rower; or “(ii) exercises control at a level comparable to that of a manager of the enterprise of the borrower, such that the person has assumed or manifested responsibility for the overall managementof the enterprise encompassing day-to-day decisionmaking with respect to environmental compliance, or with respect to substantially all of the operational as- pects (as distinguished from financial or administrative aspects) of the enterprise, other than environmental compliance. “(C) PARTICIPATE IN MANAGEMENT.—The term ‘participate in manage- ment’ does not include engaging in an actor failing to act before the time that an extension of credit is made or a security interest is created in prop- erty. *(D) PARTICIPATE IN MANAGEMENT.—The term ‘participate in manage- ment’ does not include, unless such actions rise to the level of participating in management(as defined in subparagraphs (A) and (B))— “() holding an extension of credit or a security interest or aband or releasing an extension of credit or a security interest, “(ii) including in the terms of an extension of credit, or in a contract or security agreement relating to such an extension, covenants, warran- ties, or other terms and conditions that relate to environmental compli- ance; “Gii) monitoring or enforcing the terms and conditions of an extension of credit or security interest; “(iv) monitoring or undertaking 1 or more inspections of property, ex- cept that monitoring or undertaking any such inspection, although not required by this subsection, shall provide probative evidence that a holder of a security interest is acting to preserve andprotect the prop- 45 erty during the time the holder may have possession or control of such property; “O) requiring or conducting a response action or other lawful means of addressing the release or threatened release of a hazardous sub- stance in connection with property prior to, during, or upon the expira- tion of the term of an extension of credit; “(vi) providing financial or other advice or counseling in an effort to mitigate, prevent, or cure default or diminution in the value of the property; (vii) restructuring, renegotiating, or otherwise agreeing to alter the terms and conditions of an extension of credit or security interest, or exercising forbearance; or “(viii) exercising other remedies that may be available under applica- ble law for the breach of any term or condition of the extension of credit or security agreement. “(E) Whena lender did not participate in management of property prior to foreclosure, then the lender shal! not be liable even if such person fore- closes on property, sells, re-leases, or liquidates property, maintains busi- ness activities, winds up operations, or undertakes any response action with respect to property, or takes other measures to preserve, protect. or prepare property prior to sale or disposition, if such person seeks to sell, release, or otherwise divest the property at the earliest practical, commercially rea- sonable time, on commercially reasonable terms, taking into account mar- ket conditions and legal and regulatory requirements. “(4) LIMITATION ON LIABILITY.—The liability of any lender that is liable under any Federal environmental law shall be limited to only the cost of any response action or corrective action to the extent and in the amount that the lender ac- tively and directly contributed to the hazardous substance release. A lender shallnot be liable for the cost of any response action or corrective action relat- ing to the release of a hazardous substance which commencesbefore and contin- ues after the lender obtains a security interest in the property so long as the lender does not actively and directly contribute to the hazardous substance re- lease. “(b) Frpuctary ENVIRONMENTAL LIABILITY.— “(1) IN GENERAL.— Notwithstanding any other provision or rule of Federal law, no fiduciary, acting as defined in this section, shall be liable pursuant to any Federal environmental law, except as provided in this section. “(2) LIABILITY OF FIDUCIARY.— “(A) Subject to subparagraphs (B) and (C), a fiduciary holding title to property or otherwise affiliated with property solely in a fiduciary capacity shall be personally subject to the obligations and liabilities of any person under any Federal environmental law, to the same extent as if the property were held by the fiduciary free of trust. “(B) The personal obligations and liabilities of a fiduciary referred to in subparagraph (A) shall be limited to the extent to which the assets of the trust or estate are sufficient to indemnify the fiduciary, unless— “(i) the obligations and liabilities would have arisen even if the per- son had not served as a fiduciary; “(i) the fiduciary’s own failure to exercise due care with respect to property caused or contributed to the release of hazardous substances following establishmentof the trust, estate, or fiduciary relationship; or “(iii) the fiduciary had a role in establishing the trust, estate, or fidu- ciary relationship, and such trust, estate, or fiduciary relationship has no objectively reasonable or substantial purpose apart from the avoid- ance or limitation of liability under an environmental law. Nothing in the preceding sentence shall be construed as requiring indem- nification by an employee benefit plan (within the meaning of paragraph (3) of section 3 of Employee Retirement Income Security Act of 1974), or by any trust forming a part thereof, of any fiduciary of such plan contrary to the terms of the plan or in an amountin excess of the amount permitted under the terms of such plan. “(C) A fiduciary shall not be personally liable for undertaking or directing another to undertake a responseaction. “(3) RULE OF CONSTRUCTION.—Noprovision of this subsection shall be con- strued as affecting theliability, if any, of any person who— “(A)(i) acts in a capacity other than a fiduciary capacity; and “(ii) directly or indirectly benefits from a trust or fiduciary relationship; or 062 46 “(B)() is a beneficiary and a fiduciary with respect to the same fiduc iary estate; and “(i) as a fiduciary, receives benefits that exceed customary or reason able compensation, and incidental benefits, permitted under other applic able laws. “(c) DEFINITIONS.—For purposes of subsections {a) and (b), the f ollowing defini- tions shall apply: “(1) FEDERAL ENVIRONMENTAL LAW.—The term ‘Federal environmen tal law’ means any Federal statute or rule of common law with the purposeof p rotection of the environment and any Federal regulation promulgated thereunder and any State statute or regulation created as a federally approved or deleg ated pro- gram implementing these laws, including the following: “(A) The Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.). “(B) The Toxic Substances Control Act (15 U.S.C. 2601 et seq.}. “(C) The Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.). “(D) The Oil Pollution Act of 1990 (33 U.S.C. 2701 et seq.). “(E) The Clean Air Act (42 U.S.C. 7401 et seq.). “(F) The Solid Waste Disposal Act (42 U.S.C. 6901 et seq.)}. “(G) The Comprehensive Environmental Response, Compensation, and Li- ability Act of 1980 (42 U.S.C. 9601et seq.). “EH The Pollution Prevention Act of 1990 (42 U.S.C. 13101 et se q.). “(2) EXTENSION OF CREDIT.—The term ‘extension of credit’ means the making or renewal of any loan, a grantingof a line of credit or extending credi t in any manner, such as an advance by means of an overdraft or the i ssuance of a standbyletter of credit, and a lease finance transaction— *(A) in which the lessor does not initially select the leased prope rty and does not, during the-lease term, control the daily operation or m aintenance of the property; or “(B) that conforms with regulations issued by the appropriate Federal banking agency or the appropriate State bank supervisory (as these te rms are defined in section 3 of the Federal Deposit Insurance Act or wi th regu- lations issued by the National Credit Union Administration Board, as ap- prupriaic. “(3) FrInuUCIARY.—Theterm ‘fiduciary’ means a person who acts for the ex clu- sive benefit of another person as a bonafide fiduciary within the me aning of section 3(21) of the Employee Retirement Income Security Act of 1974, trustee, executor, administrator, custodian, guardian, conservator, receiver, committee of estates of lunatics or other disabled persons, or personal representa tive; except, that the term ‘fiduciary’ does not include any person— “(A) who owns, or controls, is affiliated with, or takes an y action with re- spect to property on behalf of or for the benefit of a lender or takes any action to protect a lender's extension of credit or security interest (any such person shall be treated as a lender under subsection (a o f this section); or “(B) who is acting as a fiduciary with respect to a trust or other f iduciary estate that— “(j) was not created as part of, or to facilitate, one or. mor e estate plans or pursuantto the incapacity of a natural person; and “(ii) was organized for the primary purpose of, or is engaged in, ac- tively carrying on a trade or business for profit. "(4) FINANCIAL OR ADMINISTRATIVE ASPECT.—The term ‘fin ancial or adminis- trative aspect’ meansa function such as a credit manager, accounts pa yable of- ficer, accounts receivable officer, personnel manager, comptroller, o r chief finan- cial officer, or any similar function. “(5) FORECLOSURE, FORECLOSE.—The terms ‘foreclosure’ and ‘forec lose’ means, respectively, acquiring, and to acquire, property through— “(A) purchase at sale under a judgment or decree, a power of sale, a nonjudicial foreclosure sale, or from a trustee, deed in lieu of foreclos ure, or similar conveyance, or through repossession, if such property wa s secu- rity for an extension ofcredit previously contracted; *(B) conveyance pursuant to an extension of credit previously con tracted, including the termination of a lease agreement; or “(C) any other formal or informal manner by which the person a cquires, for subsequent disposition, possession of collateral in order to protect the security interest of the person. “(6) HAZARDOUS SUBSTANCE.—-The term ‘hazardous subst ance’ means any chemical, biological, organic, inorganic, or radioactive pollutants, con taminants, 47 materials, waste, or other substances regulated under, defined, listed, or in- cluded in any Federal environmental law. “(7) LENDER.—-The term ‘lender’ means— “(A) a person that makes a bona fide extension of credit to or takes a se- curity interest from another person and includes a successor or assign of the person which makes the extension of credit or takes the security inter- est; “(B) the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Agricultural Mortgage Corporation, or other entity that in a bona fide manner is engaged in the business of buy- ing or selling loans on interests therein; “(C) any person engaged in the business of insuring or guaranteeing against a default in the repayment of an extension of credit, or acting as a surety with respect to an extension of credit, to other persons; or “(D) any person regularly engaged in the business of providingtitle insur- ance who acquires property as a result of assignment or conveyance in the course of underwriting claims and claims settlement. “(8) OPERATIONAL ASPECT.—The term ‘operational aspect’ means a function such as a facility or plant manager, operations manager, chief operating officer, or chief executive officer. “(9) PERSON.—Theterm ‘person’ means an individual, firm, corporation, asso- ciation, partnership, consortium, joint venture, commercial entity, United States Government, State, municipality, commission, political subdivision of a State, or any interstate body. “(10) PROPERTY.—The term ‘property’ means real, personal, and mixed prop- rty. “(11) RESPONSE ACTION.---The term ‘response action’ shall have the same meaning as that term is defined in section 101 of the Comprehensive Environ- mental Response, Compensation and Liability Act. “(12) SECURITY INTEREST.—Theterm ‘security interest’ means a right under a mortgage, deed of trust, assignment, judgment lien, pledge, security agree- ment, factoring agreement, or lease, or any other right accruing to a person to secure the repayment of money, the performance of a duty, or some other obli- ation. “G SAVINGS CLAUSE.—Nothing in subsections (a) (b), or (c), shall— “(1) affect the rights or immunities or other defenses that are already avail- able to lenders or fiduciaries under any Federal environmental law; “(2) be construed to create anyliability for any lender or fiduciary; or “(3) create a private right of action against any lender or fiduciary. “(e) FEDERAL BANKING AND LENDING AGENCY ENVIRONMENTALLIABILITY.— “(1) GOVERNMENTALENTITIES,— “(A) BANKING AND LENDING AGENCIES.—Except as provided in paragraph (C), a Federal banking or lending agency shall not be liable under any law imposing strict liability for the release or threatened release of petroleum or a hazardous substance at or from property (including any right or inter- est therein) acquired— “(@j in connection with the exercise of receivership or conservatorship authority, or the liquidation or winding up of the affairs of an insured depository institution, including any of its subsidiaries, and bridge bank; “(ii) in connection with the provision of loans, discounts, advances, guarantees, insurance, or other financial assistance; or “(iij} in connection with property received in any civil or criminal pro- ceeding, or administrative enforcement action, whether by settlement or order. “(B) APPLICATION OF STATE LAW.—Nothing in paragraph (e) shall be con- strued as preempting, affecting, applying to, or modifying any State law, or any rights, actions, cause of action, or obligations under State law, except that liability under State law shall not exceed the value of the agency's in- terest in the asset giving rise to such liability. Nothing in this section shall be construed to prevent a Federal banking or lending agency from agreeing with a State to transfer property to such State in lieu of any liability that might otherwise be imposed under State law. “(C) LimITATION.—Notwithstanding paragraph (A), and subject to section 107(d) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, a Federal banking or lending agency that directly caused or materially contributed to the release of petroleum or a hazardous 064 48 substance may beliable for removal, remedial. or other response action per- taining to that release. “(D) SUBSEQUENT PURCHASER.—The immunity provided by paragraphs (A) and (B) shall extend to the first subsequent purchaser of property de- scribed in such paragraph from a Federal banking orlending agency, unless such purchaser— “(i) would otherwise be liable or potentially liable for all or part of the costs of the removal, remedial. or other response action due to a prior relationship with the property; “(ii) is or was affiliated with or related te a party described in sub- paragraph(i); “(ii) fails to agree to take reasonable steps necessary to abate the re- lease or threatened release or to protect public health and safety in a manner consistent with the purposes of applicable Federal environ- mentallaws; or “(iv) directly causes or significantly and materially contributes to any additional release or threatened release on the property. “(E) FEDERAL OR STATE ACTION.—-Notwithstanding subparagraph (D), if a Federal agency or State environmental agency is required to take remedial action due to the failure of a subsequent purchaser to carry out, in goo d faith, the agreement described in subparagraph (D) (iii), such subsequent purchaser shall reimburse the Federal or State environmental agency for the costs of such remedial action. Any such reimbursement shall not exceed the increase in the fair market value of the property attributable to the re- mediai action. "(2) LIEN EXEMPTION.—Notwithstanding any other provision of law, any prop - erty held by a subsequent purchaser referred to in paragraph (i)(D) or heid b y a Federal banking or lending agency shall not be subject to any lien for costs or damages associated with the release or threatened-release of petrole um or a hazardous substanceexisting at the timeof the transfer. “(3) EXEMPTION FROM COVENANTS TO REMEDIATE.—A Federal bank ing or lend- ing agency shall be exempt from any law requiring such agency to gran t cov- enants warranting that a removal, remedial, or other response action has been, or will in the tuture be, Taken WIErespeuy wu property avquareu an e ae described in paragraph (c)(1)(A). “(4) DEFINITIONS.—For purposes of subsection (e), the followi ng definitions shall apply: 4) FEDERAL BANKING OR LENDING AGENCY.—The term ‘Federal banking or lending agency’ means the Corporation, the Resolution Trust Corpora- tion, the Board of Governors of the Federal Reserve System. the Comptro l- ler of the Currency, the Office of Thrift Supervision, a Federal Reserve Bank, a Federal Home Loan Bank, the Department of Housing and Urb an Development, the National Credit Union Administration Board, the Farm Credit Administration, the Farm Credit System Insurance Corporation, t he Farm Credit System Assistance Board, the Farmers Home Administrati on, the Rural Electrification Administration, the Small Business Administ ra tion, and any other Federal agency acting in a similar capacity, in any of their capacities, and their agents or appointees. “(B) HAZARDOUS SUBSTANCE.—The term ‘hazardous substance’ has t he same meaning as in section 101(14) of the Comprehensive En vironmental Response, Compensation, and Liability Act of 1980. “(C) RELEASE.—The term ‘release’ has the same meaning as in section 101(22) of the Comprehensive Environmental Response, Compensation, a nd Liability Act of 1980, and includes the use, storage, disposal, treatment, generation, or transportation of a hazardous substance, “(5) SAVINGS CLAUSE.—Nothing in subsection (e) shall— “(A) affect the rights or immunities or other defenses that are avaiiabie under this Act or other applicable law to any party, subject to the provi- sions of this section; “(B) be construedto create any liability for any party; or “(C) create a private right of action against an insured depository institu- tion or lender or against a Federal banking or lending agency.” (b) EFFECTIVE DaTE.—This section shall take effect upon the date of the enact- mentof this Act and shall apply to any claim against any lender,fiduciary , or gov- ernment agency under any Federal environmental law that has not been fi nally re- solved by adjudication or settlement before such date. 49 TITLE IV—ANNUAL STUDY AND REPORT ON IMPACT ON LENDING TO SMALL BUSINESS SEC. 401. ANNUAL STUDY AND REPORT. Not later than 12 months after the date of the enactmentof this Act, and annu- ally thereafter, the Board of Governors of the Federal Reserve System, the Director of the Office of Thrift Supervision, the Comptroller of the Currency, and the Board of Directors of the Federal Deposit Insurance Corporation shall jointly conduct a study and submit to the Congress a report on the extent to which this Act and the amendments made by this Act have, through reductions in regulatory burdens, re- sulted in increased lending to small businesses. BACKGROUND AND NEED FOR LEGISLATION The Financial Institutions Regulatory Relief Act of 1995 ad- vances the effort begun by the 102nd Congress to remove unneces- sary and redundant regulations imposed on the nation’s financial institutions without affecting safety and soundness. Over the past 25 years, a variety of new laws and regulations in the areasof safe- ty and soundness and consumer protections has been imposed on financial institutions. Over the course of time, however, some of these laws and regulations have proven to be duplicative and coun- terproductive causing bank resources to be dedicated to costly pa- perwork and compliance review processes instead of commercial and consumer lending. Needless regulations result in inefficiency and increased costs to both financial institutions and consumers. In addition, the added cost of regulation produces disintermediation— the movement of savings dollars from traditional federally insured institutions to other venues where regulatory requirements are less burdensome and thusless costly. Ironically, the volume of informa- tion required to be provided to consumers under the numerous Fed- eral consumerprotection laws is so overwhelming that consumers are frequently more confused than informed. By removing excessive regulation this legislation is designed to encourage operationaleffi- ciency and to support the competitiveness of financial institutions without compromising the safety and soundness mechanisms or consumer protections required to uphold the integrity of the U.S. banking system. The complex regulatory environment of the early 1990s evolved in response to a variety of problems that occurred in financial mar- kets during the 1970s and 1980s, including the savings and loans crisis. In an effort to respond to economic immediacies, Congress enacted a series of statutes designed to improve the supervision of savings associations and to curtail investments and otheractivities that posed unacceptable risks to the Federal deposit insurance funds. While it is clear that many of the safety and soundness provi- sions enacted as a result of the financial conditions in the 1980s, such as those mandating strong capital requirements and accurate accounting standards, are necessary, other provisions are generally considered to be unnecessary burdens by regulators and the bank- ing industry. In addition, these legislative actions were followed by an avalanche of implementing regulations that have overwhelmed the management of many depository institutions regardless of size. 066 50 Other significant factors in the growth of regulatory burden are the numerous Federal consumer protection laws enacted by Con- gress. These statutes include the Real Estate Settlement Proce- dures Act of 1977 (RESPA), the Truth in Lending Act (TILA), the Home Mortgage Disclosure Act (HMDA), the Equal Credit Oppor- tunity Act (ECOA), the Fair Credit Reporting Act (FCRA), the Fair Housing Act (FHA), the Electronic Fund Transfer Act (EFTA), and the Fair Debt Collection Practices Act (FDCPA). Again, while the objectives of these laws may be worthwhile, imp ementation of these and other new requirements has increased reporting, disclo- sure, and recordkeeping which, in turn, has increased the cost of extending credit and offering deposit products. Moreover, experi- ence has shown that inundating consumers with a countless array of documents written in legal, technical language generally fails to provide. consumers with the-types of useful information intended by the above laws. As a result of all of these statutory and regulatory developments, depository institutions today bear a heavy regulatory burden. Three years ago, the banking industry estimated that the cost of compliance was into the billions of dollars. Various other studies over the past few years have estimated that compliance with regu- Intars; raaiiremenre imposes sienific ; ratory requir ements imposes significant direct costs on banks, some portion of which is passed on to the consumer. At times, the burden falls disproportionately on insured banks andthrifts, as compared with other types of financial institutions. Given the increased com- petition in the financial services market from nonbank entities not subject to federal regulations, regulatory burdens should not unnec- essarily place banks at a CUIpeulive disauvaiage. It is also important to recognize that regulatory burden generally has a significantly greater impact on smaller institutions. For ex- ample, one-quarter of the banks supervised by the Federal Deposit Insurance Corporation (FDIC) have fewer than 13 employees on a full-time basis. A labor force of this size cannot deal with the com- plexity and sheer volume of regulatory and legislative require- ments, whereas larger institutions can more easily integrate such requirements into their business operations. In short, the needfor this legislation arises from the fact that the regulatory environmentis too complex, the cost compliance is too high, and the resulting competitive disadvantages facing financial institutions are too great. In order to ensure the integrity, the com- petitiveness, and the continued success of the nation’s banking sys- tem, certain legislative action must be taken to reduce the unneces- sary regulatory burdens currently imposed on financial institu- tions. PURPOSE AND SUMMARY The purpose of this legislation is to streamline, rationalize, and modernize the regulation of financial institutions and to maintain the safety and soundness ofthe nation’s financial systems and nec- essary consumer protections. This threefold objective is principally achieved by removing unnecessary reporting, disclosure, or record- keeping requirements or by making appropriate modifications thereto. By reducing regulatory burdens, this legislation strives to significantly lower the cost of compliance and to promote competi- 067 51 tion amongall types of financial institutions both within and out- side of the United States. At the same time, this legislation delib- erately preserves the legislative safeguards already in law that per- tain to safety and soundness and consumerprotection. This legisla- tion, ultimately, is intended to provide the consumer with greater choices and lower prices for financial products and services. TITLE I—REDUCTIONS IN GOVERNMENT OVERREGULATION SUBTITLE A—THE HOME MORTGAGE PROCESS 1. Rationalizing the home mortgage lending process Government overregulation of the nation’s home mortgage lend- ing process has resulted in higher costs, excessive paperwork, and consumerfrustration to the detriment of both financial institutions and consumers. Legislation is needed to rationalize the regulatory framework that governs the home mortgage lending process in order to eliminate unnecessary costs, burdens, and complexity while providing more useful information to consumers. Currently, the home mortgage lending process is governed by the TILA and the RESPA. The TILA was enacted to enable consumers to shop comparatively for consumer credit by requiring lenders to disclose interest rates and other information about credit terms and costs in a uniform way. The TILA governs disclosures required for all consumercredit transactions, a uniform way. The TILA gov- erns disclosures required for all consumer credit transactions, in- cluding home mortgages. The RESPA was enacted to ensure that consumers are provided with greater and more timely information on the nature and costs of the real estate settlement process and are protected from unnecessarily high settlement charges and fees. Under this system of dual supervision, there is considerable over- lap in regulatory requirements, especially with respect to disclosure statements. Duplicative disclosure statements unnecessarily in- crease the costs of compliance and ultimately lessen the financial institution's ability to engage in mortgage lending. Moreover, re- dundancy in disclosure statements is frequently confusing to the consumer and often needlessly complicates the settlement process. In order to reduce the statutory overlap and to eliminate unneces- sary paperwork,this legislation would transfer rulemaking author- ity relating to the disclosure provisions under the RESPA from the Department of Housing and Urban Development (HUD)to the Fed- eral Reserve Board, which currently has rulemaking authority under the TILA. Furthermore, this legislation mandates the Board to reconcile differences between the disclosure provisions found in the TILA and the RESPA, to simplify disclosures, including the timing thereof, and to create a single format for such disclosures. These changes would reduce compliance costs and provide more meaningful information to the consumer. The current enforcement structure with regard to disclosures under the RESPA and the TILA is also problematic. Not only do these statutes have two different mechanisms for providing similar information in real estate transactions, but they are presently in- terpreted by two different regulators. By transferring interpretive authority for RESPA disclosures to the Board, along with instruc- 068 52 tions to eliminate duplicative and unnecessary requirements, real estate transactions will be greatly simplified. All other sections of RESPA pertaining to settlement services, in- cluding section 8, remain under the jurisdiction of HUD.In light of the fact that HUD is currently not providing any clear and con- sistent regulatory guidance to settlement service providers under RESPA,this legislation requires HUD toutilize a negotiated rule- making process provided for under the Negotiated Rulemaking Act of 1990 before proceeding with any additional proposed and final rules under Sections 8 and 9 of the RESPA. Negotiated rulemaking will ensure that the concerns of all parties are expressed before HUDissues any rules regarding real estate settlementissues. Enforcement of the settlement service sections of RESPAarere- tained under HUD authority with regard to non-banking entities and are transferred to the appropriate federal banking agencies for banking organizations. Additionally, in situations where numerous enforcement agencies are involved, agencies are required to coordi- nate their enforcement activities in order to assure that institu- tions are subject to the same rules of law and enforcement policies. my 2. Recent Truth in Lending Actlitigation (“Rodash’) This iegislation also addresses the United States Court of Ap- peals for the Eleventh Circuit's decision in Rodash v. AIB Mortgage Co., 16 F.3d 1142 (11th Cir. 1994), a case involving the TILA. The TILA requires lenders to disclose credit terms to borrowers in a manner that allows them to compare objectively various credit products. For example, the TILA requires lenders to characterize certain charges associated with a loan as ‘linarice citar Be” ad 1c quires them to aggregate ali such chargesinto one “finance charge to be disclosed at real estate closings. The TILA allows borrowers to rescind transactions even for technical violations of the disclo- sure provisions of the statute. On March 21, 1994, the court in Rodash v. AJB, ruled that cer- tain taxes and fees (a $20 Federal Express delivery charge), includ- ing some fees that are assessed by third parties other than the lender, must be characterized as “finance charges” under the TILA. Because of this technical violation, the borrower was able to re- scind the mortgage. When a mortgage is rescinded, the borroweris released from the mortgage lien leaving the lender with the unse- cured loan moreover, the borrower is entitled to repaymentof inter- est and all other non-principal payments madeontheloan. The Eleventh Circuit's ruling has sparked numerousclass action lawsuits against lenders who have not characterized or disclosed such taxes and fees as “finance charges” in the past. It is argued that Rodash could have. disastrous consequences for both organ iz- ers of mortgage loans and the secondary market. The potential cost of rescindingall refinanced mortgages made in thelast three years (the time allowed under TILA to exercise the rescission right h as been estimated to be as high as $217 billion. This issue was addressed by the House in the 103rd Congress by including the necessary corrective legislative language in a bill to amend the FCRA. That language, which was passed aspartof H.R. 5178, would have expressly exempted from the definition of “fi- nance charge” the types of taxes and fees that the Eleventh Circuit 53 found objectionable. Although H.R. 5178 was passed by the House on November 5, 1994 by voice vote, it'was not considered by the Senate. On April 4, 1995, with bipartisan support, the House under a suspension of the rules passed H.R. 1380, “The Truth in Lending Class Action Relief Act of 1995.” The Senate passed H.R. 1380 by unanimous consent on April 24, 1995. H.R. 1380 imposes a morato- rium until October 1, 1995 on certain TILA class action certifi- cations, including Rodash-style class actions brought in connection with first liens on real property or dwellings that constitute a refi- nancing or consolidation of a debt. Again, this legislation reflects a bipartisan compromise. This leg- islation exempts a numberof charges from inclusion in the “finance charge” and provides a tiered “tolerance” approach on finance charge miscalculations. The legislation clarifies the applicability of the three year right of rescission for material nondisclosure, and precludes rescission for certain first-lien refinances. The legislation also contains limitations on the liability of assignees and services of home mortgages. It provides retroactive relief from liability for certain errors in disclosures with respect to certain individual cases and class actions. SUBTITLE B-—-COMMUNITY REINVESTMENT ACT AMENDMENTS This legislation reaffirms the Community Reinvestment Act's (CRA) original intent to encourage financial institutions to reinvest in their communities, while not imposing comprehensive credit al- location dictates or unnecessary burdens on banks and savings as- sociations. Under the current law, the CRA requires federal regu- latory agencies to encourage financial institutions to meet the cred- it needs of their local communities consistent with the safe and sound operation of such institutions. Institutions are examined for CRA compliance and given one of four ratings: (i) “substantial noncompliance”, (ii) “needs to im- prove”, (iii) “satisfactory”, or (iv) “outstanding.” Agencies consider these ratings wheninstitutions apply to charter a bank or savings association, to relocate or establish a deposit facility, or to merge, consolidate or acquire assets of another institution. Enacted as part of the Housing and Community Development Act of 1977, the CRA was seen as a way to combat urban decay that was blamed in part on redlining (the practice of financial institu- tions intentionally not lending to certain neighborhoods or parts of a community). CRA was premised on the view that regulated insti- tutions have a continuing obligation to meet the credit needs of their local communities in exchange for deposit insurance and a governmentcharter. This legislation is designed to respond to many of the concerns that have been raised about the CRA and that were not addressed in the new inter-agency regulations. First, the legislation reemphasizes the original intent of the CRA not to impose added regulatory burden by explicitly prohibiting additional record- keeping or reporting requirements unless such requirements re- duce regulatory burden. Second, recognizing the inordinate regulatory impact of CRA compliance on small, community institutions and the fact that 070 54 these institutions must meet the credit needs of their community in order to survive, the legislation permits institutions with less than $250 million in assets to self-certify compliance with the CRA in lieu of receiving an agency CRA evaluation. In general, banks with assets of $250 million or less typically do not have the re- sources for a full time CRA officer and cannot achieve the econo- mies of scale in compliance efforts that billion dollar banks can achieve in developing and implementing CRA programs. The rea- sonableness of an institution's self-certification would be assessed during that institution's safety and soundness examination and would be based on information contained in the institution’s public notice. Interested parties would be able to commenton aninstitu- tion's performance and all comments would be maintained in the institution's public file. In addition, the legislation exempts an in- stitution if it and its holding company in the aggregate have assets of $100 million or less from the requirements of the CRA.In rural communities, in particular, small banks lend to their community out of necessity as their continued existence depends upon a strong thriving community. In essence, small banks are already doing what the CRA requires, that is lending to their entire community. Third, for institutions with assets of $250 million or greater, the appropriate federal banking agency wouldstill perform a full CRA evaluation of the institution. The inter-agency regulations adopted in April would stili be applicable. Thelegislation, however, further reforms the CRA for large institutions by establishing a new mech- anism for community input into an institution's CRA examination and further provides that CRA ratings for institutions receiving a “satisfactory” or “outstanding,” would be conclusive until the next examination. Under the present CRA system,all too often banks find that they do not hear from community advocates until the bank files a merg- er or acquisition application. Because of the delay and cost these protests add to the application process, many community groups have found it a highly effective method of “encouraging” institu- tions to enter into significant lending agreements in exchange for dropping the protest. Evidence suggests that CRA protests typically result in bank-sponsored targeted loan programs. The banks argue that they are being held “hostage” by community groups. The regu- latory system is so flawed that even a bank with an “outstanding” CRA rating can find its CRA record challenged at the timeit files an application. This legislation, by providing a procedure for community groups to respond to the institution's record of meeting its community needs in connection with the institution's examination rather than at the a 7 4 i i at the application stage, ensures that examiners will focus on the community issues raised by interested parties and encourages con- tinuous dialogue between the institutions and the communities in which they serve. Fourth, in addition to the community comment period being moved from the application process to the CRA examination stage, the legislation also requires that an institution’s CRA performance be assessed as part of, and at the sametime as, the overall evalua- tion of the institutions. For those institutions that do not receive a satisfactory or outstanding rating, the regulators may take into C c — 55 account the institution's CRA record when evaluation the institu- tion’s condition. In addition, the institution's CFA rating may be determinative of whether or not an institution can take advantage of other benefits provided in law such as the streamlined applica- tions procedures. This approach is more systematic and less disrup- tive to the business of banking. SUBTITLE C—-CONSUMER BANKING REFORMS—THE TRUTH IN SAVINGS ACT Enacted in 1991, the Truth in Savings Act (TISA) was intended to allow consumers to make a “meaningful comparison between competing claims of depository institutions with regard to deposit accounts. Currently, under the TISA, financial institutions are re- uired to disclose fees, interest rates, an annual percentage yield (APY) and other account terms through schedules and periodic dis- closures for all checking and interest-bearing accounts they offer. A bankis subject to civil liability provisions if it fails to follow the strict and complicated disclosure requirements. Unfortunately, the disclosure requirements under TISA have caused depository institutions and bank regulators more compli- ance problems than they have provided useful information to sav- ers. As was noted in testimony before the Subcommittee on Finan- cial Institutions and ConsumerCredit, it is ironic that a law aimed at providing consumers adequate information about interest rates in a simple understandable form, requires more than 200 pages of rules, covering 56 pages in the Federal Register. Instead of providing savers a better opportunity to compare “ap- ples with apples” when choosing among a wide array of savings ac- counts, the Act and its implementing regulations have limited the kinds of accounts banks can offer and created a situation where savers are comparing “apples with oranges.” A January 1995 Fed- eral Reserve study indicated that the TISA has not enhanced consumer awareness. H.R. 1858 addresses these concerns by eliminating certain provi- sions of the TISA which have caused the most compliance prob- lems, such as the requirement to disclose an APY. Thelegislation does maintain, however, the beneficial provisions of the Act which require disclosure of fees, penalties, charges and the simple inter- est rate when an account is opened and whenthere is a changein terms relating to the required disclosures. SUBTITLE D—-EQUAL CREDIT OPPORTUNITY ACT AMENDMENTS The goal of fair lending laws is to ensure that credit is not denied based on an individual's race, national origin, sex or age. One way to ensure that illegal discrimination is eradicated is to enlist the help of financial institutions in identifying and correcting discrimi- natory behavior. This legislation establishes a privilege for lenders whoself-test for compliance with the ECOA and the FHA from having such tests used against them in any proceedingorcivil ac- tion brought under these Acts where the lender has identified dis- criminatory practices and has taken appropriate corrective actions. It further grants Federal banking regulators discretionary author- ity to refer fair lending problems to the Attorney General or the Secretary of HUD undercertain circumstances. 072 56 SUBTITLE E—CONSUMER LEASING ACT AMENDMENTS The purpose of this subtitle is to assure simple, meaningful dis- closure of leasing terms to enable a consumer to comparison shop for leasing arrangements and to be protected from inaccurate and unfair leasing practices. The legislation instructs the Federal Re- serve Board to address consumerleasing issues through regulation and requires the Board to publish model disclosure forms. TirLe 1—STREAMLINING GOVERNMENT REGULATIONS SUBTITLE A—REGULATORY APPROVAL ISSUES In general, this title builds on the regulatory relief effort begun in the Riegle Community Development and Regulatory Improve- ment Act of 1994, which was enacted into law in the 103rd Con- gress. H.R. 1858 eliminates a numberof routine, but costly proce- dures and changes a number of overlapping and unnecessary re- quirements in current law, such as prior approval for the establish- ment of a domestic branch by institutions that operate safely and soundly. It also establishes expedited procedures for bank holding companies which are availabie only to companies that are weil cap- italized and well managed. Additionally, the title also removes per-branch capital require- ments without affecting the consolidated capital. requirements oth- erwise applicable to banks and amends the Depository Manage- ment Interlocks Act to allow sharing of managementofficials be- tween small institutions in situations in which there would be no fat at ler the ! Han eliminates hranch annli- COMpCUuuvspall. Say, TTS SO Be r cations for automated teller machines (ATMs) andother duplicative approval requirements pertaining to mergers and divestitures and investments in bank premises as long as the investment does not exceed 150% of capital. SUBTITLE B—-STREAMLINING OF GOVERNMENT REGULATIONS 1. Branch closures The provisions included in this legislation substantially mirror the federal regulators’ interagency policy statement on branch clos- ings and would reduce regulatory burden by eliminating the need to give prior notice of decisions to close automated teller machines, to close or relocate branches that are within 2.5 miles of another branch of the same institution, and to close certain branches ac- quired through mergers. 2. Insider lending This legislation makes minor changes to requirements governing insider lending. Specifically, the legislation amends the Federal Re- serve Act to allow insiders of financial institutions to qualify for employee-wide benefit plans offered by their institutions. Addition- ally, the legislation allows executive officers to be eligible for home equity loans and loans secured by readily marketable assets but only within established limitations on amounts and on competitive terms. The legislation also removes unnecessary restrictions on loans to executive officers or directors of affiliates that represent less than ten percent of the assets of the holding companyif the c S 57 officers or directors do not participate in a major policymaking role in the bank. 3. Insurance activities of national banks and bank holding compa- nies The legislation includes a restriction on the power of the Office of the Comptroller of the Currency (OCC) to grant new insurance powers without rolling back the status quo. It also attends the Bank Holding Company Act (BHCA) to allow affiliations between banks and insurance companies under a holding company structure in accordance with state insurance laws. Such affiliations would be delayed until March 30, 1997. Additionally, national banks would be permitted to sell insurance within empowerment zones, subject to state regulation. TITLE ITI—LENDER LIABILITY Title III provides clarity to the issue of liability of lenders, fidu- ciaries, and government agencies under Federal environmental laws. This clarification resolves the uncertainty of existing exemp- tions promulgated by the Environmental Protection Agency and, subsequently, overturned by judicial determination. The Court in United States v. Fleet Factors Corporation, 901 F.2d 1550 (11th Cir. 1990), cert. denied, 498 U.S. 1046 (1991) decided that a lender could be held liable for the costs of any corrective or response ac- tion when the lender has the mere capacity to influence the bor- rower's treatment of hazardous waste. In addition, in United States v. Maryland Bank & Trusts Co., 632 F. Supp. 573 (D. Md. 1986), the Court held a lender liable for foreclosing on a contaminated property and later disposing of the property through sale. As a re- sult of such judicial opinions, lenders are hesitant to make loans to certain borrowers and to foreclose on properties. Therefore, Title III addresses the issue of how and to what extent a lender can be held under environmentallaws. Besides providing clarity to the liability issue, Title III provides encouragement and incentives to lenders and fiduciaries to protect the properties through environmental inspections and clean ups. HEARINGS The Subcommittee on Financial Institutions and Consumer Cred- it held two days of hearings on the CRA. Testifying before the Subcommittee on March 8, 1995 were: The Honorable Joseph P. Kennedy II, U.S. House of Representatives; The Honorable Ricki Helfer, Chairman, Federal Deposit Insurance Corporation; The Honorable Eugene A. Ludwig, Comptroller of the Currency; The Honorable Jonathan L. Fiechter, Acting Director, Office of Thrift Supervision; The Honorable Lawrence Lindsey, Governor, Federal Reserve System; Mr. William A. Niskanen, Chairman, the Cato Institute; Ms. Lucy H. Griffin, Compliance Management Services; Ms. Cathy Bessant, Senior Vice President, Nations Bank; Mr. Warren Traiger, CRA Practitioner; Mr. Ned Brown, Financial Modeling Concepts. Testifying before the Subcommittee on March 9, 1995 were: Mr. James Culberson, Jr., Chairman, First National Bank and Trust 074 58 Company; Mr. Tony Abbate, Chairman, Marketing Committee, Independent Bankers Association; Mr. Mark Milligan, America’s Community Bankers; Mr. Benson F. Roberts, Vice President for Policy, Local Initiatives Support Corporation; Ms. Michelle Meier, Counsel, Government Affairs, Consumers Union; Ms. Gale Cincotta, Chairperson, National People’s Action; Mr. John E. Tay- lor, President and C.E.O., National Community Reinvestment Coa- lition; Mr. Allen Fishbein, General Counsel, Center for Community Change; Rev. Charles R. Stith, National President, Organization for a New Equality. The Subcommittee on Financial Institutions and Consumer Cred- it held four days of hearings on legislation to reduce the regulatory burdens being imposed on financial institutions, including H.R. 1362, introduced by Representative Bereuter. Testifying before the Subcommittee on May 18, 1995, were: The Honorable Richard Carnell, Assistant Secretary of Financial Insti- tutions, Departmentof the Treasury; The Honorable Susan B. Phil- lips, Governor, Federal Reserve Board; The Honorable Ricki Helfer, Chairman, Federal Deposit Insurance Corporation; The Honorable Eugene A. Ludwig, Comptroller of the Currency; The Honorable Jonathan L. Fiechter, Acting Director, Office of Thrift Supervision; The Honorable Nicholas P. Retsinas, Assistant Secretary of Hous- ing, Department of Housing and Urban Development; The Honor- able Catherine Ghiglieri, Texas Banking Commissioner, represent- ing the Conference of State Bank Supervisors. Testifying before the Subcommittee on May 23, 1995 were: Mr. lames Culberson, Jr., American Bankers Association; Mr. Richard L. Mount, President, Independent Bankers Association of America, Mr. David Carson, America’s Community Bankers; Mr. R on Snellings, National Association of Federal Credit Unions; Ms. Nancy Pierce, Credit Union National Association, Inc.; Mr. H. Jay Sarles, Consumer Bankers Association; Mr. Alfred Pollard, Bankers Roundtable: Mr. John Davey, Mortgage Bankers Association of America: Mr. Rick Adams, National Association of Realtors; Mr. Larry Swank, National Association of Home Builders; Mr. Hank Williams, Real Estate Services Providers Council; Mr. Parker Ken- nedy, American LandTitle Association, Testifying before the Subcommittee on May 24, 1995 were: The Honorable Maxine Waters, U.S. House of Representatives; Mr. Bart Harvey, The Enterprise Foundation, Dr. Francine Justa, Executive Director, Neighborhood Housing Services of New York City; Dr. Steven Roberts, Regulatory Advisory Practice, KPMG _ Peat Marwick LLP; Dr. Robert Edelstein, Walter A. Haas Schoolof Busi- ness, University of California at Berkeley; Ms. Michelle Meier, Gov- ernment Affairs Counsel, Consumers Union; Ms. Frances Smith, Director, Consumers Alert; Ms. Madeline Houston, Passaic County Legal Aid; Ms. Tess Canja, American Association of Retired Per- sons; Ms. Maude Hurd, ACORN. Testifying before the Subcommittee on June 8, 1995 were: Mr. Robert Elliott, President and C.E.O., Household Finance Corpora- tion on behalf of the American Financial Services Association; Mr. Harley Bergmeyer, President, Saline State Bank; Mr. Wayne Holsted, Chairman and Chief Counsel, Northwest Title and Es- crow: Mr. Eric Carlsen, Senior Vice President, Frontier Savings 59 Bank; Mr. Richard Roberto, Vice President, European American Bank; Mr. Stanley Lowe, First Representative, Pittsburgh Commu- nity Reinvestment Group. COMMITTEE CONSIDERATION AND VOTES (Rule XI, Clause 2(I)(2)(B)) On June 21, 22, 27, and 28, 1995, the Committee met in open session to mark up regulatory burdenrelief legislation. The Com- mittee considered as original text for purposes of amendment a Committee Print which incorporated the provisions of H.R. 1362 as reported by the Subcommittee on Financial Institutions and Consumer Credit and a provision placing a moratorium on the au- thority of the Comptroller of the Currency to allow new insurance powersfor national banks. During the markup, the Committee approved, by recorded vote, 18 amendments to the Committee Print. The Committee also de- feated, by recorded vote, 14 amendments. The following amend- ments were adopted by recorded vote. 076 60 An amendmentoffered by Mrs. Roukema and Mr. Bereuter mak- ing a numberofclarifications to Title I of the Committee Print. Pages 1-9 of the amendment which make a number of changes to the RESPA and the TILA,including the transfer of rulemaking au- thority for all disclosure aspects of the RESPAto the Federal Re- serve Board, passed 27-11. YEAS NAYS Mr. Leach Mr. LaFalce Mr. McCollum Mr. Vento Mrs. Roukema Mrs. Maloney Mr. Bereuter Ms. Roybal-Allard Mr. Roth Mr. Barrett, (WD Mr. Baker, (LA) Ms. Velazquez Mr.Lazio Mr. Wynn Mr. Bachus Mr. Fields, (LA) Mr. Castle Mr. Watt Mr. King Mr. Hinchey Mr. Royce Mr. Bentsen Mr. Weller Mr. Hayworth Mr. Metcalf Mr. Bono Mr. Ney Mr. Ehrlich Mr. Barr Mr. Chrysler IVIL . Ci wlicailo RAw Tnx WIT, OK Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mrs. Kelly Mr. Orton 61 Page 10 of the amendment which requires federal bank regu- lators to ensure that their examiners consult with each other and to consider appointing an examiner in charge for all agency exams passed 38-0. YEAS NAYS Mr. Leach Mr. McCollum Mrs. Roukema Mr. Bereuter Mr. Roth Mr. Baker, (LA) Mr. Lazio Mr. Bachus Mr. Castle Mr. King Mr. Royce Mr. Weller Mr. Hayworth Mr. Metcalf Mr. Bono Mr. Ney Mr. Ehrlich Mr. Barr Mr. Chrysler Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mrs.Kelly Mr. LaFalce Mr. Vento Mr. Orton Mrs. Maloney Ms. Roybal-Allard Mr. Barrett, (WI) Ms. Velazquez Mr. Wynn Mr. Fields, (LA) Mr. Watt Mr. Hinchey Mr. Bentsen 078 62 Pages 11-12 of the amendment which clarify the effective date of the amendments madeto the TISA passed 39-0. YEAS NAYS Mr. Leach Mr. McCollum Mrs. Roukema Mr. Bereuter Mr. Roth Mr. Baker, (LA) Mr. Lazio Mr. Bachus Mr. Castle Mr. King Mr. Royce Mr. Weller Mr. Hayworth Mr. Metcalf Mr. Bono Mr. Ney Mr. Ehrlich Mr. Barr Mr. Chrysler Mr. Cremeans Mr. Fox Mr. Heineman Mr. LoBiondo MMos Kelly ivlio. analy Mr. LaFaice Mr. Vento Mr. Orton Mr. Sanders Mrs. Maloney Mr. Gutierrez Ms. Roybal-Allard Mr. Barrett, (WI) Mr. Velazquez Mr. Wynn Mr. Fields, (LA) Mr. Watt Mr. Hinchey Mr. Bentsen 63 Page 13 of the amendment which clarifies the burden of proof for unauthorized transfers remain on the creditors passed 30-10. YEAS NAYS Mr. Leach Mr. LaFalce Mr. McCollum Mr. Vento Mrs. Roukema Mr. Sanders Mr. Bereuter Mrs. Maloney Mr. Roth Mr. Gutierrez Mr. Baker, (LA) Ms. Velazquez Mr. Lazio Mr. Wynn Mr. Bachus Mr. Fields, (LA) Mr. King Mr. Watt Mr. Royce Mr. Hinchey Mr. Lucas Mr. Weller Mr. Hayworth Mr. Metcalf Mr. Bono Mr. Ney Mr. Ehrlich Mr. Barr Mr. Chrysler Mr. Cremeans Mr. Fox Mr. Heineman Mr. LoBiondo Mr. Watts Mrs. Kelly Mr. Kanjorski Mr. Orton Ms. Roybal-Ailard Mr. Barrett, (WI) Mr. Bentsen 080 64 Page 14 of the amendment which makes a number of chang es concerning consumerleases, including the placing of statu tory pen- alties for creditors under the Consumer Credit Protection A ct passed 41-0. YEAS _ NAYS Mr. Leach Mr. McCollum Mrs. Roukema Mr. Bereuter Mr. Roth Mr. Baker, (LA) Mr. Lazio Mr. Bachus Mr. Castle Mr. King Mr. Royce Mr. Lucas Mr. Weller Mr. Hayworth Mr. Metcalf Mr. Bono Mr. Ney Mr. Ehrlich Mr. Barr Mr. Chrysier Mr. Cremeans IVIL. PUXx MAe Tlatneaman Wi, Litiiitaibiais Mr. LoBiondo Mr. Watts Mrs. Kelly Mr. LaFalce Mr. Vento Mr. Kanjorski Mr. Orton Mr. Sanders Mrs. Maloney Mr. Gutierrez Ms.Roybal-Allard Mr. Barrett, (WD Ms. Velazquez Mr. Wynn Mr. Fields, (LA) Mr. Watt Mr. Hinchey Mr. Bentsen O81 65 An amendmentoffered by Mr. Roth which prevents the CRA reg- ulations from requiring financial institutions from making loans or other agreements to an uncreditworthy person, business, organiza- tion, or any other entity that would jeopardize safety and sound- ness of the subject lending institutions was passed 25-13. YEAS NAYS Mr. Leach Mr. Ney Mr. McCollum Mr.Fox Mrs. Roukema Mr. Watts Mr. Bereuter Mr. LaFalce Mr. Roth Mr. Kennedy Mr. Baker, (LA) Mr. Mfume Mr. Bachus Ms. Waters Mr.King Mr. Sanders Mr. Royce Mr. Roybal-Allard. Mr. Weller Ms. Velazquez Mr. Hayworth Mr. Wynn Mr. Metcalf Mr. Fields, (LA) Mr. Bono Mr. Hinchey Mr.Ehrlich Mr. Barr Mr. Cremeans Mr. Stockman Mr. LoBiondo Mrs. Kelly Mr. Vento Mr. Kanjorski Mr. Barrett, (WI) Mr. Watt Mr. Ackerman Mr. Bentsen Present: Mr. Heineman. 082 66 An amendmentoffered by Mr. Weller which strikes the require- ment that regulated financial institutions with $100 million or less in assets be outside of a metropolitan statistical area in order to be exempt from CRA examination requirements was passed 23-16. YEAS NAYS Mr. Leach Mr. Bereuter Mr. McCollum Mr. Vento Mrs. Roukema Mr. Schumer Mr. Roth Mr. Frank Mr. Baker, (LA) Mr. Kennedy Mr. Bachus Ms. Waters Mr. Castle _ Mr. Sanders Mr. King Mr. Gutierrez Mr. Royce Ms. Roybal-Allard Mr. Weller Mr. Barrett, (WI) Mr. Hayworth Ms. Velazquez Mr. Metcalf Mr. Wynn Mr. Bono Mr.Fields, (LA) Mr. Ney Mr. Watt Mr. Ehrlich Mr. Hinchey Mr. Barr Mr. Bentsen Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Af. VETeae AViL. VY CLL Mrs. Kellyareuy 67 An amendment offered by Mr. McCollum which strikes assess- ment of an institution’s CRA record during the applications process for a deposit facility and instead requires the CRA record to be in- cluded in the assessment of overall evaluation of the condition of the institution was passed 25-17. YEAS NAYS Mr. Leach Mr. Vento Mr. McCollum Mr. Frank Mrs. Roukema Mr. Kanjorski Mr. Bereuter Mr. Kennedy Mr. Roth Ms. Waters Mr. Lazio Mr. Orton Mr. Bachus Mr, Sanders Mr. Castle Mrs. Maloney Mr. King Mr. Gutierrez Mr. Royce Ms. Roybal-Allard Mr. Lucas Mr. Barrett, (WI) Mr. Weller Ms. Velazquez Mr. Hayworth Mr. Wynn Mr. Metcalf Mr. Fields, (LA) Mr. Bono Mr. Watt Mr. Ney Mr. Hinchey Mr. Ehrlich Mr. Bentsen Mr. Barr Mr. Cremeans Mr Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mr.Kelly 084 68 An amendment offered by Mr. Schumer, Ms. Maloney and Mr. Vento which deletes the provision that modified liability provisions under the EFTA for the unauthorized use of electronic fund trans- fers was passed 24-18. YEAS NAYS Mr. Leach Mrs. Roukema Mr. Royce Mr. Bereuter Mr. Heineman Mr. Baker, (LA) Mr. Stockman Mr. Lazio Mr. Watts Mr. Bachus Mrs. Kelly Mr. Castle Mr. LaFalce Mr. King Mr. Vento Mr. Lucas Mr. Schumer Mr. Weller Mr. Frank Mr. Hayworth Mr. Kennedy Mr. Bono Mr. Flake Mr. Ney Ms. Waters Mr.Ehrlich Mr. Sanders Mr. Barr Mrs. Maloney Mr. Chrysier Ms. Roybal-Allard Mr. Cremeans Mr. Barrett, (WI) Mr. Fox Ms. Velazquez Mr. LoBiondo Mr. Wynn Mr. Fields, (LA) Mr. Watt IVE, Piiniciey RAL ormsaAck Pot Vil. Acker Tiiciih Mr. Bentsen 69 An amendment offered by Mr. Schumer and Mr. Vento which eliminates the provisions that modified the liability provisions under the TILA for the unauthorized use of credit cards was passed 23-21. YEAS NAYS Mr. Leach Mr. McCollum Mr. Royce Mrs. Roukema Mr. Heineman Mr. Bereuter Mr. Stockman Mr. Baker, (LA) Mr. Watts Mr. Lazio Mrs. Kelly Mr. Bachus Mr. LaFalce Mr. Castle Mr. Vento Mr. King Mr. Schumer Mr. Lucas Mr. Kennedy Mr. Weller Mr. Flake Mr. Hayworth Ms. Waters Mr. Bono Mr. Sanders Mr. Ney Mrs. Maloney Mr. Ehrlich Ms. Roybal-Allard Mr. Barr Mr. Barrett, (WI) Mr. Chrysler Ms. Velazquez Mr. Cremeans Mr. Wynn Mr. Fox Mr.Fields, (LA) Mr. LoBiondo Mr. Watt Mr. Frank Mr. Hinchey Mr. Orton Mr. Ackerman Mr. Bentsen 086 70 An amendment to Mr. Leach's amendment which strikes a re- quirement that would have required agency concurrence in Depart- ment of Justice enforcement actions under the fair lending cases was passed 24-20. YEAS NAYS Mr. Bereuter Mr. Leach Mr. Ney Mr. McCollum Mr. Fox Mrs. Roukema Mr. Watts Mr. Baker, (LA) Mrs. Kelly Mr. Lazio Mr. LaFalce Mr. Bachus Mr. Vento Mr. King Mr. Frank Mr. Royce Mr. Kennedy Mr. Lucas Mr. Flake Mr. Weller Mr. Mfume Mr. Hayworth Ms. Waters Mr. Metcalf Mr. Orton Mr. Bono Mr. Sanders Mr. Ehrlich Mrs. Maloney Mr. Barr Mr. Gutierrez Mr. Chrysler Ms. Roybal-Allard Mr. Cremeans Mr. Barrett, (WD Mr. Heineman Ms. Velazquez Mr. Stockman Mr. Wynn Mr. LoBiondo Mr. Watt RAH L¥iencnhans Mr. Ackerman Mr. Bentsen 087 71 An amendment offered by Mr. Hinchey which requires that in order to receive protection under the ECOA,credit scoring systems cannot have a disparate impact on a protected class unless thecri- terion used is justified by business necessity and a no less discrimi- natory alternative is available was passed 29-17. YEAS NAYS Mr. Leach Mr. McCollum Mrs. Roukema Mr. Baker, (LA) Mr. Bereuter Mr. Lazio Mr. Castle Mr. Bachus Mr. Weller Mr. King Mr. Fox Mr. Royce Mr. LoBiondo Mr. Lucas Mr. Watts Mr. Hayworth Mrs.Kelly Mr. Metcalf Mr. LaFalce Mr. Bono Mr. Vento Mr. Ney Mr. Frank Mr. Ehrtich Mr. Kanjorski Mr. Barr Mr. Kennedy Mr. Chrysler Mr. Flake Mr. Cremeans Mr. Mfume Mr. Heineman Ms. Waters Mr. Stockman Mr. Orton Mrs. Maloney Mr. Gutierrez Ms. Roybal-Allard Mr. Barrett, (WI) Ms. Velazquez Mr. Wynn Mr.Fields, (LA) Mr. Watt Mr. Hinchey Mr. Ackerman Mr. Bentsen 088 72 An amendmentoffered by Mr. Hinchey whichstrikes the prohibi- tion in the legislation which would have restricted the use of di s- parate impact evidence in enforcing fair lending laws was passed 32-15. YEAS NAYS Mr. Leach Mr. McCollum Mrs. Roukema Mr. Baker, (LA) Mr. Bereuter Mr. Bachus Mr. Lazio Mr.King Mr.Castle Mr. Royce Mr. Metcalf Mr. Lucas Mr. Fox Mr. Weller Mr. Heineman Mr. Hayworth Mr. LoBiondo Mr. Bono Mr. Watts Mr. Ney Mrs. Kelly Mr. Ehrlich Mr. LaFalce Mr. Barr Mr. Vento Mr. Chrysler Mr. Frank Mr. Cremeans Mr. Kanjorski Mr. Stockman Mr. Kennedy Mr. Flake Mr. Mfume Ms. Waters Mr. Orton Mr. Sanders Mr. Gutierrez Ms. Roybal-Allard Mr. Barrett, (WD) Ms. Velazquez Mr. Wynn Mr.Fieids, (LA) Mr. Watt Mr. Hinchey Mr. Ackerman Mr. Bentsen 089 73 An amendmentoffered by Mr. Castle which makes clarifications to the OCC insurance moratorium language contained in Mr. Leach’s amendment was passed 40-2. YEAS NAYS Mr. Leach Mr. McCollum Mrs. Roukema Mr. Kanjorski Mr. Bereuter Mr. Roth Mr. Baker, (LA) Mr. Lazio Mr. Bachus Mr. Castle Mr. King . Mr. Royce Mr. Lucas Mr. Hayworth Mr. metcalf Mr. Bono Mr. Ehrlich Mr. Barr Mr. Chrysler Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mrs.Kelly Mr. Gonzalez Mr. LaFalce Mr. Vento Mr. Schumer Mr. Frank Mr. Kennedy Mr. Mfume Ms. Waters Mrs. Maloney Mr. Gutierrez Ms. Roybal-Allard Mr. Barrett, (WI) Ms. Velazquez Mr. Wynn Mr. Watt Mr. Bentsen 090 74 An amendmentoffered by Mr. Baker, (LA), which amends section (4)(c)(8) of the BHCAto allow bank holding companies to own in- surance companies in accordance with state insurance laws was passed 36-12. YEAS NAYS Mrs. Roukema Mr. Leach Mr. Roth Mr. McCollum Mr. Baker, (LA) Mr. Bereuter Mr. Lazio Mr. Weller Mr. Bachus Mr. Hayworth Mr. Castle Mr. Metcalf Mr. King Mr. Ney Mr. Royce Mr. Ehrlich Mr. Lucas Mr. LoBiondo Mr. Bono Mrs. Kelly Mr. Barr Ms. Waters Mr. Chrysler Mr. Sanders Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr. Watts Mr. Gonzalez Mr. LaFalce Mr. Vento Mr. Schumer Mr. Frank Mr. Kanjorski Mr. Kennedy Mr. Flake Mr. Mfume Mr. Orton . Mrs. Maloney Mr. Gutierrez Ms. Roybal-Allard Mr. Barrett, (WI) Ms. Velazquez Mr. Wynn Mr. Watt Mr. Hinchey Mr. Bentsen 091 75 An amendmentoffered by Mr. McCollum which strikes the provi- sion putting restrictions on the ability of outside counsel and ac- countants to serve on a financial institution's board of directors was passed 27-17. YEAS NAYS Mr. Leach Mr. Gonzalez Mr. McCollum Mr. LaFalce Mrs. Roukema Mr. Vento Mr. Bereuter Mr. Schumer Mr. Baker, (LA) Mr. Kanjorski Mr. Lazio Mr. Kennedy Mr. Bachus Mr. Flake Mr. Castle Mr. Mfume Mr. King Ms. Waters Mr. Royce Mr. Orton Mr. Lucas Mrs. Maloney Mr. Weller Mr. Gutierrez Mr. Hayworth Ms. Roybal-Allard Mr. Metcalf Mr. Barrett, (WI) Mr. Bono Ms. Velazquez Mr. Ney Mr. Hinchey Mr.Ehrlich Mr. Bentsen Mr. Barr Mr. Chrysler Mr. Cremeans Mr. Fox Mr. Heineman Mr. LoBiondo Mr. Watts Mrs. Kelly Mr. Wynn Mr. Watt 092 76 The following amendments were defeated by recorded vote. An amendment offered by Mr. Barrett, (WI), to Mr. Roth's amendment which strikes reference to uncreditworthy persons was defeated 16-25. YEAS NAYS Mr. LaFalce Mr. Leach Mr. Vento Mr. McCollum Mr. Kanjorski Mrs. Roukema Mr. Kennedy Mr. Bereuter Mr. Mfume Mr. Roth Ms. Waters Mr. Baker, (LA) Mr. Sanders Mr. Lazio Ms. Roybal-Allard Mr. Bachus Mr.Barrett, (WI) Mr. Castle Ms. Velazquez Mr. Royce Mr. Wynn Mr. Lucas Mr. Fields, (LA) Mr. Weller Mr. Watt Mr. Hayworth Mr. Hinchey Mr. Metcalf Mr. Ackerman Mr. Bono Mr. Bentsen Mr. Ney Mr. Ehrlich Mr. Barr Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mrs. Kelly 093 77 An amendment offered by Mr. Kennedy which strikes the CRA subtitle was defeated 18-26. YEAS NAYS Mr. Gonzalez Mr. Leach Mr. Vento Mr. McCollum Mr. Frank Mrs. Roukema Mr. Kanjorski Mr. Bereuter Mr. Kennedy Mr. Roth Mr. Flake Mr. Lazio Ms. Waters Mr. Bachus Mr. Sanders Mr. Castle Mrs. Maloney Mr. King Mr. Gutierrez Mr. Royce Ms. Roybal-Allard Mr. Lucas Mr. Barrett, (WI) Mr. Weller Ms. Velazquez Mr. Hayworth Mr. Wynn Mr. Metcalf Mr. Fields, (LA) Mr. Bono Mr. Watt Mr. Ehrlich Mr. Hinchey Mr. Barr Mr. Bentsen Mr. Chrysler Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr, LoBiondo Mr. Watts Mrs.Kelly Mr. Orton 094 78 An amendment offered by Mr. McCollum which raises the level of CRA self-certification from $25,000,000 to $1,000,000,000 was defeated 11-32. YEAS NAYS Mr. McCollum Mr. Leach Mr. Roth Mrs. Roukema Mr. Baker, (LA) Mr. Bereuter Mr. Bachus Mr. Lazio Mr. King Mr.Castle Mr. Royce Mr. Hayworth Mr. Weller Mr. Metcalf Mr. Bono Mr. Ney Mr.Ehrlich Mr. Cremeans Mr. Barr Mr. Heineman Mr. Fox Mr. LoBiondo Mr. Watts Mrs. Kelly Mr. Vento Mr. Schumer Mr. Frank Mr. Kanjorski Mr. Kennedy Mr. Flake Mr. Mfume Ms. Waters Mr. Orton Mr. Sanders Mr. Gutierrez Ms. Roybal-Allard Mr. Barrett, (WI) Ms. Velazquez Mr. Wynn Mr. Fields, (LA) Mr. Watt Mr. Hinchey Mr. Bensten 095 79 An amendmentoffered by Mr. McCollum which amends the CRA to bring it back to its original purpose by making redlining enforce- able under the ECOA and the FHA was defeated 11-26. YEAS NAYS Mr. McCollum Mr. Leach Mr. Roth Mrs. Roukema Mr. Bachus Mr. Bereuter Mr. King Mr. Lazio Mr. Royce Mr.Castle Mr. Lucas Mr. Metcalf Mr. Hayworth Mr. Ney Mr. Bono Mr. Cremeans Mr. Ehrlich Mr. Fox Mr. Barr Mr. Heineman Mr. Chrysler Mr. LoBiondo Mr. Watts Mr. Vento Mr. Frank Mr. Kanjorski Mr. Kennedy Mr. Waters Mr. Orton Ms. Roybal-Allard Mr. Barrett, (WI) Ms. Velazquez Mr. Wynn Mr. Fields, (LA) Mr. Wait Mr. Hinchey Mr. Bensten 096 80 An amendment offered by Mr. Fields, (LA), which provides for “point of transaction” fee disclosures for all automated t eller ma- chine transactions was passed by a Voice Vote. A motion to recon- sider the amendmentwas approved 18-17. YEAS NAYS Mr. Leach Mr. Bachus Mr. Bereuter Mr. Chrysler Mr. Roth Mr. LaFalce Mr. Lazio Mr. Vento Mr. Castle Mr. Schumer Mr. King Mr. Frank Mr. Royce Ms. Waters Mr. Lucas Mr. Orton Mr. Weller Mrs. Malone Mr. Hayworth Ms.Roybal-Allard Mr. Metcalf Mr. Barrett, (WD Mr. Bono Ms. Velazquez Mr. Ehrlich Mr. Wynn Mr. Cremeans Mr. Fields, (LA) Mr. Heineman Mr. Watt Mr. Stockman Mr. Hinchey Mr. LoBiondo Mr. Ackerman Mrs. Kelly 097 81 Mr. Fields’ amendment was then defeated by a roll call vote of 21-21. YEAS NAYS Mr. Bachus Mr. Leach Mr. Stockman Mrs. Roukema Mr. LaFalce Mr. Bereuter Mr. Vento Mr. Roth Mr. Schumer Mr. Lazio Mr. Frank Mr. Castle Mr. Kanjorski Mr. King Mr. Kennedy Mr. Royce Ms. Waters Mr. Lucas Mr. Orton Mr. Weller Mr. Sanders Mr. Hayworth Mrs. Maloney Mr. Metcalf Ms. Roybal-Allard Mr. Bono Mr. Barrett, (WI) Mr. Ney Ms. Velazquez Mr. Ehrlich Mr. Wynn Mr. Barr Mr.Fields, (LA) Mr. Chrysler Mr. Watt Mr. Cremeans Mr. Hinchey Mr. Heineman Mr. Ackerman Mr. LoBiondo Mr. Bentsen Mrs. Kelly 098 82 An amendmentoffered by Mr. Kennedy which strikes the affili- ate information sharing provision of the legislation was defeated 19-23. YEAS NAYS Mr. Gonzalez Mr. Leach Mr. LaFalce Mr. McCollum Mr. Vento Mrs. Roukema Mr, Schumer Mr. Bereuter Mr. Frank Mr. Bachus Mr. Kennedy Mr.Castle Mr. Flake Mr. King Ms. Waters Mr. Royce Mr. Sanders Mr. Lucas Mrs. Maloney Mr. Weller Mr. Gutierrez Mr. Hayworth Ms. Roybal-Allard Mr. Bono Mr.Barrett, (WI) Mr. Ney Ms. Velazquez Mr. Ehrlich Mr. Wynn Mr. Barr Mr. Watt Mr. Chrysler Mr. Hinchey Mr. Cremeans Mr. Ackerman Mr. Fox Mr. Bentsen Mr. Heineman Mr. LoBiondo Mr. Watts Mrs.Kelly Mr. Orton 099 83 An amendmentoffered by Ms. Waters which imposes a two-year moratorium on bank fee increases for accounts with an average daily balance below $3,000 was defeated 4-30. YEAS NAYS Ms. Waters Mr. Leach Mr. Sanders Mr. McCollum Mr. Gutierrez Mrs. Roukema Ms. Roybal-Allard Mr. Bereuter Mr. Baker, (LA) Mr. Lazio Mr. Bachus Mr. Castle Mr. King Mr. Royce Mr. Weller Mr. Hayworth Mr. Metcalf Mr. Bono Mr. Ney Mr. Ehrlich Mr. Barr Mr. Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mrs.Kelly Mr. Frank Mr. Orton Mr.Barrett, (WD Mr. Wynn Mr. Watt Mr. Hinchey Mr. Ackerman 100 84 An amendment offered by Mr. Bentsen which changes the CRA rating system was defeated 15-22. YEAS NAYS Mr. Vento Mr. Leach Mr. Frank Mr. McCollum Mr. Kanjorski Mrs. Roukema Mr. Kennedy Mr. Bereuter Ms. Waters Mr. Lazio Mr. Orton Mr. Bachus Mr. Sanders Mr.Castle Ms. Roybal-Allard Mr. King Mr. Barrett, (WI) Mr. Royce Ms. Velazquez Mr. Lucas Mr. Wynn Mr. Hayworth Mr.Fields, (LA) Mr. Metcalf Mr. Watt Mr. Bono Mr. Hinchey Mr. Ehrlich Mr. Bentsen Mr. Barr Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mrs. Kelly 101 85 An amendment offered by Mr. Schumer and Mrs. Maloney which deletes provisions in the legislation modifying the current restric- tions on insider lending was defeated 15-26. YEAS NAYS Mr. LaFalce Mr. Leach Mr. Vento Mr. McCollum Mr. Schumer Mrs. Roukema Mr. Flake Mr. Bereuter Mr. Mfume Mr. Baker,(LA) Mr. Orton Mr. Lazio Mr. Sanders Mr. Bachus Mrs. Maloney Mr. Castle Ms. Roybal-Allard Mr. King Mr. Barrett, (WI) Mr. Royce Ms. Velazquez Mr. Lucas Mr. Wynn Mr. Weller Mr. Watt Mr. Hayworth Mr. Hinchey Mr. Metcalf Mr. Bentsen Mr. Bono Mr. Ney Mr. Ehrlich Mr. Barr Mr. Chrysler Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mrs.Kelly 102 86 An amendmentoffered by Mr. Schumer and Mrs. Maloney which deletes the provision in the legislation modifying the current statu- tory requirement that all members of bank audit committees be independent directors was defeated 20-20. YEAS NAYS Mr. Leach Mr. McCollum Mr. Lazio Mrs. Roukema Mr. Castle Mr. Bereuter Mr. Royce Mr. Roth Mr. Metcalf Mr. Baker, (LA) Mr. Heineman Mr. Bachus Mrs. Kelly Mr. King Mr. LaFalce Mr. Lucas Mr. Vento Mr. Weller Mr. Schumer Mr. Hayworth Mr. Mfume Mr. Bono Mr. Orton Mr. Ney Mrs. Maloney Mr. Ehrlich Mr. Gutierrez Mr. Barr Ms. Roybal-Allard Mr. Chrysler Mr. Barrett, (WD Mr. Cremeans Ms. Velazquez Mr. Fox Mr. Wynn Mr. Stockman Mr. Watt Mr. LoBiondo Mr. Bentsen Mr. Watts 103 87 An amendmentoffered by Mr. Vento which strikes section 234 of the legislation modifying the culpability standards for outside di- rectors was defeated 17-24. YEAS NAYS Mr. Leach Mr. McCollum Mrs. Roukema Mr. Bereuter Mr. Gonzalez Mr. Roth Mr. LaFalce Mr. Baker, (LA) Mr. Vento Mr. Lazio Mr. Frank Mr. Bachus Mr. Kanjorski Mr. Castle Mr. Kennedy Mr. King Mr. Flake Mr. Royce Mr. Orton Mr. Lucas Mrs. Maloney Mr. Weller Ms. Roybal-Allard Mr. Hayworth Mr.Barrett, (WD Mr. Bono Ms. Velazquez Mr. Ney Mr. Watt Mr. Ehrlich Mr. Hinchey Mr. Barr Mr. Bentsen Mr. Chrysler Mr. Cremeans Mr. Fox Mr. Heineman Mr. Stockman Mr. LoBiondo Mr. Watts Mrs. Kelly 104 88 An amendmentoffered by Mr. Kennedy whichstrikes section 238 concerning second mortgages was defeated by 21-23. YEAS NAYS Mr. Leach Mr. McCollum Mr. Lazio . Mrs. Roukema Mr. Metcalf Mr. Bereuter Mr. Heineman Mr. Roth Mr. LoBiondo Mr. Baker, (LA) Mr. Gonzalez Mr. Bachus Mr. LaFalce Mr. Castle Mr. Vento Mr. King Mr. Frank Mr. Royce Mr. Kennedy Mr, Lucas Mr. Flake Mr. Weller Ms. Waters Mr. Hayworth Mr. Sanders Mr. Bono Mr. Gutierrez Mr. Ney Ms. Roybal-Allard Mr. Ehrlich Mr. Barrett, (WT) Mr. Barr Ms. Velazquez Ar. Chrysler Mr. Wynn Mr. Cremeans Mr. Watt Mr. Fox Mr. Ackerman Mr. Stockman Mr. Bentsen Mr. Watts Mrs.Kelly Mr. Orton 105 89 An amendmentoffered by Mr. Bachus which makes a numberof reforms to the FDCPA was defeated 19-26. YEAS NAYS Mr. Bereuter Mr. McCollum Mr. Roth Mrs. Roukema Mr. Baker, (LA) Mr. Royce Mr. Lazio Mr. Fox Mr. Bachus Mr. LoBiondo Mr. Castle Mr. Watts Mr. King Mrs. Kelly Mr. Lucas Mr. Gonzalez Mr. Weller Mr. LaFalce Mr. Hayworth Mr. Vento Mr. Metcalf Mr. Schumer Mr. Bono Mr. Frank Mr. Ney Mr. Kennedy Mr. Ehrlich Mr. Mfume Mr. Barr Ms. Waters Mr. Chrysler Mr. Orton Mr. Cremeans Mr. Sanders Mr. Heineman Mrs. Maloney Mr. Stockman Mr. Gutierrez Ms. Roybal-Allard Mr. Barrett, (WI) Ms.Velazquez Mr. Wynn Mr. Watt Mr. Hinchey Mr. Bentsen 106 90 Present: Mr. Leach. An amendmentoffered by Mr. Vento which was an amendment in the nature of a substitute was defeated 13-24. YEAS NAYS Mr. LaFalce Mr. Leach Mr. Vento Mr. McCollum Mr. Frank Mrs. Roukema Mr. Kennedy Mr. Bereuter Mr. Flake Mr. Roth Mr. Mfume Mr. Baker, (LA) Ms. Waters Mr. Bachus Mr. Sanders Mr. King Mr. Gutierrez Mr. Royce Mr. Barrett, (WD) Mr. Lucas Mr. Watt Mr. Weller Mr. Ackerman Mr. Hayworth Mr. Bentsen Mr. Metcalf Mr. Bono Mr. Ney Mr. Ehrlich Mr. Barr Mr. Chrysler ‘Mr. Cremeans Mr. Fox Mr. Heineman Mr. LoBiondo Mr. Watts Mrs. Kelly 107 91 After adopting the Committee Print, as amended, H.R. 1858 was called up for committee consideration. A motion to strike every- thing after the enacting clause in H.R. 1858 and insert in lieu thereof the Committee Print, as amended, was approved by Voice Vote. A motion to adopt H.R. 1858 and favorably report H.R. 1858, as amended, to the House was approved 27-23. YEAS NAYS Mr. Leach Mr. Gonzalez Mr. McCollum Mr. LaFalce Mrs. Roukema ‘Mr. Vento Mr. Bereuter Mr. Schumer Mr. Roth Mr. Frank Mr. Baker, (LA) Mr. Kanjorski Mr. Lazio Mr. Kennedy Mr. Bachus Mr. Flake Mr. Castle Mr. Mfume Mr. King Ms. Waters Mr. Royce Mr. Orton Mr. Lucas Mr. Sanders Mr. Weller Mrs. Maloney Mr. Hayworth Mr. Gutierrez Mr. Metcalf Ms. Roybal-Allard Mr. Bono Mr. Barrett, (WI) Mr. Ney Ms.Velazquez Mr. Ehrlich Mr. Wynn Mr. Barr Mr. Fields, (LA) Mr. Chrysler Mr. Watt Mr. Cremeans Mr. Hinchey Mr. Fox Mr. Ackerman Mr. Heineman Mr. Bentsen Mr. Stockman Mr. LoBiondo Mr. Watts Mrs. Kelly 108 92 A motion to give power to the Chair to request to go to con- ference was approved 28-20. YEAS NAYS Mr. Leach Mr. Gonzalez Mr. McCollum Mr. Vento Mrs. Roukema Mr. Kanjorski Mr. Bereuter Mr. Kennedy Mr. Roth Mr. Flake Mr. Baker, (LA) Mr. Mfume Mr. Lazio Ms. Waters Mr. Bachus Mr. Orton Mr.Castle Mr. Sanders Mr. King Mrs. Maloney Mr. Royce Mr. Gutierrez Mr. Lucas Ms. Roybal-Allard Mr. Weller Mr. Barrett, (WI ) Mr. Hayworth Ms. Velazquez Mr. Metcalf Mr. Wynn Mr. Bono Mr. Fields, (LA ) Mr. Ney Mr. Watt Mr.Ehrlich Mr. Hinchey Mr. Barr Mr. Ackerman Mr. Chrysler Mr. Bentsen Mr. Cremeans Mr. Fox Mr. Heineman RA Mr. Watts Mrs.Kelly Mr. LaFalce COMMITTEE OVERSIGHT FINDINGS In compliance with clause 2(1)(3)(A) of rule XI of t he Rules of the House of Representatives, the Committee reports tha t the findings and recommendations of the Committee, based on overs ight activi- ties under clause 2(b)(1) of Rule X of the Rules of the House of Rep- resentatives, are incorporated in the descriptive porti ons of this re- port. COMMITTEE ON GOVERNMENT REFORM AND OVER SIGHT FINDINGS Nofindings and recommendations of the Committ ee on Govern- ment Reform and Oversight were received as referre d to in clause 2(1)(3)(D) of rule XI and clause 4(c)(2) of rule X o f the Rules of the House of Representatives. New BUDGET AUTHORITY AND TAX EXPENDITURE S Clause 2(1)(3)(B) of rule XI of the Rules of the House of Rep- resentatives is inapplicable because this legislation do es not pro- vide new budgetary authority or increased tax ex penditures. 109 93 CONGRESSIONAL BUDGET OFFICE CosT ESTIMATE The cost estimate pursuant to Clause 2(1)(3) (C) of rule XI, of the Rules of the House of Representatives and Section 403 of the Con- gressional Budget Act of 1974 has been requested, but had not been preparedas ofthe filing of Part I of this report. The estimate will be filed at a future date. ADVISORY COMMITTEE STATEMENT No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation. CONGRESSIONAL ACCOUNTABILITY ACT The reporting requirement under section 102(b)(3) of the Con- gressional Accountability Act (P.L. 104-1) is inapplicable because this legislation does not relate to terms and conditions of employ- mentor access to public services or accommodations. INFLATIONARY IMPACT STATEMENT Pursuant to clause 2(1)(4) of rule XI of the Rules of the House of Representatives, the Committee estimates that H.R. 1858 will have no significant inflationary impact on prices and costs in the national economy. SECTION-BY-SECTION ANALYSIS TITLE I—REDUCTION IN GOVERNMENT OVERREGULATION SUBTITLE A—-THE HOME MORTGAGE PROCESS SECTION 101. REGULATORY AUTHORITY OVER DISCLOSURES A ND ES- CROW ACCOUNTS UNDER RESPA TRANSFERRED TO FEDER AL RE- SERVE BOARD Section 101 transfers rulemaking authority for all disclosure pro- visions of the RESPA from HUDto the Federal Reserve Board but maintains at HUD rulemaking authority regarding certain real es- tate settlement services under the RESPA including those prohibit- ing kickbacks and unearnedfees. This section also clarifies that the purpose of RESPAis to effect changes in the residential real estate settlement process that will result in the elimination of kickbacks or referral fees without directly regulating settlement service prices or wages paid to bona fide employees that are not designed as a subterfuge to facilitate kickbacks amongaffiliated companies. Sec- tion 101 also revises the rulemaking process under the RESPA to incorporate negotiated rulemaking procedures. The section distrib- utes administrative enforcement of Section 8 and 9 of RESPA among HUD (for non-financial institutions) and the appropriate federal financial institution regulators (for financial entities): en- forcement authority for disclosure requirements is shared among the Federal Reserve Board and the Federal depository institution regulators. In addition, the section requires interagency cooperation in es- tablishing uniform penalties and enforcement guidelines. The Fed- eral Reserve Board is given the authority to determine the appro- 110 94 priate regulator in cases of more than one poten tial regulator. The Director of the Office of Thrift Supervision (OTS) is gi ven this same authority for savings and loan holding companies. In cases of joint ventures between a non-banking entity and a bank ing entity, the section provides that the banking entity's regulator will be the reg- ulator of the joint venture. The section provides ‘ that liability for criminal penalties under the RESPA exists only for wilful viola- tions (current law allows criminal penalties for unin tentional viola- tions). The section redesignates “Controlled Bus iness Arrange- ments” as “Affiliated Business Arrangements.” SECTION 102. SIMPLIFICATION AND UNIFIC ATION OF DISCLOSURES REQUIRED UNDER RESPA AND TILA FOR MO RTGAGE TRANSACTIONS Section 102 directs the Federal Reserve Board to el iminate dupli- cative disclosure requirements that require unnece ssary, confusing and costly paperwork which obscures important co nsumerinforma- tion. This section requires the Federal Reser ve Board to take swift action in this area to (1) simplify disclosures provided under RESPA and TILA,including the timing of the disclosures, and (2) provide a single format for RESPA and TILA dis closures. In the event it is necessary to adopt regulations to implement the provi- sions of this section, the Board is required to publi sh such proposed regulations within three months of the date of enactment: of this legislation. SECTION 103. INCREASED REGULATORY FLE XIBILITY UNDER THE TRUTH RINTRIG ACT Section 103 (a) and (b) grants the Board statutory authority to exempt various transactions from coverage under TILA. The Board is directed to exempt from the TILA any class of transaction for which coverage under the TILA does not provide a measurable ben- efit to consumers in the form of useful informatio n or protection. The Board is encouraged to exercise its discret ionary authority granted under Sections 102 and 103 of H.R. 1858 to reduce the reg- ulatory burdens and costs associated with the credi t-granting proc- ess. SECTION 104. REDUCTIONS IN RESPA REGU LATORY BURDENS, CLARIFYING AMENDMENTS Section 104 amends the RESPAto require disclosu re at the time of application for a loan whether servicing of the lo an may be as- signed, sold or transferred, It also eliminate s subordinate mort- gages fram RESPA coverage and clarifies th at business loans are exempt from the RESPA. SECTION 105. DISCLOSURES FOR ADJUST ABLE RATE MORTGAGES Section 105 provides financial institutions with o ptions for dis- closing information regarding the impact of cha nges in interest payments under adjustable rate mortgages. Section 105 also adds a new paragraph to section 1 28(b) of the TILA concerning the honoring of lock-in promises. 111 95 SECTION 106. CERTAIN. CHARGES This section clarifies whether certain fees should be included or excluded in the calculation of the finance charge under the TILA. (a) Third Party Fees.—This section provides that fees imposed by the closing agent should be excluded from the finance charge when the creditor does not expressly require their imposition or the serv- icés provided and the creditor does not retain the charges. Settle- ment agents frequently incur costs that they pass on to consumers without the creditor's knowledge or retention of the specific charge, one common example is courier fees. Creditors exercise little, if any, control over settlement agents’ charges. tb) Mortgage Broker Fees.—This section, which applies to trans- actions entered into after the date of enactment, clarifies that bor- rower-paid mortgage broker fees will be included in the finance charge. This bright line rule eliminates a review of such factors as whether a borrower may or may not obtain more favorable loan terms or more timely loan funding using a broker rather than ap- plying directly to the creditor for a loan. Lender-paid broker fees are not included in the finance charge because they are not paid by the borrower; only those charges which the borroweractually pays are included in the finance charge. 0) Debt Cancellation.—Section 106(c) currently pertains to the treatment of certain installment sale contracts or leases under the TILA. Under subsection 106(c) of this legislation, charges or pre- miums for such contracts must be included in the finance charge unless the creditor makes a clear and specific written statement to the borrower that sets forth the cost of the contract and states that the borrower may choose the person fram whom heor she obtains coverage. This treatment applies to contracts involving insurance or any voluntary insurance product in connection with any consumercredit transaction that provides protections against loss of or damageto property or against part or all of the debtor's liabil- ity for amounts in excess of the value of the collateral securing the debtor's obligation, or against liability arising out of the ownership or use of the property. (d) Taxes on Security Instruments or evidences of Indebtedness.— Section 106(d) of the TILA currently allows creditors to exclude from the finance charge fees imposed by law for perfecting security interests related to the credit transaction, such as filing fees for re- cording the security instrument. Some states impose taxes on the indebtedness or on the documents evidencing the indebtedness or granting the security interest, commonly referred to as intangible taxes. This legislation provides that intangible taxes may be ex- cluded from the finance charge when the tax must be paid before the creditor can perfect its security interest. (e) Preparation of Loan Documents.—Section 106(e) of the TILA currently excludes from the finance charge specific items that are regularly incurred when credit is secured by an interest in real property, such as appraisal fees, title examinations and document preparation. The Official Staff Commentary to Regulation Z ex- plains that a lump sum charged for conducting or attending a clos- ing “is excluded from the finance charge if the charge is primarily for services related to” the items excluded by section 106(e). This 112 96 legislation clarifies that a closing fee that may a lso cover the inci- dental services performed at the closing is not a finance charge. (f) Fees Relating to Pest Infestations, Inspect ions, and Hazards.— Currently, section 106(e) of the TILA excludes appraisal fees in- curred in connection with a real estate mortgage t ransaction from the finance charge. Appraisal-related fees, for s uch items as ter- mite reports, building inspections or flood hazard a ssessments, are also incurred in evaluating potential risks to the value of the real property securing the transaction both before and after extending credit. The same reasoning that excludes apprai sal fees from the finance charge when the credit is secured by r eal estate should apply to these fees. This legislation clarifies that fees for appraisal- type services should be excludable from the finan ce charge, both when the service is originally provided prior to se ttlement and for subsequent maintenance or verification serv ices after settlement. Ensuring Finance Charges Reflect Cost of Cre dit.—Section 106(f) of this legislation directs the Federal R eserve Board to reex- amine the costs that consumers incur in connecti on with an exten- sion of credit and to determine how to calcul ate the finance charge to reflect more accurately these costs. The def inition of finance charge does not currently have a unified approa ch to fees. The cur- rent list of excludable and excluded fees preve nts the consumer from knowing the total cost of the credit while the discretion give to creditors on the treatment of some char ges. results in non-uni- form disclosures. The existing exemption from rescission fo r same creditor refinancings reportedly has enabled creditors to “flip loans,” poten- Ually Ulidi ging wuncui rt on refinan cings while elimi- nating their rights of res on. The Federal Re serve Board is di- rected to study this practice to determine how creditors abuse the system the scope of such abusive practices, and whether “flipping” can be prevented. The Federal Reserve Board is specifically dir ected to work with representatives of affected industries and consu mer groups (includ- ing working with those outside of the Consumer Advisory Council) with respect to both issues in preparing its repor t to Congress. The Federal Reserve Board is to report to Congres s on regulatory or legislative recommendations for resolving both issues. To the ex- tent regulatory changes need to be made, the Federal Reserve Board is authorized and directed to promulgate final regulations within one year of the date of enactment of this iegislation. O1SS1 SECTION 107. EXEMPTIONS FROM RESCI SSION Section 125(a) of TILA provides consumers with the right to re- scind credit transactions secured by their ho mes within three days after consummation, receipt of the required disclos ures, and the no- tice of the right to rescind. This provision gives co nsumers a “cool- ing off’ period in which to reconsider offering their homes to secure the credit transaction. It was enacted in respons e to the abusive practices of certain home-improvement contractors who showed up at consumers’ doorsteps and pressured them into p urchasing home improvements on credit, secured by the house. The right of rescission has never applied to tran sactions to fi- nance the acquisition or construction of hom es. 15 U.S.C. 113 97 § 1635(e)(1). Similarly, section 125(e)(2) currently exempts from re- scission the refinancing or consolidating of existing home-secured debt with the same creditor when there are no new advances. The amendment extends the exemption from rescission for same creditor “no-cash-out” refinancings to all refinancings of debt ini- tially incurred to finance the acquisition or construction of consum- ers’ homes that are secured by a first lien on the consumers’ prin- cipal dwelling to the extent there are no new advances and no con- solidation of debt. The provision does not exempt “high cost” mort- gages, as defined in section 103(aa); these mortgages remain sub- ject to full rescission rights. The requirement that the refinancing relate back to an initial residential mortgage transaction prevents unscrupulous home im- provementcontractors from making loans to consumers with no ex- isting liens on their homes for the purchase of “improvements” and then refinancing that debt to avoid rescission rights. In addition, the exemption only applies to a refinancing to the extent that no consolidation of debt and no new advances are involved. However, if a consumerrefinances a residential mortgage transaction, (with a consolidation of debt or new advances) regardless of the remain- ing principal amount and subsequently refinances (with no consoli- dation or no new advances), the entire new refinancing is exempt from rescission. Thus, a refinancing with new advances within a series of refinancings will not affect a future refinancing’s exemp- tion from rescission, provided that the future refinancing does not involve a consolidation of existing debt and new advances. SECTION 108. TOLERANCES; BASIS OF DISCLOSURES (a) Tolerances for Accuracy.—The twokey disclosures required by TILA are the finance charge and the annual percentage rate (the “APR"). In 1980, Congress amended section 107(c) of TILA to ex- plicitly provide a tolerance of one-eighth of one percent in calculat- ing the APR; no statutory tolerance was specified for calculating the finance charge. The Board subsequently adopted, as a footnote to Regulation Z, a tolerance for finance charge calculations for closed-end credit of $5 for an amountfinanced up to $1000 and $10 for an amountfinanced greater than $1000. 12 C.F.R. §226.18 n. 41. Since every transaction subject to TILA has APR and finance charge disclosures, the lower of the two tolerances ultimately deter- mines whether a violation has occurred. Section 108(f) provides a finance charge tolerance of one-half the APR tolerance set forth in section 107(c) but includes a floor of $25 and a ceiling of $200. The provision is not intended to permit bad-faith intentional under- statementsof finance charges. The amendment provides that a disclosed finance charge that is preater than the actual finance charge shall be considered accurate for purposes of TILA. This language reinforces section 103(z) which allows for overstatements without imposingliability. The amendment also implements a different tolerance for deter- mining if the finance charge is accurate for purposes of rescission. By providing a finance charge tolerance of one-half of one percent of the loan amount, the penalty of rescission will be limited to those circumstances in which there has been a substantial disclo- sure error. 114 98 (b) Basis of Disclosure for Per Diem Interest—Int erim interest, the interest due for the period from loan closing until the date of the first payment, is regularly paid at the closing. Howe ver, it can be difficult to accurately calculate this charge at the time docu- ments are prepared for the closing since interim inter est, unlike other charges, changesif the dateof closing is advanced or delayed. The existing regulation is unclear with respect to a cred itor's right to estimate interim interest or treat it as a mino r irregularity. If the loan is consummated or funded on a date other than the date anticipated when disclosures were prepared (for exampl e, because the consumeris unable to attend closing on the targe ted date), the finance charge disclosure may become out of the range of tolerance. This provision allows creditors to have documents produ ced for the closing and sent to the closing agent based on the expec ted closing date and the information available to the creditor at th e time the documents are being prepared. SECTION 109. LIMITATION ON LIABILITY Responding to the more that 50 nation-wide class acti ons that have been filed in the last year based on the Rodash de cision, this amendment eliminates liability based on the treatme nt of specific types of charges. The limitation on liability extends to c laims based on disclosure of a finance charge, or other numeric al disclosure, that is within the tolerances established by this legis lation. In ad- dition, the limitation includes a provision protecti ng creditors from liability when they overstate an amount or percenta ge to be dis- closed. ‘Lhe amenament aisu ei ° incorrect form for providing the consumer with notice of his or her rescission rights. Existing section 125{a) of TILA require s the credi- tor to give the consumernotice of the right to rescind in accordance with regulations of the Board. The Board has adopted two model forms, Form H-8 and Form H-9,for notice of the consu mer's right to rescind in closed end transactions. The forms are l abelled, re- spectively, “Rescission Mode! Form (General)" and “Rescission Model Form (Refinancing”. This amendment elim inates creditor li- ability where a creditor has provided the consumer wit h notice of the right of rescission using a model form but selected t he incorrect model! form or a written notice based on the incorrect model form. Theliability limitations set forth in this section do not apply to class actions for which final orders certifying the clas s were en- tered prior to January 1, 1995, and to individual acti ons and ac- tions brought by the named consumers in any class act ion filed be- fore June 1, 1995. Tillie Vi cuiLG: This section responds to a court opinion that held that a le nder's reliance on either form of rescission notice published and adopted by the Federal Reserve Board was misplaced. Section 110 provides that where a creditor selects the appropriate Federal Reserve Board form of notice and properly completes the form, the borrower cannot rescind on the basis of improper notice. The F ederal Re- serve Board is directed to reexamine forms that have been adopted to eliminate further confusion facing creditors and consumer s. 115 99 SECTION Ili. CALCULATION OF DAMAGES Section 130(a) of TILA allows a consumerto recover both actual and statutory damages in connection with TILA violations. Con- gress provided for statutory damages because actual damages in most cases would be nonexistent or extremely difficult to prove. To recover actual damages, consumers must show that they suffered a loss because they relied on an inaccurate or incomplete disclo- sure. Recognizing the difficulty of proving actual damages and the in- crease in costs involved in mortgage lending, this amendmentin- creases the statutory damages available in closed end credit trans- actions secured by real property or a dwelling to a minimum of $250 and a maximum of $2,500. SECTION 112. ASSIGNEE LIABILITY (a) Violations Apparent on the Face of Transaction.—Section 131(a) of TILA currently provides that assignees are liable only if the violation is apparent on “the face of the disclosure statement.” To lessen the burden on the secondary market while maintaining the deterrent the provision has on unscrupulous lenders, this amendmentto section 131 provides that, for closed end loans se- cured by real property, the “face of the disclosure statement” refers only to the Truth In Lending disclosure document, any itemization of the amount financed and any other disclosure of disbursement, and not to “other documents assigned” generally. Following Federal Reserve Board review pursuant to section 106(g) and section 102 of this legislation, it is anticipated that the assignee will be able to determine compliance based on a review of a single format of disclosure. (b) Servicer not Treated as Assignee—A number of recent consumer lawsuits against mortgage loan servicers have claimed the servicer is an assignee of the creditor who made the loan and is therefore liable for errors under section 131. This provision clari- fies that the loan servicer (the entity collecting payments from the consumer and otherwise administering the loan) is not an “as- signee” under the TILA unless the servicer is the owner of the loan obligation. Moreover, a servicer shall not be deemed to be an owner of the loan on the basis of an assignment of the loan or the mort- gage for administrative convenience in servicing the loan. A “servicer” is defined by reference to section 6(i)(2) of the RESPA. The TILA continues to apply to servicers who were the original creditors and then sold the loan but retained servicing rights. This amendment does not change the law; rather, it provides courts with further specific guidance on the interpretation of current law. SECTION 113. RESCISSION RIGHTS IN FORECLOSURE This amendment adds a new subsection to section 125 of TILA giving consumers the right to rescind a loan within the three-year time period established in section 125(f) of TILA as a defense if the creditor brings an action to foreclose on the consumer's principal dwelling in three specific instances: improper treatment of bor- rower-paid mortgage broker fees in calculating the finance charge, use of the incorrect form of notice of the right of rescission, and dis- 116 100 closure of a finance charge which understa tes the actual finance charge by more than $35. The consumer protection provisions of this section are intended to benefit consume rs that are unable to meet their mortgage obligations and are not intended as a mecha- nism whereby consumers can avoid their o bligations by defaulting and then raising the defense in foreclosure. N othing in this section is intendedto override the exceptions to the r ights of rescission cre- ated in section 125(e). Section 125(f) of TILA provides that th e consumer's right of re- scission expires on the earlier of three years after the date of con- summation of the transaction or upon the sa le of the property even if the consumer has not received the require d disclosures or forms. Rescission rights expire in three years. The time period shall not be extended except as explicitly provided in section 125(f) relating to agency enforcement proceedings. Ho wever, section 125(f) does not affect any equitable remedies that ma y be available under State or common law. SECTION 114. RECOVERY OF FEES Section 114 makes a borrower who exercises a right of rescission liable under TILA for any appraisal repo rts or credit reports charges. SECTION i15. HOMEOWNERSHIP DEB T COUNSELING NOTIFICATION Section 115 repeals homeownership debt co unseling notification under the Housing and Urban Developmen t Act of 1968. Home- tot la thranch the nrivate sector. Therefo re, oth duplicative and wasteful. UWiiti dilip iS a government SECTION 116. HOME MORTGAGE DIS CLOSURE ACT The HMDArequiresa financial insitution wi th assets of $10 mil- lion or more that has a headquarters or a br anch within a metro- politan statistical area to compile and report data related to home mortgage loans. Section 116(a) modifies the HMDA to exempt insti- tutions with $50 million in assets or less from the reporting re- quirements. The Federal Reserve Boardis al so given the discretion to further exempt institutions with assets of $ 50 million or greater if the Board determines that the burden of compliance with the HMDAoutweighs the usefulness of the info rmation required to be reported. Finally, section 116(b) permits dep ository institutions to keep such data in their homeoffice (inste ad of in each branch) and make it available upon written request. SECTION 117. APPLICABILITY The amendments made by section 106(a), (d), (e), and (f) and sec- tions 108, 112 and 113 will apply to all co nsumer credit trans- actions in existence or consummated on or aft er the date of enact- ment. Subsections 106{a), (d), (e) and (f ) (certain charges) and sec- tion 112 (assignee liability) apply retroactively . In contrast, section 106(b) regarding the treatment of borrower-p aid mortgage broker fees applies prospectively. Sections 108 and 113 are applied retro- actively. Section 109 (limitation on liability) a pplies to all existing transactions. The remaining sections, secti on 107 (exemption for 117 101 non-cashout refinancings), section 111 (statutory damages) and sec- tion 110 (limitation on rescission liability), apply prospectively. However, nothing in this section is intended to change the law retroactively with respect to individual actions or counterclaims filed before June 1, 1995, class actions for which a final order cer- tifying the class was entered before January 1, 1995, actions by named individual plaintiffs in any class action filed before June 1, 1995, or any consumereredit transactions with respect to which a timely notice of rescission was sent to the creditor before June 1, 1995 as provided in section 109(a) (new section 139(b) of the TILA). SUBTITLE B—COMMUNITY REINVESTMENT ACT AMENDMENTS SECTION 121. EXPRESSION OF CONGRESSIONAL INTENT Section 121 amends the Congressional purpose for the CRA by stating that in encouraging financial institutions to meet the credit needs of their communities, regulators are not supposed to impose additional regulatory burden or paperwork on financial institu- tions. SECTION 122. COMMUNITY REINVESTMENT ACT EXEMPTION Section 122 exempts from the examination requirements of the CRA any financial institution if the institution and the holding company which controls the institution have not more than $100 million in assets (which is to be adjusted for inflation). SECTION 123. SELF-CERTIFICATION OF COMMUNITY REINVESTMENT ACT COMPLIANCE Section 123 allows a financial institution with no more than $250 million in assets to self-certify compliance with the CRA, provided the institution has not been found to have engaged in a pattern or practice of illegal discrimination under the FHA or the ECOAwith- in the past 5 years and has a current CRA rating of “satisfactory” or “outstanding.” This section also requires the financial institution to maintain a public notice of self-certification and provides for reg- ulatory review of self-certification reasonableness during each ex- amination for safety and soundness. In addition, this section pro- vides for the institution to be examined for CRA compliance if the institution's self-certification is found to be “not reasonable.” If after the regular CRA exam aninstitution receives a less than “sat- isfactory” CRA rating, it shall not be allowed to self-certify again for a period of five years. SECTION 124. COMMUNITY INPUT AND CONCLUSIVE RATING Section 124 amends the CRA to establish a new mechanism for community input for an institution's CRA examination by providing the public advance notice in the Federal Register of an institution's CRA examination. After the Federal financial supervisory agency provides such notice and reviewsall timely comments, the financial institution is provided a conclusive CRA rating until its next CRA examination. A reconsideration of an institution's rating may bere- quested within 30 days of the disclosure of the rating to the public. 118 102 Under section 124(c), an institution’s CRA record is taken into account in the overall evaluation of the co ndition of an institution rather than at the time of an application fo r a deposit facility. Cur- rent law requires the regulator to take into consideration an insti- tution's CRA record whenit applies for a de posit facility. SECTION 125. SPECIAL PURPOSE FINA NCIAL INSTITUTIONS Section 125(a) requires the appropriate Fe deral financial super- visory agency, in evaluating the CRA recor ds of special purpose in- stitutions, to take into account the nature of the business of such institutions and the amount of deposits rec eived by such institu- tion, Subsection (b) defines the term “speci al purpose institution” to mean a financial institution that does not generally accept de- posits in amounts less than $100,000 dolla rs. Such institutions in- clude, but are not limited to, wholesale, cre dit card and trust insti- tutions. : SECTION 126. INCREASED INCENTIVE S FOR LENDING TO LOW- AND MODERATE-INCOME COMMUNITIES Section 126 revises the CRA to expand the category of capital in- vestments, loan participations, and other ven tures for which an in- stitution can receive CRA credit. Under curr ent law, in evaluating the record of a non-minority-owned and no n-women-owned. finan- cial institution, an agency may consider as a factor capital invest- ment, loan participants, and other ventures undertaken by the in- stitution in cooperation with minority- and women-owned financial institutions and iow-incume uci u 3, pr rd that these ac- tivities help meet the credit needs of local communities in which such institutions and credit unions are char tered. In order to encourage institutions to parti cipate in transactions that have the effect of providing credit to low- and moderate-in- come neighborhoods, regardless of whether those neighborhoods are in an institution’s community, section 126 r equires the agencies to give institutions credit for investments in or loans to any minority or women's depository institution or low-in come credit union. The agencies are also directed to give credit for participation in any joint venture or other entity or project wh ich provides benefits to any distressed community, whether or not the distressed commu- nity is where the institution is chartered to do business. Institu- tions must also receive credit for inve stments in or loans to tar- geted low- and moderate-income communitie s, including real prop- erty loans to such communities. Finally, the agencies are required to conside r equally with other factors capital investment, loan participati on and other ventures undertaken by the institution in cooperati on with minority and women owned financial institutions and low income credit unions to the extent that these activities help m eet the credit needs of the community in which these institutions are l ocated. Capital invest- ment, loan participations, and other ventures undertaken by insti- tution in cooperation with a community dev elopment financial in- stitution (so long as the loans and other fina ncial services provided to low- and moderate-income persons and sm all business are meet- ing the credit needs of the local communitie s served by the major- 119 103 ity-owned institution) are also to be considered equally with all other factors. SECTION 127. PROHIBITION ON ADDITIONAL REPORTING UNDER COMMUNITY REINVESTMENT ACT This section prohibits the Federal financial institution regulators from requiring additional reporting or recordkeeping from financial institutions as a result of any regulations prescribed under the CRA SECTION 128. TECHNICAL AMENDMENT The Riegle-Neal Interstate Banking and Branch Efficiency Act of 1994 modified the CRA to include a requirement to have a separate discussion of the findings and conclusions of a CRA report for each metropolitan area in which a regulated depository institution main- tains one or more domestic branch offices. Under current law,this requirement applies to all regulated depository institutions includ- ing institutions that are located in only one state. The legislative intent of the provision was to have the requirement apply only to regulated institutions with interstate branches. Section 128 makes a technical revision to the CRA that provides that the requirement apply only to regulated banks with interstate branches. SECTION 129. DUPLICATIVE REPORTING Section 129 exempts institutions which are members of the Fed- eral Home Loan Bank System from meeting the Federal Home Loan Bank Act's community investment and service requirements if the institution has received a CRA rating of “outstanding” or “satisfactory”. SECTION 130. COMMUNITY REINVESTMENT ACT CONGRESSIONAL OVERSIGHT Section 130 requires each Federal banking agency to report to Congress by December 31, 1996 and by December 31, 1997, respec- tively, on the implementation of the CRA regulations prescribed after the date of enactment H.R. 1858. These reports are to include input from the regulated financial institutions and quantifiable measures of the cost savings of the new CRA regulations and their effectiveness in achieving CRA objectives. SECTION 131. CONSULTATION AMONG EXAMINERS Depository institutions frequently are subject to multiple exams by the same agency. For example, an institution may have an an- nual safety and soundness exam as well as a CRA exam and a trust department exam,all of which may be conducted at separate times. These separate and uncoordinated exams may result in in- consistent recommendations to an institution. Sec. 131 is intended to reduce the burden placed on banks as a result of multiple exams by requiring each agencyto direct is examiners to consult on exam- ination activities related to an institution and resolve any incon- sistencies in the examiners’ recommendations. In addition, section 131 directs that each agency appoint an “examiner-in-charge” who is responsible for consultation with all examiners of an institution. 120 104 SECTION 132. LIMITATION ON REGULATIONS Section 132 provides that no CRA regulation may be promul- gated which would require financial institutions to ma ke loans to any uncreditworthy person that would jeopardize the safety and soundness of the institution. In addition, no regulatio n prescribed under the CRA shall require a financial institution to m ake a loan on the basis of any discriminatory criteria prohibited under any U.S.law.It also clarifies that no regulation shall pre vent or hinder in any way a financial institution's full responsibili ty to provide credit to all segments of its community. Finally, it clarifies that these regulations shall encourage financial institution s to extend credit to all creditworthy persons, consistent with safety and soundness. SUBTITLE C—-CONSUMER BANKING REFORMS SECTION 141. TRUTH IN SAVINGS Section 141 revises the TISA to eliminate provisions t hat have resulted in unnecessary and overly complex regulations . The revi- sions to the TISA retain the basic components of that Act relating to disclosure of account fees, charges, penalties and sim ple interest rates, Financial institutions would continue to discl ose minimum balance requirements at the time a consumer opens an account or upon request and would also continue to be required t o disclose a change in the terms of an account at least 30 days before such change becomeseffective. Section 141 also retains t he prohibition wante PUVe Gilli iiiisiT ib Yost The changes that section 141 makes Co the TISA p rimarily con- cern the requirement that financial institutions disclos e the “an- nual percentage yield” for accounts and the applicati on of civil li- ability for violations of the TISA. The TISA currently r equires the Federal Reserve Board to develop a formula for calcul ation of an annual percentage yield. Development of such formula has proved to be extremely difficult. Furthermore, it appears that di sclosure of an annual percentage yield may not provide consumer s with sig- nificantly more information concerning an account than disclosure of the simple interest rate. As such, the requirement for financial institutions to disclose an annualpercentageyield is r epealed. Section 141 also removes the civil liability provisions for viola- tions of the TISA. The imposition of civil liability for v iolation of the TISA has resulted in financial institutions s eeking numerous clarifications and commentaries from the Federal Rese rve Board increasing the regulatory burden for both the indus try and the Board. Accordingly, the civil liability provisions are rep ealed. The federal banking agencies would still retain the authori ty to take administrative actions to enforce the TISA. SECTION 142. INFORMATION SHARING Section 142 pertains to the sharing of information amon g deposi- tory institutions and their affiliates and subsidiaries where such sharing or communication may be restricted or limited by law. This section does not authorize the sharing of information w ith persons or entities other than affiliates or subsidiaries of a depos itory insti- 121 105 tution. In addition, this section is not intended to restrict or other- wise affect the sharing or communication of information that is otherwise permissible. Before information regarding a consumer may be shared or communicated in reliance on this provision, the depository institution, subsidiary or affiliate must disclose to the consumer that such information may be communicated or shared and the customer must be given the opportunity to direct that the information not be communicated or shared. This section is not in- tended to supersede in any way any sales practice rules issued by the National Association of Securities Dealers. The Committee is of the opinion that such sales practice rules concerning information sharing should apply equally to all affiliates of a broker dealer. SECTION 143, ELECTRONIC FUND TRANSFER ACT CLARIFICATION Section 143 clarifies that provisions of the EFTA do not apply to stored value cards or value stored on such cards except for trans- actions where the card is actually used to access an accountto ef- fect a transaction. In addition, computers, computer-driven pro- grams, or software that are functionally equivalent to stored value cards are also exempted from EFTA. SECTION 144. LIMIT ON RESTITUTION FOR TRUTH IN LENDING VIOLA- TIONS IF SAFETY AND SOUNDNESS OF VIOLATOR WOULD BE AF- FECTED Under current law, Section 108(e) of TILA prescribes rules for re- imbursement of inadequately disclosed finance charges, and re- quires the federal financial institution supervisory agencies to order restitution to consumers of amounts charged but not ade- quately disclosed. Section 144 allows supervisory agencies to take into account the safety and soundness of that institution when re- quiring restitution from an institution. Under the section, two al- ternatives to full, immediate restitution exist. First, an agency is able to order partial restitution, in an amount that would not have a significantly adverse impact on the lender's safety and sound- ness. Second, an agency is allowed to order restitution in the full amount, but to be paid over a period of time to avoid a significantly adverse impact. In the case of the federal financial institution su- pervisory agencies, an agency cannot order partial restitution or restitution in partial payments over an extended period unless the agency made a factual determination that full, immediate restitu- tion would cause the creditor to become undercapitalized pursuant to such agency's regulations promulgated under section 38 of the Federal Deposit Insurance Act. SUBTITLE D—-EQUAL CREDIT OPPORTUNITY ACT AMENDMENTS SECTION 152. FINDINGS AND PURPOSE Section 152 states that the purpose of this legislation is to rec- oncile and coordinate the notice requirements under the ECOA amd FCRA. 122 106 SECTION 153. EQUAL CREDIT OPPORTUNI TY ACT AMENDMENTS Section 153 coordinates notices required under t he ECOAresult- ing from adverse credit actions with notices r equired under the FCRA where requirements of the two Acts overl ap. It also ensures that when credit is denied based on a consumerre port, the adverse action notice must state that the credit denial w as based on infor- mation contained in the credit report. In additio n, the notice must contain: (1) the name, address, and tele phone number of the consumer reporting agency making the report; and , (2) a statement of the consumer's right to obtain a free copy of t he consumer repot and to dispute the accuracy or completeness of any information in the consumerreport. In addition, the ECOAis ame ndedby limiting liability for violations of the adverse notice requi rements provided for in section 701(d) if it can be shown that the creditor maintained reasonable procedures to assure compliance. SECTION 154. FAIR CREDIT REPORTING ACT AMENDMENTS Section 154 coordinates the notices required un der the FCRA re- sulting from adverse credit actions with notice s required under the ECOA where requirements of the two Acts overlap . SECTION 155. INCENTIVES FOR SELF-TE STING Section 155 is designed to encourage lenders t o conduct self-tests in order to determine their compliance with fair lending laws. First, the section establishes a privilege for lenders whoself-test for compliance with ue GCGA u ihe FILA wing euch tects used against them in any proceeding or civil action brought under these acts where the lender has identified dis criminatory practices and has taken appropriate corrective actions. Such tests, however, can be used if the lender conducted them at th e request of an agen- cy, they have been disclosed to a third party b y the lender, if they are used as an affirmative defense by the len der, or in determining the remedy for FHA or ECOAviolations. Secon d, the section grants the Federal banking regulators discretionary a uthority to refer evi- dence of discrimination contained in a self-testi ng report to the At- torney General or the Secretary of HUD under certain cir- cumstances. Ambiguities under current law in the self-testin g area create dis- incentives for financial institutions to test their activities with the nation’s fair lending laws. Undercurrentlaw, t he possibility exists that self-tests will be used as evidence aga inst a lender in a later administrative proceeding or civil action. The p rivilege and discre- tionary referral provided for under section 15 5 are designed to eliminate these current disincentives. Under this section, the appropriate federal dep artment or agency is given the authority to determine which kinds of tests will qualify for the privilege. Although paired testing is a wi dely accepted form of testing for noncompliance, other testing met hods may produce similar and reliable evidence of unlawful pract ices and may be less cost-prohibitive for smaller institutions. Theref ore, these tests also warrant protection underthis section. 123 107 SECTION 156. CREDIT SCORING SYSTEMS Section 156 amends the ECOAto clarify that credit decisions based solely on an empirically derived, demonstrably and statis- tically sound, credit scoring system, as defined by the Federal Re- serve Board in regulations prescribed under this title, shall be in compliance with the non-discrimination requirements under ECOA (subsection (a)) so long as the system does not use any category protected under subsection (a), does not use any functional equiva- lent of such a category, and does not use any criterion that has a discriminatory effect on any category unless the use of the criterion is justified by business necessity and there is no less discriminatory alternative available. The term business necessity as well as the duty of showing a less discriminatory alternative shall be construed consistent with U.S. Supreme Court precedent such as Griggs v. Duke Power Company, 401 U.S. 424 (1971) and Albermarle Paper Company v. Moody, 422 U.S. 405 (1975). SECTION 157. CONSULTATION BY ATTORNEY GENERAL REQUIRED IN NONREFERRAL CASES Section 157 requires the Attorney General to consult with the ap- propriate regulatory agency prior to bringing a civil action. The At- torney General and the regulatory agencies are to work in close co- operation to avoid unnecessary duplication of effort, and to avoid unnecessary burdens on regulated entities. SUBTITLE E—CONSUMER LEASING ACT AMENDMENTS SECTION 163. REGULATIONS Section 163 amends the Consumer Credit Protection Act by di- recting the Federal Reserve Board to address consumer leasing is- sues through regulation and requiring the Board to publish model disclosure forms to facilitate compliance with the disclosure re- quirements and to aid consumers in understanding leasing trans- actions. SECTION 164. CONSUMER LEASE ADVERTISING Section 164 rewrites the disclosure requirements for consumer lease advertising. Under this section, when an advertisement states that an initial payment or that no initial payment is re- quired, the advertisement must also state that the transaction is a lease; the number of payments; the applicability of a security de- posit; the number, amount and timing of payments; and certain other pertinent information. In addition, the special rules govern- ing radio advertisements are repealed underthis section. SECTION 165. STATUTORY PENALTIES Section 165 amends section 185(a) of the Consumer Credit Pro- tection Act to limit a creditor's liability for statutory penalties for failure to provide certain consumerlease disclosures. 124 108 SUBTITLE F—FEDERAL HOME LOAN BANK AMENDME NTS SECTION 171. APPLICATION FOR MEMBERSHIP I N THE FEDERAL HOME LOAN BANK SYSTEM Section 171 establishes that an applicant for membershi p in the Federal Home Loan Bank (FHLB) System may submit t he applica- tion in the district where the applicant's principal place of business is located rather than submit the application to the Fed eral Hous- ing Finance Board in Washington. It also establishes that appli- cants may apply in an adjoining district if it is conven ient and meets with the approval of the Federal Housing Finance B oard. SECTION 172. FEDERAL HOME LOAN BANK EXT :ERNAL AUDITORS Section 172 provides that General Accounting Offic e audits of FHLBs shall not be limited to periods during which government capital has been invested in them. It also prohibit s the Federal Housing Finance Board from participating in the hiri ng of an ex- ternal auditor by the FHLBs, other than to establish r equirements for audit contracts. TITLE I—STREAMLINING GOVERNMENT REGULAT IONS SUBTITLE A—-REGULATORY APPROVAL ISSUES SECTION 201. STREAMLINED NONBANKING ACQU ISITIONS BY WELL CAPITALIZED AND WELL MANAGED BANKING O RGANIZATIONS Under current law, a bank holding company must sub mit a writ- ten notice to the Hederai Keserve Duait at ivasi OU days ot gaging in a nonbankingactivity. The Federal Reserve Board deter mines whetherthe activity is so closely related to ban king or man- aging or controlling banks as to be a proper incident th ereto. Section 201 permits well capitalized and well man aged bank holding companies to engage, either directly or throu gh an acquisi- tion, in nonbanking activities previously approved by the Federal Reserve Board without prior notice or with an abbrevi ated notice. In orderto be eligible for these expedited procedures ( 1) the bank holding company must be well capitalized and well m anaged, (2) the company’s lead insured depository institution must be well cap- italized and well managed; (3) insured depository insti tutions con- trolling 80 percent of the company's banking ass ets must be well capitalized; (4) insured depository institutions controll ing 90 per- cent of the company's banking assets must be well ma naged; (5) no insured depository institution controlled by the compa ny may be undercapitalized or poorly managed (with a limited ex ception for recently acquired depository institutions): and, (6) neith er the bank holding company nor any subsidiary depository institu tion may be the subject of any enforcement action, order, or a dministrative en- forcement proceeding within the prior twelve months. In addition, the book value of the assets to be acquired may not exc eed 10 per- cent of the holding company’s consolidated total risk-wei ghted as- sets, and the price paid may not exceed 15 percent of th e consoli- dated Tier 1 capital of the company. All activities must be con- ducted in compliance with any applicable regulations, orders, and interpretations of the Federal Reserve Board. G di t di V UaysS © 125 109 Qualifying bank holding companies may engage de novo in any “laundry list” nonbanking activity approved by the Federal Reserve Board by regulation without prior notice, but must inform the Board within 10 days after commencing the activity. Qualifying bank holding companies wishing to engage in an activity approved by the Federal Reserve Board by order, or wishing to acquire any nonbanking company, must provide 12 days prior notice to the Board. Prior to expiration of the notice period, the Federal Reserve Board may require the bank holding company to comply with stat- utory notice and review provisions that generally apply to propos- als under section 4(c)(8). SECTION 202. STREAMLINED BANK ACQUISITIONS BY WELL CAPITALIZED AND WELL MANAGED BANKING ORGANIZATIONS Section 202 amendsthe notice procedures of the BHCAto permit well capitalized and well managed bank holding companies that are rated “satisfactory” or “outstanding” for CRA performance to acquire another bank, without prior approval, when the acquisition is limited in size, meets competitive criteria established by the Fed- eral Reserve Board (in consultation with the Attorney General), and meets applicable geographical and other established statutory requirements. In addition, the bank holding company may not have been the subject of any enforcement action, order, or administrative enforcement proceeding within the twelve months prior to the ac- quisition. Section 202 requires bank holding companies to provide the Fed- eral Reserve Board with brief advance notification of the proposal to allow the Board to require a full notice or application if war- ranted by the specific case. It also clarifies that the Departmentof Justice’s anti-competitive review remains applicable to notices filed under the streamlined procedures. Under these streamlined proce- dures the Attorney General will receive notification of the proposed acquisition at the same time as the Federal Reserve Board. The At- torney General shall advise the Federal Reserve Board during the review period in writing if any competitive concerns exist with re- spect to the transition. If the Attorney General advises the Federal Reserve Board that no such concerns exist, the post-approval wait- ing period in section 11(b) shall not apply. SECTION 203. ELIMINATE FILING AND APPROVAL REQUIREMENTS FOR INSURED DEPOSITORY INSTITUTIONS ALREADY CONTROLLED BY THE SAME HOLDING COMPANY Section 203 amends the Federal Deposit Insurance Act (FDIA) and the National Bank Consolidation and Merger Act to allow merger of banks controlled by the same bank holding company without having to comply with certain filing and approval require- ments. Section 203 requires that these transactions meet the re- cently enacted interstate branching requirements. The responsible agency for the resulting bank may require an application under these Acts, if the facts of the specific case warrant. 126 110 SECTION 204. ELIMINATE REDUNDANT APPROVAL REQUI REMENT FOR OAKAR TRANSACTIONS Section 204 amends the FDIA to removethe duplicative approval requirements for the merger of a bank and a savings associatio n under thee Oakar Amendmentto the FDIA. Section 204 leaves r e- quirements under the Bank MergerActintact. Section 204 does no t remove the other provisions for Oakar transactions, including th e requirement that the resulting institution remain adequat ely cap- italized and the requirement that assessments paid by the result - ing institution go to the appropriate FDIC insurance fund. SECTION 205. ELIMINATION OF DUPLICATIVE REQUIREMEN TS IMPOSED UPON BANK HOLDING COMPANIES AND OTHER REGUL ATORY RELIEF UNDER THE HOME OWNERS’ LOAN ACT Section 205 amends the Home Owners’ Loan Act (HOLA ) to eliminate duplicative regulation of bank holding companies unde r the BHCA and the HOLA. Currently, a registered bank holdin g company that controls a savings association is supervised by th e Federal Reserve Board and is also subject to the requirement s of the HOLA. As such, it must obtain approval from the OTS for a c- quisitions and must register with the CTS as.a savings and loa n association holding company. The amendment eliminates duplica - tive supervision under the HOLA. However, the amendment does not free savings associations owned by bank holding compa nies from the Qualified Thrift Lender (QTL) test or from an y other re- quirements applicable to savings associations under Fede ral law. Section Z05 also amends the BHUCA to ensure Liat Ue Pode Reserve Board and the OTS will cooperate in the supervisio n bank holding companies that contro! savings associations. The Fed - eral Reserve Board must seek and consider the views of the Direc - tor of the OTS in considering any application or notice by a ban k holding company to acquire a savings association. The Federal Re - serve Board also must consult with the Director, as appropriate , in establishing the scope of inspections of bank holding companie s that control savings associations. Such consultation should be mor e involved when savings associations make up a substantial portio n of the assets of the holding companies. The Federal Reserve Boar d must also, upon request of the Director, provide the Director wit h any inspection report or any other supervisory material relating to a bank holding company that controls a savings association. F i- nally, the Federal Reserve Board and the Director are required to cooperate in any enforcement action against a bank holding com - pany that involves a savings association controlled by the company . Section 205(d) reduces the regulatory and paperwork burden faced by savings and loan associations by allowing them to satisfy the OTL test required under the HOLA by meeting the Qualified Thrift Asset (QTA) test under the Internal Revenue Code. Under HOLA the OTLtest requires thrifts to have at least 65% of their portfolios in mortgages and mortgage-related products. In addition, the law also allows a limited amount of consumer loans, commercial loans and educational loans to be considered qua lified lending. Thrifts must meet the QTL test in order to receive certai n benefits not afforded to banks. o f fa , fil e {27 111 Under the tax code, the QTA test requires thrifts to have at least 60% of their assets in certain loans and investments listed in the code. The list includes residential mortgage loans, but not commer- cial loans or many types of mortgage backed securities. The two tests are similar, but not identical. In addition, the QTL test is computed on the basis of portfolio assets and the tax test on total assets. By meeting the QTAtest, thrifts receive certain tax bene- fits, for example, the choice of using the experience method or the percentage of taxable income method of computing their bad debt reserve. This subsection does not affect tax law in any way.It - merely reduces the paperwork burden on thrifts by no longer re- quiring them to juggle their assets to ensure that they have the correct balance of assets to meet their two similar but different tests. SECTION 206. ELIMINATE REQUIREMENT THAT APPROVAL BE OBTAINED FOR DIVESTITURES Section 206 eliminates a statutory presumption that a bank hold- ing company that divests shares of any company to a third party investor in a transaction funded by any subsidiary of the bank holding company is presumed to continue to control those shares unless the Federal Reserve Board determines that the divestiture is genuine. The presumption was intended to prevent sham divestitures, but the application burden imposed on the banking in- dustry has proved to outweigh the benefits of this requirement. The Federal Reserve Board can detect sham transactions through the examination process. SECTION 207. ELIMINATE UNNECESSARY BRANCH APPLICATIONS Section 207 eliminates the notice and approval requirements con- cerning the operation of branches for well-capitalized, CAMEL 1 or 2 institutions with “outstanding” or “satisfactory” CRA ratings. This section does not change in any way the geographic restrictions that govern the establishment or operation of a branchoffice. SECTION 208. ELIMINATE BRANCH APPLICATION REQUIREMENTS FOR ATMS ANDSIMILAR FACILITIES Section 208 amends the McFadden Act and the FDIAto provide that automated teller machines (ATMs) or remote service unit (RSUs) owned by a depository institution are not considered to be branches for purposes offiling an application to establish a branch so long as they are owned andoperated at sites at which the bank could operate a branch. Existing law regarding when other cat- egories of ATMs and RSUsare to be considered branchesis not af- fected by this amendment. SECTION 209. ELIMINATE REQUIREMENT FOR APPROVAL OF INVEST- MENTS IN BANK PREMISES FOR WELL CAPITALIZED AND WELL MAN- AGED BANKS Section 209 amends the Federal Reserve Act to allow well cap- italized institutions which have received one of the two highest composite CAMELratings to invest up to 150% of the institution's capital in its premises without obtaining prior approval. 128 112 SECTION 210. ELIMINATE UNNECESSARY FILING F OR OFFICER AND DIRECTOR APPOINTMENTS Section 32 of the FDIA requires insured depository instit utions and depository institution holding companies to file a notice with their regulators at least 30 days before hiring new direct ors or sen- ior executive officers where the institution is undercapi talized or otherwise in troubled condition, has been chartered les s than two years, or the institution or holding company has un dergone a change in control during the past two years. In these si tuations, the individuals would have to undergo background check s. Section 210 adds a provision that lets the agencies wai ve the no- tice requirement on a case-by-case basis in ap propriate cir- cumstances. SECTION 211. STREAMLINING PROCESS FOR DETER MINING NEW NONBANKINGACTIVITIES Section 211 amends the BHCAto eliminate the heari ng require- ment contained in Section 4(c)(8) of that Act. Section 211 also amendssection 4{c}(8) to create an exception t o that section’s gen- eral prohibition on bank holding company insurance activities to allow bank holding companies to own insurance affiliat es in accord- ance with State insurance laws. The provision states that it shall be “closely related to banking” to provide insurance as a principal, agent, or broker in any State, in full compliance with t he laws and regulations of such state that apply uniformly to each t ype of insur- t : in ‘that tate including anti-aff ili- Gite ics. Gi < tft ation laws. SECTION 212. DISPOSITION OF FORECLOSED ASSETS Under current law, bank holding companies are accord ed up to five years to dispose of stock acquired as a result of a loan fore- closure; under certain circumstances, real estate assets may be held for up to ten years. National banks may hold bot h foreclosed real estate and foreclosed stock for a maximum period of 10 years. Section 212 would equalize the treatment of national banks and bank holding companies by amending section 4(c)(2) of t he BHCA to provide authority for the Federal Reserve Board to approve ap- plications to hold foreclosed stock for an additional fiv e years. An extension beyond theinitial five year period would be depe ndent on a showing by the bank holding company that it has mad e a good faith attempt to dispose of the asset within five years, or that dis- posal within the initial five year period would be detrimental to the company. The section also eliminates the statutory r equirement that a bank holding company must apply for an exte nsion every year. SECTION 213. INCREASE IN CERTAIN CREDIT UN ION LOAN CEILINGS Section 213 allows a federal credit union to make agg regate loans up to $50,000 to officials of the credit union without a pproval by the board of directors. Under present law, the aggregat e loan ceil- ing is $10,000. 129 113 SUBTITLE B—-STREAMLINING OF GOVERNMENT REGULATIONS; MISCELLANEOUS PROVISIONS SECTION 221. ELIMINATE THE PER-BRANCH CAPITAL REQUIREMENT FOR NATIONAL BANKS AND STATE MEMBER BANKS Section 221 eliminates section 5155(h) of the Revised Statues. Currently, section 5155(h) requires national bank associations to maintain capital for their branches as if each branch were a sepa- rately chartered bank. In deleting this subsection, national banks’ capital will be held against their total assets and not the assets of each of their individual branches. SECTION 222. BRANCH CLOSURES Section 222 clarifies the scope of the branch closing notice re- quirement under section 42 of the FDIA. Undersection 42, an in- sured depository institution that intends to close a branch is re- quired to notify the customers of the branch and the institution's appropriate Federal banking agency 90 days prior to the closing. n interagency policy statement has interpreted section 42 such that (1) the term “branch” is defined as a traditional brick and mortar branch and does not include an ATM or remote service fa- cility; and (2) the relocation or consolidation of a branch does not constitute a branch closing provided that the relocation or consoli- dation of a branch does not constitute a branch closing provided that the relocation or consolidation is within the same immediate neighborhood and the same customers are served. Section 222 confirms, and in one way, broadens these interpreta- tions in the intergency policy statement. ATMs are explicitly ex- cluded from the definition of branch. Furthermore, the merger or relocation of branch is excluded from the notice requirement when certain conditions are met. The merger or relocation of a branch is excluded if the branch affected in located within 2.5 miles of or in the same neighborhood as another branch of the sameinstitution. In other instances, the other branch must serve substantially all of the customers currently served by the branchto be closed. Section 222 also excludes from the notice requirements branch closings in connection with an emergency acquisition or other FDIC assistance under the FDIC. Section 222 grants the agencies author- ity to create further exceptions consistent with the purposes of the section. SECTION 223. AMENDMENTS TO THE DEPOSITORY INSTITUTIONS MANAGEMENT INTERLOCKS ACT This section makes several changes to the Depository Institu- tions Management Interlocks Act. First, it increases the dollar thresholds in the rule currently prohibiting banks or bank holding companies with more than $1 billion in assets from having a man- agement interlock with another nonaffiliated bank or bank holding company, where ever located, with assets greater than $500 mil- lion. This threshold would rise to $2.5 billion and $1.5 billion, re- spectively, and be adjusted annually for inflation. Second, this section permits grandfathered interlocks to continue indefinitely (until the death or resignation of the official in ques- 130 114 tion). Third, it restores the exemptive authority t he regulators had prior to 1994. Fourth,it permits a managemento fficial of one insti- tution or hold company to serve as a manage ment official of an- other non-affiliated institution or holding com pany if the institu- tions or holding companies (and their affiliates) hold in the aggre- gate no more than 20 percent of the deposits in each relevant geo- graphic area in which they are located. SECTION 224. ACCELERATION OF APPRAIS AL SUBCOMMITTEE REPAYMENT This section requires the acceleration of repa yment to the Treas- ury of a five million dollar loan held by the Finan cial Institutions Examination Council's Appraisal Subcommittee. Un der this section, the loan is to be repaid by the endof Fiscal Year 1998. SECTION 225. ELIMINATE UNNECESSARY AND DUPLICATIVE RECORD- KEEPING AND REPORTING REQUIREMENT S RELATING TO LOANS TO EXECUTIVE OFFICERS AND PERMIT PA RTICIPATION IN EMPLOYEE BENEFIT PLANS Section 22(h) of the Federal Reserve Act gove rns extensions of credit te insiders (executive officers, directors, and principal share- holders) of member banks and their affiliate s, including related in- terests of those insiders (such as companies the y control). In gen- eral, section 22(h) requires that insider loans be within certain lim- its and not be on preferential terms. Section 22 (g) of the Federal Reserve Act establishes special limits for extens ions of credit to ex- ecutive Officers uiy. Without changing anyof the core restrictions on insider lending, section 225 eliminates extraneous and unnec essary reporting re- quirements and ends coverage of certain persons who are executive officers and directorsof affiliates who cannot af fect policymaking at a bank. Section 225 does not affect the effectiv eness of the insider lending provisions of section 22 of the Federal Reserve Act of the Federal Reserve Board's Regulation O in any sign ificant way. Section 225(a)(1) allows executive officers, directors, or principal shareholders to receive extensionsof credit that ar e made pursuant to a benefit or compensation plan that is widel y available to, and used by, employees of the bank. Such loans will continue to count toward the limits of section 22(h) but will no longer be barred as preferential. This amendment will permit such persons to partici- pate in programs that allow reduced closing costs or a slightly fa- vorable rate in connection with an employm ent-related relocation. Section 225(a)(2) allows the Federal Reserv e Board to exempt from the restrictions of section 22(h) execut ive officers and direc- tors of affiliates who are not involved in policym aking at the bank, provided that the affiliate by which they are em ployed does not represent more than 10 percent of the consolidate d assets of the or- ganization. Maintaining updated records of th e identities of all these persons, and their related interests repres ent a substantial recordkeeping burden. For large banks, this me ans tracking lit- erally thousands of directors and executive off icers, sometimes overseas, as well as any company those persons co ntrol. Given that these people are not employed by the bank or a si gnificantaffiliate 131 115 and cannot therefore affect the bank’s policies, the costs of the rec- ordkeeping requirement clearly outweigh the benefits. Section 225(b) eliminates unnecessary reporting and record- keeping requirements. The crucial recordkeeping requirements nec- essary to monitor compliance with Regulation O are contained in the Federal Reserve Board's regulation. Each bank is required to track loans to its insiders and their related interests, and examin- ers make certain that loans are within statutory limits and that adequate records are being kept. Various other statutory provi- sions, however, impose unnecessary recordkeeping and reporting burdens on banks that are not worth the costs they impose. Section 225(b) eliminates these burdens. Section 225(c) amendssection 22(g) to allow member banksto ex- tend two types of credit to their executive officers: home equity lines not to exceed $100,000 and loans secured by readily market- able assets up to an amount to be set by the Federal Reserve Board. These loans are secured by collateral such that they pose minimal risk to the bank. SECTION 226. EXPANDED REGULATORY DISCRETION FOR SMALL BANK EXAMINATIONS Current law requires annual examinations for banks with $250 million or more in assets and permits examinations every 18 months for CAMEL 1 banks with less than $250 million in assets and for CAMEL 2 banks with less than $100 million in assets. The regulators may increase the CAMEL 2 threshold to $175 million after September 1996. Section 226 amends current. law to permit the regulators to raise the CAMEL 2 asset threshold to $250 mil- lion after September 1996. In addition, the Federal banking agen- cies are required to report on a semiannual basis on the progress being made on implementing a system for coordinating examina- tions. The report mustbefiled until a system is implemented. SECTION 227. COST REIMBURSEMENT This section adds corporate customers to the cost reimbursement provisions of Section 3415 of Title 12 of the U.S. Code. SECTION 228. IDENTIFICATION OF FOREIGN NONBANK FINANCIAL INSTITUTION CUSTOMERS Section 228 repeals the responsibility of a domestic depository in- stitution's obligation to maintain a listing of all domestic financial institutions having an account there. All foreign nonbank financial institutions with accounts at a domestic financial institution, how- ever, would still be required to be identified and listed. SECTION 229. PAPERWORK REDUCTION REVIEW Section 229 requires each Federal financial institution regulator and the National Credit Union Administration to review and repeal unnecessary internal written policies. 132 116 SECTION 230. DAILY CONFIRMATIONS FOR HO LD-IN-CUSTODY REPURCHASE TRANSACTIONS Section 230 requires the Secretary of the Treasury to revise regu- lations relating to confirmations for hold-in -custody repurchase transactions to permit the waiver of the right to obt ain daily writ- ten confirmations if disclosure has been received th at adequately informed the counter party of the benefits of receivin g daily written confirmations, including, but not limited to, the v alue of receiving confirmations in verifying transactions and i n perfecting a security interest under the Uniform Commercial Code. SECTION 231. REQUIRED REGULATORY REV IEW OF REGULATIONS Section 231 requires a review ofall banking regula tions at least once every ten years in order to identify outdated or otherwise un- necessary regulatory requirements imposed upon insured deposi- tory institutions. Each regulation will be reviewed by the Financial Institution Examination Council (the Council) or one of the Federal banking agencies, depending on which agency or Council promul- gated the regulation. As part of the review process, the Council or suc h appropriate Federal banking agency shall designate each regu lation by cat- egory. On a regular schedule within the 10-year period, the Council or such appropriate Federal banking agency shall notify and solicit comments on each category from the pubic for th eir recommenda- tions. Further, the Council or such appropriate Federal banking agency Slidll puvii me 5 Paricter a emmary of the comments including highlighted issues and comments. When it is appropriate, the Council or such appropriate Federal bank ing agency shall eliminate those regulations that were found to be u nnecessary. The Council shall report to the Congress within 30 day s of the publica- tion a summary including significant issues raise d during the re- view period, the relative merits of those issues, an d whether the problems need to be addressed by the appropriate Federal banking agency or by legislation. SECTION 232. COUNTRY RISK REQUIREMENTS Under Section 905 of the International Lending Supe rvision Act (ILSA), federal banking regulators are required to mandate that banks maintain special reserves when their oversea s loans have be- come impaired due to a foreign borrower's i nability to make pay- ment. Such reserves cannot be counted as capital or surplus or al- lowances for possible loan losses and are charged against current income. Section 233 provides that the regulators may , but are not required to, impose such special reserves. SECTION 233. AUDIT COSTS This section repeals the requirement that independe nt auditors attest to bank compliance with safety and soundne ss regulations and internal controls. It also inserts a “privileged an d confidential” element to the annual managementreport required under Federal Deposit Insurance Corporation Improvement Act (FDICIA) that would permit regulators to designate certain information included 133 117 in such reports as privileged and confidential and therefore not available to the public. The designation of information as privileged and confidential is not intended to alter or provide an exemption from any requirement to file audited financial statements and audit letters otherwise required under the federal securities laws or rules or regulations adopted thereunder. In addition, the section also creates a safe harbor for well-capitalized and_well-managed banks from the requirements of section 36 of the FDIA except the requirement for an independent financial audit. SECTION 234. STANDARDS FOR DIRECTOR AND OFFICER LIABILITY Section 234 provides that outside directors are subject to the same culpability standards as independent contractors in enforce- ment actions by the regulatory agencies. Under the new standard, regulators are required to show that an outside director knowingly or recklessly committed the Act in question. Underthe present law, outside directors are subject to the same standards asofficers and inside directors of a financial institution. SECTION 235. FOREIGN BANK APPLICATIONS This section amends section 7(d) of the International Banking Act (IBA) to permit the Federal Reserve Board to approve an appli- cation by a foreign bank to establish a branch or agency in the United States if the home country supervisor is working to estab- lish arrangements for the consolidated supervision of such foreign bank. This changes current law, which mandates denial of an ap- plication unless the foreign bank is already subject to consolidated supervision. The mandatory standard of consolidated supervision has prevented otherwise qualified banks from entering the U.S. market, even if the home country supervisors are working to put in place a framework for consolidated supervision of the bank. This section also requires the Federal Reserve Board to act on an application within 180 days of its receipt, except that the Board may, after giving notice to the applicant and the licensing author- ity, extend the time for no more than an additional 180 day period. Such time frames are appropriate in light of the time that can elapse in transmitting and translating information to and from for- eign countries. The amendmentalso permits the Board to deny an application if the applicant does not respond in a timely manner to requests for information necessary to process the application. Thus, the amendmentestablishes a definite time framefor final ac- tion while retaining an incentive for an applicant bank to provide information in a timely manner. The section also amends section 7(e)(1) of the IBA. Currently, section 7(e)(1) allows the Board to terminate a State-licensed office of a foreign bank if the foreign bank has committed a violation of law or engaged in unsafe practices in the United States or if the foreign bank is not subject to consolidated supervision by its home country authorities. Section 235(b) provides that, with respect to the consolidated supervision standard, the Board can terminate a foreign bank's operations for lack of consolidated supervision if the home country authorities are not making progress in establishing arrangements for the bank's consolidated supervision. Section 235(c) provides the Board parallel authority to terminate federally 134 118 licensed offices of foreign banks in addition to its current authority to terminate State-licensed offices. SECTION 236. DUPLICATE EXAMINATION OF FOREIGN BANKS This section amends section 7(c) of the IBA relating to the Fed- eral Reservice Board’s examination authority o ver foreign banks. The amendment provides that (1) the Board must take all reason- able measures to coordinate examinations with t he licensing au- thority of the foreign bank's branch or agency; and (2) a foreign bank’s offices should be examined with the same frequency as a State or national bank (currently annually) and that this examina- tion requirement may be met by an exam by State supervisor. This section also provides that the Board shall assess foreign banks for the costs of examinations, but on ly to the extent that State member banks are charged by the Board for their examina- tion costs. This provision ensures parallel treat ment of U.S. and foreign banks. SECTION 237. SECOND MORTGAGES This section amends the Home Ownership and E quity Protection Act of 1994 to apply only to subordinate mortg ages. It also man- dates the dismissal of any administrative enfor cement proceedings or other actions which are pending on the date o f enacting of the Financial Institutions Regulatory Relief Act of 19 95 and are based on regulations in effect under the TILA with r espect to high-cost residential mortgage transactions. SECTION 238. STREAMLINING PEDERAL bi : CORPORATION APPROVAL OF NEV This section gives insured state banks and their subsidiaries the ability to engage in new activities by giving the FDIC 60 days no- tice as long as the institution remains in compl iance with appro- priate capital standards. The FDIC may exten d this notice period up to 30 days for the purpose of issuing notices of disapproval. The FDIC may disapprove any new activity unless it determines that the activity would pose a significant risk to th e appropriate insur- ance fund. SECTION 239. REPEAL OF CALL REPORT A TTESTATION REQUIREMENT This section repeals the three-director attestat ion requirement. This is in addition to the provision requiri ng an officer to make a declaration as to the correctness ofthe call report . SECTION 240. AUTHORITY OF THE COMPTRO LLER OF THE CURRENCY Section 240 places a permanent moratorium on th e authority of the OCC to expand bank insurance powers, wi thout rolling back the status quo. The section also provides for the functional regula- tion of national bank insuranceactivities. In presc ribing the terms of state supervision of insurance, the section pro vides that no pro- vision of section 5136, or any other section of thi s Title of the re- vised statutes (including section 5136B as a dded bythis legislation) or section 13 of the Federal Reserve Act may be construed as limit- ing or otherwise impairing the authority o f any state to regulate. 135 119 During consideration of H.R. 1858 by the Committee, several modi- fications were made to section 240 to clarify its provisions. These modifications included: A ban on any State prohibitions relating to the extent of in- surance activities currently authorized for national banks. State supervision of annuities limited to disclosure and li- censing. No ability to limit lobby sales. Grandfather from State regulation related to the extent of insuranceactivities for all banks in towns of 5000 currently en- gaged in insurance activities in all States, subject to the out- come of pendinglitigation. Non-discrimination provisions to require that any State su- pervisory limitation is applied equally to state banks and S&Ls. Non-discrimination language to protect against a State in- surance regulator labeling traditional banking products as in- surance. Limitation on the definition of insurance requiring that the definition must be tied to a State regulator's authority under the relevant State insurance law. Express protection of any rights to engage in insurance ac- tivities by bank holding companies under the BHCA. In addition, the Committee adopted an amendment designed to make it clear that State insurance regulators could not overstep their authority to establish the regulatory framework within which national banks can act as agent or broker in the sale of insurance. That amendment also sought to assure that State insurance regu- lators would not be able to define traditional banking products as insurance. It did that by retaining for the Comptroller of the Cur- rency the ability to define the “business of banking” and authoriz- ing national banks or their subsidiaries to engage in such activi- ties. The Committee wishes to make clear, however, that this lan- guage does not permit the Comptroller to engage in definitional “games” which was the genesis of Section 240 in thefirst place. Theeffect of this provision is to clarify that a State may not de- termine that certain traditional banking products—those that are part of the business of banking—are actually insurance products. The authority to determine what is insurance and whatis tradi- tionally banking, subject to this clarification, must be exercised in a manner consistent with the overall objective of new section 5136A of the revised statutes, which is to protect a State's author- ity to regulate insurance. It is clearly not within the scope of a State's authority under this Section, or otherwise, to determine that other types of traditional banking products, like standby let- ters of credit, swaps and other risk managementtools, put option bonds, asset-backed securities, loan participations, stock indexed CDs,or other similar products, are insurance products for purposes of the National BankAct. Insurance is a State regulated business and nothing in this legis- lation is intended to interfere with the functional regulation of in- surance products. In keeping with that design, the Committee would not expect for the Comptroller to define any product as the “business of banking” which today is regulated as insurance by the States. While it may be true that some future products may have 136 120 some insurance features and some banking feat ures, the Commit- tee does not expect the Comptroller to seek to broaden banking powers without Congressional authorization and the Comptroller should not declare any current insurance pro ducts, regulated as such by the States, to be the “business of banking”. In addition, the Committee is aware that commo dity futures and option contracts are used by national banks to hedge against or manage the risk of adverse price changes in va rious physical com- modities and financial products and that some of these contracts are, in fact, traded by national banks to hedge against price move- ments in homeowners, catastrophe and other fo rms of insurance. In adopting a broad definition of “insurance” for purposes of national bank activities under the legislation, the Comm ittee does not in- tend to suggest that state regulations may pe rmissibly define in- surance so as to purport to regulate the off er, sale or trading in commodity futures and option contracts by na tional banks which are exclusively regulated by the CFTC under the Commodity Ex- change Act. SECTION 241. NATIONAL BANK COMMUN ITY DEVELOPMENT INSURANCE ACTIVITIES Section 241 authorizes the Comptroller of th e Currency to ap- prove an application by a national b ank located in an empowerment zone to act as an insurance agent or broker. How- ever, the bank must provide sufficient evidenc e that competitively priced insurance products are not adequate ly available and that lie i 1 anly in the emnowerment zone. Lilie iidui aie p x T This new section will provide greater access to insurance in dis- advantaged communities where competitively priced insurance is inadequate. Moreover,this amendmentwill fo ster economic revital- ization, such as new business and employm ent opportunities, in low income neighborhoods by permitting the sale of insurance in empowerment zones. Additionally, by requiri ng the sale of insur- ance to occur from a “full-service branch” in the empowerment zone, the amendmentprovides a significant in centive for banks to improve the quality and quantity of banking services in such com- munities. Effective immediately, this amendment allo ws national banks having main offices or full-service branches i n areas eligible for designation as empowerment zones or enterprise communities under section 1392 of the Internal Revenue C ode of 1986, or in In- dian reservations, to sell insurance from that lo cation. The designa- tion criteria for an empowerment zone or enterprise community assures that the community is one experi encing economic distress. SECTION 242. AUTHORIZING BANK SERV ICE COMPANIES TO ORGANIZE AS LIMITED LIABILITY PARTNERSHIPS Section 242 ofthis legislation modifies the Ban k Service Corpora- tion Act by expanding the scope of companies t hat may be owned by banks under the Act to include limited l iability companies. These companies often combine the elements of both corporations and partnerships to provide more flexibility in managementand in the sharing of profits among its owners than do corporations. Fur- 137 121 thermore, these companies are taxed as partnerships underthe In- ternal Revenue Code. Under current law, the Bank Service Corporation Act only allows multiple banks to invest in stock-owned corporations. These cor- porations are permitted to perform activities that the banks could engage in directly. It enables banks to join together to share over- head expenses and to realize the kinds of efficiencies of scale that are available to larger banks. By permitting institutions to own limited liability companies, banks will be granted even greater reg- ulatory relief because of the increased flexibility, profit incentive, and tax treatment noted above. Restrictions on activities that are imposed on corporations under current law and the authority of the federal banking agencies to examine and regulate these companies would be maintained. Finally, banks would continue to be required to obtain. prior approval from their primary banking regulator in order to invest in these companies. SECTION 243. BANK INVESTMENT IN EDGE ACT AND AGREEMENT CORPORATIONS Section 25A of the Federal Reserve Act imposes a non-waivable limit on a memberbank's ability to invest in subsidiaries organized under that section (i.e., Edge Act subsidiaries) and in subsidiaries held directly under Section 25 of the Federal Reserve Act(i.e., cer- tain financial service corporations held by a member bank's non- U.S. branches). The current non-waivable limit of 10% of a member bank's capital and surplus was enacted as part of the original Edge _ Act in 1919, before U.S. banks or the Federal Reserve Board had significant international banking experience. The revision would extend the non-waivable limit to 25% of capital and surplus provid- ing that the Federal Reserve Board does not find the additional amount would be unsafe and unsound. In making this determina- tion, the Federal Reserve Board would consider, inter alia, the cap- ital and management strength of the member bank. The amend- ment would not otherwise change current law. SECTION 244. REPORT ON THE RECONCILIATION OF DIFFERENCES BE- TWEEN REGULATORY ACCOUNTING PRINCIPLES AND GENERALLY AC- CEPTED ACCOUNTING PRINCIPLES. When the FDICIA was enacted in 1991, the Congress noted that differences between Regulatory Accounting Principles (RAP) and Generally Accepted Accounting Principles (GAAP) created signifi- cant, unnecessary and costly regulatory reporting and control bur- dens. Accordingly, Section 121 of FDICIA called for uniform ac- counting principles consistent with GAAP (unless the appropriate regulator found that a RAP standard was necessary to protect safe- ty and soundness, etc.). However, the regulators seem to have taken no significant actions toward this goal. Therefore, this sec- tion requires each appropriate regulator to report to both the House Committee on Banking and Financial Services and the Sen- ate Committee on Banking, Housing and Urban Affairs, within 180 days of enactment, concerning the actions taken and to be taken to achieve the goal set by FDICIA. This report will set the stage for a meaningful Congressional review as an important step toward 138 122 making sure that there is steady but prudent amelioration of this regulatory burden. SECTION 245. WAIVERS AUTHORIZED FOR RESIDENCY REQUIREMENT FOR NATIONAL BANK DIRECTORS Section 5136 of the Revised Statutes of the United S tates (12 U.S.C. 72) imposes a residency requirementon directors of nat ional banks. In generai, current law requires all directors, during their whole term of service, to be citizens of the U.S. and requi res that at least two-thirds. of the directors must be residents o the State in which the bank is located, subject to certain exceptions. Se ction 245 provides that the Comptroller of the Currency may wa ive the residency requirement. TITLE I1I—LENDER LIABILITY SECTION 301. LENDER LIABILITY Section 301 clarifies the liability under Federal environment al law for lenders, fiduciaries, and Federal banking and lending agen- cies by adding section 45 to the Federal Deposit Insurance Act. A l- though the Environmental Protection Agency promulgated rules which clarified exemptions for lenders and those who act in the se capacities, the rule was overturned by a court case. Section 30 1, again, provides certainty as to when and to what extent these: pa r- ties may be liable for violations under Federal environmental l aw for their lending,financial andfiduciary activities. New section 45{a) provides that a lenderis liable when a lender actualiy paruicipates im manage ul ail rR env iren- mental activities, regardiess of the lender's status as a lendin g in- stitution. A lender is considered under this section to be “act ually participating in management”if a lender makes decisions re gard- ing the disposition of hazardous substances or exercises co ntrol at a managementlevel. “Actually participating in management” does not include traditional lending activities, such as the extensi on of credit, holding a security interest, providing financial advice, o r un- dertaking voluntary inspection of property, unless these acti vities rise to the level of participating in the operation and manage ment of the property. A lender whois held liable pursuant to new section 45 (a) shall be liable for the cost of any response or corrective action to the e x- tent and for the amount that the lender actively and directly co n- tributed to the hazardous substance release. However, a l ender shall not be liable for the cost of any responseor corrective acti on for a release of a hazardous substance which commences prior to and continues after the lender obtains a security interest in t he property, so long as the lender does not actually participate i n the managementafter obtaining a security interest in the pro perty. Further, new section 45(b) provides that a fiduciary, while acting in a fiduciary capacity, is personally liable for non-compliance wi th Federal environmental law as if the fiduciary holds the proper ty free of trust. The fiduciary’s liability is limited to assets of the tru st or estate which are sufficient to indemnify the fiduciary. If a fid u- ciary is liable for environmental harm, section 45(b) ma kes clear that such liability does not otherwise override indemnificati on 139 123 terms of the fiduciary contract of employee benefit plans made pur- suant to section 3(3) of the Employee Retirement Income Security Act of 1974. However, the fiduciary’s liability is not limited if (1) the fiduciary had preexisting liability, (2) the fiduciary fails to exer- cise due care or contributed to the release of a hazardous sub- stance, or (3) the fiduciary established the trust for the purpose of avoiding or limiting liability under Federal environmental law. Lastly, new section 45 (e) provides three limitations on environ- mental liability of Federal banking and lending agencies and their subsequent purchasers. First, new section 45(e)(1)CA) exempts Fed- eral banking and lending agencies, their subsidiaries and subse- quent purchasers from strict liability for the release of a hazardous substance on properties which were acquired in connection with (1) receivership, conservatorship, or through liquidation, (2) the provi- sion of loans, discounts, advances, or other financial assistance, or (3) civil or criminal proceeding or administrative enforcement ac- tion, either by order or settlement under state law. However, if the party directly caused or materially contributed to the release of a hazardous substance, the party will be held liable for any remedial measures to cure the damages. Second, section 45(6)(D(B) limits the liability of these entities under State law to the value of the entity's interest in the property. Third, new section 45(e){2) makes clear that government agencies and their subsequent purchasers are not subject to the environmental lien provisions at the time of transfer. While new section 45(e) provides the liability limitations for Fed- eral banking and lending agencies and their subsequent pur- chasers, it specifically states in new section 45{e)(1)(B) that it does not preempt State law. It also does not immunize subsequent pur- chasers from liability if the purchaser (1) had preexisting liability to the property or is related to a party with suchliability, (2) fails to agree to take reasonable steps necessary to abate the release or to protect public health and safety consistent with Federal environ- mental laws, or (3) directly causes or significantly and materially contributes to any additional release or threatened release on the property pursuant to new section 45(e)(1)(D)(iv). Furthermore, if the subsequent purchaser failed to take reasonable steps necessary to abate the release or to protect public health and safety under ap- plicable Federal environmental laws, then the subsequent pur- chaser remainsliable to the appropriate government agency for the costs of such remedial action, not exceeding the fair market value of the property, according to new section 45(e)(1){E). Section 301(b) provides an effective date to occur upon the sec- tion's enactment and applies to any claim that has not reached final adjudication or settlement prior to enactment. TITLE IV--ANNUAL STUDY AND REPORT ON IMPACT ON LENDING TO SMALL BUSINESS SECTION 401, ANNUAL STUDY AND REPORT ON SMALL BUSINESS LENDING This section requires an annual study and report by the federal banking regulators on the impact this legislation has on lending to small businesses. 140 124 CHANCESIN EXISTING Law MADE BY THE BILL, AS REPORTED In compliance with clause 3 of rule XIII of the Rules of the Hous e of Representatives, changes in existing law made by thebill, as re - ported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, exist- ing law in which no change is proposed is shownin roman): REAL ESTATE SETTLEMENT PROCEDURESACT OF 1974 * * * * * * * FINDINGS AND PURPOSE SEc. 2. (a) * * * (b) It is the purpose of this Act to effect certain changes in the settlement process for residential real estate that will result— (1) in moreeffective advance disclosure to home buyers and sellers of settlement costs; (2) in the elimination of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement serv- ices without— (A) directly regulating settlement services prices, or (B) directly regulating wages to bona fide employees that are not designed as a subterfuge to facilitate kickbacks among affiliated companies; * * * Ed * Ed a Liisiai SEc. 3. For purposes of this Act— (1) the term “federally related mortgage loan” includes any loan (other than temporary financing such as a construction loan) which— (A) is secured by a first for subordinate] lien on residen- tial real property (including individual units of condomin- iums and cooperatives) designed principally for the occu- pancy of from one to four families, including any such se- cured loan, the proceeds of which are used to prepay or pay off an existing loan secured by the same property; and * 2 * * * * * (7) the term “Econtrolled business arrangement] affiliated business arrangement’ means an arrangement in which (A) a person whois in a position to refer business incident to or a part of a real estate settlement service involving a federally re- lated mortgage loan, or an associate of such person, has either an affiliate relationship with or a direct or beneficial ownership interest of more than 1 percent in a provider of settlement services: and (B) either of such persons directly or indirectly refers such business to that provider or affirmately influences the selection of that provider; [and] (8) the term “associate” means one who has one or more o f the following relationships with a person in a position to refer settlement business: (A) a spouse, parent, or child of such per- son; (B) a corporation or business entity that controls, is con- 141 125 trolled by, or is under common control with such person; (C) an employer,officer, director, partner, franchisor, or franchisee of such person; or (D) anyone who has an agreement, arrange- ment, or understanding, with such person, the purpose or sub- stantial effect of which is to enable the person in a position to refer settlement business to benefit financially from the refer- rals of such business[.]; and (9) the term “Board” means the Board of Governors of the Federal Reserve System. UNIFORM SETTLEMENT STATEMENT SEc. 4. (a) The [Secretary] Board, in consultation with the Ad- ministrator of Veterans’ Affairs, the Federal Deposit Insurance Corporation, and the [Federal Home Loan Bank Board] Director of the Office of Thrift Supervision, shall develop and prescribe a standard form for the statementof settlement costs which shall be used (with such variations as may be necessary to reflect dif- ferences in legal and administrative requirements or practices in different areas of the country) as the standard real estate settle- ment form in all transactions in the United States which involve federally related mortgage loans. Such form shall conspicuously and clearly itemize all charges imposed upon the borrower andall charges imposed upon the seller in connection with the settlement and shall indicate whether any title insurance premium included in such charges covers or insures the lender's interest in the prop- erty, the borrower's interest, or both. The [Secretary] Board may, by regulation, permit the deletion from the form prescribed under this section of items which are not, under local laws or customs, applicable in any locality, except that such regulation shall require that the numerical code prescribed by the [Secretary] Boardbere- tained in forms to be used in all localities. Nothing in this section may be construed to require that that part of the standard form which relates to the borrower's transaction to be furnished to the seller, or to require that that part of the standard form which re- lates to the seller be furnished to the borrower. (b) The form prescribed under this section shall be completed and made available for inspection by the borrower at or before settle- ment by the person conducting the settlement, except that (1) the [Secretary] Board may exempt from the requirements of this sec- tion settlements occurring in localities where the final settlement statement is not customarily provided at or before the date of set- tlement, or settlements where such requirements are impractical and (2) the borrower may, in accordance with regulations of the [Secretary] Board, waive his right to have the form made avail- able at such time. Upon the request of the borrower to inspect the form prescribed underthis section during the business day imme- diately preceding the day of settlement, the person who will con- duct the settlement shall permit the borrower to inspect those items which are known to such person during such preceding day. SPECIAL INFORMATION BOOKLETS Sec. 5. (a) The [Secretary] Board shall prepare and distribute booklets to help persons borrowing money to finance the purchase 142 126 of residential real estate better to understand the nature and costs of real estate settlement services. The [Secretary] Board shall dis- tribute such booklets to all lenders which make federally rela ted mortgage loans. (b) Each booklet shall be in such form and detail as the [Sec- retary] Board shall prescribe and, in addition to such other infor- mation as the [Secretary] Board may provide, shall include in clear and concise language— (1) a description and explanation of the nature and purpose of each cost incident to a real estate settlement; (2) an explanation and sample of the standard real estate settlement form developed and prescribed undersection 4; (3) a description and explanation of the nature and purpose of escrow accounts when used in connection with loans secured by residential real estate; (4) an explanation of the choices available to buyers of resi- dential real estate in selecting persons to provide necessary services incident to a real estate settlement; and (5) an explanation of the unfair practices and unreasonable or unnecessary charges to be avoided by the prospective buyer with respect to a real estate settlement. (c) Each lender shall include with the booklet a good faith esti- mate of the amount or range of charges for specific settlement serv- ices the borrower is likely to incur in connection with the settle- ment as prescribed by the [Secretary] Board. Such booklets shall take into consideration differences in real estate settlement pro ce- - =--- Hac af GULES Wiiiay CAidi aug Ui SOVETE: the United States and among separate politi visions within the same State andterritory. (d) Each lender referred to in subsection (a) shall provide t he booklet described in such subsection to each person from whom it receives or for whom it prepares a written application to borr ow money to finance the purchase ofresidential real estate. Such book- let shall be provided by delivering it or placing it in the mail not later than 3 business days after the lender receives the application, but no booklet need be provided if the lender denies the application for credit before the end of the 3-day period. (e) Booklets may be printed and distributed by lenders if th eir form and content are approved by the [Secretary] Board as meet- ing the requirements of subsection (b) of this section. SERVICING OF MORTGAGE LOANS AND ADMINISTRATION OF ESC ROW ACCOUNTS MENT, SALE, OR TRANSFER OF LOAN SERVICING.— [(J) IN GENERAL.—Each person who makes a federally relat- ed mortgage loan shall disclose to each person who applies for any such loan,at the time of application for the loan— (A) whether the servicing of any such loan may be as- signed, sold, or transferred to any other person at any time while such loan is outstanding; [(B) at the choice of the person making a federally relat- ed mortgage loan— Sec. 6. [(a) DiscLosuRE TO APPLICANT RELATING TO ASSIGN - 143 127 {(i) for each of the most recent 3 calendar years completed (at the time of such application), the per- centage (rounded to the nearest quartile) of loans made by such person for which the servicing has been assigned,sold, or transferred as of the end of the most recent calendar year completed, except that— [() for any loan application during the 12- month period beginning on the date of the enact- ment of the Cranston-Gonzalez National Afford- able Housing Act, the information disclosed under this subparagraph may be for only the most re- cent calendar year completed, and for any loan ap- plication during the 12-month period beginning 1 year after the date of the enactment of the Cran- ston-Gonzalez National Affordable Housing Act, the information disclosed under this subparagraph may be for the most recent 2 calendar years com- pleted; and [QD this subparagraph maynotbe construed to require the inclusion, in the percentage disclosed, of any loans the servicing of which has been as- signed, sold, or transferred by the person making the loan to a transferee servicer that is an affiliate or subsidiary of such person; or {(ii) a statement that the person making the loan has previously assigned, sold, or transferred the serv- icing of federally related mortgage loans; and {(C) if the person who makes the loan does not engage in the servicing of any federally related mortgage loans, that there is a present intent on the part of such person (at the time of such application) to assign, sell, or transfer the servicing of such loan to another person. [(2) MoDEL DISCLOSURE STATEMENTS.—Not later than 90 days after the date of the enactment of the Cranston-Gonzalez National Affordable Housing Act, the Secretary shall develop a model disclosure statement for notification to applicants under paragraph (1) with respect to servicing procedures, transfer practices and requirements, and complaint resolution. The model statement shall provide for the person originating the loan to disclose their capacity to service loans and the best available estimate of the percentage of all loans made by such person for which the servicing will be assigned, sold, or trans- ferred during the 12-month period beginning upon the origina- tion. The estimate shall be expressed as one of the following range of possibilities—between 0 and 25 percent, between 26 and 50 percent, between 51 and 75 percent, or between 76 and 100 percent. This paragraph may not be construed to require the inclusion, in the estimate disclosed, of any loans the servic- ing of which will be assigned, sold, or transferred by the person originating the loan to a transferee servicer that is an affiliate or subsidiary of such person. [(8) SIGNATURE OF APPLICANT.—Any disclosure of the infor- mation required under paragraph (1) shall not be effective for purposes of this section unless the disclosure is accompanied 144 128 by a written statement, in such form as the Secretary shall de- velop before the expiration of the 90-day period beginning on the date of the enactment of the Cranston-Gonzalez National Affordable Housing Act, that the applicant has read and under- stood the disclosure and that is evidenced by the signature of the applicant at the place where such statement appears in the application.] (a) DISCLOSURE TO APPLICANT RELATING TO ASSIGNMENT, SALE, OR TRANSFER OF LOAN SERVICING.— (1) IN GENERAL.—Each person who makes a federally related mortgage loan shall disclose to each person who applies for any such Joan, at the time of application for the loan, whether the servicing of any such loan may be assigned, sold, or transferred to any other person at any time while such loan is outstanding. (2) SIGNATURE OF APPLICANT.—Any disclosure of the informa- tion required under paragraph (1) shall notbeeffective for pur- poses of this section unless the disclosure is accompanied by a written statement, in such form as the Secretary shall develop before the expiration of the 180-day period beginning on the date of the enactment of the Financial Institutions Regulatory Relief Act of 1995, that the applicant has read and understood the disclosure and that is evidenced by the signature of the ap- plicant at the place where such statement appears in the appli- cation. a * * * * * * (j) TRANSITION.— (1) * OK OK * * a * * * * (3) REGULATIONS AND EFFECTIVE DATE,—The [Secretary] Board shall, by regulations that shall take effect not later than . April 20, 1991, establish any requirements necessary to carry out this section. Such regulations shall include the model dis- closure statement required under subsection (a) (2). SEC. 7. EXEMPTED TRANSACTIONS. (a) IN GENERAL.—This Act does not apply to credit transactions involving extensions of credit— (iy primarily for business, commercial, or agricultural pur- poses; or (2) to government or governmental agencies or instrumental- ities. (b) INTERPRETATION.—-In issuing regulations pursuant to section 19(a) of this Act, the Board shall ensure that, with regard to sub- section (a), the exemption for business credit includes all business credit which is exempt from the Truth in Lending Act in accordance with section 226.3(a) of the regulations prescribed by the Board known as “regulation Z” (12 CF.R. 226.3(a)), as in effect on the date of enactment of the Financial Institutions Regulatory ReliefAct of 1995. PROHIBITION AGAINST KICKBACKS AND UNEARNED FEES SEc. 8. (a) * * * * * * * * * * 145 129 (c) Nothing in this section shall be construed as prohibiting (1) the paymentof a fee (A) to attorneys at law for services actually rendered or (B) by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insur- ance or (C) by a lenderto its duly appointed agent for services ac- tually performed in the making of a loan, (2) the payment to any person of a bonafide salary or compensation or other payment for goods or facilities actually furnished or for services actually per- formed, (3) payments pursuant to cooperative brokerage and refer- ral arrangements or agreements between real estate agents and brokers, (4) [controlled business arrangements] affiliated business arrangements so long as (A) at or prior to the time of the referral a disclosure is made of the existence of such an arrangement to the person being referred and, in connection with the referral, such person is provided a written estimate of the charge or range of charges generally made by the provider to which the person is re- ferred, except that where a lender makesthe referral, this require- ment maybesatisfied as part of and at the time that the estimates of settlement charges required under section 5(c) are provided, (B) such person is not required to use any particular provider of settle- mentservices, and (C) the only thing of value that is received from the arrangement, other than the payments permitted under this subsection, is a return on the ownership interest or franchise rela- tionship, or (5) such other payments or classes of payments or other transfers as are specified in regulations prescribed by the Secretary, after consultation with the Attorney General, the Sec- retary of Veterans Affairs, the Federal Home Loan Bank Board,the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Secretary of Agriculture. For purposes of the preceding sentence, the following shall not be con- sidered a violation of clause (4)(B): (i) any arrangement that re- quires a buyer, borrower,or seller to pay for the services of an at- torney, credit reporting agency, or real estate appraiser chosen by the lender to represent the lender's interest in a real estate trans- action, or (ii) any arrangement where an attorney or law firm rep- resents a client in a real estate transaction issues or arranges for the issuanceof a policy of title insurance in the transaction directly as agent or through a separate corporate title insurance agency that may be established by that attorney or law firm and operated as an adjunct to his or its law practice. (d)(1) Any person or persons who willfully violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year,or both. * * * * * * x (3) No person or persons shall be liable for a violation of the pro- visions of section (8)(c)(4)(A) if such person or persons proves by a preponderance of the evidence that such violation [was not inten- tional and] resulted from a bona fide error notwithstanding main- tenance of procedures that are reasonably adapted to avoid such error. 146 130 (4) The Secretary, any other agency described in subsection (f(1), the Attorney General of any State, or the insurance commi ssioner of any State may bring an action to enjoin violations of this section. * * * * * * * (6) No provision of State law or regulation that impos es more stringent limitations on [controlled business arrangeme nts] affili- ated business arrangements shall be construed as bein g inconsist- ent with this section. * Ed * * * * * (e) NEGOTIATED REGULATIONS.— (1) IN GENERAL.—The Secretary may not publish a propo sed or final regulation under this section and section 9 af ter the date of the enactment of the Financial Institutions Regu latory Relief Act of 1995 unless the Secretary has used t he negotiated rulemaking procedure established under subchapter III of c hap- ter 5 of title 5, United States Code, to attempt to negotia te and develop the rule. (2) CONSISTENCY WITH PURPOSE.—Any regulation prescr ibed in accordance with paragraph (1) shall be consistent w ith the purposesofthis title as set forth in section 2. ‘TY A(8 ADMINISTRATIVE ENFORCEMENT.— (1) IN GENERAL.—Compliance with the requirements of this section and sections 9 and 12 shall be enforced under this Act— (A) in the case of an insured depository instituti on (as de- fined in section 3 of the Federal Deposit Insurance Act) , by the appropriate Federal banking agency (as defined in such section, (B) in the case of an insured credit union fa s defined in section 101(7) of the Federal Credit Union Act), by the Na- tional Credit Union Administration, (C) in the case of a bank holding company (as defined in section 2 of the Bank Holding Company Act of 1956) and any affiliate of any such holding company (other than an insured depository institution), by the Board; (D) in the case of a savings and loan holding comp any (as defined in section 10 of the Home Owners’ Lo an Act) and any affiliate of any such holding company (other than an insured depository institution), by the Director of the OF- fice of Thrift Supervision; and (E) in the case of any other person, by the Secretary. (2) SPECIAL RULES RELATING TO DETERMINATION OF AP PRO- PRIATE REGULATOR.— (A) CASES OF MORE THAN 1 APPROPRIATE REGULA TOR.— If, under paragraph (1), a company may be regulated b y more than I agency, the Board shall determine which agen - cy onaye the responsible agency, notwithstanding para- graph (1). B) CASES INVOLVING JOINT VENTURES, PARTNERS HIPS, AND OTHER AFFILIATED BUSINESS ARRANGEMENTS.—If a ny insured depository institution is involved in a joint ventur e, partnership, or other affiliated business arrangement with any person who is not an insured depository institutio n, the agency responsible for enforcing this section and sections 9 147 131 and 12 with respect to such insured depository institution Shall be the agency with such responsibility with respect to such joint venture, partnership, or other affiliated business arrangement. (3) INTERAGENCY COOPERATION AND ENFORCEMENT GUIDE- LINES.—AIl the agencies referred to in any subparagraph of paragraph (1) shall cooperate with each other to develop en- forcement guidelines and other means for achieving effective compliance with this section and sections 9 and 12. (4) PREFERENCE FOR CIVIL ENFORCEMENT OVER CRIMINAL EN- FORCEMENT.—As part of the cooperative efforts required under paragraph (3), the agencies referred to in paragraph (1) shall consider means for achieving compliance with this section and section 9 through the exercise of administrative enforcement au- thority under this subsection without resorting to criminal en- forcement actions under subsection (d) except in appropriate cases. (5) EFFECTIVE DATE.—Paragraphs (1) and (2) shall not take effect untiljoint interagency cooperation and enforcement guide- lines are adopted by all the agencies to which paragraphs (1) and (2) apply and the enforcement authority of the Secretary with respect to this section and sections 9 and 12 shall continue until such paragraphs takeeffect. * * * * * * * ESCROW ACCOUNTS Sec. 10. (a) * * * * 2K * * * * * (c) Escrow ACCOUNT STATEMENTS.— (1) INITIAL STATEMENT.— (A) 2K OK OF a cd * a * * * (C) INITIAL STATEMENT AT CLOSING.—Any servicer may submit the statement required under subparagraph (A) to the borrower at closing and may incorporate such state- ment in the uniform settlement statement required under section 4. [Not later than the expiration of the 90-day pe- riod beginning on the date of the enactment of the Cran- ston-Gonzalez National Affordable Housing Act, the] The Secretary shall issue regulations prescribing any changes necessary to the uniform settlement statement under sec- tion 4 that specify how the statement required under sub- paragraph (A) of this section shall be incorporated in the uniform settlement statement. * * * * * * * (d) PENALTIES.— (1) IN GENERAL.—In the case of each failure to submit a statement to a borrower as required under subsection (c), the [Secretary] Board shall assess to the lender or escrow servicer failing to submit the statementa civil penalty of $50 for each such failure, but the total amount imposed on such lender or 148 132 escrow servicer for all such failures during any 12-month pe- riod referred to in subsection (b) may not exceed $10 0,000. * * * * * * * (ESTABLISHMENT ON DEMONSTRATION BASIS OF LAND PARCEL RECORDATION SYSTEM [SEc. 13. The Secretary shall establish and place in oper ation on a demonstration basis, in representative political subdi visions (se- lected by him) in various areas of the United States, a model sys- tem or systems for the recordation of land title infor mation in a manner and form calculated to facilitate and simplif y land trans- fers and mortgage transactions and reduce the cost t hereof, with a view to the possible development(utilizing the informat ion and ex- perience gained under this section) of a nationally unif orm system of land parcel recordation. [REPORT OF THE SECRETARY ON NECESSIT Y FOR FURTHER CONGRESSIONAL ACTION [Skc. 14. (a) The Secretary, after consultation w ith the Adminis- trator of Veterans’ Affairs, the Federal Deposit insur ance Corpora- tion, and the Federal Home Loan Bank Board, a nd after such study, investigation, and hearings (at which represent atives of con- sumers’ groups shall be allowed to testify) as he dee ms appropriate, shall, not less than three years nor more than five y ears from the = a data af thie Act’ renort to the Congress on whether, in of the implementation of the provisions of this Ac t imposing certain requirements and prohibiting certain practices in connec- tion with real estate settlements, there is any neces sity for further legislation in this area. [(b) If the Secretary concludes that there is necessi ty for futher legisiation, he shall report to the Congress on the s pecific practices or problems that should be the subject of such legisl ation and the corrective measures that need to be taken. In addit ion, the Sec- retary shall include in his report— [(1) recommendationson the desirability of requiring le nders of federally related mortgage loans to bear the costs of particu- lar real estate settlement services that would otherwise be paid for by borrowers; {(2) recommendations on whether Federal regulati on of the charges for real estate settlement services in federally related mortgage transactions is necessary and desirabl e, and, if he concludes that such regulation is necessary and desirabl e, a de- scription and analysis of the regulatory scheme hebe lieves Congress should adopt; and {(3) recommendations on the ways in which the F ederal Gov- ernment can assist and encourage local governments to mod- ernize their methods for the recordation of landtitle inf orma- tion, including the feasibility of providing financial as sistance or incentives to local governments that seek to adopt on e of the model systems developed by the Secretary in accordan ce with the provisons of section 13 of this Act. 149 133 [DEMONSTRATION TO DETERMINE FEASIBILITY OF INCLUDING STATE- MENTS OF SETTLEMENT COSTS IN SPECIAL INFORMATION BOOKLETS [SEc. 15. The Secretary shall, on a demonstration basis in se- lected housing market areas, have prepared and included in the special information booklets required to be furnished undersection 5 of this Act, statements of the range of costs for specific settlement services in such areas. Not later than June 30, 1976, the Secretary shall transmit to the Congress a full report on the demonstration conducted under this section. Such report shall contain the Sec- retary’s assessment of the feasibility of preparing and including settlement cost range statements for all housing market areas in the special information booklets for such areas.] JURISDICTION OF COURTS SEC. 16. Any action pursuant to the provisions of section 8 or 9 may be brought in the United States district court or in any other court of competent jurisdiction, for the district in which the prop- erty involved is located, or where the violation is alleged to have occurred, within one year from the date of the occurrence of the violation, except that actions brought by the [Secretary,] Board, an agency referred to in any subparagraph of section 8(f)(1), the At- torney General of any State, or the insurance commissioner of any State may be brought within 3 years from the date of the occur- rence of the violation. * * * * * * * RELATION TO STATE LAWS SEC. 18. This Act does not annul, alter, or affect, or exempt any person subject to the provisions of this Act from complying with, the laws of any State with respect to settlement practices, except to the extent that those laws are inconsistent with any provision of this Act, and then only to the extent of the inconsistency. The {Secretary is authorized to] Board and Secretary mayjointly deter- mine whether such inconsistencies exist. The Board and Secretary may not determine that any State law is inconsistent with any pro- vision of this Act if the Board and Secretary [determines] deter- mine that such laws gives greater protection to the consumer. In making these determinations the Board and Secretary shall con- sult with the appropriate Federal agencies. [AUTHORITY OF THE SECRETARY] AUTHORITY OF THE SECRETARY AND THE FEDERAL RESERVE BOARD SEc. 19. [(a) The Secretary is authorized to prescribe such rules and regulations, to make such interpretations, and to grant such reasonable exemptions for classes of transactions, as may be nec- essary to achieve the purposesof this Act.] (a) REGULATIONS.— (1) IN GENERAL.—Subject to paragraph (2), the Secretary and the Board may prescribe such regulations, make such interpre- tations, and grant such reasonable exemptions for classes of transactions, as may be necessary to achieve the purposes of this Act. 150 134 (2) APPLICATION.— (A) BoARD.—The authority of the Board under para- graph (1) shall apply with respect to— (i) sections 4, 5, 6, 10, and 12; and (ii) sections 3, 7, 17, and 18 to the extent such sec- tions are applicable with respect to the sections de- scribed in clause(i). (B) SECRETARY.—The authority of the Secretary under paragraph(1) shall apply with respect to— (i) sections 8 and 9; and (ii) sections 3, 7, 17, and 18 to the extent such sec- tions are applicable with respect to the sections de- scribed in clause(i). (b) No provision of this Act or the laws of any State imposing any liability shall apply to any act done or omitted in good faith in con- formity with any rule, regulation, or interpretation thereof by the Secretary, the Board, or the Attorney General, notwithstanding that after such act or omission has occurred, suchrule, regulation, or interpretation is amended, rescinded, or determined by judicial oer other authority to be invalid for any reason, (c)(1) The [Secretary] Board, with respect to any action to enforce section 4, 5, 6, or 10, and each agency referred to in any subpara- graph ofsection 8((1), with respect to any action to enforce section 8, 9, or 12, may investigate any facts, conditions, practices, or mat- ters that may be deemed necessary or proper to aid in the enforce- mentof the provisions of this Act, in prescribing of rules and regu- Intiane tharaunder or in securing information to serve as a basis for recommending further legislation concerning real estate settle- ment practices. To aid in the investigations, the [Secretary] Board or such other agency is authorized to hold such hearings, admin- ister such oaths, and require by subpena the attendance andtesti- mony of such witnesses and production of such documents as the {Secretary} Board or such other agency deems advisable. (2) Any district court of the United States within the jurisdiction of which an inquiry is carried on may, in the case of contumacy or refusal to obey a Subpena of the [Secretary] Board or an agency referred to in any subparagraph ofsection 8(f(1) issued under this section, issue an order requiring compliance therewith; and any failure to obey such order of the court may be punished by such court as a contemptthereof. * ** * * * * on Yr ~ 7TRUTH IN LENDING ACT TITLE I—CONSUMER CREDIT COST * * * * * * * CHAPTER 1—GENERAL PROVISIONS * * * * * * * 151 135 § 101. Shorttitle This title may be cited as the Truth in Lending Act. * * * * * * bd § 103. Definitions and rules of construction (a * OR OK * * * * * * * (aa)(1) A mortgage referred to in this subsection means a consumer credit transaction that is secured by a subordinate mort- , gage on the consumer's principal dwelling, other than [a residen- tial mortgage transaction], a reverse mortgage transaction, or a transaction under an open end credit plan, if— (A) we Ok Ok * * * * Fs * * § 104. Exempted transactions This title does not apply to the following: (1) OK ok * Ed * a * Ed (7) Transactions for which the Board, by regulation, deter- mines that coverage under the Act is not needed to carry out the purposes of the Act. § 105. Regulations (a) * OK Ok (b) EXEMPTIVE AUTHORITY.— (1) IN GENERAL.—The Board shall exempt from all or parts of this title any class of transactions for which, in the Board's judgment, coverage under all or part of this title does not pro- vide a measurable benefit to consumers in the form of useful in- formation or protection. (2) FACTORS TO BE CONSIDERED.—In determining which classes of transactions to exempt in whole or in part, the Board shall consider, among other factors, the following: (A) The amount of the loan or closing costs and whether the disclosures, right of rescission, and other provisions are necessary, particularly for small loans. (B) Whether the requirements of this title complicate, hinder, or make more expensive the credit process for the class of transactions. (C) The status of the borrower, including, the borrowers’ related financial arrangements, the financial sophistication of the borrower relative to the type of transaction, and the importance of the credit and related supporting property to the borrower. [(b)] (¢) The Board shall publish model disclosure forms and clauses for commontransactions to facilitate compliance with the disclosure requirements of this title and to aid the borrowerorles- see in understanding the transaction by utilizing readily under- standable language to simplify the technical nature of the disclo- sures. In devising such forms, the Board shall consider the use by 152 136 creditors or lessors of data processing or similar auto mated equip- ment. Nothing in this title may be construed to re quire a creditor or lessor to use any such model form or clause pres cribed by the Board under this section. A creditor or lessor shall be deemed to be in compliance with the disclosure provisions of th is title with re- spect to other than numerical disclosures if the cr editor or lessor (1) uses any appropriate model form or clause as pub lished by the Board, or (2) uses any such model form or clause an d changes it by (A) deleting any information which is not requir ed by thistitle, or (B) rearranging the format, if in making suc h deletion or rear- ranging the format, the creditor or lessor does not a ffect the sub- stance, clarity, or meaningful sequence of the disclosur e. [(c}] (d) Made! disclosure forms and clauses s hall be adopted by the Board after notice duly given in the Federal Reg ister and an opportunity for public comment in accordance with section 553 of title 5, United States Code. [(d)] () Any regulation of the Board, or any amendment or in- terpretation thereof, requiring any disclosure which differs from the disclosures previously required by this chapter, chapter 4, or chapter 5, or by any regulation of the Board prom ulgated there- under shall have an effective date of that October 1 which follows by at least six months the date of promulgation, except that the Board may at its discretion take interim action by regulation, amendment, or interpretation to lengthen the peri od of time per- mitted for creditors or lessors to adjust their forms to accommodate new requirements or shorten the length of time for creditors or les- 5 to make euch adincstments when it makes a specific finding that such action is necessary to comply with the fin dings of a court or to prevent unfair or deceptive disclosure pr actices. Notwith- standing the previous sentence, any creditor or les sor may comply with any such newly promulgated disclosure requir ements prior to the effective date of the requirements. § 106. Determination of finance charge (a) Except as otherwise provided in this section, t he amount of the finance charge in connection with any consume r credit trans- action shall be determined as the sum of all char ges, payable di- rectly or indirectly by the person to whom the cred it is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The finance charge does not i nclude charges of a type payable in a comparable cash transactio n. The finance charge shall not include fees and amounts imposed by third party closing agents (including settlement agents, attorney s, and escrow and title companies) if the creditor does not expres sly require the imposition of the charges or the services provided an d does not re- tain the charges. Examples of charges which are inc luded in thefi- nance charge include any of the following types of charges which are applicable. (1) Interest, time price differential, and any amount p ayable under a point, discount, or other system of additiona l charges. (2) Service or carrying charge. (3) Loan fee, finders fee, or similar charge. (4) Fee for an investigation or credit report. 153 137 (5) Premium or other charge for any guarantee or insurance protecting the creditor against the obligor’s default or other credit loss. (6) Mortgage brokerfees. * * * * * * * {(c) Charges or premiums for insurance, written in connection with any consumercredit transaction, against loss of or damage to property or against liability arising out of the ownership or use of property, shall be included in the finance charge unless a clear and specific statement in writing is furnished by the creditor to the per- son to whom thecredit is extended, setting forth the cost of the in- surance if obtained from or through the creditor, and stating that the person to whom the credit is extended may choose the person through which the insurance is to be obtained.] (c) TREATMENTOF CERTAIN DEBT CANCELLATION AND DEFICIENCY WAIVER CONTRACTS.—Charges or premiums for any insurance or for any voluntary noninsurance product, written in connection with any consumer credit transaction, that provides protections against loss of or damage to property or against part or all of the debtor's liability for amounts in excess of the value of the collateral securing the debtor's obligation, or against liability arising out of the owner- ship or use ofproperty, shall be included in the finance charge un- less a clear and specific statement in writing is furnished by the creditor to the person to whom the credit is extended, setting forth the cost of the insurance or product if obtained from or through the creditor, and stating that the person to whom credit is extended may choose the person through which the insurance or product is to be obtained. (d) If any of the following items is itemized and disclosed in ac- cordance with the regulations of the Board in connection with any transaction, then the creditor need not include that item in the computation of the finance charge with respect to that transaction: (1) * * * * * * * * * * (3) Any tax levied on security instruments or on documents evidencing indebtedness if the payment of such taxes is a pre- condition for recording the instrument securing the evidence of indebtedness. (e) The following items, when charged in connection with any ex- tension of credit secured by an interest in real property, shall not be included in the computation of the finance charge with respect to that transaction: 1) * Ok Ok [(2) Fees for preparation of a deed, settlement statement, or other documents.] (2) Fees for preparation of loan-related documents and for at- tending or conducting settlement. (3) Escrows for future payments of taxes and insurance. (4) Fees for notarizing deeds and other documents. (5) Appraisal fees, including fees related to pest infestations, premises and structural inspections, and flood hazards. (6) Credit reports. 154 138 (0 TOLERANCES FOR ACCURACY.—In conne ction with credit trans- actions not under an open end credit plan that are secured by real property or a dwelling, the disclosure of the f inance charge and other disclosures affected by any finance charge— (1) except as provided in paragraph OQ). shall be treated as being accurate for purposes of this title if the a mount disclosed as the finance charge— (A) does not vary from the actual finance c harge by more than an amount equal to 1% of the numerical to lerance cor- responding to, and generatedby, the tolerance p rovided by section 107(c) with respect to the annual percentage r ate, but in no case may the tolerance under this par agraph be Jess than $25 or greater than $200; or (B) is greater than the amount required to be d isclosed underthis title; and (2) shall be treated as being accurate for purp oses of section 125 if the amount disclosed as the finance charg e does not vary from the actual finance charge by more than an amount equal to 0.5 percent of the total amount of credit extend ed. 7 * *x E d * * oe § 108. Administrative enforcement (a) se OK * * * * * * * fe\(1) * * * 2 * * * * * * (3) Notwithstanding paragraph (2), no adjust ment shall be or- dered (A) if it would have a significantly adve rse impact upon the safety or soundness of the creditor, but [in any such case, the agency may require] in any such case, the ag ency may (i) require a partial adjustment in an amount whic h does not have such an impact[, except that with respect to any trans action consummated after the effective date of section 608 of t he Truth in Lending Sim- plification and Reform Act, the agency shall]; o r (ii) require the full adjustment, but permit the creditor to make the required adjust- ment in partial payments over an extended p eriod of time which the agency considers to be [reasonable,] reason able if, in the case of an agency referred to in paragraph (1), (2), o r (3) of subsection (a), the agency determines that a partial adjust mentor the making of partial payments over an extended period is ne cessary to avoid causing the creditor to become undercapitaliz ed (as determined in accordance with regulations prescribed by such agency under sec- tion 38 of the Federal Deposit Insurance ‘Act); (B) if the amountof the adjustment would be less than $1, exc ept that if more than one year has elapsed since the date of the viol ation, the agency may re- quire that such amount be paid into the Treas ury of the United States, or (C) except where such disclos ure error resulted from a willful violation which was intended to mislead t he person to whom credit was extended, in the case of an open-e nd credit plan, more than two years after the viclation, or in the c ase of any other ex- tension of credit, as follows: 155 139 “(i *** * * * * * * * CHAPTER 2—CREDIT TRANSACTIONS Sec. 121. General requirementof disclosure. 122. Form ofdisclosure; additional information. ae * * * * * * £39. Certain limitations on liability. § 121. General requirement of disclosure (a) * KOK ak * * * * * a (c) The Board may provide by regulation that any portion of the information required to be disclosed by this title may be given in the form of estimates where the provider of such information is not in a position to know exact information. In the case of any consumer credit transaction a portion of the interest on which is de- termined on a per diem basis and is to be collected upon the con- summation of such transaction, any disclosure with respect to such portion of interest shall be deemed to be accurate for purposes of this title if the disclosure is based on information actually known to the creditor at the time that the disclosure documents are being ‘prepared for the consummation of the transaction. * * * * a * * § 125. Right of rescission as to certain transactions (a) *** (b) When an obligor exercises his right to rescind under sub- section (a), he is not liable for any finance or other charge, except any charge for an appraisal report or credit report, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or [otherwise] as otherwise required under this sub- section, and shall take any action necessary or appropriate to re- flect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obli- gor, the obligor may retain possession of it. Upon the performance of the creditor's obligations under this section, the obligor shall ten- der the property to the creditor, except that if return of the prop- erty in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the prop- erty vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court. * x * x * * * (e) This section does not apply to— 156 140 " residential mortgage transaction as defined in section 103(w); (2) a transaction which constitutes a refinancing or consoli- dation (with no new advances), other than a transaction de- scribed in subsection (e)(5), of the principal balance then due and any accrued and unpaid finance charges of an existing ex- tension of credit by the same creditor secured by an interest in the same property; (3) a transaction in which an agency of a State is the credi- tor; [or] (4) advances under a preexisting open endcredit plan if a se- curity interest has already been retained or acquired and such advances are in accordance with a previously established credit limit for such plan[.], or (9) a transaction, other than a mortgage referred to in section 103(aa), which— (A) is a refinancing of the principal balance then due and any accrued and unpaid finance charges of a residential mortgage transaction as defined in section 1 03(w), or is any subsequent refinancing ofsuch a transaction, and (B) does not provide any new consolidation or new ad- vance. * * * * * * * (h) LIMITATION ON RESCISSION.—An obligor shall have no rescis- sion rights arising from the form of written notice used by the credi- tor to inform the obligor of the rights of the obligor under this sec- tion if the creditor provided the obligor the appropriate form of written notice published and adopted by the Board, or a coimparavie written notice of the rights of the obligor, that was properly cor pleted by the creditor. (i) RESCISSION RIGHTS IN FORECLOSURE.— (1) IN GENERAL.—Notwithstanding section 139, and subject to the time period provided in subsection (8, in addition to any other right ofrescission available under this section for a trans- action, upon an action of a creditor to execute foreclosure on the primary dwelling of an obligor securing an extension of credit, the obligor shall have a right to rescind the transaction equiva- lent to other rescission rights providedby this section, if— (A) a mortgage brokers fee is not included in the finance charge in accordance with the laws and regulations in ef- fect at the time the consumer credit transaction was con- summated; or (B) the form of notice of rescission for the transaction is not the appropriate form of written notice published and adopted by the Board or a comparable written notice, or was not properly completed by thecreditor. (2) TOLERANCE FOR DISCLOSURES. —Notwithstanding section 106(, and subject to the time period provided in subsection , for the purposes of exercising any rescission rights following an action by a creditor to foreclose on the principal dwelling of the obligor securing an extension of credit, the disclosure of the fi- nance charge and other disclosures affected by any finance charge shall be treated as being accurate for purposes of this section if the amount disclosed as the finance charge does not 157 141 vary from the actual finance charge by more than $35 or is greater than the amount required to be disclosed under this title. * * * * * * * SEC. 127A. DISCLOSURE REQUIREMENTS FOR OPEN END CONSUMER CREDIT PLANS SECURED BY THE CONSUMER'S PRIN- CIPAL DWELLING. (a) APPLICATION DISCLOSURES.—In the case of any open end consumer credit plan which provides for any extension of credit which is secured by the consumer's principal dwelling, the creditor pal make the following disclosures in accordance with subsection b): (1) FixED ANNUAL PERCENTAGE RATE.—Each annual percent- age rate imposed in connection with extensions of credit under the plan and a statement that such rate does not include costs other than interest. (2) VARIABLE PERCENTAGE RATE.—Inthe case of a plan which provides for variable rates of interest on credit extended under the plan— (A) OK OK * * Ed * * * * (G) subject to subsection (b)(3), a table, based on a $10,000 extension of credit, showing how the annual per- centage rate and the minimum periodic payment amount under each repayment option of the plan would have been affected during the preceding 15-year period by changes in any index used to compute such rate, or a statement that the monthly payment may increase or decrease significantly due to increases in the annual percentage rate, * * a * * * * (b) TIME AND FORM OF DISCLOSURES.— (1) * Ke OK a * * a * * * (3) REQUIREMENT FOR HISTORICAL TABLE.—In preparing the table [required under] referred to in subsection (a)(2)(G), the creditor shall consistently select one rate of interest for each year and the mannerof selecting the rate from year to year shall be consistent with the plan. Ed * * * * * * § 128. Consumercredit not under open end credit plans (a) For each consumer credit transaction other than under an open end credit plan, the creditor shall disclose each of the follow- ing items, to the extent applicable: Q) ae ok Ok * * * * * * * (14) In any variable rate transaction secured by the consum- er's principal dwelling with a term greater than I year, at the creditors’ option, a statement that the monthly payment may in- crease or decrease substantially, or a historical example illus- 158 142 trating the effects of interest rate changes implemented accord- ing to the loan program. (b) (1 OK OK * * * * * * * (3) In.the case of a residenti al mortgage transaction, the disclo- sures under subsection (a) shal l include the following: (A) The note rate and points, and a statement, if applicable, that these terms are subject to chan ge. (B) A statement that the cred itor must include the disclos ed note rate and points in the credit agreement unless, in relation to either or both of those terms— (i) the disclosure clearly and cons picuously indicates that the term is subject to change, or (ii) in the case of any term to which clause (i) does not apply— (1) the creditor has clearly and conspicuously indi- cated that the term is conditioned on closing the trans- action within a prescribed time, (II) the creditor has promptly a nd clearly commu- nicated te the consumer the inf ormation and docu- mentation that the consumer is required to provide to the creditor; and (IID) the consumer has failed to provide such infor- mation and documentation with in a reasonable time after receiving that communication . * * * * a * * £12 teil Wabili§ 130. Civil liability (a) Except as otherwise provided in this section, any creditor who fails to comply with any require ment imposed under this chapter , including any requirement under section 125, or chapter 4 or 5 of this title with respect to any per son is liable to such person in a n amount equal to the sum of— (1) any actual damage sustained by such person as a result of the failure; (2)(A)(@i) in the case of an indi vidual action twice the amoun t of any finance charge in connecti on with the transaction, for] (ii) in the case of an individu al action relating to a consu mer lease under chapter 5 of this titl e, 25 per centum of the total amount of monthly payments und er the lease, except that the liability under this subpara: raph shall not be less than $100 nor greater than $1,000, or ii ) in the case of an individual ac- tion relating to a credit transaction not under an open end cred- it plan that is secured by real pr operty or a dwelling, not less than $250 or greater than $2,500, o r * * * * * * * § 131. Liability of assignees (a) * OK * * * * * oe * (e) LIABILITY OF ASSIGNEE FOR CONSUMER CREDIT TRANSACTI ONS SECURED BY REAL PROPERTY.— 159 143 (1) IN GENERAL.—Except as otherwise specifically provide d in this title, any civil action against a creditor for a viola tion of this title, and any proceeding under section 108 against a cr edi- tor, with respect to a consumer credit transaction secu red by real property may be maintained against any assignee o f such creditor only if— (A) the violation for which such action or procee ding is brought is apparent on the face of the disclosure statemen t provided in connection with such transaction pursuant t o this title; and (B) the assignment to the assignee was voluntary. (2) VIOLATION APPARENT ON THE FACE OF THE DISCLOSUR E DESCRIBED.—For the purpose of this section, a violation is ap- parent on the face of the disclosure statement if— (A) the disclosure can be determined to be incomplete or inaccurate from the face of the disclosure statement, any itemization of the amount financed, or any other dis closure of disbursement; or (B) the disclosure statement does not use the terms orfor- mat requiredto be used by this title. (§ TREATMENT OF SERVICER.— (1) IN GENERAL.—A servicer of a consumer obligati on arising from a consumer credit transaction shall not be treated as an assignee of such obligation for purposes of this section unless the servicer is the owner of the obligation. (2) SERVICER NOT TREATED AS OWNER ON BASIS OF ASSI CN- MENT FOR ADMINISTRATIVE CONVENIENCE.—A _ servicer of -a consumer obligation arising from a consumer credit tran saction shall not be treated as the owner of the obligation for purp oses of this section on the basis of an assignment ofthe obl igation from the creditor or another assignee to the servicer solely for the administrative convenience of the servicer in servicing the obligation. Upon written request by the obligor, the s ervicer shall provide the obligor, to the best knowledge of the serv icer, with the name, address, and telephone number of the owne r of the obligation or the master servicer of the obligation. (3) SERVICER DEFINED.—For purposes of this subsect ion, the term “servicer” has the same meaning as in section 6( i) (2) of the Real Estate Settlement Procedures Actof 1974. * x * * * * * SEC. 139. CERTAIN LIMITATIONSONLIABILITY. (a) LIMITATIONS ON LIABILITY.—For any consumer cre dit trans- action subjectto this title that is consummated before the date of the enactment of the Financial Institutions Regulatory Relief Act of 1995, a creditor or any assignee of a creditor shall have no c ivil, administrative, or criminal liability under this title for, and a consumer shall have no extended rescission rights under sec tion 125(9 with respect to— (1) the creditor's treatment, for disclosure purposes, of— (A) taxes described in section I 06(d) (3); ge fees and amounts described in section 106(e) (2) and 5, fa 160 144 (C) fees and amounts referred to in t he 3rd sentence of section 106(a); or (D) mortgage broker fees referred to in section 106(fa (@; (2) the form of written notice used by the creditor to inform the obligor of the rights of the obligor und er section 125 if the creditor provided the obligor with a prop erly dated form of written notice published and adopted by th e Board or a com- arable written notice; or (3) any disclosure relating to the finance char ge imposed with respect to the transaction if the amountor percentage actually disclosed— (A) may be treated as accurate pursuant to section 106(0, or (B) is greater than the amount or percentag e required to be disclosed underthis title. (b) EXCEPTIONS.—Subsection (a) shall not app ly to— (1) any individual action or counterclaim b rought under this title which was filed before June 1, 1995, (2) any class action brought under this title for which a final order certifying a class was entered before Ja nuary 1, 1993; (3) the ‘named individual plaintiffs in any class action brought under this title which was filed bef ore June 1, 1995; or (4) any consumer credit transaction with r espect to which a timely notice of rescission was sent to the c reditor before June 1, 1995. SECTION 106 OF THE HOUSING AND URB AN DEVELOPMENTAUTUF 1908 TECHNICAL ASSISTANCE, COUNSE LING TO TENANTS AND HOME- OWNERS, AND LOANS TO SPONSOR S OF LOW- AND MODERATE-IN- COME HOUSING Sec. 106. (a) * * * * * * * * * * (c) GRANTS FOR HOMEOWNERSHIP COUNSEL ING ORGANIZATIONS.— (1) * Ok OK o* * * * * * * [() NOTIFICATION OF AVAILABILITY OF HOMEOWNERSHIP COUNSELING.— [(A) NOTIFICATION OF AVAILABILITY OF HOMEOWNERSHIP COUNSELING.— [(i) REQUIREMENT.—-Except as rovided in s ubpara- graph (C), the creditor of a loan (or proposed creditor) shall provide notice under clause (ii) to (i) any eligible homeowner whofails to pay any amount by the date the amount is due under a homeloan, a nd ({I) any ap- plicant for a mortgage described in paragrap h (4). (Gi) ConTENT.—Notification under th is subpara- graph shall— [(Q) notify the homeowner or mortgage applic ant of the availability of any homeownership couns el- ing offered by the creditor (or proposed cred itor); 161 145 [(I]) if provided to an eligible mortgage appli- cant, state that completion of a counseling pro- gram is required for insurance pursuant to section 203 of the National Housing Act; and {(II}) notify the homeowner or mortgage appli- cant of the availability of homeownership counsel- ing provided by nonprofit organizations approved by the Secretary and experienced in the provision of homeownership counseling, or provide the toll- free telephone number described in subparagraph (D)(i). [(B) DEADLINE FOR NOTIFICATION.—The notification re- quired in subparagraph (A) shall be made— {G) in a manner approved by the Secretary; and {(ii) before the expiration of the 45-day period begin- ning on the date on which the failure referred to in such subparagraph occurs. [(C) ExcEPTIONS.—Notification under subparagraph (A) shall not be required with respect to any loan— EG) insured or guaranteed under chapter 37 of title 38, United States Code; or [(ii) for which the eligible homeowner pays the amountoverdue before the expiration of the 45-day pe- riod under subparagraph(B)(ii). [(D) ADMINISTRATION AND COMPLIANCE.—The Secretary shall, to the extent of amounts approved in appropriation Acts, enter into an agreement with an appropriate private entity under which the entity will— [(i) operate a toll-free telephone number through which any eligible homeownercan obtain a list of non- profit organizations, which shall be updated annually, that— {() are approved by the Secretary and experi- enced in the provision of homeownership counsel- ing; and [(I]) serve the area in which the residential property of the homeowneris located: [Gi monitor the compliance of creditors with the re- quirements of subparagraphs (A) and (B); and [(iii) report to the Secretary not less than annually regarding the extent of compliance of creditors with the requirements of subparagraphs (A) and (B). [(E) REPorRT.—The Secretary shall submit a report to the Congress not less than annually regarding the extent of compliance of creditors with the requirements of sub- paragraphs (A) and (B) and the effectiveness of the entity monitoring such compliance. The Secretary shall also in- clude in the report any recommendationsforlegislative ac- tion to increase the authority of the Secretary to penalize creditors who do not comply with such requirements.] * * * * * * 162 146 HOME MORTGAGE DISCLOSUREACTOF 1975 TITLE III-HOME MORTGAGE DISCLOSURE SHORT TITLE SEc. 301. This title may be cited as the “Home Mortgage D isclo- sure Act of 1975”. * * * * * * * MAINTENANCE OF RECORDS AND PUBLIC DISCLOSURE Sec. 304. (a) * * * * * * * * * * (m) OPPORTUNITY TO REDUCE COMPLIANCE BURDEN.— (1) A depository institution will have satisfied the public availability requirements of subsection (a) if such institu tion keeps the information required under that subsection at its homeoffice and provides notice at the branch locations speci fied in such subsection that such information is available upon re- quest from the homeoffice of the institution. A home offic e of the depository institution receiving a request for such in forma- tion pursuant to this subsection shall provide the informat ion pertinent to the location of the branch in question within fifteen days of the receipt of the written request. (2) In complying with paragraph (1), a depository institution may provide the individual requesting such information, at the institution's choice, with— (Aj a paper copy viUe nied (B) if acceptable to the individual, the inf ormation through a form of electronic medium, such as compute r disc. * * * * x * * EFFECTIVE DATE Sec. 309. This title shall take effect on the one hundred and eightieth day beginning after the date of its enactment. A ny insti- tution specified in section 303(2)(A) which has total as sets as of its last full fiscal year of [$10,000,000] $50,000,000 or less is e xempt from the provisions of this title. The Board, in consultat ion with the Secretary, may exempt institutions described in section 303(2)(B) that are comparable within their respective ind ustries to institutions that are exempt under the preceding sentence . The Board may also, by regulation, exept from the provisions o f this Act institutions specified in section 303(2)(A) which h ave total assets as of their last full fiscal year of $50,000,000 or greater whe re the burden of complying with this Act on such institutions outw eighs the usefulness of the information required to be disclosed. T he ex- emptions provided under this section shall not be applicable to an institution which the Board, by order, has found a reasonable basis to believe is not fulfilling its obligations to serve the housing needs of the communities and neighborhoods in which it located. An insti- tution subject to such an order shall be required to comply wi th the requirements of this Act for loans made after the time that the order 163 147 is issued at such time and for such period as the Board deems ap- propriate. The dollar amountin this section shall be adjusted annu- ally after December 31, 1994, by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published by the Bureau ofLabor Statistics. * * * * * * * COMMUNITY REINVESTMENTACT OF 1977 TITLE VIIT—COMMUNITY REINVESTMENT Sec. 801. This title may be cited as the “Community Reinvest- ment Act of 1977”. Sec. 802. (a) * * * [(b) It is the purpose of this title to require each appropriate Federal financial supervisory agency to use its authority when ex- amining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions.] (b) It is the purpose of this title to require each appropriate Fed- eral financial supervisory agency to use its authority, when examin- ing financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such insti- tutions. When examining financial institutions, a supervisory agen- cy shall not impose additional burden, recordkeeping, or reporting upon such institutions. SEc. 803. For the purposes of this title— (1) the term “appropriate Federal financial supervisory agen- cy” means— (A) the Comptroller of the Currency with respect to na- tional banks; * * * * * * * {(2) section 8 of the Federal Deposit Insurance Act, by the Director of the Office of Thrift Supervision, in the case of a savings association (the deposits of which are insured by the Federal Deposit Insurance Corporation) and a savings and loan holding company;] (D) the Director of the Office of Thrift Supervision with respect to any savings association (the deposits of which are insured by the Federal Deposit Insurance Corporation) and any savings and loan holding company (other than a com- pany which is a bank holding company); * * * * * * * (5) SPECIAL PURPOSE INSTITUTIONS.~-The term “special pur- pose institution” means a financial institution that does not generally accept deposits from the public in amounts of less than $100,000, such as wholesale, credit card, and trust institu- tions. 164 148 (6) STATE BANK SUPERVISOR.—The term “S tate bank _super- visor” has the same meaning as in sectio n 3(r) of the Federal Deposit Insurance Act. Sec. 804. (a) IN GENERAL.—In connection with its examination of a financial institution, conducted in accordanc e with section 806A, the appropriate Federal financial supervisory a gency shall— (1) assess the institution's record of meet ing the credit needs of its entire community, including low- and m oderate-income neighborhoods, consistent with the safe and so und operationof such institution; and {(2) take such record into account in its evaluation of an ap- plication for a deposit facility by such institutio n.] (2) take such record into account in the overall evaluation of the condition of the institution by the appropr iate Federal fi- nancial supervisory agency. {(b) MayoriTy-OWNED INSTITUTIONS.—In assessing and taking into account, under subsection (a), the r ecord of a nonminority- owned and nonwomen-ownedfinancial institut ion, the appropriate Federal financial supervisory agency may cons ider as a factor cap- ital investment, loan participation, and other ve ntures undertaken by the institution in cooperation with minority - and women-owned financial institutions and low-income cre dit unions provided that these activities help meet the credit needs of local communities in which such institutions and credit unions are chartered.] (b) POSITIVE CONSIDERATION OF CERTA IN LOANS AND INVEST- MENTS.—In assessing and taking into account the records of a regu- lated financial institution under subsection (a), the appropriate Fed- erai tinafnciai Supe v4 Cy Guia! (i) consider as a positive factor, consist ent with the safe and sound operation of the institution, the institu tion's investment in or loan to— (A) any minority depository institution or wome n's depos- itory institution (as such terms are define d in section 808(b)) or any low-income credit union; (B) anyjoint venture or other entity or project which pro- motes the public welfare in any distressed c ommunity (as defined by such agency) whether or not the di stressed com- munity is located in the local community in wh ich the regu- lated financial institution is chartered to do business; and (C) targeted low- and moderate-income c ommunities, in- cluding real property loans to such communities ; and (2) consider equally with other factors capita l investment, loan participation, and other ventures underta ken by the insti- tution in cooperation with— (A) minority- and women-owned financial ins titutions and low-income credit unions to the extent that these activi- ties help meet the credit needs of the local comm umities in which such institutions are chartered; and (B) community development corporations in extending credit and other financial services principally to low- and moderate-income persons and small businesses t o the extent that such community development corporatio ns help meet the credit needs of the local communities serv ed by the ma- Jority-owned institution. Ci viouiy agon & 165 149 (c) SELF-CERTIFICATION OF CRA COMPLIANCE.— (1) CERTIFICATION.—In lieu of being evaluated under section 806A and receiving a written evaluation under section 807, a qualifying financial institution may elect to self-certify to the appropriate Federal financial supervisory agency that such in- Stitution is in compliance with the goals of this title. (2) QUALIFYING INSTITUTION.— (A) IN GENERAL.—For purposes of paragraph (1), the term “qualifying institution” means a financial institution which— (i) has not more than $250 million in assets; (ii) has not been found to have engaged in a pattern or practice of illegal discrimination under the Fair Housing Act or the Equal Credit Opportunity Act for the preceding 5-year calendar period; and (iti) received rating under section 807(b) (2) of “satis- factory” or “outstanding” in the most recent evaluation. ofsuch institution underthistitle. (B) ANNUAL ADJUSTMENT.—The dollar amount in sub- paragraph (A) shall be adjusted annually after December 31, 1994, by the annual percentage increase in_ the Consumer Price Index for Urban Wage Earners and Cleri- cal Workers published by the Bureau ofLabor ‘Statistics. (3) PUBLIC NOTICE.— (A) IN GENERAL.—A qualifying institution shall maintain in every branch a public notice stating that— (@) the institution has self-certified that the institu- tion is satisfactorily helping to meet the credit needs of its community; and (ii) the institution maintains— () at the main office ofsuch institution, a public file which contains a copy of the self-certification to the appropriate Federal financial supervisory agency; and (ID a map delineating the community served by the institution; iii) a list of the types of credit and services that the institution provides to the community served by the in- stitution; (iv) such other information that the institution be- lieves demonstrates the institution’s record of helping to meet the credit needs of its community; and (v) every public commentor letter to the institution (and any response by the institution) received within the previous 2-year period about the record of the insti- tution of helping to meet the credit needs of its commmu- nity. (B) PUBLIC FILE.—A qualifying institution shall maintain a public file containing the contents described in this para- raph at the institution's main office (4) RATING.— (A) IN GENERAL.—A qualifying institution shall be deemed to have a rating of a “satisfactory record ofmeeting 166 150 community credit needs” for the purposes of this section and section 806A (c). (B) PUBLICATION.—Each Federal finan cial supervisory agency shall publish in the Federal Regis ter once each month a list of institutions that have self-c ertified during the previous month. (C) PUBLICATION CONSTITUTES DISCLOSU RE. —FPublication of the name of the institution in the Feder al Register as having self-certified shall constitute disclosur e of the rating of the institution to the public for purposes of sections 806A and 807. (5) REGULATORY REVIEW.— (A) ASSESSMENT.—During each exami nation for safety and soundness, a qualifying institution's sup ervisory agen- cy shall, as part of the agency's review of th e institution's loans, assess whether the institution's basis for its self-cer- tification is reasonable based on the public notice and the information contained in the public file p ursuant to para- graph (3). (B) EXAMINATION IF SELF-CERTIFICATION IS NOT REASON” ABLE. —If the agency determines that the institution's basis for the institution's self-certification is not reasonable, the agency shall schedule an examination of the institution for the purpose of assessing the institution's record of helping to meet the credit needs of its community. (C) REVOCATION OF SELF-CERTIFICATION.—If an assess- : purenant tn subnaragraph (B) results in a less than “satisfactory” rating, the agency shall revoke the institu- tion’s self-certification and substitute a written evaiuation as provided under section 807. ‘D) PERIOD OF INELIGIBILITY FOR SELF-CERTIFICATION.— An institution whose self-certification has been revoked may not self-certify pursuant to this subsection during the 5 years succeeding the year in which the self-certification is revoked. (E) SUBSEQUENTELIGIBILITY. __After the end of the period of ineligibility described in subparagraph (D), an institu- tion which meets the requirements for self-certification may elect to self-certify. (6) PROHIBITION ON ADDITIONAL REQUIREMENTS.—No appro- priate Federal financial supervisory agency may impose any ad- ditional requirements, whether by regulation or otherwise, relat- ing to the self-certification procedure under this subsection. (d) SPECIAL PURPOSE INSTITUTIONS.— (1) IN GENERAL.—In conducting assessments pursuant to tis section at any special purpose institution, the appropriate Fed- eral financial supervisory agency shall— (A) consider the nature of business such institution is in- volved in; and (B) assess and take into account the record of the institu- tion commensurate with the amountof deposits (as defined in section 3(1) of the Federal Deposit Insurance Act) re- ceived by such institution. 167 151 (2) STANDARDS.—Each appropriate Federal financial super- visory agency shall develop standards under which special pur- pose institutions may be deemed to have complied with the re- quirements of this title which are consistent with the specific nature ofsuch businesses. * ed * * * * * [Sec. 806. Regulations to carry out the purposes of this title shall be published by each appropriate Federal financial super- visory agency, and shall take effect no later than 390 days after the date of enactmentofthistitle.] SEC, 806. REGULATIONS. (a) IN GENERAL.— (1) PUBLICATION REQUIREMENT.—Regulations to carry out the purposes of this title shall be published by each appropriate Federal financial supervisory agency. (2) PROHIBITION ON ADDITIONAL RECORDKEEPING.—Regula- tions prescribed and policy statements, commentary, examiner guidance, or other supervisory material issued under thistitle shall not impose any additional recordkeeping on a financial institution. (3) PROHIBITION ON LOAN DATA COLLECTION.—No loan data may be required to be collected and reported by a financial in- stitution and no such data may be made public by any Federal financial supervisory agency under this title. (b) LIMITATION ON REGULATIONS.—No regulation may be pre- scribed under this title by any Federal agency which would— (1) require any regulated financial institution to— (A) make any loan or enter into any other agreement on the basis of any discriminatory criteria prohibited under any law of the United States; or (B) make any loan to, or enter into any other agreement with, any uncreditworthy person that wouldjeopardize the safety and soundness ofsuch institution, or (2) prevent or hinder in any way a financial institution's full responsibility to provide credit to all segments of the commu- nity. (o ENCOURAGE LOANS TO CREDITWORTHY BORROWERS.—Regula- tions prescribed underthis title shall encourage regulated financial institutions to make loans and extend credit to all creditworthy per- sons, consistent with safety and soundness. * * * * * * * SEC. 806A. COMMUNITYINPUTAND CONCLUSIVE RATING. (a) PUBLICATION OF EXAM SCHEDULE AND OPPORTUNITY FOR COMMENT.— (1) PUBLICATION OF NOTICE.—Each appropriate Federal fi- nancial supervisory agency shall (A) publish in the Federal Register, 30 days before the be- ginning of a calendar quarter, a listing of institutions scheduled for evaluation for compliance with this title dur- ing such calendar quarter; and 168 152 (B) provide opportunity for written comments from the community on the performance, under this title, of each in- stitution Scheduledfor evaluation. (2) COMMENT PERIOD.—Written comments may no t be submit- ted to an appropriate Federal financial supervisory age ncy Pur- suant to paragraph (1) after the end of the 30-day period begin- ning on the first day of the calendar quarter. (3) COPY OF COMMENTS.—The agency shall provide a c opy of such comments to the institution. (b) EVALUATION.—The appropriate Federal financial su pervisory agency shall— (1) evaluate the institution in accordance with th e standards contained in section 804; and (2) prepare and publish a written evaluation of the insti tution as required under section 807. (c) RECONSIDERATION OF RATING.— (1) REQUEST FOR RECONSIDERATION.—A reconside ration of an institution's rating referred to in section 807(b) (1) (C ), may be re- quested within 30 days of the rating’s disclosure to the ublic. (2) PROCEDURES FOR REOUEST.—Any such reque st shall be made in writing and filed with the appropriate ‘eder al finan- cial supervisory agency, and may be filed by the insti tution or a member of the community. (3) BASIS FOR REQUEST.~-Any request for reconsider ation under this subsection shall be based on significant is sues ofa substantive nature which are relevant to the delineated commu- nity of the institution and, in the case of a request by a member sf all ha limited tn issues previously raised _in comments submitted pursuantto subsection (a). (4) COMPLETION OF REVIEW.—The appropriate Federal f inan- cial supervisory agency shall complete any requested rec onsider- ation within 30 days ofthe filing of the request. (d) CONCLUSIVE RATING.— (1) IN GENERAL.—Aninstitution's rating shall become co nclu- sive on the later of— (A) 30 days after the rating is disclosed to the public; or (B) the completion of any requested reconsideration by the Federal financial supervisory agency. (2) RATING CONCLUSIVE OF MEETING COMMUNITY CREDIT NEEDS.--An institution's rating shall be the conclusive assess- mentof the institution's recordof meeting the credit nee ds of its community for purposes of section 804 until the institu tion's next rating, developed pursuant to an examination, becomes conclusive. (3) SAFE HARBOR.—Institutions which have rece ived a “satis- factory” or “outstanding” rating shall be deemed to h ave met the purposes of section 804. (4) RULE OF CONSTRUCTION. —Notwithstanding any other pr o- vision of law, no provision of this section shall be constru ed as granting a cause of action to any person. SEC. 807. WRITTEN EVALUATIONS. (a) x ok (b) PUBLIC SECTION OF REPORT.— (1) FINDINGS AND CONCLUSIONS.—— 169 153 (A) * Oe OK (B) METROPOLITAN AREA DISTINCTIONS.—[The informa- tion} in the case of a regulated financial institution that maintains domestic branches in 2 or more States, the infor- mation required by clauses (i) and (ii) of subparagraph (A) shall be presented separately for each metropolitan area in which a regulated depository institution maintains one or more domestic branch offices. * * * * * * * SEC. 809. EXAMINATION EXEMPTION. (a) IN GENERAL.—A regulated financial institution shall not be subject to the examination requirements of this title or any regula- tions issued under this section if the institution and any bank hold- ing company which controls such institution have aggregate assets ofnot more than $100,000,000. (b) ANNUAL ADJUSTMENT.—The dollar amount in subsection (a) shall be adjusted annually after December 31, 1994, by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers published by the Bureau of Labor Statistics. FEDERAL HOME LOAN BANK ACT * * * * * * * ELIGIBILITY OF MEMBERS AND NONMEMBER BORROWERS SEC. 4. (a) * * * {(b) An institution eligible to become a member underthis sec- tion may become a memberonly of, or secure advances from, the Federal Home Loan Bank of the district in which is located the in- stitution’s principal place of business, or of the bank of a district adjoining such district, if demanded by convenience and then only with the approval of the Board.] (b) MEMBERSHIP BASED ON CONVENIENCY.—An. institution eligible to become a member of a Federal home loan bank under this section may become a member by submitting the institution’s application for membership to the bank in the district where the applicant's principal place of business is located. An application for member- ship shall be approved by the bank if, in thejudgment of the bank, the applicant meets the criteria for eligibility contained in this sec- tion. An institution eligible to become a member under this section may apply for membership in an adjoining district, if appropriate for the convenience of the institution and then only with the ap- proval of the Board. * * * * * * * ADVANCES TO MEMBERS SEc. 10. (a) * * * * * * * * * * (g) COMMUNITY SUPPORT REQUIREMENTS.— 170 154 (1) *** * * * * * * * (3) SPECIAL RULE.—This subsection shall not app ly to mem- bers receiving a grade of “outstanding” or “satis factory” under section 807 of the Community ReinvestmentActof 1 977. * * * * * * * GENERAL POWERS AND DUTIES OF BANKS Sec. 11. (a) * * * x « * * * * * [(j) Notwithstanding the provisions of the first sentence of sec- tion 202 of the Government Corporation Control Ac t, audits by the General Accounting Office of the financial transact ions of a Federal Home Loan Bankshall not be limited to periods during which Gov- ernment capital has been invested therein. The provisions of the first sentence of subsection (d) of section 303 of the Government Corporation Control Act shall not apply to any Fed eral Home Loan Bank. (j) AUDITS.— ~ (1) Notwithstanding any other provision of law, au dits by the Comptroller Generalof the United States of the fi nancial trans- actions of a Federal home loan bank shall not b e limited to pe- riods during which Governmentcapital has been invested in the bank. The provisionsofsection 9107,(c)(2) and 91 08(d)(1) of title 31. of such Code, shall not apply to any Federal home loan bank. (2) Notwithstanding any other provision of law , the Board shall not participate in the hiring of an external auditor by the banks; except, that the Board may establish requ irements for ex- ternal audit contracts and, that all 12 banks shal l contract for an annual audit with a single provider. * * * * * * * FEDERAL DEPOSIT INSURANCE ACT a cd * * * * * Src. 3. As used in this Act— (a) eo Ok ok * * * * * ed {(o} The term] (0) DEFINITIONS RELATING T O BRANCHES.— (1) DOMESTIC BRANCH.— (A) IN GENERAL.—The term “domestic bra nch” includes any branch bank, branch office, branch agency, additional office, or any branch place of business located in any State of the United States or in any Territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, or the Virgin I slands at which deposits are received or checks paid or m oney [lent; and the term] Jent. (B) CERTAIN PROPRIETARY ATMS AND REMOTE S ERVICING UNITS.—The term “domestic branch” does not i nclude any 171 155 automated teller machine or remote service unit which is owned and operated by a depository institution— () primarily for the benefit of the institution and the affiliates of the institution; and (ii) which could operate a branch at the location of such machine or unit. (2) FOREIGN BRANCH.—The term “foreign branch” means any office or place of business located outside the United States, its territories, Puerto Rico, Guam, American Samoa,or the Virgin Islands, at which banking operations are conducted. * * * * Ey * * (u) INSTITUTION-AFFILIATED PARTY.—The term “institution-affili- ated party” means— (1) any director (other than an outside director), officer, em- ployee, or controlling stockholder (other than a bank holding company) of, or agent for, an insured depository institution; * 2 * *x * * * (3) any shareholder (other than a bank holding company), consultant, joint venture partner, and any other person (other than an outside director) as determined by the appropriate Federal banking agency (by regulation or case-by-case) who participates in the conduct of the affairs of an insured deposi- tory institution; and (4) any independent contractor (including any attorney, ap- praiser, or accountant) or outside director who knowingly or recklessly participates in— (Ay ek OK * * * * * * * SEC. 5. DEPOSIT INSURANCE. (a x ok OK * * * * * a" a (d) INSURANCE FEES.— (1) eK OK * Ed * * 2K * * (3) OPTIONAL CONVERSIONS SUBJECT TO SPECIAL RULES ON DEPOSIT INSURANCE PAYMENTS.— (A) CONVERSIONS ALLOWED.—Notwithstanding para- graph (2)(A), and subject to the requirements of this para- graph, any insured depository institution may participate in a transaction described in clause(ii), (iii), or (iv) of para- graph (2)(B) [with the prior written approval of the re- sponsible agency undersection 18{c)(2)]. * * * * * * * (E) CONDITIONS [FOR APPROVAL, GENERALLY].— [() FacTORS TO BE CONSIDERED; APPROVAL PROC- Ess.—In reviewing any application for a proposed transaction under subparagraph (A), the responsible agency shall follow the procedures and consider the factors set forth in section 18(c). 172 156 {(ii) INFORMATION REQUIRED.—An application to en- gage in any transaction under this paragrap h shall contain such information relating to the factors to be considered for approval as the responsible agency may require, by regulation or by specific request, in connec- tion with any particular application. [Gii)] Gj) No TRANSFER OF DEPOSIT INSUR ANCE PER- MITTED.—This paragraph shall not be construed as au- thorizing transactions which result in the trans fer of any insured depository institution's Federal dep osit in- surance from 1 Federal deposit insurance fund to the other Federal deposit insurance fund. [(iv) MINIMUM CAPITAL.—The responsib le agency shall disapprove any application for any trans action under this paragraph unless such agency deter mines that the acquiring, assuming, or resulting depo sitory institution will meet ail applicable capital re quire- ments upon consummation 0 the transactio n.] (ii) A transaction shall not be authorized under this paragraph unless the acquiring, assuming, or r esulting depository institution will meet all applicable capital requirements upon consummation of the t ransaction. * * * * * * [(G) EXPEDITED APPROVAL OF ACQUISITIO NS.~— [(i) IN GENERAL.—Any application by a State nonmember insured bank to acquire another insured denository institution that is required to be filed with the Corporation by subparagraph \A) oratly Vi lici ap- plicable law or regulation Shail be approved o r dis approved in writing by the Corporation before th e end of the 60-day period beginning on the date suc h appli- cation is filed with the Corporation. [(ii) EXTENSIONS OF PERIOD.—The perio d for ap- proval or disapproval referred to in clause (i) may be extended for an additional 30-day period if t he Cor- poration determines that— [()) an applicant has not furnished all of the in- formation required to be submitted; or {(ID) in the Corporation's judgment, any mate- rial information submitted is substantially inac- curate or incomplete. {(H)] (G) ALLOCATION OF COSTS IN EVENT O F DEFAULT.— If any acquiring, assuming, or resulting deposito ry institu- tion is in default or danger of default at any t ime before this paragraph ceases to apply, any loss incurre d by the Corporation shall be allocated between the Bank Insurance Fund and the Savings Association Insurance Fund, in amounts reflecting the amount of insured deposi ts of such acquiring, assuming, or resulting depository institution as- sessed by the Bank Insurance Fund and the Sav ings Asso- ciation Insurance Fund, respectively, under sub paragraph ). {()] (A) SUBSEQUENT APPROVAL OF CONVERSION TRANS- ACTION.—This paragraph shall cease to apply if-— 173 157 (i) after the end of the moratorium period estab- lished by paragraph (2)(A), the Corporation approves an application by any acquiring, assuming, or result- ing depository institution to treat the transaction de- scribed in subparagraph (A) as a conversion trans- action; and (ii) the acquiring, assuming, or resulting depository institution pays the amount of any exit and entrance fee assessed by the Corporation under subparagraph (E) of paragraph (2) with respect to such transaction. {J)] @ AcQUIRING, ASSUMING, OR RESULTING DEPOSI- TORY INSTITUTION DEFINED.—For purposes of this para- graph, the term “acquiring, assuming, or resulting deposi- tory institution” means any insured depository institution which— (i) results from any transaction described in para- graph (2)(B)(ii) and approved under this paragraph; * * * * * * * SEC. 7. (a) * * * * * * * * * * [(k) The appropriate Federal banking agencies are authorized to issue rules and regulations, including definitions of terms, to re- quire the reporting and public disclosure of information by a bank or any executive officer or prinicipal shareholder thereof concerning extensions of credit by the bank to anyof its executive officers or principal shareholders, or the related interests of such persons.] * Ed * * * o * SEc. 10. (a) * * * * * * * * * * (d) ANNUAL ON-SITE EXAMINATIONS OF ALL INSURED DEPOSITORY INSTITUTIONS REQUIRED.— (1) Ok Ok * * * * * ak * (8) REPORT.—At the time the system provided for in para- graph (6) is established, the Federal banking agencies shail submit a joint report describing the system to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Banking, Finance and Urban Affairs of the House of Representatives. Thereafter, the Federal banking agencies shall annually submit a joint report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Banking, Finance and Urban Affairs of the House of Representatives regarding the progress of the agen- cies in implementing the system and indicating areas in which enhancements to the system, including legislature improve- ments, would be appropriate. L(8)] (9) AGENCIES AUTHORIZED TO INCREASE MAXIMUM ASSET AMOUNTOF INSTITUTIONS FOR CERTAIN PURPOSES.—At any time after the end of the 2-year period beginning on the date of en- actmentof the Riegle Community Development and Regulatory Improvement Act of 1994, the appropriate Federal banking 174 158 agency, in the agency's discretion, may increase th e maximum ammount limitation contained in paragraph (4)(C) (i) , by regula- tion, from $100,000,000 to an amount not to exceed £$175,000,000) $250,000,000 for purposes of such p aragraph,if the agency determines that the greater amount wo uld be con- sistent with the principles of safety and soundness for insured depository institutions. fol (10) STANDARDS FOR DETERMINING ADE QUACY OF STATE EXAMINATIONS.—The Federal Financial Institution s Examina- tion Council shall issue guidelines establishing stand ards to be used at the discretion of the appropriate Federal ba nking agen- % for purposes of making a determination under paragraph 3). (11) ANNUAL CPI ADJUSTMENT. —The dollar a mount in this section shall be adjusted annually after December 3 1, 1994, by the annual percentage increase in the Consumer Pri ce Index for Urban Wage Earners and Clerical Workers publi shed by the Bureau of Labor Statistics. * *x * * * * * (j) CONSULTATION AMONG EXAMINERS.— (1) IN GENERAL.—Each appropriate Federal banking agency shall take such action as may be necessary to ensure that exam- iners employed by the agency— (A) consult on examination activities with r espect to any depository institution, and (B) achieve an agreement and resolve any inconsis tencies ¥ ~ tn ha aiven ta ouch institution as Uii iit 1 TY. a a consequence of any examinations. (2) EXAMINER-IN-CHARGE.—Each agency shall consider ap- pointing an examiner-in-charge with respect to a depository in- ‘stitution to ensure consultation on examination activities among all of the agency's examiners involved in examinations of such institution. * * * a * * * Sec. 18. (a) * * * x * * * * * * (c)(1) * * * * * * * * * * (12) The provisions of this subsection shall not apply to any merger, consolidation, acquisition of assets or ass umption of Ii- abilities involving only insured depository institution s that are subsidiaries of the same depository institution holding company (A) the responsible agency would not be prohibited fr om approving the transaction under section 44, if applicabl e; (B) the acquiring, assuming, or resulting institution co m- plies with all applicable provisions of section 44, if any , as if the merger, consolidation, or acquisition were approv ed under this subsection; (C) the acquiring, assuming, or resulting institution pr o- vides written notification of the transaction to the ap pro- 175 159 priate Federal banking agency for the institution at least 10 days prior to consummation of the transaction; and (D) after receiving such notice, the agency does not re- quire the institution to submit an application with respect to such transaction and so notifies the institution. (d)(1) * * * aK * * * aK * * (5) APPLICATION EXEMPTION FOR CERTAIN BANKS.—Notwith- standing paragraph (1), the consent of the Corporation shall not be required for a State nonmember insured bank to estab- lish and operate any domestic branch if— (A) the bank is well-capitalized (as defined in section 38 and regulations prescribed by the Corporation under such section); (B) the bank received a composite CAMEL rating of “I” or “2” under the Uniform Financial Institutions Rating System (or an equivalent rating under a comparable rating system) as of its most recent examination; (C) the bank did not receive a “needs to improve”or “sub- stantial noncompliance” composite rating as result of the bank's most recent examination under the Community Re- investment Act of 1977; and (D) the Corporation is otherwise authorized to give con- sent under this section to such bank to establish and oper- ate a domestic branch at the proposed Jocation. (6) APPROVAL GRANTED.—A branch established by a State member bank under paragraph (5) shall be deemed to have been established and operated pursuant to an application ap- proved under this section. * * * * * * * (s) CUSTOMER ACCESS TO PRODUCTS.— (1) IN GENERAL.—Notwithstanding any other provision of Jaw, any depository institution, or any affiliate or subsidiary of any depository institution, may share or exchange information or otherwise transfer information between or among themselves without any restriction or limitation if it is clearly and con- spicuously disclosed that the information may be communicated among such persons and the consumer is given the opportunity, before the time that the information is initially communicated, to direct that such information not be communicated among such persons. (2) DEFINITION.—For purposes of this subsection, the term “information” means any and all data, records, or other infor- mation and material obtained or maintained by any depository institution or any affiliate or subsidiary thereof in the ordinary course of its business that relates in any way to a person (as such term is defined in section 603(b) of the Fair Credit Report- ing Act) who applies for, maintains, or has maintained an ac- count or credit relationship with or applied for, purchased or obtained other products or services from any depository institu- tion or any affiliate or subsidiary of any depository institution, regardless of the source of manner in which the information is obtained or furnished. 176 160 (3) RULE OF CONSTRUCTION.-—Any depository ins titution, or any affiliate or subsidiary of any depository i nstitution, relying on this subsection shall not be deemed to be a cons umer report ing agency, user, or third party, and the informatio n itself shall not constitute a consumer report, within the m eaning of the Fair Credit Reporting Act or other similar law. * * 2 * * * Ed SEC. 24. ACTIVITIES OF INSURED STATE BAN KS. . [(a) IN GENERAL.—After the end of the l-year period beginning on the date of the enactmentof the Federal Deposit Insurance Cor- poration Improvement Act of 1991, an insured Sta te bank may not engage as principal in any type of activity that is not permissible for a national bank unless— [(1) the Corporation has determined that the activity would pose no significant risk to the appropriate deposi t insurance fund; and {(2) the State bank is, and continues to be, in compliance with applicable capital standards prescribed by t he appropriate Federal banking agency.] (a) ACTIVITIES GENERALLY.— (1) IN GENERAL.—An insured State bank may no t engage as principal in any type of activity that is not permiss ible for a na- tional bank unless— (A) the bank has given the Corporation written notice of the bank's intention to engage in such activity at least 60 ; j ae in the activity and with- ithin the extended period pro- Gayo veiuic Lua ‘Oofor vw in such 60-day period “A vided under paragraph (2)) the Corporation has not dis- approvedthe activity; and (B) the State bank is, and continues to be, i n compliance with applicable capital standards prescribed by the appro- viate Federal banking agency. (3EXTENSION OF PERIOD.--The Corporation may extend the 60-day period referred to in paragraph (1) for iss uing a notice of disapproval with respect to any activity for an a dditional 30 days. (3) CONTENTS OF NOTICE.—Any notice submitted b y a State bank under paragraph (1){A) shall contain su ch information as the Corporation may require. (4) BASIS FOR DISAPPROVAL.—The Corpora tion may dis- approve an activity for a State bank under this subs ection un- less the Corporation determines that the activity wou ld pose no significant risk to the appropriate insurance fund. ¥* * * * * * * (d) SUBSIDIARIES OF INSURED STATE BANKS.— [(1) IN GENERAL.—After the end of the 1-year perio d begin- ning on the date of the enactment of the Federal D eposit In- surance Corporation Improvement Act of 1991, a su bsidiary of an insured State bank may not engage as principal in any type of activity that is not permissible for a subsidiary of a national bank unless— 177 161 [(A) the Corporation has determined that the activity poses nosignificant risk to the appropriate deposit insur- ance fund; and ((B) the bank is, and continues to be, in compliance with applicable capital standards prescribed by the appropriate Federal banking agency.] (1) ACTIVITIES GENERALLY.— (A) IN GENERAL.—A subsidiary of an insured State bank may not engage as principal in any type of activity that is not permissible for a subsidiary of a national bank un- less— @ the subsidiary has given the Corporation written notice of the subsidiary's intention to engage in such activity at least 60 days before commencing to engage in the activity and within such 60-day period (or with- in the extended period provided under paragraph (2)) the Corporation has not disapproved the activity; and (ii) the bank is, and continues to be, in compliance with applicable capital standards prescribed by the ap- propriate Federal banking agency. (B) EXTENSION OF PERIOD.—The Corporation may extend the 60-day period referred to in subparagraph (A) for issu- ing a notice of disapproval with respect to any activity for an additional 30 days. (C) CONTENTS OF NOTICE.—Any notice submitted by a subsidiary of an insured State bank under subparagraph (A)@ shall contain such information as the Corporation may require. (D) BASIS FOR DISAPPROVAL.—The Corporation may dis- approve an activity for a subsidiary of an insured State bank under this paragraph unless the Corporation deter- mines that the activity would pose no significant risk to the appropriate insurance fund. * * * * * * * SEC. 32. AGENCY DISAPPROVAL OF DIRECTORS AND SENIOR EXECU- TIVE OFFICERS OF INSURED DEPOSITORY INSTITUTIONS OR DEPOSITORY INSTITUTION HOLDING COMPANIES. (a) *** * * * * * * * [(d) ADDITIONAL INFORMATION.—Any notice submitted to an ap- propriate Federal banking agency with respect to an individual by any insured depository institution or depository institution holding company pursuant to subsection (a) shal! include— [(1) the information described in section 7(j)(6)(A) about the individual; and [(2) such other information as the agency may prescribe by regulation.] (d) ADDITIONAL INFORMATION.— (1) IN GENERAL.—Any notice submitted to an appropriate Federal banking agency with respect to an individual by any insured depository institution or depository institution holding company pursuant to subsection (a) shall include— 178 162 (A) the information described in section 7) (6) (A) about the individual; and (B) such other information as the agency may pre scribe by regulation. (2) WAIVER.—An appropriate Federal banking agency m ay waive the requirement of this section by regulation or on a ca se- by-case basis consistent with safety and soundness. * * * * * * * SEC. 36. EARLY IDENTIFICATION OF NEEDED IMPROVEMENTSIN FI- NANCIAL MANAGEMENT. (a) ANNUAL REPORT ON FINANCIAL CONDITION AN D MANAGE- MENT.— (1) xR OK (2) CONTENTS OF REPORT.—Any annual report requir ed under paragraph (1) shail contain— tA) the information required to be provided by— () the institution's management under subsecti on (b); and (ii) an independent public accountant under [sub- sections (c) and (d)] subsection (c}: and (3) PUBLIC AVAILABILITY.—Any annual report required u nder paragraph (1) shail be available for public inspection. Not with- standing the preceding sentence, the Corporation and the a ppro- priate Federal banking agencies may designate certain inf orma- tion as privileged and confidential and not available to the pub- lic. * * * cd * a * [(c) INTERNAL CONTROL EVALUATION AND REPO RTING REQUIRE- MENTS FOR INDEPENDENT PUBLIC ACCOUNTANTS.— [(i) IN GENERAL.—With respect to any internal control re- port required by subsection (b)(2} of any institution, t he insti- tution’s independent public accountant shall attest to, and re- port separately on, the assertions of the institution’s ma nage- ment contained in such report. [(2) ATTESTATION REQUIREMENTS.—Any attestation pur suant to paragraph (1) shall be made in accordance with gen erally accepted standardsfor attestation engagements. [(d)] () ANNUAL INDEPENDENT AUDITS OF FIN ANCIAL STATE- MENTS.— (1) AUDITS REQUIRED.—The Corporation, in consu ltation with the appropriate Federal banking agencies, shall prescrib e regu- lations requiring that each insured depository institutio n shall have an annual independent audit made of the instituti on's fi- nancial statements by an independent public accountant in ac- cordance with generally accepted auditing standards and s ec- tion 37. * * * * * * * [(e) DETECTING AND REPORTING VIOLATIONS OF LAWS AND REGULATIONS.— [(1) IN GENERAL.—An independent public accountant shall apply procedures agreed upon by the Corporation to object ively determine the extent of the compliance of any insure d deposi- 179 163 tory institution or depository institution holding company with laws and regulations designated by the Corporation, in con- sultation with the appropriate Federal banking agencies. [(2) ATTESTATION REQUIREMENTS.—Anyattestation pursuant to paragraph (1) shall be made in accordance with generally accepted standards for attestation engagements. [1 (d) FoRM AND CONTENT OF REPORTS AND AUDITING STAND- ARDS.— (1) IN GENERAL.—The scope of each report by an independent public accountant pursuant to this section, and the procedures followed in preparing such report, shall meet or exceed the scope and procedures required by generally accepted auditing standards and other applicable standards recognized by the Corporation. * * * * * * * [(g)] @ IMpROvED ACCOUNTABILITY.— (1) INDEPENDENT AUDIT COMMITTEE.— (A) ESTABLISHMENT.—Each insured depository institu- tion (to which this section applies) shall have an independ- ent audit committee entirely made up of outside directors who are independent of management of the institution, and whosatisfy any specific requirements the Corporation may establish. (B) Duties.—An independent audit committee's duties shall include reviewing with management and the inde- pendent public accountant the basis for the reports issued under subsections [(b)(2), (c), and (d)] (6) (2) and (c). * * * * * * * [(h)] (9 EXCHANGE OF REPORTS AND INFORMATION.— (1) REPORT TO THE INDEPENDENT AUDITOR.— (A) IN GENERAL.—Each insured depository institution which has engaged the services of an independent auditor to audit such institution shall transmit to the auditor a copy of the most recent report of condition made by thein- stitution (pursuant to this Act or any other provision of law) and a copy of the most recent report of examination received by the institution. Ed * a * * * * [G@)] (@) REQUIREMENTS FOR INSURED SUBSIDIARIES OF HOLDING COMPANIES.— (1) IN GENERAL.—Except with respect to any audit require- ments established under or pursuant to subsection [(d)}] (@), the requirements of this section may be satisfied for insured depository institutions that are subsidiaries of a holding com- pany, if— (A) * Ok Ox * * * * * * * [G)] (f) EXEMPTION FOR SMALL DEPOSITORY INSTITUTIONS.—This section shall not apply with respect to any fiscal year of any in- sured depository institution the total assets of which, as of the be- ginning of such fiscal year, are less than the greater of— 180 164 (1) x OK OX * * * * * * * Gi) EXEMPTION FOR WeELL-CAPITALIZED AND WELL-M ANAGED In- SURED DEPOSITORY INSTITUTIONS.—No_ provision of t his section other than subsection (c) shall apply with respect to any ins ured de- pository institution which is well-capitalized and well-manage d. * * * * * * * SEC. 42. NOTICE OF BRANCH CLOSURE. (a) *** * * * * * * * (e) SCOPE OF APPLICATION.— (1) IN GENFRAL.—-This section shall not apply with resp ect to-—— (A) an automated teller machine; (B) a branch which— (ij) has been acquired through merger, consolidation, purchase, assumption, or other method; and fii) is located— () within 2.5 miles of another branch of the ac- quiringinstitution, or (I) within a neighborhood currently being served by another branch of the acquiring institu- tion, if such other branch of the acquiring institution is expecte d to continue to provide banking services to substanti ally all of the customers currently served by Ue Manis acquir ed, (C) a branch which is ciosing ana reopening at a socalion which is— Gi) within 2.5 miles of the location of the branc h being closed; or Gi) within the same neighborhood as the bra nch being closed, if the branch at the new location is expected to continu e to provide banking services to substantially all of the c us- tomers served by the branch at the formerlocation; (D) a branch thatis closed in connection with— (i) an emergency acquisition under— (2) section 11(n); or (11) subsections (0) or (k) ofsection 13; or: (ii) any assistance provided by the Corporation under section 13(¢); and (E) any other branch closure whose exemption from the notice requirements of this section would not produce a re- sult inconsistent with the purposes of this section. (2) REGULATIONS.—The appropriate Federal banking age ncy shall, by regulation, determine the circumstances under which any exemption under paragraph(1)(E) may be granted. * * * * * * * SEC. 45. LENDER, FIDUCIARY, AND GOVERNMEN T AGENCY ENVIRON- MENTAL LIABILITIES. (a) LENDER ENVIRONMENTAL LIABILITY.— 181 165 (1) IN GENERAL.—Notwithstanding any other provision or rule of Federal law, no lender, acting as defined in this section, Shall be liable pursuant to a Federal environmental law, except as providedin this section. & ACTUAL PARTICIPATION REQUIRED.—A lender shall only be liable pursuant to a Federal environmental law when the lender actually participates in management of another person's activi- ties which create liability under the same Federal environ- mental law. (3) DEFINITIONS.—The following definitions shall apply for purposes of this section: (A) PARTICIPATE IN MANAGEMENT.—Theterm ‘participate in management” means actually participating in the man- agement or operational affairs of other persons’ activities, and does not include merely having the capacity to influ- ence, or the unexercised right to control such activities; (B) PARTICIPATE IN MANAGEMENT.—A person shall be considered to ‘participate in management” while a bor- rower is still in possession of property, only if such per- son— (i) exercises decisionmaking control over the environ- mental compliance of a borrower, such that the person has undertaken responsibility for the hazardous sub- stance handling or disposal practices of the borrower; or (ii) exercises control at a level comparable to that of a manager of the enterprise of the borrower, such that the person has assumed or manifested responsibility for the overall management of the enterprise encom- passing day-to-day decisionmaking with respect to en- vironmental compliance, or with respect to substan- tially all of the operational aspects (as distinguished from financial or administrative aspects) of the enter- prise, other than environmental compliance. (C) PARTICIPATE IN MANAGEMENT.—The term “participate in management” does not include engaging in an act or failing to act before the time that an extension of credit is made or a security interest is created in property. (D) PARTICIPATE IN MANAGEMENT.—The term “participate in management” does not include, unless such actions rise to the level of participating in management (as defined in subparagraphs (A) and (B))— (i) holding an extension of credit or a security inter- est or abandoning or releasing an extension of credit or a Security interest; (ii) including in the terms of an extension of credit, or in a contract or security agreement relating to such an extension, covenants, warranties, or other terms and conditions that relate to environmental compliance; (iii) monitoring or enforcing the terms and conditions of an extension of credit or security interest; (iv) monitoring or undertaking I or more inspections ofproperty, except that monitoring or undertaking any such inspection, although not required by this sub- 182 166 section, shall provide probative evidence that a h older of a security interest is acting to preserve and protect the property during the time the holder may h ave pos- session or control ofsuch properly, . (v) requiring or conducting a response action or other lawful means of addressing the release or threa tened release of a hazardous substance in connection with property prior to, during, or upon the expiration of the term of an extension of credit; (vi) providing financial or other advice or couns eling in an effort to mitigate, prevent, or cure defa u lt or dim- inution in the value of the property, (vii) restructuring, renegotiating, or otherwise agree- ing to alter the terms and conditions of an exte nsion of credit or security interest, or exercising fo rbearance, or (viii) exercising other remedies that may be av ailable under applicable law for the breach of any term or con- dition of the extension of credit or security agr eement. (E) When a lender did not participate in mana gement of property prior to foreclosure, then the lender sh all not be liable even if such person forecloses on property , sells, re- leases, or liquidates property, maintains busine ss activities, winds up operations, or undertakes any res ponse action with respect to property, or takes other measur es to pre- serve, protect, or prepare property prior to sale or disposi- tion, if such person seeks to sell, release, or oth erwise divest the property at the earliest practical, commerci ally reason- able ume, Of Cunuiueiviatiy cc : ta king intn accouni market conditions and lega: quirements. (4) LIMITATION ON LIABILITY.—The liability of any lender that is liable under any Federal environmental law shall be limited to only the cost of any response action or co rrective action to the extent and in the amount that the lender activ ely and directly contributed to the hazardous substance release. A lender shall not be liable for the cost of any response actio n or corrective ac- tion relating to the release ofa hazardous. substa nce which com- mences before and continues after the lender ob tains a security interest in the property so long as the lender does not actively and directly contribute to the hazardous substanc e release. (b) FIDUCIARY ENVIRONMENTAL LIABILITY.— (1) IN GENERAL.—Notwithstanding any other provision or rule of Federal law, no fiduciary, acting as def ined in this sec- tion, shall be liable pursuant to any Federal environmental law, except as providedin this section. (2) LIABILITY OF FIDUCIARY.— (A) Subject to subparagraphs (B) and ( C), a fiduciary holding title to property or otherwise affiliated with prop- erty solely in a fiduciary capacity shall be perso nally sub- ject to the obligations and liabilities of any p erson under any Federal environmental law, to the same exte nt as if the property were held by the fiduciary free of trust. (B) The personal obligations and liabilities of a f iduciary referred to in subparagraph (A) shall be limited to the ex- hidc iy it regulatory re- 183 167 tent to which the assets of the trust or estate are sufficient to indemnify the fiduciary, unless— (i) the obligations and Iiabilities would have arisen even if the person had not served as a fiduciary; (ii) the fiduciary’s own failure to exercise due care with respect to property caused or contributed to the re- lease of hazardous substances following establishment of the trust, estate, or fiduciary relationship; or (iii) the fiduciary had a role in establishing the trust, estate, or fiduciary relationship, and such trust, estate, or fiduciary relationship has no objectively reasonable or substantial purpose apart from the avoidance or limitation ofliability under an environmental law. Nothing in the preceding sentence shall be construed as re- quiring indemnification by an employee benefit plan (with- in the meaning of paragraph (3) of section 3 of Employee Retirement Income Security Act of 1974), or by any trust forming a part thereof, of any fiduciary of such plan con- trary to the terms of the plan or in an amount in excess of the amount permitted under the terms ofsuch plan. _ (C) A fiduciary shall not be personally liable for under- taking or directing another to undertake a response action. (3) RULE OF CONSTRUCTION.—No provision of this subsection Shall be construed as affecting the liability, if any, of any per- son who— (A)() acts in a capacity other than a fiduciary capacity; and (ti) directly or indirectly benefits from a trust or fiduciary relationship; or (B) i) is a beneficiary and a fiduciary with respect to the same fiduciary estate; and (ii) as a fiduciary, receives benefits that exceed customary or reasonable compensation, and incidental benefits, per- mitted under other applicable laws. (¢) DEFINITIONS.—For purposes of subsections (a) and (b), the fol- lowing definitions shall apply: (1) FEDERAL ENVIRONMENTAL LAW.—The term “Federal envi- ronmental law" means any Federal statute or rule of common law with the purpose ofprotection of the environment and any Federal regulation promulgated thereunder and any State stat- ute or regulation created as a federally approved or delegated program implementing these laws, including the following: (A) The Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. 136 et seq.). (B) The Toxic Substances Control Act (15 U.S.C. 2601 et seq.). (C) The Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.). my The Oil Pollution Act of 1990 (33 U.S.C. 2701 et seq.). (E) The Clean Air Act (42 U.S.C. 7401 et seq.). eo The Solid Waste Disposal Act (42 U.S.C. 6901 et seq.). 184 168 (G) The Comprehensive Environmental Response, Co m- pensation, and Liability Act of 1980 (42 U.S.C. 96 01 et seq.). dey The Pollution Prevention Act of 1990 (42 US.C. 13101 et seq.). (2) EXTENSION OF CREDIT.—The term “extension of credit” means the making or renewal of any Joan, a granting of a line of credit or extending credit in any manner, such as an advance by means of an overdraft or the issuance of a standby letter of credit, and a lease finance transaction— (A) in which the lessor does not initially select the leased property and does not, during the lease term, control the daily operation or maintenance of the property, or (B) that conforms with regulations issued by the appro- priate Federal banking agency or the appropriate State bank supervisory (as these terms are defined in section 3 of the Federal Deposit Insurance Act or with regulations is- sued by the National Credit Union Administration Board, as appropriate. (3) Fipuctary.—The term “fiduciary” means a person who acts for the exclusive benefit of another person as a bona fide fiduciary within the meaning of section 3(21) of the Employee Retirement Income Security Act of 1974, trustee, executor, ad- ministrator, custodian, guardian, conservator, receiver, commit- tee of estates of lunatics or other disabled persons, or personal representative; except, that the term “fiduciary” does not include any person— (A) who owns, or controls, 1S Gililiditu wii, vi taacs Giz; action with respect to property on behalf of or for the bene- fit of a lender or takes any action to protect a lender's ex- tension of credit or security interest (any such person shall be treated as a lender under subsection (a) of this section); or (B) who is acting as a fiduciary with respect to a trust or other fiduciary estate that— Gi) was not created as part of. or to facilitate, one or more estate plans or pursuant to the incapacity of a natural person; and (ii) was organized for the primary purpose of, or is engaged in, actively carrying on a trade or business for profit. (4) FINANCIAL OR ADMINISTRATIVE ASPECT.—The term “finan- cial or administrative aspect” means a function such as a credit manager, accounts payable officer, accounts receivable officer, personnel manager, comptroller, or chief financial officer, or any similar function. (5) FORECLOSURE, FORECLOSE.—The terms “foreclosure” and “foreclose” means, respectively, acquiring, and to acquire, prop- erty through— (A) purchase at sale under a judgment or decree, a power of sale, a nonjudicial foreclosure sale, or from a trustee, deed in lieu of foreclosure, or similar conveyance, or through repossession, if such property was security for an extension of credit previously contracted; 185 169 (B) conveyance pursuant to an extension of credit pre- viously contracted, including the termination of a lease agreement; or (C) any other formal or informal manner by which the person acquires, for subsequent disposition, possession of collateral in order to protect the security interest of the per- Son. (6) HAZARDOUS SUBSTANCE.—The term “hazardous sub- stance” means any chemical, biological, organic, inorganic, or radioactive pollutants, contaminants, materials, waste, or other substances regulated under, defined, listed, or included in any Federal environmental law. (7) LENDER.—The term “lender” means— (A) a person that makes a bona fide extension of credit to or takes a security interest from another person and in- cludes a successor or assign of the person which makes the extension of credit or takes the security interest; (B) the Federal National Mortgage Association, the Fed- eral Home Loan Mortgage Corporation, the Federal Agri- cultural Mortgage Corporation, or other entity that in a bona fide manner is engaged in the business of buying or selling loans on interests therein; (C) any person engaged in the business of insuring or guaranteeing against a default in the repayment of an ex- tension of credit, or acting as a surety with respect to an extension of credit, to other persons; or (D) any person regularly engaged in the business of pro- viding title insurance who acquires property as a result of assignment or conveyance in the course of underwriting claims and claims settlement. (8) OPERATIONAL ASPECT.—The term ‘operational aspect” means a function such as a facility or plant manager, oper- ations manager, chief operating officer, or chief executive officer. (9) PERSON.—The term “person” means an individual, firm, corporation, association, partnership, consortium, joint venture, commercial entity, United States Government, State, municipal- ity, commission, political subdivision of a State, or any inter- state body. (10) PROPERTY.—The term “property” means real, personal, and mixed property. (11) RESPONSE ACTION.—The term “response action” shall have the same meaning as that term is defined in section 101 -of the Comprehensive Environmental Response, Compensation and Liability Act. (12) SECURITY INTEREST.—The term “security interest" means a right under a mortgage, deed of trust, assignment, judgment lien, pledge, security agreement, factoring agreement, or lease, or any other right accruing to a person to secure the repayment of money, the performance of a duty, or some other obligation. (d) SAVINGS CLAUSE.—Nothing in subsections (a) (b), or (co), shall— (1) affect the rights or immunities or other defenses that are already available to lenders or fiduciaries under any Federal environmental law; 186 170 (2) be construed to create any liability for any len der or fidu- ciary, or (3) create a private right of action against any Je nder or fidu- ciary. (e) FEDERAL BANKING AND LENDING AGENCY ENVIRONMENTAL Li- ABILITY.— (1) GOVERNMENTAL ENTITIES.— (A) BANKING AND LENDING AGENCIES.—Except as pro- vided in paragraph (C), a Federal banking or lend ing agen- cy shall not be liable under any law imposing strict liabil- ity for the release or threatened release of petro leum or a hazardous substance at or from property (inc luding any right or interest therein) acquired— (i) in connection with the exercise of receiv ership or conservatorship authority, or the liquidation or wind- ing up of the affairs of an insured depository institu- tion, including any of its subsidiaries, and bridge ank; fii) in connection with the provision of loans, dis- counts, advances, guarantees, insurance, or other fi- nancial assistance; or ' iii} in connection with property received in an y civil or criminal proceeding, or administrative enfor cement action, whether by settlementor order. (B) APPLICATION OF STATE LA w.—Nothing in paragraph (e) shall be construed as preempting, affecting, applying to, or modifying any State law, or any rights, action s, cause of action, or obligations unaer State iaw, caccpe under State law shall not exceed the valuc o f the agencys interest in the asset giving rise to such liabilit y. Nothing in this section shall be construed to prevent a Fed eral banking or lending agency from agreeing with a State to transfer property to such State in lieu of any liability t hat might otherwise be imposed under Staie Jaw. (C) LIMITATION. —Notwithstanding paragr aph (A), and subject to section 107(d) of the Comprehensiv e Environ- mental Response, Compensation, and Liability A ct of 1980, a Federal banking or lending agency that direc tly caused or materially contributed to the release of petro leum or a hazardous substance may be liable for removal, remedial, or other response action pertaining to that release. (D) SUBSEQUENT PURCHASER.—The immunity p rovided by paragraphs (A) and (B) shall extend to the f irst subse- quent purchaser of property described in suc h paragraph fom a Federal banking or lending agency, unless such pur- chaser— (i) would otherwise be liable or potentially l iable for all or part of the costs of the removal, remedia l, or other response action due to a prior relationship with the property, (ii) is or was affiliated with or related to a part y de- scribed in subparagraph (i); (iii) fails to agree to take reasonable steps necess ary to abate the release or threatened release or to pr otect 187 171 public health and safety in a manner consistent with the purposes of applicable Federal environmental laws; or (iv) directly causes or significantly and materially contributes to any additional release or threatened re- lease on the property. (E) FEDERAL OR STATE ACTION.—Notwithstanding sub- paragraph (D), if a Federal agency or State environmental agency is required to take remedial action due to the failure of a subsequent purchaser to carry out, in good faith, the agreement described in subparagraph (D)(iti), such subse- quent purchaser shall reimburse the Federal or State envi- ronmental agency for the costs of such remedial action. Any such reimbursement shall not exceed the increase in the fair market value of the property attributable to the reme- dial action. (2) LIEN EXEMPTION.—Notwithstanding any other provision of law, any property held by a subsequent purchaser referred to in paragraph ()(D)or held by a Federal banking or lending agen- cy shall not be subject to any lien for costs or damages associ- ated with the release or threatened release of petroleum or a hazardous substance existing at the time of the transfer. (3) EXEMPTION FROM COVENANTS TO REMEDIATE.—A Federal banking or lending agency shall be exempt from any law re- quiring such agency to grant covenants warranting that a re- moval, remedial, or other response action has been, or will in the future be, taken with respect to property acquired in the manner described in paragraph (DIA). (4) DEFINITIONS.—For purposes of subsection (e), the follow- ing definitions shall apply: (A) FEDERAL BANKING OR LENDING AGENCY.-——The term “Federal banking or lending agency” means the Corpora- tion, the Resolution Trust Corporation, the Board of Gov- ernors of the Federal Reserve System, the Comptroller of the Currency, the Office of Thrift Supervision, a Federal Reserve Bank, a Federal Home Loan Bank, the Department of Housing and Urban Development, the National Credit Union Administration Board, the Farm Credit Administra- tion, the Farm Credit System Insurance Corporation, the Farm Credit System Assistance Board, the Farmers Home Administration, the Rural Electrification Administration, the Small Business Administration, and any other Federal agency acting in a similar capacity, in any of their capac- ities, and their agents or appointees. (B) HAZARDOUS SUBSTANCE.—The term “hazardous sub- stance” has the same meaning as in section 101(14) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. (C) RELEASE.—The term “release” has the same meaning as in section 101(22) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, and in- cludes the use, storage, disposal, treatment, generation, or transportation of a hazardous substance. (5) SAVINGS CLAUSE.-—Nothing in subsection (e) shall— 188 172 (A) affect the rights or immunities or other de fenses that are available under this Act or other applicable law to any party, subject to the provisions of this section; (B) be construed to create any liability for any part y; or (C) create a private right of action against an insure d de- pository institution or lender or against a Federa l banking or lending agency. TRUTH IN SAVINGS ACT Subtitle F—Truth in Savings SEC. 261. SHORT TITLE. This subtitle may be cited as the “Truth in Savings Act”. [SEC. 262. FINDINGS AND PURPOSE. {(a) FinpDINGS.—The Congress hereby finds that economic stabil- ity would be enhanced, competition between deposi tory institutions would be improved, and the ability of the c onsumer to make informed decisions regarding deposit accounts, and to verify ac- counts, would be strengthened if there was unif ormity in the disclo- sure of terms and conditions on which interestis paid and fees are assessed in connection with such accounts. [(b) Purpose.—It is the purpose of this subt itle to require the clear and uniform disclosure of— {(1) the rates of interest which are payable on deposit ac- counts Dy GepoSiLOTy iistituiiviio, a: Be i (2) the fees iat are assessable against deposit accounts, so that consumers can make a meaningful comp arison between the competing claims of depository institutions wit h regard to deposit accounts. [SEC. 263. DISCLOSURE OF INTERES T RATES AND TERMS OF AC- COUNTS. ((a) IN GENERAL.—Except as provided in subsections (b) and (c), each advertisement, announcement, or solicitat ion initiated by any depository institution or deposit broker relatin g to any demand or interest-bearing account offered by an insured depository institu- tion which includes any reference to a specific ra te of interest pay- able on amounts deposited in such account, or to a specific yield or rate of earnings on amounts so deposited, s hall state the following information, to the extent applicable, in a clea r and conspicuous manner: {(1) The annual percentage yield. F(2) The period during which such annual perce ntage yield is in effect. (3) All minimum account balance and t ime requirements which must be met in order to earn the adverti sed yield (and, in the case of accounts for which more than 1 yi eld is stated, each annual percentage yield and the account m inimum bal- ance requirement associated with each such yi eld shall be in close proximity and have equal prominence). {(4) The minimum amountof the initial deposit which is re- quired to open the account in order to obtain the yield adver- 189 173 tised, if such minimum amountis greater than the minimum balance necessary to earn the advertised yield. [(5) A statement that regular fees or other conditions could reduce the yield. [(6) A statement that an interest penalty is required for early withdrawal. [(b) BROADCAST AND ELECTRONIC MEDIA AND OUTDOOR ADVER- TISING EXCEPTION.—The Board may, by regulation, exempt adver- tisements, announcements, or solicitations made by any broadcast or electronic medium or outdoor advertising display not on the premises of the depository institution from any disclosure require- ments described in paragraph (4) or (5) of subsection (a) if the Board finds that any such disclosure would be unnecessarily bur- densome. [(c) DISCLOSURE REQUIRED FOR ON-PREMISES DISPLAYS.— [(1) IN GENERAL.—Thedisclosure requirements contained in this section shall not apply to any sign (including a rate board) disclosing a rate or rates of interest which is displayed on the premises of the depository institution if such sign contains— [(A) the accompanying annual percentage yield; and [(B) a statement that the consumer should request fur- ther information from an employee of the depository insti- tution concerning the fees and terms applicable to the ad- vertised account. [(2) DerInrrIon.—For purposes of paragraph(1), a sign shall only be considered to be displayed on the premises of a deposi- tory institution if the sign is designed to be viewed only from the interior of the premises of the depository institution. [(d) MISLEADING DESCRIPTIONS OF FREE OR No-Cost ACCOUNTS PROHIBITED.—No advertisement, announcement, or solicitation made by any depository institution or deposit broker may refer to or describe an account as a free or no-cost account (or words of similar meaning) if— [(1) in order to avoid fees or service charges for any period— [(A) a minimum balance must be maintained in the ac- count during such period; or [(B) the numberof transactions during such period may not exceed a maximum number; or ((2) any regular service or transaction fee is imposed. [(e) MISLEADING OR INACCURATE ADVERTISEMENTS, ETC., PROHIB- ITED.—No depository institution or deposit broker shall make any advertisement, announcement,or solicitatioh relating to a deposit account that is inaccurate or misleading or that misrepresents its deposit contracts. (SEC. 264, ACCOUNT SCHEDULE. {(a) IN GENERAL.—Each depository institution shall maintain a schedule of fees, charges, interest rates, and terms and conditions applicable to each class of accounts offered by the depository insti- tution, in accordance with the requirementsof this section and reg- ulations which the Board shall prescribe. The Board shall specify, in regulations, which fees, charges, penalties, terms, conditions, and account restrictions must be included in a schedule required under this subsection. A depository institution need not include in such schedule any information not specified in such regulation. 190 174 {(b) INFORMATION ON FEES AND CH ARGES.—The schedule re- quired under subsection (a) with respect to any account shall con- tain the following information: [(1) A description of all fees, periodic serv ice charges, and penalties which may be charged or a ssessed against the ac- count (or against the account holder in connection with such account), the amount of any such fees , charge, or penalty (or the method by which such amount will be calculated), and the conditions under which any such amount wi ll be assessed. [(2) All minimum balance requiremen ts that affect fees, charges, and penalties, including a clear description of how each such minimum balanceis calculated. £(3) Any minimum amount required with res pect to the ini- tial deposit in order to open the account. [(c) INFORMATION ON INTEREST RATES .—The schedule required under subsection (a) with respect to any acc ount shall include the following information: L(t) Any annual percentageyield. {(2) The period during which any such a nnual percentage yield will be in effect. {(3) Any annual rate of simple interest. {(4) The frequency with which interest wil l be compounded and credited. {(5) A clear description of the method used to determine the balance on which interestis paid. [(6) The information described in paragrap hs(1) through (4) with recnert ta anv period after the end of the period ref erred to in paragraph (2) (or the method for comp uung any iniius iia: tion described in-any such paragraph), if a pplicabie. {(7) Any minimum balance which m ust be maintained to earn the rates and obtain the yields disclos ed pursuant to this subsection and a clear description of how any such minimum balance is calculated. (8) A clear description of any minimum t ime requirement which must be met in order to obtain the y ields disclosed pur- suant to this subsection and any informati on described in para- graph(1), (2), (3), or (4) that will apply if a ny time requirement is not met. [(9) A statement, if applicable, that any interest which has accrued but has not been credited to an acc ount at the time of a withdrawal from the account will not be p aid by the deposi- tory institution or credited to the account by reason of such withdrawal. {(10) Any provision or requirement relatin g to nonpayment of interest, including any charge or penalt y for early with- drawal, and the conditions under which an y such charge or penalty may be assessed. [(d) OTHER INFORMATION.—The sched ule required under sub- section (a) shall include such other d isclosures as the Board may determine to be necessary to allow c onsumers to understand and compare accounts, including frequency of int erest rate adjustments, accountrestrictions, and renewalpolicies for time accounts. {(e) STYLE AND FORMAT.—Schedules required under subsection (a) shall be written in clear and plain lang uage and be presented 191 175 in a format designed to allow consumers to readily understand the termsof the accounts offered. [SEC. 265. DISCLOSURE REQUIREMENTS FOR CERTAIN ACCOUNTS. [The Board shall require, in regulations which the Board shall prescribe, such modification in the disclosure requirements under this Act relating to annual percentage yield as may be necessary to carry out the purposesof this Act in the case of— {(1) accounts with respect to which determination of annual percentage yield is based on an annual rate of interest that is guaranteed for a period of less than 1 year; L(2) variable rate accounts; [(3) accounts which, pursuant to law, do not guarantee pay- ment of a stated rate; [(4) multiple rate accounts; and {(5) accounts with respect to which determination of annual percentage yield is based on an annualrate of interest that is guaranteed for a stated term. [SEC. 266. DISTRIBUTION OF SCHEDULES. {(a) IN GENERAL.—A schedule required under section 264 for an appropriate account shall be— [(1) made available to any person upon request; [(2) provided to any potential customer before an account is opened ora service is rendered; and {(3) provided to the depositor, in the case of any time deposit which is renewable at maturity without notice from the deposi- tor, at least 30 days before the date of maturity. [(b) DISTRIBUTION IN CASE OF CERTAIN INITIAL DEPOSITS.—If— [(1) a depositor is not physically present at an office of a de- pository institution at the time an initial deposit is accepted with respect to an account established by or for such person; and [(2) the schedule required under section 264(a) has not been furnished previously to such depositor, the depository institution shall mail the schedule to the depositor at the address shown on the records of the depository institution for such account no later than 10 days after the date of the initial deposit. L(c) DISTRIBUTION OF NOTICE OF CERTAIN CHANGES.—If— [(1) any change is made in any term or condition which is required to be disclosed in the schedule required under section 264(a) with respect to any account; and [(2) the change may reduce the yield or adversely affect any holder of the account, all account holders who may be affected by such change shall be notified and provided with a description of the change by mail at least 30 days before the change takeseffect. [(d) DISTRIBUTION IN CASE OF ACCOUNTS ESTABLISHED BY MORE THAN 1 INDIVIDUAL OR By A GroupP.—If an account is established by more than 1 individual or for a person other than an individual, any distribution described in this section with respect to such ac- count meets the requirements of this section if the distribution is made to 1 of the individuals who established the account or 1 indi- 192 176 vidual representative of the person on whose behalf su ch account was established. [(e) Notice To ACCOUNT HOLDERS AS OF THE EFFE CTIVE DATE oF REGULATIONS.—For any account for which the depos itory insti- tution delivers an account statement on a quarterly or more fre- quentbasis, the depository institution shall include on or w ith any regularly scheduled mailing posted or delivered within 180 days after publication of regulations issued by the Board in final form, a statement that the account holder has the right to req uest an ac- count schedule containing the terms, charges, and intere st rates of the account, and that the account holder may wish to re quest such an account schedule.] SEC. 262. PURPOSE. It is the purpose of this subtitle to ensure that consumers can make a meaningful comparison between the competing claims of de- pository institutions with regard to deposit accounts by requiring that institutions offering interest-bearing accounts pay interest on the full amountofprincipal each day in a consumer deposit account at the rate agreed to be paid by the institution. SEC. 263. PROHIBITION ON MISLEADING OR INACCURATE ADVERTISE- MENTS AND DISCLOSURES. No depository institution or deposit broker shall make an y adver- tisement, announcement, solicitation or disclosure relat ing to a de- posit account that is inaccurate or misleading, includ ing any inac- curate or misleading description of a free or no-cost ac count, or that misrepresents its deposit contracts. SEC. 264. ACCOUNT INFORMATION. (a) IN GENERAL.—Each depository institution shall di sclose fees, charges, penalties, and interest rates applicable to eac h class of ac- counts offered by the institution in accordance with this section. (b) INFORMATION ON FEES AND CHARGES. —_Each deposit ory insti- tution shall disclose the following information with respect to any account to a consumer at the time the accountis opened, or at such earlier time as a consumer may request (and no addition al informa- tion may be required to be disclosed under this subtitle by regula- tion or otherwise with respect to such account): (1) A description of all fees, periodic service charges, pen- alties, and interest rates which may be charged or as sessed against the account (or against the account holder in co nnection with such account), the amount of any such fees, charge s, or penalties (or the method by which such amount will be cal- culated), and the conditions under which any such amount will be assessed. (2) All minimum balance requirements that affec t fees, charges, and penalties, including a clear description of how each such minimum balanceis calculated. (3) Any minimum amount required with respect to the init ial deposit in order to open the account. (c) INFORMATION ON INTEREST Rates.—The disclosu res required under subsections (a) and (b) with respect to any a ccount shall in- clude the following information: (1) Any annual rate of simple interest. 193 177 (2) The frequency with which interest will be compounded andcredited. (d) No REGULATIONS AUTHORIZED.—No regulations may be pre- scribed with respect to this section by the Board or any agency re- ferred to in this title, including any regulation to define any terms used in this section. SEC. 265. DISCLOSURE OF CHANGE IN TERMS. If any change is made in any item required to be disclosed under section 264, all account holders who may be affected by such change Shall be notified by mail and provided with a description of such change at least 30 days before the effective date of the change. SEC. [267.] 266. PAYMENT OF INTEREST. . (a) CALCULATED ON FULL AMOUNT OF PRINCIPAL.—Interest on an interest-bearing account at any depository institution shall be cal- culated by such institution on the fuli amount of principal in the account for each day of the stated calculation period at the rate or rates of interest disclosed pursuantto this Act. (b) No PARTICULAR METHOD OF COMPOUNDING INTEREST RE- QUIRED.—Subsection (a) shall not be construed as prohibiting or re- quiring the use of any particular method of compoundingorcredit- ing of interest. c) DATE BY WHICH INTEREST MusT ACCRUE.—Interest on ac- counts that are subject to this Act shall begin to accrue not later than the business day specified for interest-bearing accounts in sec- tion 606 of the Expedited Funds Availability Act, subject to sub- sections (b) and (c) of such section. [SEC. 268. PERIODIC STATEMENTS. [Each depository institution shall include on or with each peri- odic statement provided to each account holder at such institution a clear and conspicuous disclosure of the following information with respect to such account: [(1) The annual percentage yield earned. [(2) The amountof interest earned. [(3) The amountof any fees or charges imposed. {(4) The numberof days in the reporting period. (SEC. 269. REGULATIONS. L(a) IN GENERAL.— [(1) REGULATIONS REQUIRED.—Before the end of the 9-month period beginning on the date of the enactmentof this Act, the Board, after consultation with each agency referred to in sec- tion 270(a) and public notice and opportunity for comment, shall prescribe regulations to carry out the purpose and provi- sions of this Act. [(2) EFFECTIVE DATE OF REGULATIONS.—Theregulations pre- scribed under paragraph (1) shall take effect not later than 9 monthsafter publication in final form. [(3) CONTENTS OF REGULATIONS.—The regulations prescribed under paragraph (1) may contain suchclassifications, differen- tiations, or other provisions, and may provide for such adjust- ments and exceptions for any class of accounts as, in the judg- ment of the Board, are necessary or proper to carry out the purposesof this Act, to prevent circumvention or evasion of the 194 178 requirements of this Act, or to facilitate complian ce with the requirements of this Act. {(4) DATE OF APPLICABILITY.—The provisions o f this Act shall not apply with respect to any depository institutio n before the effective date of regulations prescribed by the Board underthis subsection (or by the National Credit Union Adm inistration Board under section 12(b), in the case of any deposit ory insti- tution described in clause (iv) of section 19{b) (1)(A) of the Fed- eral Reserve Act). ((b) MopDEL FORMS AND CLAUSES.— [(1) IN GENERAL.—The Board shall publish mo del forms and clauses for common disclosures to facilitate compl iance with this Act. In devising such forms, the Board shall c onsider the use by depository institutions of data processing or similar automated machines. [(2) USE OF FORMS AND CLAUSES DEEMED IN COMPL IANCE. Nothing in this Act may be construed to require a depository institution to use any such model form or clause pr escribed by the Board under this subsection. A depository insti tution shall be deemed to be in compliance with the disclosu re provisions of this Act if the depository institution— {(A) uses any appropriate modei form lished by the Board; or [(B) uses any such model form or clause and chan gesit ae claves AS fi GF CiaUiSe as pub- [(i) deleting any information which is not requi red by this Act: or [(ii) rearranging the format, if in making such deletion or rearranging t he format, the depository institution does not affect the substance,cl arity, or meaningful sequenceof the disclosure. {(3) PUBLIC NOTICE AND OPPORTUNITY FOR COM MENT.—Model disclosure forms and clauses shall be adopted by the Board after duly given notice in the Federal Register a nd an oppor- tunity for public comment in accordance with sec tion 553 of title 5, United States Code.] SEC. 267. REGULATIONS. (a) IN GENERAL.—The Board, after consultation with each agency referred to in section 265(a) and public notice and opportunity for comment, shali prescribe regulations to carry out the purpose and provisions of this subtitle. (b) EFFECTIVE DATE OF RECULATIONS.—The provisions of this subtitle shall not apply with respect to any depository institution be- fore the effective date of regulations prescribed by the Board under this subsection. SEC. [270.] 268. ADMINISTRATIVE ENFORCEMENT. (a) IN GENERAL.—Compliance with the requirements imposed under this Act shall be enforced under— (1) section 8 of the Federal Deposit Insurance Act— (A) by the appropriate Federal banking agency (as de- fined in section 3(q) of the Federal Deposit Insurance Act) in the case of insured depository institutions (as defined in section 3(c)(2) of such Act); 195 179 (B) by the Federal Deposit Insurance Corporation in the case of depository institutions described in clause (i), (ii), or (iii) of section 19(b)(1)(A) of the Federal Reserve Act which are. not insured depository institutions (as defined in section 3(c)(2) of the Federal Deposit Insurance Act); and (C) by the Director of the Office of Thrift Supervision in the case of depository institutions described in clause (v) and or (vi) of section 19(b)(1)(A) of the Federal Reserve Act which are not insured depository institutions (as defined in section 3(c)(2) of the Federal Deposit Insurance Act); and (2) the Federal Credit Union Act, by the National Credit Union Administration Board in the case of depository institu- tions described in clause (iv) of section 19(b)(1)(A) of the Fed- eral Reserve Act. (b) ADDITIONAL ENFORCEMENT POWERS.— (1) VIOLATION OF THIS ACT TREATED AS VIOLATION OF OTHER ACTS.—For purposes of the exercise by any agency referred to in subsection Gy) of such agency's powers under any Act re- ferred to in such subsection, a violation of a requirement im- posed underthis Act shall be deemed to be a violation of a re- quirement imposed under that Act. (2) ENFORCEMENT AUTHORITY UNDER OTHER ACTS.—In addi- tion to the powers of any agency referred to in subsection (a) under any provision of law specifically referred to in such sub- section, each such agency may exercise, for purposes of enforc- ing compliance with any requirement imposed under this Act, any other authority conferred on such agencyby law. (c) REGULATIONS BY AGENCIES OTHER THAN THE BOARD.—The authority of the Board to issue regulations under this Act does not impair the authority of any other agency referred to in subsection (a) to make rules regarding its own procedures in enforcing compli- ance with the requirements imposed underthis Act. (SEC. 271. CIVIL LIABILITY. [(a) Crviz LiaBiLiry.—Except:as otherwise provided in this sec- tion, any depository institution which fails to comply with any re- quirement imposed under this Act or any regulation prescribed underthis Act with respect to any person whois an account holder is liable to such person in an amount equal to the sum of— {(1) any actual damage sustained by such person as a result of the failure; [(2)(A) in the case of an individual action, such additional amount as the court may allow, except that the liability under this subparagraphshall not be less than $100 nor greater than $1,000; or [(B) in the case of a class action, such amount as the court may allow, except that— [(i) as to each memberof the class, no minimum recov- ery shall be applicable; and [(ii) the total recovery under this subparagraph in any class action or series of class actions arising out of the same failure to comply by the same depository institution shall not be more than the lesser of $500,000 or 1 percent of the net worth of the depository institution involved; and 196 180 [(3) in the case of any successful action to enforce any liabil- ity under paragraph (1) or (2), the costs of the action , together with a reasonable attorney's fee as determined by the c ourt. [(b) CLass ACTION Awarps.—In determining the am ount of any award in any class action, the court shall consider , among other relevant factors— [(1) the amountof any actual damages awarded; {(2) the frequency and persistence of failures of comp liance; [(3) the resources of the depository institution; {(4) the number of persons adversely affected; an d [(5) the extent to which the failure of com pliance was intentional. [(c) BONA FIDE ERRORS.— [() GENERAL RULE.—A depository institution ma y not be held liable in any action brought under this section f or a viola- tion of this Act if the depository institution demonstr ates bya preponderance of the evidence that the violatio n was not inten- tional and resulted from a bonafide error, notw ithstanding the maintenance of procedures reasonably adapted to avoid any sucherror. [(2) EXAMPLES.—Examples of a bona fide erro r include cleri- cal, calculation, computer malfunction and programmi ng, an printing errors, except that an error of legal judgmen t with re- spect to a depository instituti n's obligation under t his Act is not a bonafide error. {(d) No LiaBILITy FOR OVERPAYMENT.—A depositor y institution mav not be held liable in any action under this sect ion for a viola- tion of this Act if the violation nas resuited in— L(1) an interest paymentto the account holder in an amount greater than the amount determined under any di sclosed rate of interest applicable with respect to such payment; o r (2) a charge to the consumer in an amount less than the amount determined under the disclosed charge orf ee schedule applicable with respect to such charge. [(e) JuRISDICTION.—Any action under this sec tion may be brought in any United States district court, or in a ny other court of competentjurisdiction, within 1 year after the da te of the occur- rence of the violation involved. [(f) RELIANCE ON BOARD Ru.incs.—No provis ion of this section imposing anyliability shall apply to any act done o r omitted in good faith in conformity with any regulation or orde r, or any inter- pretation of any regulation or order, of the Board, o r in conformity with any interpretation or approval by an official or employee of the Board duly authorized by the Board to issue suc h interpreta- tion or approval under procedures prescribed by the Board, not- withstanding, the fact that after such act or omission has occurred, such regulation, order, interpretation, or approval is amended,re- scinded, or determined by judicial or other authority to be invalid for any reason. [(g) NOTIFICATION OF AND ADJUSTMENT FOR Errors. —A deposi- tory institution shall not be liable under this section o r section 270 for any failure to comply with any requirement impos ed underthis Act with respect to any account if— {(1) before— Mune, ise 197 181 [(A) the end of the 60-day period beginning on the date on which the depository institution discovered the failure to comply; E(B) any action is instituted against the depository insti- tution by the account holder under this section with re-. spect to such failure to comply; and {[(C) any written notice of such failure to comply is received by the depository institution from the account holder, the depository institution notifies the account holder of the fail- ure of such institution to comply with such requirement; and [(2) the depository institution makes such adjustments as may be necessary with respect to such account to ensure that— [(A) the account holder will not be liable for any amount in excess of the amount actually disclosed with respect to any fee or charge; {(B) the account holder will not be liable for any fee or charge imposed under any condition not actually disclosed; and L(C) interest on amounts in such account will accrue at the annual percentage yield, and underthe conditions, ac- tually disclosed (and credit will be provided for interest al- ready accrued at a different annual percentage yield and eeeerent conditions than the yield or conditions dis- closed). {(h) MULTIPLE INTERESTS IN 1 ACCOUNT.—If more than 1 person holds an interest in any account— £(1) the minimum and maximum amounts ofliability under subsection (a)(2)(A) for any failure to comply with the require- ments of this Act shall apply with respect to such account; and {(2) the court shall determine the manner in which the amountof any suchliability with respect to such account shall be distributed among such persons. [(j) CONTINUING FAILURE TO DISCLOSE.— [(1) CERTAIN CONTINUING FAILURES TREATED AS 1 VIOLA- TION.—Except as provided in paragraph (2), the continuing failure of any depository institution to disclose any particular term required to be disclosed under this Act with respect to a particular account shall be treated as a single violation for pur- poses of determining the amount of any liability of such insti- tution under subsection (a) for such failure to disclose. {(2) SUBSEQUENT FAILURE TO DISCLOSE.—Thecontinuing fail- ure of any depository institution to disclose any particular term required to be disclosed under this Act with respect to a par- ticular account after judgment has been rendered in favor of the account holder in connection with a prior.failure to disclose such term with respect to such account shall be treated as a subsequent violation for purposes of determining liability under subsection (a). £(3) COORDINATION WITH SECTION 270.—-This subsection shall not limit or otherwise affect the enforcement power under sec- tion 270 of any agency referred to in subsection (a) of such sec- tion.] 198 182 SEC. (272.] 269. CREDIT UNIONS. (a) Iv GENERAL.—No regulation prescribed by the Board under this Act shall apply directly with respect to any depository institu- tion described in clause(iv) of section 19(b)(1)(A) of the Federal Re- serve Act. (b) REGULATIONS PRESCRIBED BY THE NCUA.—Within 90 days of the effective date of any regulation prescribed by the Board under this Act, the National Credit Union Administration Board shall prescribe a regulation substantially similar to the regulation pre- scribed by the Board taking into account the unique nature of cred- it unions and the limitations under which they may pay dividends on memberaccounts. [SEC. 273. EFFECT ON STATE LAW. [The provisions of this Act do not supersede any pro visions of the law of any State relating to the disclosure of yield s payable or terms for accounts to the extent such State law requires the disclo- sure of such yields or terms for accounts, except to the e xtent that those laws are inconsistent with the provisions of this Act, and then only to the extent of the inconsistency. The Board may deter- mine whether such inconsistencies exist. {SEC. 274. DEFINITIONS. [For the purposes of-this Act— {(1) AccounT.—The term “account” means any account in- tended for use by and generally used by consumers primarily for personal, family, or household purposes that is offered by i ui : cite finds a GEPOSILOTy ilisiilutivii iity ¥ inciuding demand accounts, time accounts, withdrawal accounts, and share draft accounts. {(2) ANNUAL PERCENTAGE YIELD.—The term “ann ual percent- age yield” means the total amount of interest that would be re- ceived on a $100 deposit, based on the annual rate of simple interest and the frequency of compounding for a 365-d ay pe- riod, expressed as a percentage calculated by a method which shall be prescribed by the Board in regulations. {(3) ANNUAL RATE OF SIMPLE INTEREST.—The te rm “annual rate of simple interest”— [(A) means the annualized rate of interest paid with respect to each compounding period, expressed as a per- centage; and {(B) may bereferred to as the “annual percentage rate”. £(4) Boarp.—The term “Board” means the Board of Gov- ernors of the Federal! Reserve System. ((5) Deposir BROKER.—The term “deposit broker ”— [{A) has the meaning given to such term in s ection 29(f)(1) of the Federal Deposit Insurance Act; and [(8) includes any person whosolicits any amount from any other person for deposit in an insured depository insti- tution. [(6) DEPosIToRY INSTITUTION.—The term “depository insti tu- tion” has the meaning given such term in clauses (i) thro ugh (vi) of section 19(b)(1){A) of the Federal Reserve Act. otiable order of 199 183 {(7) INTEREST.—The term “interest” includes dividends paid with respect to share draft accounts which are accounts within the meaning of paragraph (3). {(8) MULTIPLE RATE ACCOUNT.—The term “multiple rate account” means any account that has 2 or more annual rates of simple interest which take effect at the same time or in suc- ceeding periods and which are known at the time of disclo- sure.] SEC. 270. DEFINITIONS. For the purposes of this subtitle, the following definitions shall apply: 7 (1) ACCOUNTS.—The term “account” means any account in- tended for use by and generally used by a consumer primarily for personal, family, or household purposes that is offered by a depository institution. (2) DEPOSIT BROKER.—The term “deposit broker’— (A) has the meaning given to such term in section 29()(1) of the Federal Deposit Insurance Act; and (B) includes any person who solicits any amount from any other person for deposit in an insured depository insti- tution. (3) DEPOSITORY INSTITUTION.—The term “depository institu- tion’— (A) means an institution described in clause (i), (ii), (iii), (iv), (v), or (vi) of section 19(b)(1)(A) of the Federal Reserve Act, and (B) does not include nonautomated credit unions which were not required to comply with the requirements of this title as of the date of the enactment of the Financial Institu- tions Regulatory Relief Act of 1995 pursuant to the deter- mination of the National Credit Union Administration Board. (4) INTEREST.—The term “interest” includes dividends paid with respect to share accounts which are accounts within the meaning ofparagraph (1). (5) BOARD.—The term “Board” means the Board of Governors of the Federal Reserve System. SECTION 903 OF THE ELECTRONIC FUND TRANSFER ACT §903. [15 U.S.C. 1693a] Definitions As used in this title— (1) the term “accepted card or other means of access” means a card, code, or other means of access to a consumer's account for the purpose of initiating electronic fund transfers when the person to whom such card or other meansof access was issued has requested and received or has signed or has used, or au- thorized another to use, such card or other meansof access for the purpose of transferring money between accounts or obtain- ing money,property, labor, or services, but such term does not include a card, device, or computer that a person may use to pay for transactions through use of value stored on, or assigned 200 184 to, the card, device, or computeritself, except for those trans- actions where such card, device, or computer is actually used to access an accountto effect such transaction, (2) the term “account” means a demand deposit, savings de- posit, or other asset account (other than an occasional or inci- dental credit balance in an open end credit plan as defined in section 103(i) of this Act), as described in regulations of the Board, established primarily for personal, family, or household purposes, but such term does not include an account held by a financial institution pursuant to a bona fide trust agreement and does not include any value which is stored on, or assigned to, a card, device, or computer itself that enables a person to pay for transactions through use of that stored value, * * * * * * ok EQUAL CREDIT OPPORTUNITY ACT TITLE VIL—EQUAL CREDIT OPPORTUNITY Sec. 701. Prohibited discrimination. * * * * * * * 704A. Incentives for self-testing and self-correction. * * * * * * * 3 70L. Pronipite (a) OOK OK Ed * * * * * * (d)(1) Within thirty days (or such longer reasonable t ime as spec- ified in regulations of the Board for any class of credit transa ction) after receipt of a completed application for credit, a credi tor shall notify the applicantof its action on the application. (2) Each applicant against whom adverseaction is taken shall be entitled to a statement of reasons for such action from the cre ditor. A creditor satisfies this obligation by— (A) providing statements of reasons in writing as a matter of course to applicants against whom adverse action is take n; or [(B) giving written notification of adverse action which dis- closes (i) the applicant’s right to a statement of reasons within thirty days after receipt by the creditor of a request made within sixty days after such notification, and (ii) the identity of the person oroffice from which such statement may be ob- tained. Such statement may begivenorally, if the written noti- fication advises the applicantof his right to have the statement of reasons confirmed in writing on written request.] (B) giving written notification of adverse action which discloses— (i) the applicant's right to a statement of reasons within 30 days after receipt by the creditor of a request made within 60 days after such notification; 201 185 (ii) if credit is denied or the charge for such credit is increased either wholly or partly because of informa- tion contained in a consumer report from a consumer reporting agenicy— () that fact and the name, address, and tele- Phone number of the consumer reporting agency making the report; (fT) the consumer's right to obtain, under section 612, a free copy of a consumer report on the consumer, from the consumer reporting agency re- ferred to in subclause (I) within the 30-day period provided under such section; and (II) the consumer's right to dispute, under sec- tion 611, with a consumer reporting agency the ac- curacy or completeness of any information in a consumer report furnished by the agency. (iii) if credit is denied or the charge for credit is in- creased either wholly or partly because of information obtained from a person other than a consumer report- ing agency bearing upon the consumer's credit worthi- ness, credit standing, credit capacity, character, gen- eral reputation, personal characteristics or modeofliv- ing, that fact and the right to receive disclosure of the nature of the information so received, within a reason- able period of time, upon the consumer's written re- quest for information within 60 days after learning of such adverse action; and (iv) the identity of the person or office from which such notification may be obtained. Such statement of reasons may be given orally if the writ- ten notification advises the applicant of his right to have the statement of reasons confirmed in writing on written re- quest. * * * * * * * (3) A statement of reasons meets the requirements of this section only if it contains the specific reasons for the adverse action taken[.] and, to the extent applicable, the name and address, and telephone number of the consumer reporting agency identified in ac- cordance with the requirements of subsection (d)(3)(ii) and a state- ment of the right to obtain disclosure of the nature of the informa- tion upon which adverse action was taken as required by such sub- section. * * * * * * * SEC. 704A. INCENTIVES FOR SELF-TESTING AND SELF-CORRECTION. (a) IN GENERAL.—Ifa creditor— (1) conducts, or authorizes an independent third party to con- duct, a self-test of the creditor's lending or any partof the credi- tor'’s lending operations in order to determine the level or effec- tiveness of compliance with this title by the creditor; and (2) has identified discriminatory practices and has taken or is taking appropriate corrective actions to address the discrimi- nation, 202 186 any report or results of such a self-test may not be obt ained or used by any applicant, department, or agency in any p roceeding orcivil action brought under this title. (b) RESULTS OF SELF-TESTING. —wNoprovision of this section shall be construed as preventing an applicant, departme nt, or agency from obtaining and using the results of any self-tes ting in any pro- ceeding or civil action brought under this title if— (1) the creditor or any other entity conducted such activity at the request of a department or agency, (2) the creditor or any other entity, or any person ac ting on behalf of the creditor or other entity— (A) voluntarily releases or discloses all, or any par t of, such results; or (B) refers to or describes such results as a defense to charges of unlawful discrimination against such cre ditor, erson, or entity; or athe results are sought by the applicant, departm ent, or agency by means of a discovery request for the purpo ses of de- termining an appropriate penalty or remedy for a v iolation of this title. (c) REGULATIONS.—The appropriate Federal departme nt or agency shall prescribe regulations, after notice and opp ortunity for coim- ment, which determine what typesof “self-tests” are s ufficieritly ex- tensive so as to constitute a determination of the l evel or effective- ness of a creditor's compliance with this title. * *x a * * * * § 706. Civil liability Ok{a * * a * * * * * {(g) The agencies} (g) REFERRALS TO THE ATTORNE Y GENERAL.— (1) IN GENERAL.—The agencies having responsibil ity for ad- ministrative enforcement undersection 704, if unabl e to obtain compliance with section 701, are authorized to refer the matter to the Attorney General with a recommendation tha t an appro- priate civil action be instituted. Each agency ref erred to in paragraphs (1), (2), and (3) of section 704(a ) shall refer the matter to the Attorney General whenever the agen cy has rea- son to believe that 1 or more creditors has e ngaged in a pat- tern or practice of discouraging or denying appli cations for credit in violation of section 701(a). Each such a gency may refer the matter to the Attorney General whenever the agency has reason to believe that 1 or more creditors has violated sec- tian 7TO1fa)LiOrl Puayay;. (2) LIMITATION ON REFERRALS OF SELF-TESTING RESUL TS. (A) IN GENERAL.—No agency shall be required to refer any report or results of a self-test relating to any creditor to the Attorney General if the creditor— (i) has already identified discriminatory practices as the result of self-testing instituted by the creditor t o de- termine compliance with this title; and (ii) has taken or is taking appropriate corrective ac- tions to address the discrimination. 203 187 (3) ENFORCEMENT UNDER OTHER LAWS.—Noprovision of this section shall be construed as limiting the authority of the agen- cy to enforce the provisions of this Act under any other provi- sion of law. * * * * * * * (k) Notice to HUD oF VIOLATIONS..-Whenever an agency re- ferred to in paragraph (1), (2), or (3) of section 704(a)— (1) has reason to believe, as a result of receiving a consumer complaint, conducting a consumer compliance examination, or otherwise, that a violation of this title has occurred; (2) has reason to believe that the alleged violation would be a violation of the Fair Housing Act; and (3) does not refer the matter to the Attorney General pursu- ant to subsection (g), the agency shall notify the Secretary of Housing and Urban Devel- opmentof the violation, and shall notify the applicant that the Sec- retary of Housing and Urban Development has been notified of the alleged violation and that remedies for the violation may be avail- able under the Fair Housing Act. No such agency shall be required to notify the Secretary of Housing and Urban Development or the applicant that the agency has reason to believe that a violation of this title or the Fair Housing Act occurred if the reason is based on a result of self-testing instituted by the creditor to determine compli- ance with this title, and the creditor has already identified the pos- sible violation and has taken or is taking appropriate corrective ac- tions to address the possible violation. No provisions of this section shall be construed as limiting the authority of the agency to enforce the provisions of this title under any other provision oflaw. oOREASONABLE PROCEDURES TO ASSURE COMPLIANCE.—WNo per- son shall be held liable for any violation ofsubsection 701 (d) if such person shows by a preponderance of the evidence that at the time of the alleged violation the person maintained reasonable proce- dures to assure compliance with the provisions of the subsection. * * * * * * * § 709. Shorttitle This title may be cited as the “Equal Credit Opportunity Act”. SECTION 615 OF THE FAIR CREDIT REPORTING ACT §615. Requirements on users of consumer reports (a) Whenever [credit or] insurance for personal, family, or household purposes, or employment involving a consumeris denied or the charge for such [credit or] insurance is increased either wholly or partly because of information contained in a consumerre- port from a consumer reporting agency, the user of the consumer report shall so advise the consumer against whom such adverseac- tion has been taken and supply the name and address of the consumer reporting agency making the report. {(b) Whenevercredit for personal, family, or household purposes involving a consumer is denied or the charge for such credit is in- creased either wholly or partly because of information obtained 204 188 from a person other than a consumer reporting agency bea ring upon the consumer's credit worthiness, credit standing, cre dit ca- pacity, character, general reputation, personal characteristi cs, or modeofliving, the user of such information shall, wit hin a reason- able period of time, upon the consumer's written request for the reasons for such adverse action received within sixty day s after learning of such adverse action, disclose the nature of the info rma- tion to the consumer. The user of such information shall clearly and accurately disclose to the consumer his right to mak e such written request at the time such adverse action is communi cated to the consumer.] {(c)] (b) No person shall be held liable for any violation of this section if he shows by a preponderance of the evidence that at the time of the alleged violation he maintained reasonable proced ures to assure compliance with the provisions of [subsections (a) and (b)] subsection (a). FAIR HOUSING ACT TITLE VII—FAIR HOUSING SHORT TITLE SEc. 800. This title may be cited as the “Fair Housing Act”. * * * * * * * ENFORCEMEN? BY ihib AiiUnNiT GOINDRA L Sec. 814. {a) PATTERN OR PRACTICE CASES.—Wheneverth e Attor- ney General has reasonable cause to believe that any perso n or group of persons is engaged in a pattern or practice o f resistance to the full enjoyment of any of the rights granted by this tit le, or that any group of persons has been denied any of the right s grant- ed by this title and such denial raises an issue of general p ublic importance, the Attorney General may commence a civil acti on in any appropriate United States district court. Before bringing a civil action under the preceding sentence against any person or group of persons described in paragraph (1), 2), or (3) of sectio n 704(a) of the Equal Credit Opportunity Act with respect to a violatio n of 805(a) of this title, the Attorney General shall consult with th e ap- propriate agency under such paragraph. * * * * * * * SEC, 8144. SELF-TESTING ENHANCEMENT. (a) IN GENERAL.—Ifany person— (1) conducts, or authorizes an independent third party to con- duct, a self-test of that person's residential real estate related lending activities, or any part of such activities, in order to de- termine the level or effectiveness of compliance with this title by the person; and (2) has identified discriminatory practices and has taken or is taking appropriate corrective actions to address the discrimi- nation, i w ~ N 189 any report or results of such a self-test may not be obtained or used by any aggrieved person, complainant, department, or agency in any proceeding or civil action brought under this title. (b) RESULTS OF SELF-TESTING.—No provision of this section shall be construed as preventing an aggrieved person, complainant, de- partment, or agency from obtaining and using the results of any self-testing as described in subsection (a) in any proceeding or civil action brought under this title if— (1) the creditor or any other entity conducted such activity at the request of a department or agency; (2) the creditor or any other entity, or any person acting on behalf of the creditor or other entity— (A) voluntarily releases or discloses all, or any part of, such results; or (B) refers to or describes such results as a defense to charges of unlawful discrimination against such creditor, erson, or entity; or (Hthe results are sought by the aggrieved person, complain- ant, department, or agency by means of a discovery request for the purposes of determining an appropriate penalty or remedy for a violation ofthis title. (c) REGULATIONS.—The appropriate Federal department or agency shall prescribe regulations, after notice and opportunity for com- ment, which determine what types of “self-tests” are sufficiently ex- tensive so as to constitute a determination of the level or effective- ness of a creditor's compliance with this title. * * * * * * * EQUAL CREDIT OPPORTUNITY ACT TITLE VII—EQUAL CREDIT OPPORTUNITY * * * * * * * §701. Prohibited discrimination; reasons for adverse action (a * OK OK * * * * *x * * (9 CREDIT SCORING SYSTEM.— (1) IN GENERAL.—A creditor shall be deemed to be in compli- ance with subsection (a) with respect to any credit decision made by the creditor which is based solely on the use of an em- pirically derived, demonstrably and Statistically sound, credit scoring system (as defined by the Board in regulations pre- scribed under this title) ifsuch system— (A) does not utilize any category protected under sub- section (a); (B) does not use as a factor in such system any criterion which is so directly associated with such a category as to be the functional equivalent ofsuch a category; and (C) does not use as a factor in such system any criterion that has a disparate impact on a category protected under subsection (a) unless use of the criterion isjustified by busi- 206 190 ness necessity and there is no less discriminat ory alter- native available. (2) AGE AS A FACTOR.—No provision of this su bsection shall be construed as precluding a creditor from using age as a factor in a credit scoring system under paragraph (1) to the extent oth- erwise permitted under thistitle. * * * * * * * §706. Civil liability (a * kK * * * * * * * (h) When a matter is referred to the Attorney Genera l pursuant to subsection (g), or whenever he has reason to believe that one or more creditors are engaged in a pattern or practice in violation of this title, the Attorney General may bring a civil action in any ap- propriate United States district court for such relief as may be ap- propriate, including actual and punitive damages an d injunctive re- lief. Before bringing a civil action against any credi tor described in paragraph (1), (2), or (3) of section 704(a), the Attorney General shall consult with the appropriate agency under suc h paragraph. * * * * * * * CONSUMER CREDIT PROTECTION ACT * EY * ok * * * TITLE I—CONSUMER CREDIT COST DISCLOSURE * * * * * * * CHAPTER 5—CONSUMERLEASES Sec. 181. Definitions. * * * * * * * 187, Regulations. * * * * * * * {§ 184. Consumerlease advertising [(a) No advertisement to aid, promote, or assist direc tly or indi- rectly any consumerlease shall state the amount of an y payment, the number of required payments, or that any or no downpayment or other payment is required at inception of t he lease unless the advertisement also states clearly and conspicuously a nd in accord- ance with regulations issued by the Board each of the following items of information which is applicable: {(1) That the transaction advertised is a lease. {(2) The amount of any payment required at the ince ption of the lease or that no such paymentis require d if that is the case. 207 19] £(3) The number, amounts, due dates or periods of scheduled payments, and the total of payments underthelease. [(4) That the lessee shall be liable for the differential, if any, between the anticipated fair market value of the leased prop- erty and its appraised actual value at the termination of the lease, if the lessee has such liability. {(5) A statementof the amount or method of determining the amountof any liabilities the lease imposes upon the lessee at the end of the term and whether or not the lessee has the op- tion to purchase the leased property and at what price and time. [(b) RADIO ADVERTISEMENTS.— [(1) IN GENERAL.—An advertisement by radio broadcast to aid, promote, or assist, directly or indirectly, any consumer lease shall be deemed to be in compliance with the require- ments of subsection (a) if such advertisement clearly and con- spicuously— {(A) states the information required by paragraphs (1) and (2) of subsection (a); £(B) states the number, amounts, due dates or periods of scheduled payments, and the total of such payments underthe lease; {(C) includes— {(i) a referral to— [d) a toll-free telephone number established in accordance with paragraph (2) that may be used by consumers to obtain the information required under subsection (a); or {(I]) a written advertisement that— [(aa) appears in a publication in general circulation in the community served by the radio station on which such advertisementis broadcast during the period beginning 3 days before any such broadcast and ending 10 days after such broadcast; and [(bb) includes the information required to be disclosed under subsection (a); and { (ii) the name and dates of any publication referred to in clause (i)(I); and [(D) includes any other information which the Board de- termines necessary to carry out this chapter. [(2) ESTABLISHMENT OF TOLL-FREE NUMBER.— [(A) IN GENERAL.—In the case of a radio broadcast ad- vertisement described in paragraph (1) that includes a re- ferral to a toll-free telephone number, the lessor whooffers the consumerlease shall [(i) establish such a toll-free telephone number not later than the date on which the advertisementinclud- ing the referral is broadcast; L(ii) maintain such telephone numberfor a period of not less than 10 days, beginning on the date of any such broadcast; and 208 192 {(iii) provide the information required u nder sub- section (a) with respect to the lease to an y person who calls such number. ((B) FORM OF INFORMATION.—The informa tion required to be provided under subparagraph (A) (iii) sha ll be pro- vided verbally or, if requested by the consumer , in written form. {(3) No EFFECT ON OTHER Law.—Nothing in this subsection shall affect the requirements of Federal law a s such require- ments apply to advertisement by any medium o ther than radio broadcast. [(c) There is no liability under this section on the part of any owneror personnel, as such, of any medium in w hich an advertise- ment appears or through whichit is disseminated. ] SEC. 184. CONSUMER LEASE ADVERTISING. (a) IN GENERAL.—If an advertisement for a co nsumer lease states the amount of any r payment or states that any or no initial paymen t is required, the advertisement must also clearly and conspicuously state the following terms, as applicable: (1) That the transaction advertised is a lease. (2) The total af initial payments required a t or before con- summation of the lease or delivery of the property, whichever is Jater. (3) That a security deposit is required. (4) The number, amounts, and timing of scheduled payments. (5) For a lease in which the consumer's li ability at the end Ol the iease wim iy Vasc aii Oc A raci dual value of the property, that an extra charge ma of the lease term. (o) ADVERTISING MEDIUM NOT LIABLE.—Any own er or personnel of any medium in which an advertisement ap pears or through which it is disseminated shall notbe liable under this section. § 185. Civil liability (a) Any lessor who fails to comply with any req uirement imposed under section 182 or 183 of this chapter with r espect to any person is liable to such person as provided in section 130 . Notwithstanding the preceding sentence, a creditor shall only h ave liability deter- mined under section 130(a)(2) for failing to comp ly with the require- ments of paragraph (2), (8), (9), or (1OFof s ection 182 or for failing to comply with disclosure requirements under State law for any term which the Board has determined to be subs tantially the same in meaning under section 186 as any of the terms referred to in sec- tion 182. e imposed at the end * * * * Ey * * SEC. 187, REGULATIONS. (a) REGULATIONS AUTHORIZED.— (1) IN GENERAL.—The Board shall write regulations or staff commentary, if appropriate, to update and clarify the require- ments and definitions for lease disclosures, contracts, and any other specific issues related to consumer leasing which would carry out the purposes of this chapter, to prevent any cir- 209 193 cumvention of the chapter, and to facilitate compliance with the requirements of the chapter. (2) CLASSIFICATIONS, ADJUSTMENTS.—The regulations pre- scribed under paragraph (1) may contain classifications and differentiations andmay provide for adjustments and excep- tions for any class of transaction. (b) MODEL DISCLOSURES.—The Board shall publish model disclo- sure forms and clauses to facilitate compliance with the disclosure requirements and to aid the consumer in understanding the trans- action. In designing forms, the Board shall consider the use by les- sors of data processing or similar automated equipment. Use of the models shall.be optional. A lessor who properly uses the material aspects of the models shall be deemed to be in compliance with the disclosure requirements. (Q) EFFECTIVE DATES.— (1) IN GENERAL.—Any regulation of the Board, or any amend- ment or interpretation thereof, that requires a disclosure dif- ferent from the disclosures previously required shall have an ef- fective date of the October I that follows the date of promulga- tion by at least 6 months. (2) LONGER PERIOD.—The Board may, in the Board's discre- tion, lengthen the period of time referred to in paragraph (1) to permit lessors to adjust their forms to accommodate new re- quirements. (3) SHORTER PERIOD.—The Board may also shorten the period of time referred to in paragraph (1) if the Board makes a spe- cific finding that such action is necessary to comply with the findings of a court or to prevent unfair or deceptive practices. (4) COMPLIANCE BEFORE EFFECTIVE DATE.—Lessors may com- ply with any newly promulgated disclosure requirement before the effective date ofsuch requirement. BANK HOLDING COMPANYACT OF 1956 DEFINITIONS SEc. 2. {a) * * * * * * * Bd * * (g) For the purposes of this Act— (1) shares owned or controlled by any subsidiary of a bank holding company shall be deemed to be indirectly owned or controlled by such bank holding company; and (2) shares held or controlled directly or indirectly by trustees for the benefit of (A) a company, (B) the shareholders or mem- bers of a company, or (C) the employees (whether exclusivel or not) of a company, shall be deemed to be controlled by suc company[; and]. [(3) shares transferred after January 1, 1966, by any bank holding company (or by any company which, but for such transfer, would be a bank holding company) directly or indi- rectly to any transferee that is indebted to the transferor, or has one or moreofficers, directors, trustees, or beneficiaries in common with or subject to control by the transferor, shall be deemed to be indirectly owned or controlled by the transferor 210 194 unless the Board, after opportunity for hearing, determines that the transferor is not in fact capable of cont rolling the transferee.] * o* ae * * * * (o) OTHER DEFINITIONS.-For purposes of this Act, th e following definitions shall apply: [(1) ADEQUATELY CAPITALIZED.—The term “adequatel y cap- italized” means a level of capitalization which meets or exceeds all applicable Federal regulatory capital standards.] (1) CAPITAL TERMS.— (A) INSURED DEPOSITORY INSTITUTIONS.—With respect to insured depository institutions, the terms “well-capital ized’, “adequately capitalized", and “uncapitalized” have the meaning given those terms in section 38(b) of the Federal Deposit Insurance Act. (B) BANK HOLDING COMPANY.— (i) ADEQUATELY CAPITALIZED.—The term “ade quately capitalized” means a level of capitalization whi ch meets or exceeds all applicable Federal regulatory ca p- ital standards. (ii) WELL CAPITALIZED.—A bank holding company is “well capitalized”if it meets the required capital levels for well capitalized bank holding companies estab- lished by the Board. (QC) OTHER CAPITAL TERMS.—T!he terms “Ti er 1” and xnanino aiven those terms £ ionWigs - in the capital guidelines or regulations established by the Board for bank holding companies. * * * * * * * (8) LEAD INSURED DEPOSITORY INSTITUTIONS.— (A) IN GENERAL.—The term “lead insured de pository in- stitution” means the largest insured depository in stitution controlled by the bank holding company at any time, based on a comparison of the average total risk-weighted assets controlled by each insured depository institution duri ng the previous 12-month period. (B) BRANCH OR AGENCY.—For purposes of this paragr aph and section 4{j)(4), the term ‘insured depository insti tution’ shall also include any branch or agency operated in the United States by a foreign bank. (9) WELL MANAGED.—The term “well managed” m eans— (A) in the case of any company or depository insti tution which receives examinations, the achievement of— (i) a CAMEL composite rating of 1 or 2 (or an equiv- alent rating under an equivalent rating system) in con- nection with the most recent examination or subsequen t review ofsuch companyor institution; and (ii) at least a satisfactory rating for management, if such rating is given; or (B) in the case of a company or depository institu tion that has not received an examination rating, the exist ence 211 195 and use of managerial resources which the Board deter- mines are satisfactory. * x * * * * * ACQUISITION OF BANK SHARES OR ASSETS SEC. 3. (a) * * * * * * 7 * * * (h) No APPROVAL REQUIRED FOR CERTAIN TRANSACTIONS.— () IN GENERAL.—Notwithstanding paragraph (3) or (5) of subsection (a) and subject to paragraphs (5) and (6), an acquisi- tion of shares by a registered bank holding company, or a merg- er or consolidation between registered bank holding companies, Shall be deemed approved at the conclusion of the period speci- fied in subparagraph (G) if all of the following conditions have been met: (A) FINANCIAL AND MANAGERIAL CRITERIA.— (i) WELL CAPITALIZED BANK HOLDING COMPANY.— Both at the time of and immediately after the proposed transaction, the acquiring bank holding company is well capitalized. (ii) WELL CAPITALIZED LEAD INSURED DEPOSITORYIN- STITUTION.—Both at the time of and immediately after the proposed transaction, the lead insured depository institution of the acquiring bank holding company is well capitalized. (tii) CAPITAL OF OTHER INSURED DEPOSITORY INSTI- TUTIONS.—At the time of the transaction, well capital- ized insured depository institutions control at least 80 percent of the aggregate total risk-weighted assets of in- sured depository institutions controlled by the acquir- ing bank holding company. (iv) NO UNDERCAPITALIZED INSURED DEPOSITORYIN- STITUTIONS.—At the time of the transaction, no insured depository institution controlled by the acquiring bank holding company is undercapitalized. (v) WELL MANAGED.— (D) IN GENERAL.—At the time of the transaction, the acquiring bank holding company, its lead in- sured depository institution, and insured deposi- tory institutions that control at least 90 percent of the aggregate total risk-weighted assets of insured depository institutions controlled by such holding company are well managed. (i O POORLY MANAGED INSTITUTIONS.—Except with respect to insured depository institutions de- scribed in paragraph (2), no insured depository in- stitution controlled by the acquiring bank holding company has received I of the 2 lowest composite ratings at the later of the institution's most recent examination or subsequentreview. (B} NO UNSATISFACTORY CRA RATINGS.—Except with re- spect to insured depository institutions described in para- graph (3), no insured depository institution controlled by 212 196 the acquiring bank holding company has receive d a “needs to improve” or “substantial noncompliance” co mposite rat- ing as a result of the institution's most re cent examination under the Community Reinvestment Act of 197 7. (C) COMPETITIVE CRITERIA.—Consummatio n of the pro- posal complies with guidelines established by the Board by regulation, after consultation with the Attorney General, that identify proposals that are not likely to have a signiti- cantly adverse effect on competition in any releva nt market. (D) SIZE OF ACQUISITION.— (ij) ASSET SIZE.—The book value of the tota l assets to be acquired does not exceed 10 percent of the consoli- dated total risk weighted assets of the acquir ing bank holding company. (ii) CONSIDERATION.—The gross consideration t o be paid for the securities or assets does not exceed 15 per- cent of the consolidated Tier 1 capital of the acq uiring bank holding company. (E) INTERSTATE ACQUISITIONS.—Board ap proval of the transaction is not prohibited under subsect ion (d). (F) COMPLIANCE CRITERION.—During the 12-m onth pe- riod ending on the date of the transaction, no administra- tive enforcement action has been commenced, and no cease and desist order has been issued pursuant to section 8 of the Federal Deposit Insurance Act, against any b ank hold- ing company involved in the transaction or an y depository institution subsidiary of any such holding comp any and no such enforcement action, order, OF olfer aUiiiitio u aiive cit forcement proceeding is pending as of sucti adaieé. (G) OTHER CONSIDERATIONS.—Board approva l of the transaction is not prohibited under subsect ion (c)(3). (HX) NotiFicaTIOn.—The acquiring bank holdin g com- pany provides written notice of the transaction, i ncluding a description of the terms of the transaction, to t he Board and the Attorney General, simultaneously, at leas t 15 busi- ness days (or such shorter period as permitte d by the Board) before the transaction is consummate d. (1) NO BOARD DISAPPROVAL. __Before the en d of the 15-day period (or the shorter period) referred to in su bparagraph (H), the Board has not required an application u nder sub- section (a). (2) SPECIAL RULE RELATING TO THE REQUIR EMENT FOR WELL MANAGED INSTITUTIONS.—Insured depository i nstitutions which have been acquired by a bank holding company during the 12- month period preceding the date of the transact ion may be ex- cluded for purposes ofparagraph (1) (A)(vy) ID if— (A) the bank holding company has developed a plan for the institution to restore the capital and manage ment of the institution which is acceptable to the appropriat e Federal banking agency; and (B) all such insured depository institutions repres ent, in the aggregate, less than 10 percent of the aggre gate total risk-weighted assets of all insured depository in stitutions controlled by the holding company. 213 197 (3) SPECIAL RULE RELATING TO THE REQUIREMENT FOR COM- MUNITY INVESTMENT.—Insured depository institutions acquired during the 12-month period preceding the date of the trans- action may be excluded for purposes ofparagraph (1)(B) if the bank holding company has developed a plan to restore the per- formance of the institution to at least a “satisfactory” rating under the Community Reinvestment Act of 1977 which is ac- ceptable to the appropriate Federal banking agency. (4) ADJUSTMENT OF PERCENTAGES.—-The Board may by regu- lation adjust the percentages and the manner in which the per- centages of insured depository institutions are calculated under subparagraph Awd or (D) of paragraph (1) or paragraph (2)(B) if the Board determines that such adjustment is consist- ent with safety and soundness and the purposes of this Act. (5) ADVICE OF ATTORNEY GENERAL.—The Attorney General shall advise the Board during the period referred to in para- graph (1)(H) in writing if any competitive concerns exist with respect to the transaction. 6) WAIVER OF POSTAPPROVAL WAITING PERIOD.—If the Attor- ney General advises the Board that no competitive concerns exist with respect to the transaction, the provisions of section 11(b) relating to a postapproval waiting shall not apply with re- spect to such transaction. INTERESTS IN NONBANKING ORGANIZATIONS SEc.4. (a) * * * * * * Bd * * * (c) The prohibitions in this section shall not apply to (i) any com- pany that was on January 4, 1977, both a bank holding company and a labor, agricultural, or horticultural organization exempt from taxation under section 501 of the Internal Revenue Code of 1954, or to any labor, agricultural, or horticultural organization to which all or substantially all of the assets of such company are hereafter transferred, or (ii) a company covered in 1970 more than 85 per centum of the voting stock of which was collectively owned on June 30, 1968, and continuously thereafter, directly or indirectly, by or for members of the same family, or their spouses, who are lineal descendants of common ancestors; and such prohibitions shall not, with respect to any other bank holding company, apply to— (1) shares of any company engaged or to be engagedsolely in one or more of the following activities: (A) holding or operat- ing properties used wholly or substantially by any banking subsidiary of such bank holding company in the operations of such banking subsidiary or acquired for such future use; or (B) conducting a safe deposit business; or (C) furnishing services to or performing services for such bank holding companyorits banking subsidiaries; or (D) liquidating assets acquired from such bank holding company or its banking subsidiaries or ac- quired from any other source prior to May 9, 1956, or the date on which such company became a bank holding company, whicheveris later; (2) shares acquired by a bank holding company or any ofits subsidiaries in satisfaction of a debt previously contracted in 214 198 good faith, but such shares shall be disposed of wit hin a period of two years from the date on which they were acquir ed, except that the Board is authorized upon application by s uch bank holding company to extend such period of two years from time to time as to such holding company [for not more than one year at a time] if, in its judgment, such an exte nsion would not be detrimental to the public interest, [but no such exten- sions shall extend beyond a date five years] and, in the case of a bank holding company which has not dispo sed of such shares within 5 years of the date such shares were a cquired, the Board may, upon the application of such company, gr ant addi- tional exemptions if, in the Board’s judgment, su ch extension would not be detrimental to the public interest an d either the bank holding company has made a good faith attem pt to dis- pose of such shares during such 5-year period or the disposal of such shares during such 5-year period-would have been det- rimental to the company, but the aggregate duratio n ofsuch ex- tensions shall not extend 10 years after the date on w hich such shares were acquired; * Eg * Ed ok * * (8) shares of any company the activities of which the Board after due notice [and opportunity for hearing] has determined (by order or regulation) to be so closely related to banking or managingor controlling banks as to be a proper in cident there- to, but for purposes of this subsection it is not cl osely related to banking or managing or controlling banks for a bank hold- ing company te provide incurance as a principal, agent, or broker except (A) where the insuranceis limited to assuring re- paymentof the outstanding balance due on a speci fic extension of credit by a bank holding company or its subsi diary in the event of the death, disability, or involuntary une mployment of the debtor: (B) in the case of a finance compa ny which is a sub- sidiary of a bank holding company, where the insu rance is also limited to assuring repayment of the outstanding balance on an extension of credit in the event of loss or da mage to any property used as collateral on such extention of credit and, during the period beginning on the date of the e nactment of this subparagraph and ending on December 31, 1982 , such ex- tension of credit is not more than $10,000 ($ 25,000 in the case of an extension of credit which is made to fina nce the purchase of a residential manufactured home and which is s ecured by such residential manufactured home) and for any given year after 1982, such extension of credit is mot mo re than an amount equal to $10,000 ($25,000 in the case of an extension of credit which is madeto finance the purchaseof a residential manufactured home and which is secured b y such residential manufactured home) increased by the percen tage increase in the Consumer Price Index for Urban Wage Earners and Cleri- cal Workers published monthly by the Bureau of La bor Statis- tics for the period beginning on January 1, 1982, and ending on December 31 of the year preceding the yea r in which such extension of credit is made; (C) any insuran ce agency activity in a place that (i) has a population not exceed ing five thousand (as shown by the last preceding decennial c ensus), or (ii) the 215 199 bank holding company, after notice and opportunity for a hear- ing, demonstrates has inadequate insurance agency facilities; (D) any insurance agency activity which was engaged in by the bank holding company or any of its subsidiaries on May 1, 1982, or which the Board approved for such company or any of its subsidiaries on or before May 1, 1982, including (i) sales of insurance at new locations of the same bank holding com- pany or the same subsidiary or subsidiaries with respect to which insurance was sold on May 1, 1982, or approved to be sold on or before May 1, 1982, if such new locations are con- fined to the State in which the principal place of business of the bank holding company is located, any State or States im- mediately adjacent to such State, and any State or States in which insurance activities were conducted by the bank holding companyor any of its subsidiaries on May 1, 1982, or were ap- proved to be conducted by the bank holding companyor any of its subsidiaries on or before May 1, 1982, and (ii) sales of in- surance coverages which may become available after May 1, 1982, so long as those coverages insure against the same types of risks as, or are otherwise functionally equivalent to, cov- erages sold on May 1, 1982, or approved to be sold on or before May 1, 1982 (for purposes of this subparagraph, activities en- gaged in or approved by the Board on May 1, 1982, shall in- clude activities carried on subsequent to that date as the result of an application to engage in such activities pending on May 1, 1982, and approved subsequentto that date or of the acqui- sition by such company pursuantto a binding written contract entered into on or before May 1, 1982, of another company en- gaged in such activities at the time of the acquisition); (E) any insurance activity where the activity is limited solely to super- vising on behalf of insurance underwriters the activities of re- tail insurance agents whosell (i) fidelity insurance and prop- erty and casualty insurance on the real and personal property used in the operations of the bank holding company or any of its subsidiaries, and (ii) group insurance that protects the em- loyees of the bank holding company or any of its subsidiaries; (F) any insurance agency activity engaged in by a bank holding company, or any of its subsidiaries, which bank holding com- panyhastotal assets of $50,000,000 or less: Provided, however, That such a bank holding company and its subsidiaries may not engage in thesale of life insurance or annuities except as provided in subparagraph (A), (B), or (C); or (G) where the ac- tivity is performed, or shares of the company involved are owned, directly or indirectly, by a bank holding company which is registered with the Board of Governors of the Federal Re- serve System and which, prior to January 1, 1971, was en- gaged, directly or indirectly, in insurance agency activities as a [consequence of approval by the Board prior to January 1, 1971.] consequence of approval by the Board prior to January 1, 1971, except that, after March 30, 1997, it shall be closely re- lated to banking or managing or controlling banks and a prop- er incident thereto to provide insurance as a principal, agent, or broker in any State, in full compliance with the laws and regulations of such State that apply uniformly to each type of 216 200 insurance license or authorization in that State, including laws that restrict a bank in that State from having an affiliate, agent, or employee in that State licensed to provide insurance as principal, agent, or broker. The Board shall prescribe regula- tions concerning insurance affiliations that provide equivalent treatment forall stock and mutual fund insurance companies that control or are affiliated with a bank, and fully accommo- date and are consistent with State law. In determining whether a particular activity is a proper incident to banking or manag- ing or controlling banks the Board shall consider whether its performance by an affiliate of a holding company can reason- ably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in effi- ciency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interests, or unsound banking practices. In orders and regulation under this subsection, the Board may differen- tiate between activities commenced de novo and activities com- menced by the acquisition, in whole or in part, of a going con- cern. Notwithstanding any other provision of this Act, if the Board finds that an emergency exists which requires the Board to act immediately on any application under this subsection in- volving a thrift institution, and the primary Federal regulator of such institution concurs in such finding, the Board may dis- pense with the notice and hearing requirement of this sub- section and the Board may approve or deny any such applica- tion without notice or hearing. If an application is filed under this paragraph in connection with an applitativin iv make oh acquisition pursuant to section 13( of the Federal Deposit In- surance Act, the Board may dispense with the notice and hear- ing requirement ofthis paragraph and the Board may approve or deny the application underthis paragraph without notice or hearing. If an application described in the preceding sentence is approved, the Board shall publish in the Federal Register, not later than 7 days after such approvalis granted, the order approving the application and a description of the nonbanking activities involved in the acquisition; PGC. wa SCLIOI e x*x * * * * * * (i) ACQUISITION OF SAVINGS ASSOCIATIONS.—— (a x OK OR * * * * * * * (4) SOLICITATION OF VIEWS.— (A) NOTICE TO DIRECTOR.—Upon receiving any ap plica- tion or notice by a bank holding company to acqui re di- rectly or indirectly a savings association under subs ection (c)(8), the Board shall solicit the Director's comments and recommendations with respect to such acquisition. (B) COMMENT PERIOD.—-The comments and views of the Director under subparagraph (A) with respect to an y acqui- sition subject to such subparagraph shall be trans mitted to the Board within 30 days of the receipt by the Di rector of the notice relating to such acquisition (or such shor ter pe- riod as the Board may specify if the Board advises the Di- 217 201 rector that an emergency exists which requires expeditious action). (5) EXAMINATION.— (A) ScoPE.—The Board shall consult with the Director, as appropriate, in establishing the scope of an examination by the Board of a bank holding company that controls di- rectly or indirectly a savings association. (B) ACCESS TO INSPECTION REPORTS.—Upon the request of the Director, the Board shall furnish the Director with a copy ofany inspection report, additional examination ma- terials, or supervisory information relating to any bank holding company which directly or indirectly controls a savings association. (6) COORDINATION OF ENFORCEMENT EFFORTS.—The Board and the Director shall cooperate in any enforcement action against any bank holding company which controls a savings as- sociation, if the relevant conduct involves such association. (7) DIRECTOR DEFINED.—For purposes of this section, the term “Director” means the Director of the Office of Thrift Super- vision. (j) NOTICE. PROCEDURES FOR NONBANKING ACTIVITIES.— (1) GENERAL NOTICE PROCEDURE.— (A) NOTICE REQUIREMENT.—[No] Except as provided in paragraph (3), no bank holding company may engage in any nonbanking activity or acquire or retain ownership or control of the shares of a company engaged in activities based on subsection (c)(8) or (a)(2) without providing the Board with written notice of the proposed transaction or activity at least 60 days before the transaction or activity is proposed to occur or commence. ae * * * * * * (3) NO NOTICE REQUIRED FOR CERTAIN TRANSACTIONS.—No notice under paragraph (1) or subsections (c)(8) or (a)(2)(B) is required for a proposal by a bank holding company to engage in any activity or acquire the shares or assets of any company if the proposal qualifies under paragraph (4). (4) CRITERIA FOR STATUTORY APPROVAL.~A proposal qualifies under this paragraphifall of the following criteria are met: (A) FINANCIAL CRITERIA.—Both before and immediately after the proposed transaction— () the acquiring bank holding company is well cap- italized; (ii) the lead insured depository institution of such holding company is well capitalized; (iii) well capitalized insured depository institutions control at least 80 percent of the aggregate total risk- weighted assets of insured depository institutions con- trolled by such holding company; and (iv) no insured depository institution controlled by such holding company is undercapitalized. (B) MANAGERIAL CRITERIA.— (i) WELL MANAGED.—At the time of the transaction, the acquiring bank holding company, its lead insured idepository institution, and insured depository institu- 218 202 tions that control at least 90 percent of the aggregate total risk-weighted assets of insured depository institu- tions controlled by such holding company are well managed. (ii) LIMITATION ON POORLY MANAGED _ INSTITU- TIONS.—Except with respect to insured depository insti- tutions described in paragraph (6), no insured deposti- tory institution controlled by the acquiring bank hold- ing company has received I of the 2 lowest composite ratings at the later of the institution's most recent ex- amination or subsequent review. (C) ACTIVITIES PERMISSIBLE.—Following consummation of the proposal, the bank holding company engages directly or through a subsidiary solely in— (i) activities that are permissible under subsection (c)(8), as determined by the Board by regulation or order thereunder, subject to all of the restrictions, terms and conditions ofsuch subsection and such regu- lation or order; and ii) such other activities as are otherwise permissible under this section, subject to the restrictions, terms and conditions, including any prior notice or approval re- uirements, provided in this section. oO SIZE OF ACQUISITION.— (i) ASSET SIZE.—The book value of the total assets to be acquired does not exceed 10 percent of the consoli- dated total risk-weighted assets of the acquiring bank holding compariy, aud (ii) CONSIDERATION,—The gross consideration to be paid for the securities or assets does not exceed 15 per- cent of the consolidated Tier 1 capital of the acquiring bank holding company. (E) NOTICE NOT OTHERWISE WARRANTED.—For proposals described in paragraph (5)(B), the Board has not, before .the conclusion of the period provided in paragraph (5)(B), ad- vised the bank holding company that a notice under para- graph (1) is required. (F) COMPLIANCE CRITERION.—During the 12-month pe- riod ending on the date on which the bank holding com- Pany proposes to commence an activity or acquisition, no administrative enforcement action has been commenced, and no cease and desist order has been issued pursuant to section 8 of the Federal Deposit Insurance Act, against the bank holding company or any depository institution sub- sidiary of the holding company and no such enforcement action, order, or other administrative enforcement proceed- ing is pending as ofsuch date. (5) NOTIFICATION.— (A) COMMENCEMENT OF ACTIVITIES APPROVED BY RULE.— A bank holding company that qualifies under paragraph (4) and that proposes to engage de novo, directly or through a subsidiary, in any activity that is permissible under sub- section (8). as determined by the Board by regulation, may commence that activity without prior notice to the 219 203 Board and must provide written notification to the Board no later than ten business days after commencing the activ- ity. (B) ACTIVITIES PERMITTED BY ORDER AND. ACQUISI- TIONS.— (i) IN GENERAL.—At least 12 business days before commencing any activity pursuant to paragraph (3) (other than an activity described in subparagraph (A)) or acquiring shares or assets of any company pursuant to paragraph (3), the bank holding company shall pro- vide the written notification of the proposal to the Board, unless the Board determines that no notice or a shorter notice period is appropriate. (ii) DESCRIPTION OF ACTIVITIES AND TERMS.—A _noti- fication under this subparagraph shall include a de- scription of the proposed activities and the terms of any proposed acquisition. (6) RECENTLY ACQUIRED INSTITUTIONS.—Insured depository institutions which have been acquired by a bank holding com- pany during the 12-month period preceding the date on which the company proposes to commence an activity or acquisition pursuant to paragraph (3) may be excluded for purposes of paragraph (4B)GD if— : (A) the bank holding company has developed a plan for the institution to restore the capital and managementof the institution which is acceptable to the appropriate Federal banking agency; and (B) all such insured depository institutions represent, in the aggregate, less than 10 percent of the aggregate total risk-weighted assets of all insured depository institutions controlled by the bank holding company. (7) ADJUSTMENT OF PERCENTAGES.—The Board may, by regu- lation, adjust the percentages and the manner in which the per- centages of insured depository institutions are calculated under paragraph (4)(B)(i), (4)(D), or paragraph (6)(B) if the Board de- termines that any such adjustment is consistent with safety and soundness and the purposes of this Act. * * * * * * * NATIONAL BANK CONSOLIDATION AND MERGER ACT * * 2k * * * * SEC. 2. CONSOLIDATION OF BANKS WITHIN THE SAMESTATE. (a) IN GENERAL.—Any national bank or any bank incorporated under the laws of any State may, with the approval of the Comp- troller, be consolidated with one or more national banking associa- tions located in the same State under the charter of a national banking association on such terms and conditions as may be law- fully agreed upon by a majority of the board of directors of each association or bank proposing to consolidate, and be ratified and confirmed by the affirmative vote of the shareholders of each such association or bank owning at least two-thirds of its capital stock outstanding, or by a greater proportion of such capital stock in the 220 204 case of such State bank if the laws of the State where it is orga- nized so require, at a meeting to be held on the call of the direc tors after publishing notice of the time, place, and object of the meet ing for four consecutive weeks in a newspaper of gener al circulation published in the place where the association or bank is located, or, if there is no such newspaper, then in the paper of general circ ula- tion published nearest thereto, and after sending such no tice to each shareholder of record by certified or registered mail a t least ten days prior to the meeting, except to those shar eholders who specifically waive notice, but any additional notice shall be given to the shareholders of such State bank which may be requi red by the laws of the State where it is organized. Publication of notice may be waived, in cases where the Comptroller determines tha t an emergency exists justifying such waiver, by unanimous ac tion of the shareholders of the association or State bank. No appro val by the Comptroller of the Currency is required under this sub section for a transaction which involves the consolidation of banks t hat, at the time of the consolidation, are all subsidiaries (as d efined in sec- tion 3 of the Federal Deposit Insurance Act) of the same co mpany. (b) The consolidated association shall be liable for all liabilities of the respective consolidating banks or association s. The capital stock of such consolidated association shall net be less than that required under existing law for the organization of a nat ional bank in the place in whichit is located: Provided, That if such consolida- tion shall be voted for at such meetings by the necessary ma jorities of the shareholders of each association and State bank proposing to consolidatef, and thereafter the consolidation shall b e approved by the Comptroiierj, any Shareivide: vi auy uf CGC r State banks so consolidated who has voted against sucn consolida- tion at the meeting of the association or bank of whi ch he is a stockholder, or who has given notice in writing at or pr ior to such meeting to the presiding officer that he dissents from t he plan of consolidation, shall be entitled to receive the value of th e shares so held by him [when such consolidationis approved by the Comptrol- ler] upon written request made to the consolidat ed association at any time before thirty days after the date of consummatio n of the consolidation, accompanied by the surrender of his st ock certifi- cates. a c S o e t A * * * * * * * Sec. 3. (a) One or more national banking associations or one or more State banks, with the approval of the Comptroller, und er an agreement not inconsistent with this Act, may merge i nto a na- tional banking association located within the same State, unde r the charter of the receiving association. The merger agreement sh all— 1 wx Ok OK At) * * * * * * * No approval by the Comptroller of the Currency is required u nder this subsection for a transaction which involves the merger o f banks that, at the time of the merger, are all subsidiaries (as defined in section 3 of the Federal Deposit Insurance Act) of the sam e com- pany. (by If a merger shall be voted for at the called meetings by the necessary majorities of the shareholders of each associa tion or 221 205 State bank participating in the plan of merger[, and thereafter the merger shall be approved by the Comptroller], any shareholder of any association or State bank to be merged into the receiving asso- ciation who has voted against such merger at the meeting of the association or bank of which he is a stockholder, or has given no- tice in writing at or prior to such meeting to the presiding officer that he dissents from the plan of merger shail be entitled to receive the value of the shares so held by him [when such mergershall be approved by the Comptroller] upon written request made to the receiving association at any time before thirty days after the date of consummation of the merger, accompanied by the surrender of his stock certificates. * * * * * * * REVISED STATUTES TITLE LXII NATIONAL BANKS CHAPTER ONE ORGANIZATION AND POWERS Sec. 5133. Formation of national banking associations. 5134. Requisites of organization certificate. 5135. How certificate shall be acknowledged andfiled. 5136. Corporate powers of associations. 5136A. State supervision ofinsurance. 5136B. Insurance sales in empowerment zones. [5136A.] 5136C. Participation in lotteries prohibited. 5137. Power to hold real property. * * * * * * * SEC. 5136. [Upon duly making andfiling articles of association] (a) IN GENERAL.— Upon duly making and filing articles of associa- tion and an organization certificate, the association shall become, as from the date of the execution of its organization certificate, a body corporate, and as such, and in the name designated in the or- ganizationcertificate, it shall have power— First. To adopt and use a corporateseal. Second. To have succession from the date of the approval of this Act, or from the date of its organization if organized after such date of approval until such time as it be dissolved by the act of its shareholders owning two-thirds of its stock, or until its franchise becomesforfeited by reason of violation of law, or until terminated by either a general or a special Act of Congress or until its affairs be placed in the hands of a receiver and finally wound up by him. * * * * * * * 222 206 Seventh. To exercise by its board of directors or duly authoriz ed officers or agents, [subject to law,} subject to subsection (bj, section 5136A, and any other provision of law, all such incidental powers as shall be necessary to carry on the business of bank ing; by dis- counting and negotiating promissory notes, drafts, bills o f ex- change, and other evidences of debt; by receiving deposits; by buy- ing and selling exchange, coin, and bullion; by loaning mone y on personal security; and by obtaining, issuing, and cir culating notes according to the provisionsof thistitle. The business of deali ng in securities and stock by the association shall be limited to pur chas- ing and selling such securities and stock without reco urse, solely upon the order, and for the account of, customers, and in no case for its own account, and the association shall not underwrite any issue of securities or stock: Provided, That the association may pur- chase for its own account investmentsecurities under such limita- tions and restrictions as the Comptroller of the Currency ma y by regulation prescribe. In no event shall the total amount of the in- vestment securities of any one obligor or maker, held by the asso- ciation for its own account, exceed at any time 10 per centu m of its capital stock actually paid in and unimpaired and 10 per cen- tum of its unimpaired surplus fund, except that this li mitation shall not require any association to dispose of any securities law- fully held by it on the date of enactment of the Banking A ct of 1935. As used in this section the term “investment securities” shall mean marketable obligations evidencing indebtedness of any per- son, copartnership, association, or corporation in the form of b onds, notes and/or debentures commonly known as investmentsecuri ties under sucht furiiier Geii fie idem “ r ities” ae may by regulation be prescribed by the Comptroller of t he Cur- rency. Except as hereinafter provided or otherwise permi tted by law, nothing herein contained shall authorize the purchase by the association for its own account of any shares of stock of any cor- poration. The limitations and restrictions herein c ontained as to dealing in, underwriting and purchasing for its own acco unt, in- vestment securities shall not apply to obligations of the Un ited States, or general obligations of any State or of any political sub- division thereof, or obligations of the Washington Metropol itan Area Transit Authority which are guaranteed by the Secr etary of Transportation under section 9 of the National Capital Tr anspor- tation Act of 1969,or obligations issued under authority of the Fed- eral Farm Loan Act, as amended, or issued by the thirteen b anks for cooperatives or any of them or the Federal Home Loan Ba nks, or obligations which are insured by the Secretary of Housi ng and Urban Development under title XI of the National Housing Act, or obligations which are insured by the Secretary of Housing and Urban Development (hereafter in this sentence referred to a s the “Secretary” pursuant to section 207 of the National Housing Act, if the debentures to be issued in payment of such insured ob liga- tions are guaranteed as to principal and interest by the Un ited States, or obligations, participations, or other instrume nts of or is- sued by the Federal National Mortgage Association or the Gov ern- ment National Mortgage Association, or mortgages, obligation s, or other securities which are or ever have been sold by the Fe deral Home Loan Mortgage Corporation pursuant to section 30 5 or sec- LiUii Ui LITT Veil = 223 207 tion 306 of the Federal Home Loan Mortgage Corporation Act or obligations of the Federal Financing Bank or obligations of the En- vironmental Financing Authority or obligations or other instru- ments or securities of the Student Loan Marketing Association, or such obligations of any local public agency (as defined in section 110 (h) of the Housing Act of 1949) as are secured by an agreement between the local public agency and the Secretary in which the local public agency agrees to borrow from said Secretary and said Secretary agrees to lend to said local public agency, monies in an aggregate amount which (together with any other monies irrev- ocably committed to the payment of interest on such obligations) will suffice to pay, when due, the interest on and all installments {including the final installment) of the principal of such obligations, which monies under the terms of said agreement are required to be used for such payments, or such obligations of a public housing agency (as defined in the United States Housing Act of 1937, as amended) as are secured (1) by an agreement between the public housing agency and the Secretary in which the public housing agency agrees to borrow from the Secretary and the Secretary agrees to lend to the public housing agency, prior to the maturity of such obligations, monies in an amount which (together with any other monies irrevocably committed to the payment of interest on such obligations) will suffice to pay the principal of such obligations with interest to maturity thereon, which monies under the terms of said agreement are required to be used for the purpose of paying the principal of and the interest on’ such obligations at their matu- rity, (2) by a pledge of annual contributions under an annual con- tributions contract between such public housing agency and the Secretary if such contract shall contain the covenant by the Sec- retary which is authorized by subsection (b) of section 22 of the United States Housing Act of 1937, as amended, and if the maxi- mum sum and the maximum period specified in such contract pur- suant to said subsection 22(b) shall not be less than the annual amount and the period for payment which are requisite to provide for the payment when dueofall installments of principal and inter- est on such obligations, or (3) by a pledge or both annual contribu- tions under an annual contributions contract containing the cov- enant by the Secretary which is authorized by section 6(g) of the United States Housing Act of 1937, and a loan under an agreement between the local public housing agency and the Secretary in which the public housing agency agrees to borrow from the Secretary, and the Secretary agrees to lend to the public housing agency, prior to the maturity of the obligations involved, moneys in an amount which (together with any other moneys irrevocably committed under the annual contributions contract to the payment of prin- cipal and interest on such obligations) will suffice to provide for the payment when dueofall installments of principal and interest on such obligations, which moneys under the terms of the agreement are required to be used for the purpose of paying the principal and interest on such obligations at their maturity: Provided, That in carrying on the business commonly knownas the safe-deposit busi- ness the association shall not invest in the capital stock of a cor- poration organized under the law of any State to conduct a safe- deposit business in an amount in excess of 15 per centum of the 224 208 capital stock of the association actually paid in and unimpaired and 15 per centum ofits unimpaired surplus. Th e limitations and restrictions herein contained as to dealing in and u nderwriting in- vestment securities shall not apply to obligations issued by the International Bank for Reconstruction and Develop ment, the Euro- pean Bank for Reconstruction and Development, the Inter-Amer- ican Development Bank, the Asian Development Ban k the African Development Bank, the Inter-American Investment C orporation, or the International Finance Corporation, or obligation s issued by any State or political subdivision or any agency of a S tate or political subdivision for housing, university, or dormitory p urposes, which are at the timeeligible for purchase by a national bank for its own account, nor to bonds, notes and other obligation s issued by the Tennessee Valley Authority or by the United Stat es Postal Service.: Provided, That no association shall hold obligation s issued by any of said organizations as a result of underwriting, dealing, or pur- chasing for its own account (and for this purpose o bligations as to which it is under commitment shall be deem ed to be held by it) in a total amount exceeding at any one time 10 per ce ntum of its cap- ital stock actually paid in and unimpaired and 10 per centum of its unimpaired surplus fund. Notwithstanding any other provision in this paragraph, the association may purchase for its own ac- count shares of stock issued by a corporation aut horized to be cre- ated pursuant to title IX of the Housing and Urba n Development Act of 1968, and may make investments in a part nership, limited partnership, or joint venture formed pursuant to section 907(a) or an7(c) of that Act. Notwithstanding any other pro vision of this paragraph, the association may purcnase TOr iS uwii awourie shares of stock issued by any State housing corporation incor- porated in the State in which the association is located and may make investments in loans and commitments for loans to any such corporation: Provided, That in no event shall the total amount of such stock held for its own account and such inves tments in loans and commitments madeby the association exceed at any time 5 per centum of its capital stock actually paid in and un impaired plus 5 per centum of its unimpaired surplus fund. Notwi thstanding any other provision in this paragraph, the association m ay purchasefor its own account shares of stock issued by a corpor ation organized solely for the purpose of making loans to farmers a nd ranchersfor agricultural purposes, including the breeding, raisi ng, fattening, or marketing of livestock. However, unless the associ ation owns at least 80 per centum of the stock of such agricultura l credit corpora- tion the amountinvested by the association at any one time in the stock of such corporation shall not exceed 20 per centum of the unimpaired capital and surplus of the association: P rovided further, That notwithstanding any other provision of this paragraph, the association may purchase for its own account shar es of stock of a bank insured by the Federal Deposit Insurance C orporation or a holding company which owns or controls such an insured bankif the stock of such bank or company is owned exclusiv ely (except to the extent directors’ qualifying shares are required by law) by de- pository institutions or depository institution holdin g companies (as defined in section 3 of the Federal Deposit Insu rance Act) and such bank or company and ali subsidiaries thereof are e ngaged exclu- 225 209 sively in providing services to or for other depository institutions, their holding companies, and the officers, directors, and employees of such institutions and companies, and in providing correspondent banking services at the request of other depository institutions or their holding companies (also referred to as a “banker's bank”), but in no event shall the total amount of such stock held by the asso- ciation in any bank or holding company exceed at any time 10 per centum of the associations capital stock and paid in and unimpaired surplus and in no event shall the purchase of such stock result in an association’s acquiring more than 5 per centum of any class of voting securities of such bank or company. The limi- tations and restrictions contained in this paragraph as to an asso- ciation purchasing for its own account investment securities shall not apply to securities that (A) are offered and sold pursuant to section 4(5) of the Securities Act of 1933 (15 U.S.C. 77d(5)); (B) are small business related securities (as defined in section 3(a)(53) of the Securities Exchange Act of 1934); or (C) are mortgage related securities (as that term is defined in section 3(a)(41) of the Securi- ties Exchange Act of 1934 (15 U.S.C. 78c(a)(41)). The exception pro- vided for the securities described in subparagraphs (A), (B), and (C) shall be subject to such regulations as the Comptroller of the Cur- rency may prescribe, including regulations prescribing minimum size of the issue (at the timeof initial distribution) or minimum ag- gregate sales prices, or both. A national banking association may deal in, underwrite, and purchase for such association’s own ac- count qualified Canadian government obligations to the same ex- tent that such association may deal in, underwrite, and purchase for such association's own account obligations of the United States or general obligations of any State or of any political subdivision thereof. For purposes of this paragraph— (1) the term “qualified Canadian government obligations” means any debt obligation which is backed by Canada, any Province of Canada, or any political subdivision of any such Province to a degree which is comparable to the liability of the United States, any State, or any political subdivision thereof for any obligation which is backed by the full faith and credit of the United States, such State, or such political subdivision, and such term includes any debt obligation of any agent of Canada or any such Province or any political subdivision of such Province if— (A) the obligation of the agent is assumed in such agent’s capacity as agent for Canada or such Province or such political subdivision; and (B) Canada, such Province, or such political subdivision on whose behalf such agent is acting with respect to such obligation is ultimately and unconditionally liable for such obligation; and (2) the term “Province of Canada” means a Province of Can- ada and includes the Yukon Territory and the Northwest Ter- titories and their successors. (b) INTERPRETIVE AUTHORITY OF THE COMPTROLLER OF THE CUR- RENCY.— 226 210 (1) IN GENERAL.—Subject to paragraph (2), it shall no t be in- cidental to banking for a national bank to provide ins urance as a principal, agent, or broker. (2) SCOPE OF APPLICATION. —Notwithstanding paragr aph (1), it shall be incidental to banking for a national bank to engage in the following activities: (A) Providing, as an agent or broker, any annuity con- tract the income on which is tax deferred under sec tion 72 of the Internal Revenue Code of 1986. (B) Providing, as a principal, agent, or broker, any type of insurance, other than an annuity or title ins urance, which the Comptroller of the Currency specifically deter- mined, before May 1, 1995, to be incidental to banking with respect to national banks. SEC. 5136A. STATE SUPERVISION OFINSURAN CE. (a) STATE LICENSING OF INSURANCE ACTIVITIES. — ” (1) IN GENERAL.—Subject to paragraph (2), no provision of section 5136, any other section of this title, or secti on 13 of the Federal Reserve Act may be construed as limiting or otherwise impairing the authority of any State to regulate— (A) the extent to which, and the manner in whi ch, a na- tional bank may engage within the State in insuran ce ac- tivities pursuant to section 5136B of this chapter or section 13 of the Federal Reserve Act; (B) the manner in which a national bank may eng age within the State in insurance activities pursuant to section D1d0(D)/(Z)(b) UF Ute Reviscd Gia of od Statec: or (C) the manner in which a national bank may eng age within the State in insurance activities pursuant to section 5136(b)(2)(A) of the Revised Statutes of the U nited States through, and limited to, consumer disclosure requ irements or licensing requirements, procedures, and qualification s as described in paragraph (2)(C). (2) PROHIBITION ON STATE DISCRIMINATION AGAIN ST NA- TIONAL BANKS.—Notwithstanding paragraph (1)— (A) PROVIDING INSURANCE AS AGENT OR B ROKER.—No State may impose any insurance regulatory requirem ent re- lating to providing insurance as an agent or bro ker that treats a national bank differently than all other p ersons who are authorized to provide insurance as agents or bro- kers in such State, unless there is a legitimate and rea son- able State regulatory purpose for the requirement for w hich there is no less restrictive alternative. (B) PROVIDING INSURANCE AS PRINCIPAL, AGENT, OR BROKER.—— (i) No State may impose on a national bank any in - surance regulatory requirement relating to providin g insurance as principal, agent, or broker that treats th e national bank morerestrictively than any other deposi - tory institution (as defined in section 3(c)(1) of t he Fed- eral Deposit Insurance Act, 12 U.S.C. 1813(c) (1) oper- ating in the State. 227 211 (ii) Nothing in this subparagraph shall affect the va- lidity of a State law that— () prevents a national bank from engaging in insurance activities within the State to as great an extent as a savings association (as defined in sec- tion 3(b)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(b)(1)) may engage in such activities within the State; and (1D) was in effect on June 1, 1995. (C) LICENSING QUALIFICATIONS AND PROCEDURES.—No State may discriminate against a national bank with re- spect to the following requirements, procedures, and quali- fications as such requirements, procedures, and qualifica- tions relate to the authority of the national bank to provide insurance in such State as an agent or broker: (i) License application and processing procedures. (ii) Character, experience, and educational qualifica- tions for licenses. (iii) Testing and examination requirements for Ii- censes. (iv) Fee requirements for licenses. (v) Continuing education requirements. (vi) Types of licenses required. (vii) Standards and requirements for renewal ofIi- censes. (b) AUTHORITY OF THE COMPTROLLER OF THE CURRENCY.~—~A na- tional bank may not provide insurance as a principal, agent, or broker except as specifically provided in this section, the paragraph designated as the “Seventh” of section 5136(a) of this chapter, sec- tion 5136(b) or 5136B of this chapter, or section 13 of the Federal Reserve Act. (c) PRESERVATION OF FEDERALLY AUTHORIZED BANK ACTIVITIES IN PERMISSIVE STATES.—No provision of this section may be con- strued as affecting the authority, pursuant to section 5136B of this . chapter or section 13 of the Federal Reserve Act, of a national bank to act as insurance agent or broker consistent with State law. (d) PRESERVATION OF NATIONAL BANK AUTHORITY CONSISTENT WitH STATE BANK AUTHORITY.—Except as provided in subsection (a) (2) (B), no provision of this section or section 5136(b) (1) shall have the effect of enabling a State to deny a national bank authority that the bank otherwise possesses to provide a product in a State, includ- ing as agent, broker, or principal, where the bank is not providing the product in the State other than to an extent and in a manner that a State bank (as defined in section 3(a)(2) of the Federal De- posit Insurance Act, 12 U.S.C. 1813(a)(2)) is permitted by the law of the State to provide such product, except that nothing in this sub- section shall be construed as granting any new authority to a na- tional bank to provide any product because the law of the State has authorized State banks to provide such product. (e) DEFINITIONS.—For purposes of this section, sections 5136 and 9136B, and section 13 of the Federal Reserve Act, the following defi- nitions shall apply: (1) INSURANCE.-——-The term “insurance” means any product de- fined or regulated as insurance, consistent with the relevant 228 212 State insurance law, by the insurance regulatory aut hority of the State in which such product is sold, solicited, or under- written, including any annuity contract the income on w hich is tax deferred under section 72 of the Internal Revenue C ode of 1986. (2) STATE.—The term “State” has the same meani ng as in sec- tion 3(a)(3) of the Federal Deposit Insurance Act. (9 GRANDFATHER PROVISION.— (1) IN GENERAL.—Any national bank which, before Janu ary 1, 1995, was providing insurance as agent or broker und er sec- tion 13 of the Federal Reserve Act may provide insuranc e as an agent or broker under such section, to no less extent an d in a no more restrictive manner as such bank was providin g insur- ance as agent or broker under such section on January 1 , 1995, notwithstanding contrary State law, subject to final, cont rolling judgment in a pending action. 2) TERMINATION.—This subsection shall cease to apply with respect to any national bank described in paragraph (1i t (A) the bank is subject to an acquisition, merger, consoli - dation, or change in control, other than a transactio n to which section 18(c)(12) of the Federal Deposit Insurance Act applies; or (B) any bank holding company which directly or i ndi- rectly controis such bank is subject to an acquisition, me rg- er, consolidation, or change in control, other than a trans- action in which the beneficial ownership ofsuch bank h old- ina camnanyor of a bank holding company which controls such company does not change as a result of the tr ans- action. (g) PRESERVATION OF BANKING Propucrs.—Nothing i n this sec- tion shall be construed as affecting the ability of a na tional bank, or a subsidiary ofa national bank, to engage in ary act ivity, includ- ing any activity authorized pursuant to the paragrap h designated the “Seventh”ofsection 5136(a), that is part of, and not merely inci- dental to, the business of banking. SEC. 5136B. INSURANCE SALES INEMPOWERME NTZONES. (a) AUTHORITY TO SELL INSURANCE AS A GENT FROM EMPOWERMENT ZONES.—The Comptroller of the Currenc y may ap- prove an application by a national bank maintaining a m ain office or full-service branch in an empowerment zone to act as an agent or broker from such office or branch for anyfire, life, or o ther insur- ance company authorized to do business in the State in which the customer is located if— (1) the bank provides sufficient evidence that the avail ability of competitively priced insurance products in the emp owerment zone is inadequate; and (2) the insurance products are sold only in the empower ment zone. (b) APPLICATION OF STATE Law.—State laws which regulate con- ducting the business of insurance shall apply to national banks and their employees that sell insurance as agent or broker under this section to the same extent as such laws apply to other entities and persons not affiliated with depository institutions except — 229 213 (1) in any case in which the Comptroller of the Currency de- termines, after notice to and comment by the appropriate State insurance officials, that the application of a State law would have an unreasonably discriminatory effect upon the sale of in- surance by national banks or their employees in comparison with the effect the application of the State law would have with respect to sale ofinsurance by other entities; or 2) when State law by its own terms does not apply to na- tional banks or employees ofsuch banks. (c) AUTHORITY OF COMPTROLLER OF THE CURRENCY.— (1) IN GENERAL.—The Comptroller of the Currency may pre- scribe regulations governing sales of insurance by national banks pursuantto this section. (2) ENFORCEMENT OF STATE LAW.—The provisions of any State law to which an national bank is subject under this sec- tion shall be enforced with respect to such bank by the Comp- troller of the Currency. (d) DEFINITIONS.— (1) EMPOWERMENT ZONE.—The term “empowerment zone" means an area that meets the standards for designation as an empowerment zone or enterprise community under section 1392 of the Internal Revenue Code of 1986 or an Indian reservation. (2) FULL-SERVICE BRANCH.—The term “full-service branch” means a staffed facility which has been approved as a branch andoffers loan and deposit services. (3) INDIAN RESERVATION.—The term “Indian reservation” has the meaning given such term by section 168(j)(6) of the Internal Revenue Code of 1986. SEc. [5136A.] 5136C. (a) A national bank may not— (1) deal in lottery tickets; (2) deal in bets used as a meansor substitute for participa- tion in a lottery; * * * * * * * SEC. 5146. Every director must during his whole term of service, be a citizen of the United States, and at least a majority of the di- rectors must have resided in the State, Territory, or District in which the association is located, or within one hundred miles of the location of the office of the association, for at least one year imme- diately preceding their election, and must be residents of such State or within a one-hundred-mile territory of the location of the association during their continuance in office, except that (J) the Comptroller of the Currency may, in the Comptroller's discretion, waive the residency requirement in the case of any director of a na- tional bank to whom the requirement would otherwise apply, and (2) in the case of an association which is a subsidiary or affiliate of a foreign bank, the Comptroller of the Currency mayin his dis- cretion waive the requirementof citizenship in the case of not more than a minority of the total number of directors. Every director must own in his or her own right either shares of the capital stock of the association of which he or she is a director the aggregate par value of which is not less than $1,000, or an equivalent interest, as determined by the Comptroller of the Currency, in any company which has control over such association within the meaning of sec- tion 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841). 230 214 If the capital of the bank does not exceed $2 5,000, every director must own in his or her own right either shares of such capital stock the aggregate par value of which is not less t han $500, or an equivalent interest, as determined by the Comptrol ler of the Cur- rency, in any company which has control over s uch association within the meaning of section 2 of the Bank Hold ing Company Act of 1956 (12 U.S.C. 1841). Any director who c eases to be the owner of the required number of shares of the stock, or who becomes in any other manner disqualified, shall thereby vacate h is place. * * * * * * * Src. 5155. The conditions upon which a nationa l banking asso- ciation may retain or establish and operate a b ranch or branches are the following: (a) * OK OF * * * * * * * {(h) The aggregate capital of every national b anking association and its branches shall at no time be less than t he aggregate mini- mum capital required by law for the establis hment of an equal number of national banking associations situa ted in the various places where such association and its branc hesare situated. £G) No branch] (h) RELOCATION.— (1) APPROVAL REQUIRED.—Except as provided in paragraph (2), ne branch of any national banking associa tion shall be. es- tablished or moved from onelocation to ano ther without first obtaining the consent and approval of the C omptroller of the Currency. (4) INO APPRUVAL KE\UInE FOR CONTA IN mmancure—Nat- withstanding (f1is subsection or subsection (b) or (c), the consent and approval of the Comptroller of the Curren cy shall not be required for a national bank to establish and operate, or to re- tain and operate, a branch or seasonal agency if— (A) the bank is well capitalized (as defined in section 38 of the Federal Deposit Insurance Act and reg ulations pre- scribed by the Comptroller of the Currency un der such sec- tion}; (B) the bank received a composite CAMEL rating of “I” or ‘2" under the Uniform Financial Instituti ons Rating System (or an equivalent rating under a compar able rating system) as of its most recent examination, (C) the bank did not receive a “needs to imp rove” or “sub- stantial noncompliance” composite rating at its most recent examination under the Community Reinvest ment Act of 1977; and (D) the Comptroller of the Currency is oth erwise author- ized to grant approval under this section to su ch bank to establish and operate, or to retain and operate, a b ranch or seasonal agency at the proposed location. (3) CERTAIN BRANCHES DEEMED TO HAVE APPROV ED APPLICA- TIONS.—A branch or seasonal agency established by a national bank under paragraph (2) shall be deemed to have been estab- lished and operated pursuant to an application a pproved under this section. [(j) The term] (i) BRANCH.— 231 215 (1) IN GENERAL.—The term “branch” as used in this section shall be held to include any branch bank, branchoffice, branch agency, additional office, or any branch place of business lo- cated in any State or Territory of the United States or in the District of Columbia at which deposits are received, or checks paid, or moneylent. (2) CERTAIN PROPRIETARY ATMS AND REMOTE SERVICING UNITS.—The term “branch”does not include any automatedtell- er machine or remote service unit which is owned and operated by a depository institution— ia) primarily for the benefit of the institution and the af- filiates of the institution; and (B) which could operate a branch at the location of such machine or unit. {(kK)] ( This section shall not be construed to amend or repeal section 25 of the Federal Reserve Act, as amended, authorizing the establishment by national banking associations of branches in for- eign countries, or dependencies, or insular possessions of the Unit- ed States. [1 (&) The words “State bank,” “State banks,” “bank,” or “banks,” as used in this section, shall be held to include trust com- panies, savings banks, or other such corporations or institutions carrying on the banking business under the authority of State laws. SEC. 5156A. MERGERS, CONSOLIDATIONS, AND OTHER ACQUISITIONS AUTHORIZED. (a) * OK Ok (b) EXPEDITED APPROVAL OF ACQUISITIONS.— (1) IN GENERAL.—Any application by a national bank to ac- quire or be acquired by another insured depository institution which is required to be filed with the Comptroller of the Cur- rency by [section 5(d)(3) of the Federal Deposit Insurance Act or] any other applicable law or regulation shall be approved or - disapproved in writing by the agency before the end of the 60- day period beginning on the date such application is filed with the agency. * ok ca * * a *x CHAPTER THREE REGULATION OF THE BANKING BUSINESS * * * * * * * SEC. 5211. (a) Every association shall make reports of condition to the Comptroller of the Currency in accordance with the Federal Deposit Insurance Act. The Comptroller of the Currency may call for additional reports of condition, in such form and containing such information as he may prescribe, on dates to be fixed by him, and may call for special reports from any particular association wheneverin his judgment the sameare necessary for his use in the performance of his supervisory duties. Each report of condition shall contain a declaration by the president, a vice president, the cashier, or by any other officer designated by the board of directors of the bank to make such declaration, that the report is true and 232 216 correct to the best of his knowledge and belief. [The cor rectness of the report of condition shall be attested by the signat ures of least three of the directors of the bank other than the offi cer making such declaration, with the declaration that the report ha s been ex- amined by them and to the best of their knowledge an d belief is true and correct.}] Each report shall exhibit in detail and under ap- propriate heads the resources and liabilities of the ass ociation at the close of business on any past day specified by the Comptroller, and shall be transmitted to the Comptroller within the period of time specified by the Comptroller. Special reports called for by the Comptroller need contain only such information as is s pecified by the Comptroller in his request therefore, and publicati on of such reports need to be madeonly if directed by the Comptrolle r. * * * * * * * SECTION 10 OF THE HOME OWNERS’ LOAN ACT SEC. 10. REGULATION OF HOLDING COMPANIES. (a) DEFINITIONS.— (1) IN GENERAL.—As used in this section, unless the context otherwise requires— (A) * OK OK * * * * * * * [(D) SAVINGS AND LOAN HOLDING COMPANY.—The term savings and ivan inviding Lonipany” 5 , nany which directly or indirectly contrels a savings associ ation or controls any other company which is a savings and loan holding company.]} (D) SAVINGS AND LOAN HOLDING COMPANY.— @) IN GENERAL.—Except as provided in clause (ii) , the term “savings and loan holding company” means any company which directly or indirectly controls a savings association or controls any other co mpany which is a savings and loan holding company. (ti) EXCEPTION FOR BANK HOLDING COMPANY.— The term “savings and loan holding company” does not in- clude any company which is registered under, and sub- ject to, the provisions of the Bank Holding Company Act of 1956, or any company directly or indirectly con- trolled by such company. rammnany * * * * * * * (m) QUALIFIED THRIFT LENDER TEST.— (i) IN GENERAL.—Except as provided in paragraphs [(2) and (1 (2), @, and (8), any savings association is a qualified thrift lender if— (A) the savings association's qualified thrift investments equal or exceed 65 percent of the savings associatio n's portfolio assets; and (B) the savings association’s qualified thrift investments continue to equal or exceed 65 percent of the savings as so- 233 217 ciation’s portfolio assets on a monthly average basis in 9 out of every 12 months. * * * * * * * (8) ALTERNATIVE TEST.—Any savings association which meets the requirements set forth in section 7701 (a)(19)(C) of the Inter- nal Revenue Code of 1986 shall be deemed to be a qualified thrift lender and any qualified thrift lender shall be deemed to meet the requirements ofsuch section. * * * * * * * () EXEMPTION FOR BANK HOLDING COMPANIES.—This section Shall not apply to a bank holding company that is subject to the Bank Holding Company Act of 1956 or any company controlled by such bank holding company (other than a savings association). FEDERAL RESERVE ACT STATE BANKS AS MEMBERS SEc. 9, Any bank incorporated by special law of any State, or or- ganized under the general laws of any State or of the United States, including Morris Plan banks and other incorporated bank- ing institutions engaged in similar business, desiring to become a member of the Federal Reserve System, may make application to the Board of Governors of the Federal Reserve System, under such rules and regulations as it may prescribe, for the right to subscribe to the stock of the Federal reserve bank organized within the dis- trict in which the applying bank is located. Such application shall be for the same amount of stock that the applying bank would be required to subscribe to as a national bank. For the purposes of membership of any such bank the terms “capital” and “capital stock” shall include the amount of outstanding capital notes and debentures legally issued by the applying bank and purchased by the Reconstruction Finance Corporation. The Board of Governors of the Federal Reserve System, subject to the provisions of this Act and to such conditions as it may prescribe pursuant thereto may permit the applying bank to becomea stockholder of such Federal reserve bank. * ae * x * * * Any such State bank which, at the date of the approval of this Act, has established and is operating a branch or branches in con- formity with the State law, may retain and operate the same while remaining or upon becoming a stockholder of such Federal reserve bank; but no such State bank may retain or acquire stock in a Fed- eral reserve bank except upon relinquishment of any branch or branches established after the date of the approval of this Act be- yond the limits of the city, town, or village in which the parent bankis situated. Provided, however, That nothing herein contained shall prevent any State member bank from establishing and oper- ating branches in the United States or any dependency or insular possession thereof or in any foreign country, on the same terms and conditions and subject to the same limitations and restrictions as are applicable to the establishment of branches by national 234 218 banks except that the approval of the Board of Gove rnors of the Federal Reserve System, instead of the Comptroll er of the Cur- rency, shall be obtained before any State member ba nk may here- after establish any branch and before any State ban k hereafter ad- mitted to membership may retain any branch esta blished after February 25, 1927, beyond the limits of the city, t own, or village in which the parent bank is situated. The approval of the Board shall likewise be obtained before any State member bank may es- tablish any new branch within the limits of an s uch city, town, or village (except within the District of Columbia.) N otwithstanding the preceding 2 sentences, the approvalof the Board shall not be re- quired for a State member bank to establish and oper ate a branch or seasonal agency if— (A) the State member bank is well-capitalized (as defined in section 38 of the Federal Deposit Insurance Act and r egulations prescribed by the Board under such section); , (B) the State member bank received a composi te CAMEL rat- ing of “1” or “2” under the Uniform Financial Institu tions Rat- ing System (or an equivalent rating under a compar able rating system); (C) the State member bank did not receive a “needs to im- prove” or “substantia noncompliance” composite rating at its most recent examination under the Community r einvestment Act; and (D) the Board is otherwise authorized to grant approval under this section to such State member bank to establish and operate a branch or seasonal agency at the prop osed location. A branch or seasonal agency establistieu uy a Sia ics memes bank under the previous sentence siiail be deemed t o have been estab- lished and operated pursuant to an application a pproved under this section. * * * aK a * * POWERS OF FEDERAL RESERVE BANKS Sec. 13. Any Federal reserve bank may receive from any of its member banks or other depository institutions, a nd from the Unit- ed States, deposits of current funds in lawful mone y, national-bank notes, Federal reserve notes, or checks, and draft s, payable upon presentation or other items, andalso, for collection , maturing notes and bills; or, solely for purposes of exchange or o f collection, may receive from other Federal reserve banks deposits of current funds in lawful money, national-bank notes, or checks up on other Federal reserve banks, and checks and drafts, payable up on presentation within its district or other items, and maturin g notes and bills pay- able within its district; or, solely for the purpose s of exchange or of collection, may receive from any nonmember ba nk or trust com- pany or other depository institution deposit s of current funds in lawful money, national-bank notes, Federal reser ve notes, checks and drafts payable upon presentation or other items, or maturing notes and bills: Provided, Such nonmemberbankor trust company or other depository institution maintains with the Federal reserve bank of its district a balance in such amount as the Board deter- mines taking into account items in transit, ser vices provided by the 235 219 Federal Reserve bank, and other factors as the Board may deem appropriate: Provided further, That nothing in this or any other section of this Act shall be construed as prohibiting a member or nonmember bank or other depository institution from making rea- sonable charges, to be determined and regulated by the Board of Governors of the Federal Reserve System, but in no case to exceed 10 cents per $100 or fraction thereof, based on thetotal of checks and drafts presented at any one time, for collection or payment of checks and drafts and remission therefor by exchange or otherwise; but no such charges shall be made against the Federal reserve banks. * * * * *x 2 * That in addition to the powers not vested by law in national banking associations organized under the laws of the United States, and subject to section 5136A of the Revised Statutes of the United States, any such association located and doing business in any place the population of which does not exceed five thousand in- habitants, as shown by the last preceding decennial census, may, under such rules and regulations as may be prescribed by the Comptroller of the Currency, act as the agent for anyfire, life, or other insurance company authorized by the authorities of the State in which said bank is located to do business in said State, by solic- iting and selling insurance and collecting premiums on policies is- sued by such company; and may receive for services so rendered such fees or commissions as may be agreed upon between thesaid association and the insurance company for which it may act as agent: Provided, however, That no such bank shall in any case as- sume or guarantee the payment of any premium on insurancepoli- cies issued through its agency by its principal: And provided fur- ther, That the bank shall not guarantee the truth of any statement madeby an assuredin filing his application for insurance. * * ok 2 oe 2 * SEc. 22. * * * (d) * KOK * o* * 2 ak * * (g)(1} Except as authorized under this subsection, no member bank may extend credit in any manner to anyof its own executive officers. No executive officer of any member bank may becomein- debted to that member bank except by means of an extension of credit which the bank is authorized to make under this subsection. Any extension of credit under this subsection shall be promptly re- ported to the board of directors of the bank, and may be made only if-— (A) the bank would be authorized to make it to borrowers other than its officers; (B) it is on terms not more favorable than those afforded other borrowers; (C) the officer has submitted a detailed current financial statement; and (D) it is on condition that it shall become due and payable on demand of the bank at any time when the officer is in- debted to any other bank or banks on account of extensions of 236 220 credit [of any one of the three categories respectively referred to in paragraphs (2), (3), and (4)] of any category referred to in paragraph (2), (3), (4), (5), or (6) in an aggregate amount greater than the amountof credit of the same category that could be extended to him by the bank of which heis an officer. * * * * * * * (4) HOME EQUITY LINES OF CREDIT.—A member bank may make a revolving open-end extension of credit to any executive officer of the bank if the credit— (A) does not exceed $100,000; and (B) is secured by a dwelling that is owned by such officer and used by the officer as a residence. (5) LOANS SECURED BY MARKETABLE ASSETS.—A member bank may extend credit to any executive officer of the bank if the credit is secured by readily marketable assets of a value not exceeding such amount as the Board may establish by regulation. {(4)] (@) A member bank may make extensions of credit not ot h- erwise specifically authorized under this subsection to any execu” tive officer of the bank in an amountprescribed in a regulation of the member bank's appropriate Federal banking agency. 1(5)] (7) Except to the extent permitted under paragraph [(4)] (6), a member bank may not extend credit to a partnership in which ‘one ‘or more of its executive officers are partners having ei- ther individually or together a majority interest. For the purposes of paragraph [(4)] (6), the full amount of any credit so extended shall be considered to have been extended to each officer of th e bank whois a MemberoI the partnersnip. [(6) Whenever an executive officer of a member bank become s in- debted to any bank or banks (other than the one of which he is an officer) on account of extensions of credit of any one of the thre e categories respectively referred to in paragraphs (2), (3) and (4) in an aggregate amount greater than the aggregate amount of credit of the same category that could lawfully be extended to him by the bank, he shall make a written report to the board of directors of the bank, stating the date and amount of each such extension of credit, the security therefor, and the purposes for which the pro- ceeds have beenorare to be used.] {(7)] @) This subsection does not prohibit any executive offic er of a member bank from endorsing or guaranteeing for the protec- tion of the bank any loan or other asset previously acquired by the bank in good faith or from incurring any indebtedness to the bank for the purpose of protecting the bank against loss or giving finan- cial assistancetoit. {(8)1 (9) Each day that any extensionof credit in violation o f this subsection exists is a continuation of the violation for the purposes of section 8 of the Federal Deposit Insurance Act. {(9) Each member bank shall include with (but not as part o f) each report of condition and copy thereof filed under section 7(a) (3) of the Federal Deposit Insurance Act a reportof all loans under au- thority of this subsection made by the banksinceits previous re- ort of condition.] (10) The Board of Governors of the Federal Reserve System ma y prescribe such rules and regulations, including definitions of terms, 237 221 as it deems necessary to effectuate the purposes and to prevent evasions of this subsection. (12 U.S.C. 375a). (h) EXTENSIONS OF CREDIT TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS OF MEMBER BANKS.— } * OK OK [(2) PREFERENTIAL TERMS PROHIBITED.—A member bank} (2) PREFERENTIAL TERMS PROHIBITED.— (A) IN GENERAL.—A member bank may extend credit to its executive officers, directors, or principal shareholders, or to any related interest of such a person, only if the ex- tension of credit— [(A)] @ is made on substantially the same terms, including interest rates and collateral, as those pre- vailing at the time for comparable transactions by the bank with persons who are not executive officers, di- rectors, principal shareholders, or employees of the bank; ((8)] (ii) does not involve more than the normal risk of repayment or present other unfavorable features; and L(C)] (ii) the bank follows credit underwriting pro- cedures that are not less stringent than those applica- ble to comparable transactions by the bank with per- sons who are not executive officers, directors, principal shareholders,or employees of the bank. (B) ExcePTion.—No provision of this paragraph shall be construed as prohibiting extensions of credit that constitute a benefit or compensation program that is widely available to and used by employees of the member bank, including employees who are not executive officers of the bank. * * * * * * * (8) EXECUTIVE OFFICER, DIRECTOR, OR PRINCIPAL SHARE- HOLDER OF CERTAIN AFFILIATES TREATED AS EXECUTIVE OFFI- CER, DIRECTOR, OR PRINCIPAL SHAREHOLDER OF MEMBER BANK.— (A) * * * [(B) ExcerTion.—The Board may, by regulation, make exceptions to subparagraph (A), except as that subpara- graph makes applicable paragraph (2), for an executive of- ficer or director of a subsidiary of a companythat controls the member bank,if that executive officer or director does not have authority to participate, and does not participate, in major policymaking functions of the member bank.] (B) ExcePTion.—The Board may, by regulation, make ex- ceptions to subparagraph (A) for an executive officer or di- rector of a subsidiary of a company that controls the mern- ber bank if— (i) the executive officer or director does not have au- thority to participate, and does not participate, in major policymaking functions of the member bank; and (ii) the assets of such subsidiary do not exceed 10 percent of the consolidated assets of a company that 238 222 controls the member bank and such subsidiary (a nd is not controlled by any other company). * * * * * * * (10) BoaRD'S RULEMAKING AUTHORITY.—The Board of Gov- ernors of the Federal Reserve System may prescribe such regu - lations, including definitions of terms, as it determines to b e necessary to effectuate the purposes and prevent evasion s of this subsection. The Board shall specify by regulation the rec- ordkeeping required of member banks to ensure compliance with this section. * * * * * x * Sec. 24A. Hereafter no national bank, without the app roval of the Comptroller of the Currency, and no State memberbank, with- out the approval of the Board of Governors of the Federal Reserve System, shail (1) invest in bank premises, or in th e stock, bonds, debentures, or other such obligations of any corporation ho lding the premises of such bank or (2) make loans to or upon the security of the stock of any such corporation, if the aggregate of all such in- vestments and leans, together with the amountof any indebt edness incurred by any such corporation which is an affiliate of the bank, as defined in section 2 of the Banking Act of 1933, as ame nded, will exceed the amountof the capital stock of such bank or, in the case of a bank which received a composite CAMEL rating of “I” or “2” under the Uniform Financial Institutions Rating Syst em (or an equivalent rating under a com, arable rating system) as of it s most vacant avaminatinn and hath hefore and immediately following the ynvestment or loan, is well capitalized (as defined under S ection 56 of the Federal Deposit Insurance Act), the amount which is equai to 150 percentof the capital stock and surplus ofsuch bank. * * * * * * * BANKING CORPORATIONS AUTHORIZED TO DO FOR EIGN ‘BANKING BUSINESS SEc. 25A. Corporations to be organized for the purpose of e ngag- ing in international or foreign banking or other internat ional or foreign financial operations, or in banking or other financ ial oper- ations in a dependency or insular possession of the United S tates, either directly or through the agency, ownership, or control o f local institutions in foreign countries, or in such dependencies o r insular possessions as provided by this section, and to act when req uired by the Secretary of the Treasury as fiscal agents of the United States, may be formed by any numberof natural persons, no t less in any case than five: Provided, That nothing in this section shall be construed to deny the right of the Secretary of the Tre asury to use any corporation organized under this section as de positaries in Panama and the Panama Canal Zone,or in the Philippine I slands and other insular possessions and dependencies of the U nited States. Th US SCCiu Gi. Sica * * * * * * * No corporation shall be organized under the provisions o f this section with a capital stock of less than $2,000,000, one-qu arter of 223 which must be paid in before the corporation may be authorized to begin business, and the remainderof the capital stock of such cor- poration shall be paid in installments of at least 10 per centum on the whole amount to which the corporation shall be limited as fre- quently as one installment at the end of each succeeding two months from the time of the commencementof its business oper- ations until the whole of the capital stock shall be paid in: Pro- vided, however, That whenever $2,000,000 of the capital stock of any corporation is paid in the remainderof the corporation's capital stock or any unpaid part of such remainder may, with the consent of the Board of Governors of the Federal Reserve System and sub- ject to such regulations and conditions as it may prescribe, be paid in upon call from the board of directors; such unpaid subscriptions, however, to be included in the maximum of 10 per centum of the national bank's capital and surplus which a national bank is per- mitted under the provisions of this Act to hold in stock of corpora- tions engaged in business of the kind described in this section and in section 25 of the Federal Reserve Act as amended. The capital stock of any such corporation may be increased at any time, with the approval of the Board of Governors of the Federal Reserve Sys- tem, by a vote of two-thirds of its shareholders or by unanimous consent in writing of the shareholders without a meeting and with- out a formal vote, but any such increase of capital shall be fully paid in within ninety days after such approval; and may be reduced in like manner, provided that in no event shall it be less than $2,000,000. No corporation, except as herein provided, shall during the time it shall continue its operations, withdraw or permit to be withdrawn, either in the form of dividends or otherwise, any por- tion of its capital. [Any national banking association may invest in the stock of any corporation organized under the provisions of this section, but the aggregate amountof stock held in all corporations engaged in business of the kind described in this section and in section 25 of the Federal Reserve Act as amendedshal! not exceed 10 per centum of the subscribing bank's capital and surplus.] Any national bank may invest in the stock of any corporation organized under this section. The aggregate amount of stock held by any na- tional bank in all corporations engaged in business of the kind de- scribed in this section or section 25 shall not exceed an amount equal to 10 percent of the capital and surplus of such bank unless the Board determines that the investment of an additional amount by the bank would not be unsafe or unsound and, in any case, shall not exceed an amount equal to 25 percent of the capital and surplus ofsuch bank. * * * * * Ed * SECTION 107 OF THE FEDERAL CREDIT UNION ACT POWERS Sec. 107. A Federal credit union shall have succession in its cor- porate name during its existence and shall have power— (1) x ok OK * * * * * * * 240 224 (5) to make loans, the maturities of which shall not ex ceed twelve years except as otherwise provided herein, and extend lines of credit to its members, to other credit unions, and to credit union organizations and to participate with other credit unions, credit union organizations, or financial organizatio ns in making loans to credit union members in accordance with the following: (A) Loans to members shall be made in conformity wit h criteria established by the board of directors: Provided, That— (i) * OR OK a * * * * * * (iv) a loan or aggregate of loans to a director or memberof the supervisory or credit committee of the credit union making the loan which exceeds [$10,000] $50,000 plus pledged shares, be approved by the board of directors; (v) loans to other members for which directors or members of the supervisory or credit committee act as guarantor or endorser be approved by the board of di- rectors when such loans standing alone or when added io any outstanding loan or ioans of the guarantor or endorser exceeds [$10,000] $50,000, 7 * * * * 2 * NENNCITaPY INCTITHTTIAN MANAGEMENT INTERLOCKS ACT SEC. 203. (a) PROHIBITIONS.—A management official of a deposi- tory institution or a depository holding company may not serve as a managementofficial of any other depository institution or de posi- tory holding company notaffiliated therewith if an office of o ne of the institutions or any depository institution that is an affiliate of such institutions is located within either— (1) the same primary metropolitan statistical area, the same metropolitan statistical area, or the same consolidated metro- politan statistical area that is not comprised of designated pr i- mary metropolitan statistical areas as defined by the Office of Managementand Budget, except in the case of depository insti- tutions with less than $20,000,000 in assets in which case the provision of paragraph (2) shall apply, as that in which an of- fice of the other institution or any depository institution that is an affiliate of such institution is located, or (2) the samecity, town, or village as that in which anoffi ce of the other institution or any depository institution that is an affiliate of such other institution is located, or in any city, town, or village contiguous or adjacentthereto. (b) SMALL MARKET SHARE EXEMPTION.— (1) IN GENERAL.—This section shall not be construed as pr o- hibiting a managementofficial of a depository institution or de- pository holding company from serving as a managementoffi- cial of another depository institution or depository holding com- pany not affiliated with such institution or holding company if 241 225 the depository institutions or depository holding companies with which the managementofficial serves hold, together with all the affiliates of such institutions or holding companies, in the ag- gregate no more that 20 percent of the deposits in each relevant geographic banking market whereoffices of the depository instt- tutions or depository holding companies or their affiliates are located. (2) RELEVANT GEOGRAPHIC BANKING MARKET DEFINED.—For purposes ofparagraph (1), the term “relevant geographic bank- ing market” means— (A) the area defined by the boundaries identified by the Board of Governors of the Federal Reserve System; (B) if the Board has not defined such boundaries, the area defined by the boundaries of the Ranally Metropolitan Area in which the office of the depository institution or the depository institution holding company is located; and (C) if the office of such institution or company is not lo- cated within a Ranally Metropolitan Area, the area defined by the county (or an equivalent area of general local gov- ernment) in which such office is located. [SkEc. 204. If a depository institution or a depository holding com- pany hastotal assets exceeding $1,000,000,000, a managementoffi- cial of such institution or any affiliate thereof may not serve as a management official of any other nonaffiliated depository institu- tion or depository holding company having total assets exceeding $500,000,000 or as a managementofficial of any affiliate of such other institution.] SEC, 204. DUAL SERVICEAMONG LARGER ORGANIZATIONS. (a) IN GENERAL.—If a depository institution, depository institu- tion holding company, or depository institution affiliate of any such institution or company has total assets exceeding $2,500,000,000, a management official of such institution, company, or affiliate may not serve as a management official of any other depository institu- tion, depository institution holding company, or depository institu- tion affiliate ofany such institution or company which— (1) is not an affiliate of the institution, company, or affiliate of which such person is a managementofficial; and (2) has total assets exceeding $1,500,000,000. (b) CPI ADJUSTMENTS.—The dollar amounts in this section shall be adjusted annually after December 31, 1994, by the annual per- centage increase in the Consumer Price Index for Urban Wage Earn- ers and Clerical Workers published by the Bureau of Labor Statis- tics. * * * * * * SEC. 206. (a) A person whoseservice in a position as a manage- mentofficial began prior to the date of enactmentofthis title and who was not immediately prior to the date of enactmentof this title in violation of section 8 of the Clayton Act is not prohibited by section 203 or section 204 of this title from continuing to serve in that position [for a period of, subject to the requirements of sub- section (c), 20 years after the date of enactment of this title]. The appropriate Federal depository institutions regulatory agency may provide a reasonable period of time for compliance with this title, 242 226 not exceeding fifteen months, after any chang e in circumstances which makes service described in the preceding senten ce prohibited by this title, except that a merger, acquisition, increa se in total as- sets, establishment of one or more offices, or chang e in manage- ment responsibilities shall not constitute changes in cir cumstances which would make such service prohibited by section 203 or section 204 ofthistitle. (b) Effective on the date of enactment of this tit le, a person who serves as a managementofficial of a company whichis not a depos- itory institution or a depository holding company and as a manage- ment official of that depositery institution or depos itory holding company as a result of that company which is not a depository in- stitution or depository holding company becoming a di versified sav- ings and loan holding company as that term is defin ed in section 408(a) of the National Housing Act. [This subsecti on shall expire, subject to the requirements of subsection (c), 20 years after the date of enactmentof thistitle. {(c) REVIEW OF EXISTING MANAGEMENT INTER LOCKS.—Upon the timely filing of a submission by a person petitioning to serve as a managementofficial in more than 1 position pursuant to subsection (a) or (b), each appropriate Federal depository inst itutions regu- latory agency shall, not later than 6 monthsafter the date of enact- ment of this Act-—— {(1) review, on a case-by-case basis, the circums tances under which such person has served as a management offi cial under the provisions of subsection (a) or (b); and 6} permit the management official to continue to s erve in DULLL pUoiuiL Uiany a8 (A) such person has provided a resolution from the boards of directors of each affected depository institution, depository holding company, or company described in sub- section (b), certifying to the appropriate Federal depository institutions regulatory agency for each of the institutions involved that there is no other qualified candidate from the community described in paragraph (1) or (2) of section 203 who— [(j) possesses the level of expertise necessary for such service with respect to the affected depository in- stitution, depository holding company, or company de- scribed in subsection (b); and (Gi is willing to serve as a management official at the affected depository institution, depository holding company, or company described in subsection (b); and {(B) the appropriate Federal depository institutions reg” ulatory agency determines that continuation of service by the managementofficial does not produce an anticompeti- tive effect with respect to each affected depository institu- tion, depository holding company, or company described in subsection b)4 * * * * oe * * SEc. 209. [(a) IN GENERAL.—] Rules and regulationst o carry out this title, including rules or regulations which permit service by a managementofficial which would otherwise be prohibit ed by section 203 or section 204, may be prescribed by— L PrOoQuce Ali Aktivstusspecs 243 227 (1) * Ok Ok * * a * x * * [(b) REGULATORY STANDARDS.—An appropriate Federal deposi- tory institution regulatory agency may permit, on a case-by-case basis, service by a managementofficial which would otherwise be prohibited by section 203 or 204 only if— [(1) the board of directors of the affected depository institu- tion, depository institution holding company, or company de- scribed in section 206(b), provides a resolution to the appro- priate Federal depository institutions regulatory agency certify- ing that there is no other candidate from the community de- scribed in paragraph (1) or (2) of section 203 who— [(A) possesses the level of expertise necessary for such service with respect to the affected depository institution, depository institution holding company, or company de- scribed in section 206(b) and is not prohibited from service under section 203 or 204; and [(B) is willing to serve as a managementofficial at the affected depository institution, depository institution hold- ing company, or company described in section 206(b); and [(2) the appropriate Federal depository institutions regu- latory agency determines that— {(A) the managementofficial is critical to the safe and sound operations of the affected depository institution, de- pository institution holding company, or company de- scribed in section 206(b); {(B) continuation of service by the managementofficial does not produce an anticompetitive effect with respect to the affected depository institution, depository institution holding company, or company described in section 206(b); and [(C) the managementofficial meets such additional re- quirements as the agency may impose. {(c) LimirED EXCEPTION FOR MANAGEMENT OFFICIAL CONSIGN- MENT PROGRAM.— [(1) IN GENERAL.—Notwithstanding the requirements of sub- section (b), an appropriate Federal depository institutions regu- latory agency may establish a program to permit, on a case-by- case basis, service by a managementofficial which would oth- erwise be prohibited by section 203 or 204, for a period of not more than 2 years, if the agency determines that such service would— [(A) improve the provision of credit to low- and mod- erate-income areas; [(B) increase the competitive position of minority- and woman-owned institutions; or [(C) strengthen the management of newly chartered in- stitutions that are in an unsafe or unsound condition. [(2) EXTENSION OF SERVICE PERIOD.—The appropriate Fed- eral depository institutions regulatory agency may extend the 2-year period referred to in paragraph (1) for one additional pe- riod of not more than 2 years, subject to making a new deter- 244 228 mination described in subparagraphs (A) through (C) of para- graph (1).] * * * * * * * SECTION 106 OF THE BANK HOLDING COMPANY AC T AMENDMENTSOF 1970 Src. 106. (a) * * * (b)(1) * * * (2) (A OK OO * * * * * * * {(G)(i) Each executive officer and each stockholder of record who directly or indirectly owns, controls, or has the power to v ote more than 10 per centum of any class of voting securities of an insured bank shall make a written report to the board of d irectors of such bank for any year during which such executive officer or share- holder has outstanding an extension of credit fr om a bank which maintains a corresponding account in the name of such ba nk. Such report shall include the following information: {(i) the maximum amount of indebtedness to the ba nk main- taining the correspondent account during such year of (a) such executive officer or stockholder of record, (b) each comp any con- trolled by such executive officer or stockholder, or (c) each po- litical or campaign committee the funds or services of which will benefit such executive officer or stockholder, or whi ch is controlled by such executive oiticer or stocknoider; [(2) the amount of indebtedness to the bank main taining the correspondent account outstanding as of a date not mo re than ten days prior to the date offiling of such report of (a) such executive officer or stockholder of record, (b) each comp any con- trolled by such executive officer or stockholder, or (c) each po- litical or campaign committee the funds or services of which will benefit such executive officer or stockholder; {(3) the range of interest rates charged on such indebte dness of such executive officer or stockholder of record; and {(4) the terms and conditions of such indebtedn ess of such executive officer or stockholderof record. [(ii) The appropriate Federal banking agencies are autho rized to issue rules and regulations, including definitions of term s, to re- quire the reporting and public disclosure of informatio n by any bank or executive officer or principal shareholder there of concern- ing any extension of credit by a correspondent bank to the report- ing bank's executive officers or principal shareholders, or the relat- ed interests of such persons.] {(4) (G For the purposeof this paragraph— [(i) the term “bank” includes a mutual savings ban k, a sav- ings bank, and a savings association (as those terms ar e de- fined in section 3 of the Federal Deposit Insurance Act); (ii) the term “related interests of such persons” includes a ny company controlled by such executive officer, director, o r per- son, or nay political or campaign committee the fu nds or serv- ices of which will benefit such executive officer, direct or, or 245 229 person or which is controlled by such executive officer, director, or person; and (ii) the terms “control of a company” and “company” have the same meaning as under section 22(h) of the Federal Re- serve Act (12 U.S.C. 375b). [QJ] (A) Notice UNDER THIS SECTION AFTER SEPARATION FROM SERVICE.—The resignation, termination of employmentor participa- tion, or separation of an institution-affiliated party (within the meaning of section 3(u) of the Federal Deposit Insurance Act) with respect to such a bank (including a separation caused by the clos- ing of such a bank) shall not affect the jurisdiction and authority of the appropriate Federal banking agency to issue any notice and proceed under this section against any such party, if such notice is served before the end of the 6-year period beginning on the date such party ceased to be such a party with respect to such bank (whether such date occurs before, on, or after the date of the enact- mentof this subparagraph). * ae * * * * * SECTION 1115 OF THE RIGHT TO FINANCIAL PRIVACY ACT COST REIMBURSEMENT SEC. 1115. (a) Except for records obtained pursuant to section 1103(d) or 1113 (a) through (h), or as otherwise provided by law, a Government authority shall pay to the financial institution as- sembling or providing financial records pertaining to a customer (including corporate customers) and in accordance with procedures established by this title a fee for retmbursement for such costs as are reasonably necessary and which have been directly incurred in searching for, reproducing, or transporting books, papers, records, or other data required or requested to be produced. The Board of Governors of the Federal Reserve System shall, by regulation, es- tablish the rates and conditions under which such payment may be made. (b) This section shall take effect on October 1, 1979. CHAPTER53 OF TITLE 31, UNITED STATES CODE CHAPTER 53—MONETARY TRANSACTIONS * * * * * * * SUBCHAPTER II—RECORDS AND REPORTS ON MONETARY INSTRUMENTS TRANSACTIONS 5311. Declaration of purpose. * * * * * * * (5327. Identification of financial institutions.] $327. Identification offoreign nonbank financial institutions. * * * * * * * 246 230 §5327. Identification of foreign nonban k financial institu- tions (a) REGULATIONS REQUIRED.—The Secretary of the Treasury shall prescribe regulations requiring each deposito ry institution to identify any customer (of the depository institution) which— [(1) is a financial institution described in— [(A) any subparagraph of section 5312(a)(2 ) other than subparagraphs (A) through (G); or [(B) any regulation under any such subparagraph; and] (1) is a financial institution (other than a for eign bank (as defined in section 101(b) of the Internationa l Banking Act of 1978)) which is a foreign person; and * * * X* * * * SECTION 905 OF THE INTERNATIONAL LE NDING SUPERVISION ACT OF 1983 RESERVES Sec, 905. (a)(1) Each appropriate Federai bankin g agency ishail] may require a banking institution to establish and maintain a spe- cial reserve whenever, in the judgment of such app ropriate Federal banking agency— (A) the quality of such banking institution's asset s has been iuupaucd by a protracted inability of nublic or pr ivate borrow- ers in a foreign country to make payments on thei r external in- debtedness as indicated by such factors, among oth ers, as— (i) a failure by such public or private borrowers to make full interest payments on external indebtedness; (ii) a failure to comply with the terms of any restruc- tured indebtedness, or (iii) a failure by the foreign country to comply wit h any International Monetary Fundor other suitable ad justment program; or (B) no definite prospects exist for the orderly res toration of debt service. * * * * * * * (b) The appropriate Federal banking agencies [sha ll] may ana- lyze the results of foreign loan reschedulin g negotiations, assess the loan loss risk reflected in rescheduling agreeme nts, and, using the powers set forth in section 908 (regarding ca pital adequacy), ensure that the capital and reserve positions of United States banks are adequate to accommodate potential los ses on their for- eign loans. * * * * * * * 247 231 SECTION 7 OF THE INTERNATIONAL BANKING ACT OF 1978 AUTHORITY OF FEDERAL RESERVE SYSTEM SEC. 7. (a) * * * * * 2K * * * « (1) EXAMINATION OF BRANCHES, AGENCIES, AND AFFILIATES.— (A) IN GENERAL.—The Board may examine each branch or agency of a foreign bank, each commercial lending com- pany or bank controlled by 1 or more foreign banks or 1 or more foreign companies that control a foreign bank, and otheroffice or affiliate of a foreign bank conducting busi- ness in any State. : (B) COORDINATION OF EXAMINATIONS.— (i) IN GENERAL.—The Board shall coordinate exami- nations under this paragraph with the Comptroller of the Currency, the Federal Deposit Insurance Corpora- tion, and appropriate State bank supervisors to the ex- tent such coordination is possible. (ii) SIMULTANEOUS EXAMINATIONS.—-The Board may request simultaneous examinations of each office of a foreign bank and eachaffiliate of such bank operating in the United States. (iii) AVOIDANCE OF DUPLICATION.—In exercising its authority under this paragraph, the Board shall take all reasonable measures to reduce burden and avoid unnecessary duplication of examinations. [(C) ANNUAL ON-SITE EXAMINATION.—Each branch or agency of a foreign bank shall be examined at least once during each 12-month period (beginning on the date the most recent examination of such branch or agency ended) in an on-site examination. [(D) CosT OF EXAMINATIONS.—Thecost of any examina- tion under subparagraph (A) shall be assessed against and collected from the foreign bank or the foreign company that controls the foreign bank, as the case may be.] (C) ON-SITE EXAMINATION,—Each Federal branch or agency, and each State branch or agency, of a foreign bank shall be subject to on-site examination by a Federal bank- ing agency or State bank supervisor as frequently as would a national bank or State bank, respectively, by its appro- priate Federal banking agency. (D) COST OF EXAMINATIONS.—The cost of any examina- tion undertaken pursuant to subparagraph (A) shall be as- sessed against and collected from the foreign bank or the foreign company that controls the foreign bank, as the case may be, but only to the same extent that fees are collected by the Board for examination of any State member insured bank. (d) ESTABLISHMENT OF FOREIGN BANK OFFICES IN THE UNITED STATES.— 248 232 (1) PRIOR APPROVAL REQUIRED.—Noforeign b ank may estab- lish a branch or an agency, or acquire ownership or control of a commercial lending company, without the prior a pproval of the Board. (2) REQUIRED STANDARDS FOR APPROVAL.—[T he] Except as provided in paragraph (6), the Board may not appro ve an ap- plication under paragraph (1) unless it determines th at— (A) the foreign bank engages directly in the busin ess of banking outside of the United States and is subject to com- prehensive supervision or regulation on a conso lidated basis by the appropriate authorities in its home c ountry; and (B) the foreign bank has furnished to the Boa rd the in- formation it needs to adequately assess the applicatio n. * * Ed * * a Eg (5) ESTABLISHMENT OF CONDITIONS.—-[Consiste nt with the standards for approval in paragraph (2), the] The Board may impose such conditions on its approval under this sub section as it deems necessary. (6) EXCEPTION.— {A} IN GENERAL.—-If the Board is unable to f ind under paragraph (2) that a foreign bank is subject to co mprehen- sive supervision or regulation on a consolidated basis by the appropriate authorities in its home country, the Board may nevertheless approve an application under par agraph (1) by such foreign bank if— (i) the appropriate auciivi (uc ss ihe Homie county o f such foreign bank are working to establish arran ge- ments for the consolidated supervision of such b ank; and (ii) all other factors are consistent with approval. (B) ADDITIONAL CONDITIONS.—The Board, afte r request- ing and considering the views of the appropriate Stat e bank supervisor or the Comptroller of the Currency, as the case may be, may impose such conditions or restrictions relating to activities or business operations of the proposed branch, agency, or commercial lending company subsidiary, includ- ing restrictions on sources of funding, as are conside red ap- propriate in the public interest. (e) MODIFICATION OF CONDITIONS.—Any condit ion or re- striction imposed by the Board under this subsectio n in connection with the approval of an application may be var- ied or withdrawn where such modification is consi stent with the public interest. (7) TIME PERIOD FOR BOARD ACTION.-— (A) FINAL ACTION.—The Board shall take final action on any application under paragraph (1) within 180 day s of re- ceipt of the application, except that the Board may ex tend for 180 days the period within which to take final action on such application, after providing notice of, and the rea- sons for, the extension to the applicant foreign ban k and any appropriate State bank supervisor or the Compt roller of the Currency, as the case may be. 249 233 (B) FAILURE TO SUBMIT INFORMATION.—The Board may deny any application if it has not received information re- quested from the applicant foreign bank or appropriate au- thorities in the home country in sufficient time to permit the Board to evaluate such information adequately within the time periods for final action set forth in subparagraph ‘A (C) WaIveR.—A foreign bank may waive the applicability of subparagraph (A) with respect to any such application. (e) TERMINATION OF FOREIGN BANK OFFICES IN THE UNITED STATES.— (1) STANDARDS FOR TERMINATION.—The Board, after notice and opportunity for hearing and notice to any appropriate State bank supervisor or the Comptroller of the Currency, may order a foreign bank that operates a State branch or agency or commercial lending company subsidiary or a Federal branch or agency in the United States to terminate the activities of such branch, agency, or subsidiary if the Board finds that— (A)the foreign bank is not subject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in its home country; Cor] and (ti) the appropriate authorities in the home country are not making progress in establishing arrangements for the comprehensive supervision or regulation of such foreign bank on a consolidated basis; or (B)(i) there is reasonable cause to believe that such for- eign bank, or anyaffiliate of such foreign bank, has com- mitted a violation of law or engaged in an unsafe or un- sound banking practice in the United States; and (ii) as a result of such violation or practice, the contin- ued operation of the foreign bank's branch, agency or com- mercial lending company subsidiary in the United States would not be consistent with the public interest or with the purposes of this Act, the Bank Holding Company Act of 1956, or the Federal Deposit Insurance Act. However, in making findings under this paragraph, the Board shall not make size the sole determinant factor, and may take into account the needs of the community as well as the length of operation of the foreign bank andits relative size in its home country. Nothing in this paragraph shall affect the abil- ity of the Board to order a State branch, agency, or commercial lending company subsidiary or a Federal branch or agency to terminate its activities in the United States pursuant to any standard set forth in this Act. * * * * * x * [(5) RECOMMENDATION TO AGENCY FOR TERMINATION OF A FEDERAL BRANCH OR AGENCY.—The Board may transmit to the Comptroller of the Currency a recommendation that the license of any Federal branch or Federal agency of a foreign bank be terminated in accordance with section 40) if the Board has rea- sonable cause to believe that such foreign bank or any affiliate of such foreign bank has engaged in conduct for which the ac- tivities of any State branch or agency may be terminated under paragraph(1).] . 250 234 [(6)] (6) ENFORCEMENT OF ORDERS.— (A) IN GENERAL.—In the case of contumacy o f any office or subsidiary of the foreign bank against which— ( Ny the Board has issued an order under pa ragraph 1); or (ii) the Comptroller of the Currency has issu ed an order undersection 4(i), or a refusal by such office or subsidiary to com ly with such order, the Board or the Comptroller of the Cu rrency may invoke the aid of the district court of the U nited States within the jurisdiction of which theoffice or subsidi- ary is located. (B) CouRT ORDER.—Any court referred to i n subpara- graph (A) may issue an order requiring compliance with an order referred to in subparagraph(A). [(7)] (6) CRITERIA RELATING TO FOREIGN SU PERVISION.—Not later than 1 year after the date of enactment of this subsection, the Board, in consultation with the Secretary of the Treasury, shall develop and publish criteria to be used in e valuating the operation of any foreign bank in the United State s that the Board has determined is not subject to comprehens ive super- vision or regulation on a consolidated basis. In devel oping such criteria, the Board shall allow reasonable opportu nity for pub- lic review and comment. * *x * * * * * SECTION 1306 OF TITLE 18, UNITED STAT ES CODE § 1306. Participation by financial institutions Whoever knowingly violates section [5136A] 5136C of the Re- vised Statutes of the United States, section 9A of the Federal Re- serve Act, or section 20 of the Federal Deposit In surance Act shall be fined underthis title or imprisoned not more than one year, or both. BANK SERVICE CORPORATION ACT SHORT TITLE AND DEFINITIONS SECTION 1. [(a) This Act may be cited as the “Bank Service Cor- poration Act”.] (a) SHORT TITLE.—This Act may be cited as the “Bank Service Company Act”. (b) For the purpose of this Act— (1) the term “appropriate Federal banking agency” sh all have the meaning provided in section 3(q) of the Federal De posit Insurance Act (12 U.S.C. 1813(q)): [(2) the term “bank service corporation” mean s a corporation or- ganized to perform services authorized by this Act, all of the capital Stock of which is owned by one or more insured ba nks;] (2) the term “bank service company” means— (A) any corporation— 251 235 (i) which is organized to perform services authorized by this Act; and (ii) all of the capital stock of which is owned by 1 or more insured banks; and (B) any limited liability company— (i) which is organized to perform services authorized by this Act; and (ii) all of the members of which are 1 or more insured banks. * * * * * * * (6) the term “invest” includes any advance of funds to a bank service [corporation] company, whether by the purchaseof stock, the making of a loan, or otherwise, except a payment for rent earned, goods sold and delivered, or services rendered prior to the making of such payment; [and] (7) the term “limited liability company” means any company orga- nized under the law of a State (as defined in section 3 of the Fed- eral Deposit Insurance Act) which provides that a member or man- ager of such company is not personally liable for a debt, obligation, or liability of the company solely by reason of being, or acting as, a member or manager ofsuch company; and [(7)] (& the term “principal investor” means the insured bank that has the largest dollar amount invested in the [capital stock] equity of a bank service [corporation] company. In any case where two or more insured banks have equal dollar amounts invested in a bank service [corporation] company, the [corporation] company shall, prior to commencing operations, select one of the insured banks as its principal’ investor and shall notify the bank’s appro- priate Federal banking agency of that choice within 5 business daysof its selection. AMOUNTOF INVESTMENTIN BANK SERVICE [CORPORATION] COMPANY SEC. 2. Notwithstanding any limitation or prohibition otherwise imposed by any provision of law exclusively relating to banks, an insured bank may invest not more than 10 per centum of paid-in and unimpaired capital and unimpaired surplus in a bank service [corporation] company. No insured bank shall invest more than 5 per centum ofits total assets in bank service [corporation] compa- nies. PERMISSIBLE BANK SERVICE [CORPORATION] COMPANYACTIVITIES FOR DEPOSITORY INSTITUTIONS SEC. 3. Without regard to the provisions of sections 4 and 5 of this Act, an insured bank may invest in a bank service [corpora- tion] company that performs, and a bank service [corporation] company may perform, the following services only for depository in- stitutions: check and deposit sorting and posting, computation and posting of interest and other credits and charges, preparation and mailing of checks, statements, notices, and similar items, or any other clerical, bookkeeping, accounting, statistical, or similar func- tions performed for a depository institution. 252 236 PERMISSIBLE BANK SERVICE {CORPORATION] COMPANYACTI VITIES FOR OTHER PERSONS Src. 4. (a) A bank service [corporation] company may provide to any person any service authorized by this section, except that a bank service [corporation] company shall not take deposits. (b) Except with the prior approval of the Board under section 5(b) of this Act in accordance with subsection (f) of this s ection— (1) a bank service [corporation] company shall not perform the services authorized by this section in any State other than that State in which its shareholders or membersare located; and (2) all insured bank shareholders or members of a bank serv- ice [corporation] company shall be located in the same State. () A bank service [corporation] company in which a State bank is a shareholder or member shall perform only those services tha t such State bank shareholder or member is authorized to perfor m under the law of the State in which such State bank operates and shall perform such services only at locations in the State in whic h such State bank shareholder or member could be authorized to per - form such services. (d) A bank service [corporation] company in which a national bank is a shareholder or member shall perform only those service s that such national bank shareholder or member is authorized t o perform under the law of the United States and shall perf orm such services only at locations in the State at which such national ban k shareholder or member could be authorized to perform suc h (e) A bank service [corporation] company that has both national bank and State bank shareholders or members shall perform onl y those services that may lawfully be performed by both Lits national bank shareholder or shareholders] any shareholder or member o f the company which is a national bank under the law of the United States and its State bank shareholder or shareholders] any share- holder or member of the company which is a State bank under th e law of the State in which [such State bank or banks] any suc h State bank operate and shall perform such services only at location in the State at which both its State bank and national bank share - holders or members could be authorized to perform such services . () Notwithstanding the other provisions of this section or any other provision of law, other than the provisions of Federal and State branching law regulating the geographic location of banks to the extent that those laws are applicable to an activity authorize d by this subsection, a bank service {corporation] company may per- form at any geographic location any service, other than deposit tak - ing company, that the Board has determined, by regulation, tc be permissible for a bank holding company under section 4{c)(8) of the Bank Holding Company Act. PRIOR APPROVAL FOR INVESTMENTSIN BANK SERVICE [CORPORATIONS] COMPANIES Sec. 5. (a) No insured bank shall invest in the capital sto ck of a bank service [corporation] company that performs an y service under authority of subsection (c}, (d), or (e) of section 4 of th is Act 253 237 without prior notice, as determined by the bank's appropriate Federal banking agency. (b) No insured bank shall invest in the capital stock of a bank service [corporation] company that performs any service under au- thority of section 4(f) of this Act and no bank service [corporation] company shall perform any activity under section 4(f) of this Act without the prior approval of the Board. (c) In determining whether to approve or deny any application for prior approval or whether to approve or disapprove any notice under this section, the Board or the appropriate Federal banking agency, as the case may be, is authorized to consider the financial and managerial resources and future prospects of the bank or banks and bankservice [corporation] company involved, including the financial capability of the bank to make a proposed investment under this Act, and possible adverse effects such as undue con- centration of resources, unfair or decreased competition, conflicts of interest, or unsafe or unsound bankingpractices. (d) In the event the Board or the appropriate Federal banking agency, as the case may be, fails to act on any application under this section within ninety days of the submission of a complete ap- plication to the agency, the application shall be deemed approved. SERVICES TO NONSTOCKHOLDERS OR NONMEMBERS SEC. 6. No bankservice [corporation] cornpany shall unreason- ably discriminate in the provision of any services authorized under this Act to any depository institution that does not own stock in or is not a member of the service [corporation] company on the basis of the fact that [the nonstockholding institution such depository institution is in competition with an institution that owns stock in or is a member of the bank service [corporation] company, except that— (1) it shall not be considered unreasonable discrimination for a bank service [corporation] company to provide services to a nonstockholding or nonmemberinstitution only at a price that fully reflects all of the costs of offering those services, including the cost of capital and a reasonable return thereon; and (2) a bank service [corporation] company may refuse to pro- vide services to a nonstockholding or nonmember institution if comparable services are available from another source at com- petitive overall costs, or if the providing of services would be beyond the practical capacity of the service [corporation] com- pany. REGULATION AND EXAMINATION OF BANK SERVICE [CORPORATION] COMPANIES SEc.7. (a) A bank service [corporation] company shall be subject to examination and regulation by the appropriate Federal banking agency of its principal investor to the same extent as its principal investor. The appropriate Federal banking agency of the principal shareholder or principal member of such a bank service corpora. tion] company may authorize any other Federal banking agency that supervises any other shareholder or member of the bank serv- ice [corporation] company to make such an examination. 254 238 (b) A bank service [corporation] company shall be subject t o the provisions of section 8 of the Federal Deposit Insuranc e Act (12 U.S.C. 1818) as if the bank service [corporation] compan y were an insured bank. For this purpose, the appropriate Federal banking agency shall be the appropriate Federal banking agency of the principal investor of the bank service {corporation} compan y. ** * * * * * 255 MINORITY VIEWS TO HLR.1858 The Democratic and Independent Members of the Committee on Banking and Financial Services voted unanimously to oppose the Financial Institutions Regulatory Relief Act of 1995. We oppose this ill-conceived bill because it poses a danger to the safety and soundness of the nation’s banking industry, eviscerates well proven community development law, and seriously compromises many consumer safeguards. H.R. 1362 (the precursor of H.R. 1858) as introduced, was a grab bag and was overreaching in responding to special interests and lobbyists. This bill follows a new trend of legislating by anecdote, not fact, as the Committee received no documentation of costs sup- posedly borne by banks because of their community or consumer obligations imposed by law. In fact, many of the provisions in the bill were rejected in the last Congress because they were unjusti- fied, they gutted consumer protection laws and they compromised the safe and sound operation of our banks. Nonetheless, the bill, H.R. 1362, actually was made even worse during the Subcommittee markup by Republican amendments. As a result of these amend- ments, important civil rights laws were hobbled; community devel- opment laws were further eroded; and directors and officers who in the past pillaged their institutions would be sheltered in the future from liability. Because these amendments were so damaging, to the point of embarrassing our colleagues, a number were either pared back or dropped altogether in the full Committee deliberations. Far from “accommodating” the concerns of the minority, as suggested by the Chairman, these amendments and other provisions in the bill were voted down because they are simply bad policy. Although the full Committee markup improved the bill in several areas, the commu- nity reinvestment provisions’ were made dramatically worse—so muchso that there remains no enforcement mechanism for the gut- ted CRA law. As a result, the bill has justly earned the distinction of becoming a veto target. In fact, following the Committee's action, Secretary of the Treasury Robert Rubin wrote to inform Chairman Leach that he would recommend that the President veto the bill in its current form. We, Democratic and Independent Members, fully, support rea- sonable efforts to streamline government regulations, but cannot support this extreme and radical legislation. As the Vento sub- stitute illustrates, it is possible to achieve more efficient regulation without putting communities, consumers and the deposit insurance fundsatrisk. (239) 256 240 I. EROSION OF BANKS’ AND THRIFTS’ COMM ITMENT TO SERVING THEIR COMMUNITIES A. Gutting of CRA We are extremely disappointed and alarmed by th e Committee’s action in systematically dismantling the Communit y Reinvestment Act (‘CRA”). Because of a series of Republic an amendments, CRA, a law that has been responsible for the flow of more than $30 bil- lion (and by some estimates over $60 billion ) to urban and rural communities across the country has beencrippled. CRA,a law that simply requires banks and thrifts to make credit available to the communities they are chartered to serve, has been unjustly demon- ized by the Republicans on the Committee. One of o ur Republican colleagues wentso far as to refer to GRA as “a bunc hof crap.” This attitude and the actions of the Republicans demonst rate a complete insensitivity to or lack of understanding of the inabi lity of low and moderate income Americans to obtain credit in our society. CRA has been a law that has madecredit accessibl e for hundreds of thousands of low- and moderate-income Americ ans. CRA is not a civil rights law nor an affirmative action meas ure, but rather, a law that requires institutions chartered and insure d by the federal government to lend within all the communities th ey are chartered to serve. And, CRA expressly states that servin g the credit needs of local communities is to be consistent with the safe and sound op- erations of institutions. In fact, CRA has not been found to jeopardize the safety and soundness of institutions, nor the underlying b ackstop of federal deposit insurance Federal Reserve Board Gov ernor Lawrence Lindsey, in a response to Representative Frank, referred to a lew of the studies analyzing CRA loan perf ormance. Regarding one such study by the Woodstock institute in 1993 , Governor Lindsey wrote: “the combined delinquency and foreclosure rates for multi- family housing loans in low- and moderate-in come areas were slightly superior to those gleaned from national samples reflecting loans in all income area.” Governor Lindsey also asserted that an- ecdotal information has shown that “loans to l ow- and: moderate- income people perform with respect to repaymen t as well as, and in some cases better than, loans to others. Fur thermore, I have heard of no cases in which a bank's portfolio cont ained such a large numberof such loans that evenif a significant n umberof the bor- rowers defaulted, it would put the bank in a seri ously adverse safe- ty and soundnessposition.’ President Clinton and the banking regulators a re to be lauded for their two year efforts to reform CRA regulat ions. They have produced regulations which emphasize performa nce over paper- work. Banks and thrifts will be judged by the lea ns, investments, and services they provide to their communities—no t by the quality of their documentation. Small banks would receive streamlined ex- aminations and will have no reporting requirement s under CRA. Yet, despite being hailed by both the banking indust ry and commu- nity groups, these regulations will not even have the opportunity to go into effect if this bill ever becomes law. Because of the Republican actions in Comm ittee, institutions with $100 million or less in assets will be ex empt from CRA cov- 257 241 erage altogether. Institutions with $250 million or less in assets will be able to “self certify” their compliance with the law. These two provisions would effectively exempt close to 90% percent of banks and thrifts from CRA coverage. Furthermore, institutions with CRA ratings of satisfactory or above—95% of the industry— will be deemed to have satisfied their CRA obligations until their next examination. And, the most egregious vote by the Republicans wasto eliminate the sole enforcement mechanism in CRA—the ob- ligation of the regulators to take into account an institution’s record of meeting its community credit needs when considering an institution’s application to branch, acquire, or merge with another bankor thrift. The Republicans have effectively reduced CRA to a hollow hope; a shadow ofits former self. They have hobbled a law that has suc- cessfully channeled billions of dollars to urban and rural commu- nities. At a time when public funds for such communities are get- ting scarcer, private dollars are essential to the economic vitality of these neighborhoods. The Republican attack on the Community Reinvestment Act is one of the major reasons cited by Secretary Rubin in a letter to Chairman Leach advising that he would recommendto the Presi- dent that this regulatory bill be vetoed in its current form. B. Exemption of over 3,000 institutions from HMDA By increasing the statutory exemption from the Home Mortgage Disclosure Act (“HMDA”) for institutions with $10 million in assets or less, to those with $50 million in assets or less, section 116 will exempt more than 3,000 additional lenders from the iaw’s coverage. Although purported to adjust the exemption for inflation, this pro- vision more than doubles the actual CPI adjusted dollar figure from 1975. Furthermore,it is unclear how many moreinstitutions (with over $50 million in assets) will be exempt from HMDA under the new grantof discretion to the Federal Reserve Board. The bill per- mits the Board to exempt any other lender from complying with HMDAbecause the law is too burdensome. There is simply no jus- tification for granting this exemptive authority to the Board which will create a gaping loophole in the law. HMDAimposes no moreobligation on financial institutions than to report their loan data. But this data has provento becritical in revealing discrepancies between lending to minorities and non-mi- nority applicants. HMDA has put both lenders and the public on notice about the fairness of individual institutions’ lending prac- tices. Disclosures under HMDA are important for purposes of monitor- ing an institution’s service to its community and its compliance with the fair lending laws. While HMDA data alone is not deter- minative of a fair lending violation, it is an essential investigative tool. Because of the utility of HMDA, both Secretary Cisneros and Acting Assistant Attorney General Kent Markus have written let- ters to Committee members strongly condemningthis roll back of HMDAby the Committee. 258 242 C. Restoration of fair lending laws We were successful in striking provisions adopted by the Sub- committee that seriously undermined our civil rig hts laws. The Subcommittee passed an amendmentthat would hav e stripped the Attorney General of the authority to initiate cases ch arging a “pat- tern of practice” of discrimination under the Fair H ousing Act and the Equal Credit Opportunity Act. In a letter to Cha irman Leach, Attorney General Reno wrote that to prohibit the D epartment of Justice from challenging pattern or practice cases would be “un- thinkable.” Furthermore, the amendment would have disallowed the use of disparate impact theory in fair lending cas es. Yet, one of our Republican colleagues exhorted the Committee to “rein in the whole idea of the blackmail opportuniti es that are here today when these suits are being brought on disparate impact, and courts of appeals are divided on this issue, and let's not go along with this kind of funny business anymore. . .”. We are offended that lawsuits to vindicate the rights of individua ls who have been mistreated by financial institutions are equated with “blackmail” and “funny business.” Moreover, amendments to the Fair Housing Act are well outside of the Committee's jurisdiction and expertise. T he far reaching amendment would have impeded lawsuits beyon d the lending con- text and extendedto such areas as realtor and rent al practices, and housing discrimination against families with chi ldren. All this, without even one hearing on the topic. Fortunately, the Committee recognized the poten tial and far- reaching damage that would have been done by these pro visions and struck them from the bill. “TI. A RETREAT FROM SAFETY AND SOUN DNESS We also oppose this bill because it weakens mea sures designed to ensure the safe and sound operation of federal ly insured institu- tions. Without critical safeguards, the taxpayers stand to lose a lot. The recent savings and lean crisis should ser ve ‘as a grave re- minder of the dangers of irresponsible deregulat ion of an industry. Wecannot support a bill that poses increased risk of loss to the de- posit insurance funds and the taxpayers who gu arantee that fund. A. BCCI redux The Republican majority on_the Committee s truck a positive amendment to section 223 by Congressman Kanj orski adopted at the Subcommittee. The Kanjorski amendment pro vided important safeguards necessary to help prevent another BC CI scandal. The provisions would have (1) required that boards of directors be com- prised of a majority of outside directors; (2) prohib ited lawyers and accountants who provide professional advice to th e board of finan- cial institutions over $250 million in size fr om serving on those boards of directors; and (3) required certain owner ship disclosures to boards ofdirectors. Those provisions are crucial to ensuring that a board of directors serve as an independent overseer of the finan- cial institution. The independence of a board is be st insured when a majority of the directors are outside directors. F urthermore, pro- hibiting such outside counsel and accountants from serving on the 259 243 board would prevent a clear conflict of interest from arising, as in the case of BCCI. B. The wrong signal on insider lending The amendments to current law contained in section 225 would effectively encourage the risky and unsafe practice of self-serving insider lending. A major cause of the failure of banks and thrifts over the past decade wastheir penchant for making exorbitant and tisky loans to their own officers and directors. This unsafe practice was properly restricted in recent years. The Republican majority now seeks to seriously weaken those restrictions and the ability of the banking regulators to monitor and detect that conduct. This section contains major exceptions to the prohibition on insider lend- ing and eliminates bank reports on such loans. C. The chilling of Government investigations Section 227, requiring the government to reimburse a financial institution for providing financial records on corporate customers pursuant to a government request, would have a chilling effect on major investigations and cost the taxpayers approximately thirty million dollars in the first year alone. In opposing this provision, the Justice Department has stated that: “Financial information about corporations is a critical component of some of the Govern- ment’s most important investigations. For example, such informa- tion is often indispensable in defense procurement fraud and money laundering cases. . . . investigators and prosecutors with whom we spoke indicated that requiring reimbursement for cor- porate record requests could have chilling impact on investigations, particularly in a time of declining government resources.” D. Audit committees compromised Section 233 of the bill repeals important bank audit require- ments legislated in response to the egregious abuses of the thrift crisis. These requirements sought to ensure that insured depository institutions be subject to independent, objective and public finan- cial audit procedures in a manner consistent with their fiduciary responsibilities and the safety and soundness of the banking sys- tem. The bill would eviscerate nearly all of these requirements for well over 90% of the nation’s banking institutions. For example,it repeals the requirement that the banks’ boards of directors estab- lish audit committees composed entirely of independent, outside di- rectors. Thus, all but fewer than 10% of U.S. banks would be able to either abolish their audit committee altogether or appoint all in- siders to the audit committee. Service of insiders on the audit com- mittee presents a clear conflict of interest since those who manage the institution can hardly be expected to objectively audit orcriti- cize its operations. Such an exception from the audit committee re- quirement, for instutitions which enjoy the benefits of federal de- posit insurance, is a standard far below that for nearly all pri- vately-owned, publicly-traded American corporations. And to make matters worse, this exception is absolute—banking regulators are given no discretion to require that even one memberof the audit committee be an independent, outside director. 260 244 The bill also eliminates statutory requirements tha t a bank's independent accountants attest to the bank's complia nce with safe- ty and soundness laws. It also repeals the require ment that ac- countants report on, and attest to, the effectiveness of a bank's in- ternal control polices and procedures, which are key to the institu- tion’s risk management and financial soundness . These attestation requirements are critical in maintaining the a ccountants’ objectiv- iy and providing essential information about the ban k's condition. The bill would also permit banking regulators to des ignate certain aspects of the bank's audited financial reports as confi dential and unavailable to the public. This patently undermines t he fundamen- tal principle of public accountability for federally i nsured banks and opens the door to concealment of basic financial information that all investors, depositors and taxpayers have the right to know. E. Outside directors—Hear no evil, see no evil Section 234 would exclude outside directors from th e definition of “institution affiliated party” for purposes of various enforcement actions. They should thus be subject to an enforceme nt action only if an agency could prove that the outside director “ knowingly” or “recklessly” participated in a violation of law or re gulation. Cur- rently, outside directors are subject to the same neg ligence stand- ard as applies to other directors. This amendment would harm corporate governance and create perverse incentives for outside directors to avoid lear ning about, or following up on,facts that could give raise to liabilit y. As the Fed- eral Deposit Insurance Corporation has stated in c orrespondence i tol wary ost af dA denncitary institution s. vu Une piuvional “An Garcckers C2 imsures ON) % regardiess of whether they are inside or outside dir ectors, have a duty to set policies for their institutions and see that those policies are implemented and adhered to while meeting its community's needs on a safe and sound basis. Losses an insured depository in- stitution can sustain as a result of negligent oversig ht are not de- termined by whether the negligent director is an i nsider or an out- sider. The experience of the FDIC has shown that both inside and outside directors can engage in negligent conduct as well as abu- sive self-dealing transactions. We believe good corp orate govern- ance and effective regulatory oversight require that all directors know that they will be held responsible for fulfillin g their duties to properly managetheir institution. Put differently, tel ling outside directors that they can be negligent with impunity is definitely the wrong message.” These are only the most egregious examples of how thi s legisla- tion would in many ways place our nation's insured de pository in- stitutions on unsafe and unsoundfooting, and thereby increase the risk that the taxpayers wili once again be asked to pay for the ex- cesses of an unregulated financial institutions indust ries. Fortu- nately, a very dangerous and costly section of the bill added by the Republicans at the Subcommittee was deleted at the full Commit- tee by other Republicans who painfully recognized t he harm it would cause. The provision would have established ne w rules gov- erning the legal liability and standard of conduct for d irectors and officers of insured depository institutions. Those direct ors and offi- cers of insured depository institutions. Those rules we re roundly 261 245 opposed by the banking regulators as irresponsibly absolving direc- tors and officers of any real duty to safely and soundly oversee an insured depository institution. Ill. THE CONSUMERIS THE BIG LOSER A, The Home Ownership and Equity Protection Act is substantially weakened The bill effectively eliminates the important consumerprotection of the Home Ownership and Equity Protection Act passed just last year, by limiting the Act’s coverage to second mortgages. The Home Ownership and Equity Protection Act, which has not even been im- plemented, requires additional disclosures in the case of mortgages with interest rates more than 10 points above comparable Treasury securities or mortgages with fees that are more than the greater of 8 points or $400. The Act also prohibits certain particularly abu- sive terms in connection with these high cost mortgages, such as negative amortization, prepayment penalties and balloon payments within 5 years. The law was enacted with bipartisan support and addresses un- scrupulous lending practices. Congressional hearings documented abusive tactics employed by certain lenders whereby these lenders would target poor people with equity in their homes, oftentimes with credit problems, for home equity loans. The loans would be made for purposes of debt consolidation or home improvements, im- provements which the homeowners were often convinced to under- take by the lender. Testimony from numerous sources, including the National Housing Law Project and AARP,indicated that, in the vast majority of cases lenders target homeowners who either own their homes outright or have very small payments remaining on their mortgages. Where mortgages do remain, the new lender pays off any existing balance in order to obtain the first lien. This is done both to ensure that the new lender gets the priority lien and because federal law prohibits interest rate regulation on first mort- gages thus allowing the high rates to be charged. Multiple fees are usually folded into the loan amounts, often without the knowledge of the borrower. In many cases, because of these fees, the proceeds to the homeowner amount to as little as one third of the loan amount. As a result, homeowners with fixed incomes are saddled with monthly payments they cannot afford, and inevitably their homes are subject to foreclosure. The Home Ownership and Equity Protection Act does not affect a single legitimate lender, as indicated by industry testimony dur- ing the last Congress in supportof the legisiation. This year, in tes- timony before the Subcommittee, Federal Reserve Board Governor Susan Phillips stated, “It is not immediately apparent why this re- vision is being proposed, however, given the clear anecdotal and other evidence presented to Congress at the time the law was en- acted—which showedthat the abuses and problemsassociated with high-cost loans occurred primarily in connection with first-lien refinancings.” Wejoin the Federal Reserve Board in questioning the reason for gutting this Act. It appears to us to be no more than pandering to special interests at the expense of unsuspecting consumers. 262 246 B. Truth in Savings Act protections are diminished The bill repeals importantprovisions of the Truth in Saving s Act (‘TISA"), which protect bank customers from misleading, dec eptive or incomplete disclosures and advertising relating to their fed erally insured deposits. As introduced, H.R. 1362 would have rep ealed nearly the entire Act, which became éffective only in 1 993, but im- provements were made during the Subcommittee and full Co mmit- tee markups. Because of a Democrat-initiated amen dment, signifi- cant consumer protections concerning mandatory disclosure of the rates, fees and terms of deposit accounts and any change in those items, was restored. Under the bill, however, TISA’s req uirement that banks use a uniform methodof calculating and disclosing ac- count yields—the annual percentage yield—would be repealed. Without such uniform disclosures, consumers cannot make in- formed comparisons about banks and bank products. Additionally, the bull strips TISA of its civil liability pr ovisions. Therefore, if a consumer is misled about the terms of an account, or even if the bank fails to give the consumer the prop er interest rate, the consumeris left without recourse against the b ank under the Act. Only administrative remedies remain. Administr ative rem- edies alone are insufficient to enforce the Act's provision s and vin- dicate an individual customer's rights. C. Consumer privacy breached by information sharing am ong affili- ates We strongly disagree with the manner in which the bill permits affiliates and subsidiaries of Gepositury inotiiuiiwi s snare con fidential and sensitive financiai information on thei r customers. Section 142 completely overrides the statutory prote ctions of the Fair Credit Reporting Act (“FCRA") without puttin g in place any echanism whereby consumers can ensure the accuracy of the in- formation that is being shared among affiliated companies. Should H.R. 1062, the Financial Services Modernizati on Act, be enacted, the scope of this provision will be far reaching . Depository institutions will be permitted to freely share sensitive customer in- formation with their affiliated securities firms, and in some in- stances, commercial entities and insurance companies. Under sec- tion 142, depository institutions could establish affilia ted credit bu- reaus with files on millions of customers to service the se companies free of any regulation. While permitting affiliated companies to share credit info rmation on their customers may be a desired goal, it should be accom- plished in the context of reforming the FCRA. This was the ap- proach taken by the Committee in the last Congress. Las t year, the Committee, and the full House voted to allow such s haring of infor- mation among affiliated companies, without limiting it to deposi- tory institutions and their affiliates. In so doing, the Co mmittee also passed important consumer safeguards and streng thened the FCRA.It is time for the Committee to once again demonst rateits resolve to aid consumers by considering and passing mu ch needed reforms to the FCRA. 263 247 D. The bill cedes too much authority to the Federal Reserve Board to reduce TILA’s coverage Section 103 of the bill provides the Federal Reserve Board with broad authority to run literally roughshod over the Truth in Lend- ing Act (“TILA"}. This section automatically excludes from the law's coverage any transaction that the Board determines by regulation is not needed to carry out the purposes of the Act. The bill further directs the Board to exclude from TILA’s coverage any class of transaction that the Board determines does not provide a “measur- able benefit to consumers”. Far from providing the Board with ap- propriate regulatory flexibility to interpret the Act, this section amounts to an extraordinary grantof legislative authority to a reg- ulator which could serve to undermine the purposesof the Act. E. RESPA is balkanized Amendments made at the Subcommittee and full Committee have mangled the enforcement of the Real Estate Settlement Pro- cedures Act (RESPA). These proposed changes could render this law, which was designed to protect consumers during settlement procedures for a home purchase, useless as a result of the regu- latory confusion. The Republican bill will transfer responsibility for all of RESPA from the Department of Housing and Urban Develop- ment (HUD) to the Federal Reserve except for Sections 8, 9 and 12. The enforcement aspects of these sections will be balkanized be- cause enforcement will be divided among the financial institutions’ regulators and HUD. The amendments to RESPA would also mandate HUD to use ne- getiated rulemaking—even on the somewhat contentious rules that are soon to be completed by the Department after over two years of work by this Administration's HUD alone. Requiring HUD to conduct negotiated rulemaking, particularly where affected indus- tries will never agree, will prolong the rulemaking process indefi- nitely and will only further delay the resolution of issues such as Computerized Loan Originations (CLOs) and Controlled Business Arrangements (CBAs). Finally, despite being labeled as mere changes to the “purposes” section of RESPA, the amendments will make substantive revisions to RESPAby directing HUD how to specifically regulate settlement services prices or compensation agreements. Numerous Congres- sional hearings have highlighted egregious practices utilized by some in the mortgage settlement industries. Significant changes were made in this bill to RESPA, without consideration of the ramifications for consumers. IV. BANK INSURANCE POWERS—-WHY ARE WE ROLLING BACK INSURANCE POWERS IN A DEREGULATION BILL? A numberof us are troubled by the inclusion of a provision in a regulatory relief bill that addresses bank insurance powers. We recognize that the approach adopted by the Republicans was an at- tempt to balance the competing demands of the banking and insur- ance industries and was done so at the direction of the Republican leadership. However, this is an issue most appropriately addressed in legislation amending the Glass Steagall Act. We must admonish 264 248 our Republican colleagues that any attempts to join this regulatory relief bill with the Financial Services Modernizati on Act of 1995, HLR. 1062, will severely erode any possible biparti san support that H.R. 1062 might enjoy and will diminish prospect s for its v pas- sage. V. WE STAND FOR RESPONSIBLE REGULA TORY AND STATUTORY — REFORM Responding to the need for real regulatory relief , the Committee Democrats crafted a comprehensive substitute bil l with provisions that would reduce regulatory burden without sacrificing commu- nities, consumers, or the taxpayer. The Vento substitute would modernize and strea mline numerous banking laws and regulations. This regulatory burden relief pro- posal will provide for a simplified and improved Re al Estate Settle- ment Practices Act (‘RESPA") and Truth i n Lending Act (“TILA’). It also simplifies the TILA disclosures for Adjustable Rate Mortages (“ARMs”). Other provisions clarify con fusing disclosures to applicants relating to assignment, sale, or tra nsfer of loan serv- ices under RESPA. The Democratic proposal streamlines the Trut h in Savings Act (‘TISA”) without compromising its effectiveness . The Vento sub- stitute modifies the civil liability provision to exclude its applica- tion to advertisements, and would further requi re the Federal Re- serve Board (FRB) to determine and report to C ongress within six months which accounts(if any) are not appropria tely served by the calculation of interest under the Annual Percentage Yield APY) iVUilluia. The Vente substitute allows for a realis tic adjustment of the Home Mortgage Disclosure Act (HMDA) exc eption from reporting for institutions with assets of $10 million or le ss every five years based on CPIfor inflation starting from the beginning of calendar year 1990. It also encourages self-testing by cr editors by protecting the results of such self-testing unless it was co nducted at an agen- cy's request, the creditor used the results to d efend themselves, or the agency received evidence of discrimination independently of the self-testing. The substitute includes the comprehensive bip artisan provisions providing relief from the “Rodash' case that d estabilize the mort- gage banking system, including the secondar y market for mort- gages. Major provisions of the proposal include t he exclusion of cer- tain third party fees imposed by closing agen ts and intangible taxes from the finance charge; the elimination of the right of rescis- sion for mortgages that are refinanced with a c ertain lenders only where those loans contain no new cash advances and consolidation of other existing debt; the provision for a highe r tolerance for er- rors in the calculation of the finance charge equ alto Yie of 1% of the APR, but in no event less than $25 or more t han $200; the rais- ing of statutory damages for loans secured by hom es from $100 to $1,000, to $250 to $2,500; and, the provision of r etroactive relief for lenders against individual claims filed after June 1, 1995 and for class actions certified after January 1, 1995 that relate to misdisclosure of third party fees, errors exceedi ng the tolerance in section 108, or the use of improperrescission forms . 265 249 The substitute streamlines the Bank Holding Company Act by permitting well-capitalized and well-managed BHCs whose banks all have received “satisfactory” CRA ratings to acquire certain other banks without prior approval of the Federal Reserve Board, but rather, through a public notice of 30 days. It further would per- mit these BHCs to engage in any nonbankingactivity (closely relat- ed to banking) simply by noticing the Board. The bill further streamlines the bank application process for branches of banks that are well-capitalized, rated a CAMEL 1 and 2, haveat least a “satis- factory” CRA rating, and seek to operate in an area that satisfies all applicable geographic limitations with appropriate public notice and comment. Other streamlining measures would direct the Office of Thrift Supervision (OTS) and the Federal Reserve Board to coordinate and establish a unified examination procedure for dual holding companies and streamline regulatory oversight of such companies by requiring the agencies to coordinate and unify regulatory re- quirements imposed on dual holding companies consistent. Importantly, the Vento substitute expands regulatory discretion for examinations from institutions with up to $175 million to insti- tutions with up to $250 million. It also eliminates branch applica- tion requirements for automated teller machines (ATMs) and re- mote service units while it removes the out-dated per-branch cap- ital standard in 12 U.S.C. Section 36(h). Also included are reductions in overlap in foreign bank applica- tions and requirements that the Federal Reserve Board should rely on examinations of other Federal and State regulators for the ex- amination of foreign banks to the maximum extent practicable. The substitute would amend provisions of the Depository Institutions Management Interlocks Act (DIMIA) to prohibit an outside attor- ney or accountantof a depository institution from serving as a di- rector of the institution with limited exceptions, while also requir- ing that a majority of each board be made up ofoutside directors. As part of comprehensive, on-going regulatory review the sub- stitute requires the Federal Financial Institutions Examination Council (FFIEC) and each respective federal banking agency rep- resented on the FFIEC, and the National Credit Union Administra- tion (NCUA) Board to identify outdated or otherwise unnecessary regulatory requirements on financial institutions, and eliminate them as appropriate within every 10 year period. The Vento substitute also includes the bipartisan provisions lim- iting lenderliability for environmental clean-up by clarifying theli- ability under Federal environmental law for lenders, fiduciaries, and Federal banking and lending agencies and providing certainty as to when and to whatextent these parties may have liability for violations under Federal environmental law for their lending, fi- nancial andfiduciary activities. These provisions show that Democratic and Independent Mem- bers of the Banking Committee have been listening and do what to respond to the call for true regulatory relief in an bipartisan manner whenever possible. However, this relief should not and does not have to come at the expense of the American consumers, its communities or the taxpayers. Proponents of many of the provi- sions of the Committee reported regulatory repeal bill have not yet 266 250 demonstrated that laws such as the Truth in Savings Act or the Community Reinvestment Act, significantly a dd to the costs of or are detrimental to financial institutions—e specially in light of record bankprofits. For the reasons generally outlined in these v iews, we will con- tinue to oppose the provisions of H.R. 1858. We will actively seek, however, to further improve this bill or ul timately work for its timely demise. HENRY GONZALES. FLoyD H. FLAKE. JOHN J. LAFALCE. CLEO FIELDS. TOM BARRETT. KwEIst MFUME. JOE KENNEDY. MAURICE HINCHEY. NYDIA VELAZQUEZ. LUCILLE ROYBAL-ALLARD. ALBERT R. WYNN. BRUCE F. VENTO. Gary L. ACKERMAN. CAROLYN B. MALONEY. Luis V. GUTIERREZ. MAXINE WATERS. PauL E. KANJORSKI. CHARLES SCHUMER. MELVIN L. WATT. 267 ADDITIONAL VIEWS OF MR. FLAKE As author of this amendment, I am offering my separate views to be included in the final report in order to clarify any interpreta- tions of my empowerment zone amendment. It is my intention for it to operate independently of section 5136A, and the provisions of section 5136A shall not apply to the powers of National Banks as so conferred under section 5136B. This new section will provide greater access to insurance in dis- advantaged communities where competively priced insurance is in- adequate. Moreover, this amendmentwill foster economic revital- ization, such a new business and employment opportunities, in low income neighborhoods by permitting the sale of insurance in empowerment zones. Additionally, by requiring the sale of insur- ance to occur from a “full-service branch” in the empowerment zone, the amendment provides a significant incentive for banks to improve the quality and quantity of banking services in such com- munities. Effective immediately, this amendment allows national banks having main offices or full-service branches in areas eligible for designation as empowerment zones or enterprise communities under section 1392 of the Internal Revenue Code of 1986,or in In- dian reservations, to sell insurance from that location. The designa- tion criteria for an empowerment zone or enterprise community assures that the community is one experiencing economic distress. State laws that regulate conducting the business of insurance, in- cluding those that provide operational restrictions protecting con- sumers, would apply to national banks sale of insurance under this section. However, State laws would not apply if the appropriate Federal banking agency determined, after notice to and comment by the appropriate State officials, that application of a specific State law would have an unreasonably discriminatory effect upon the sale of insurance by banks or their employees in comparison with the effect the application of such state law would have on the sale of insurance by other entities. This provision will ensure that banks selling insurance in a State are subject to the same oper- ational and customer protection standards that apply to other enti- ties selling insurance in the State. FLOYD H. FLAKE. (251) 268 ADDITIONAL VIEWS OF MS. WATERS This legislation contains many objectionable provi sions. However, during consideration of the bill in committee, pe rhaps the most ob- jectionable discussion of the deliberations centere d aroundthebill's proposed changes to the legal standards applied to the Fair Hous- ing Act and Equal Credit Opportunity Act. Combined with the severe weakening of the Co mmunity Rein- vestment Act, including changes in its enforceabi lity, and the roll- back of several consumer laws, I felt personall y offended by the changes which were proposed in the committee pr int. The attempt to eliminate disparate impact as a standard for re- view of discrimination claims brought under the F air Housing Act and the Equal Credit Opportunity Act—changes which were con- tained in the committee print of the bill—repres ented a frontal at- tack on civil rights law—civil rights laws that peo ple have fought and died for. Disparate impact is one of three long-standing legai standards (intentional discrimination and disparate tre atment are the others) used to challenge discrimination. Disparate impact is used to chal- lenge practices that are neutral in design but w hen applied has a disnrovortionate and substantially discrimi natory effect on people because of their race, color, religion, Sex, famili al siaius, wationa origin, or handicap. Under this anaiysis, prac tices and policies which have a discriminatory effect must be el iminated or changed where they have no business necessity. This attack on our civil rights laws did not b elong in this bill. It did not belong in the Banking Committee. I do not know who was behind it. I do not know whether it wa s an organized effort on the part of a special interest. I do not know if it was one per- son's bias. But whatever the source, I, and othe rs on the Banking Committee, were seriously disrespected by the kin ds of representa- tions of civil rights laws that were made during the committee de- liberations. Fortunately, the committee had the good senseto strike the most egregious part of the underlying bill which wou ld have exempted an entire class of fair lending and fair housing violations from en- forcement. Those disparate impact provisions wou ld have created a loophole for a single industry from the stand ards Congress and the Federal Courts have determined are necessary to prohibit discrimi- nation. Despite the removal of these provisions from the bill, I remain troubled that the committee was forced to spend ma ny hours debat- ing an attempt to deny me my rights, my children their rights, and which would have dramatically affected the futur e of me and my people. I truly hope that as this bill moves forward , we will not see (252) 269 293 any recurrence of this effort to undermine longstandingcivil rights laws and practices. MAXINE WATERS. 270 ADDITIONAL VIEWS OF CONGRESSMAN MAURICE HINCHEY INCENTIVES FOR SELF-TESTING FOR DISCRIMI NATION As the author of the section 155 provision s providing incentives for institutions to test themselves for lendin g or housing discrimi- nation, I would like to explain the intent of this section. My sub- stitute language for the original self-testin g provisions of the bill was adopted on a voice vote by the Committ ee, and it reflects a fair and balanced approach to this issue. It is supported by both the Justice Department and Department of Hous ing and Urban Devel- opment, two of the primary enforcement ag encies for our fair lend- ing and housing laws. In order to provide incentives for institutio ns to self-test for and correct violations of the Fair Housing Act or Equal Credit Oppor- tunity Act, Section 155 prevents evidenc e of discrimination gath- ered through a self-test from being used against an institution if the institution is taking appropriate corrective actions for any dis- crimination that is found. Testing, as defined by the Supreme Court , refers to the method of using “individuals who, without the intent to rent or purchase . . . pose as renters or purchase rs for the purpose of col- putin evidence af unlawful . . . practices.” Havens Rea lty Corp v. o Coleman, 455 U.S. 363, 373 (1982) ( detining testers in ue Curicat of fair housing investigations). In the fai r housing and employment context, testing has traditionally been “p aired testing”—a process that examines disparate treatment of t wo individuals that are matched in every respect except for the protected category (e.g. race, gender disability, etc.). Paired testin g is a valuable method of obtaining evidence of disparate treatment and I strongly encourage its use by lending institutions to find a nd correct discriminatory practices. Although paired testing is the most widely accepted form of test- ing, I recognize that other testing method s may produce similar and reliable new evidence of unlawful pra ctices and therefore war- rant protection under the law. I intended for Federal regulations to address the scope of what additional pra ctices should be accom- modated within the definition of the term “s elf-test.” The principal attribute of self-testing is that it produces new evi- dence of discrimination against fictitious a pplicants. Self-testing should be distinguished from compliance r eviews, file analysis, the use of second review committees, or o ther methods that examine existing evidence of discrimination against real applicants. I did not intend for Section 155 to provide protect ion to apply to such ac- tivities. It is my intent to limit evidentiary pr otection to those institu- tions that correct discrimination found throu gh self-testing. Section 155 is not intended to create an evidentiar y shield for institutions (254) 271 255 that find violations of fair lending or housing laws andfail to take appropriate steps to correct such discrimination. An institution that discovers discrimination should make all rea- sonable efforts to determine the extent of the discrimination and its cause including, for example, whether the discrimination is ground- ed in the institution's policies, the implementation of its policies, employee misconduct, or some other factor. Appropriate action to rectify the cause and effect of discrimination should be taken com- mensurate with the scope of discrimination. On April 15, 1994, the Interagency Fair Lending Task Force addressed several specific components of “appropriate corrective actions to address the dis- crimination” found through self-testing. “Policy Statement on Dis- crimination in Lending.” 59 Fed. Reg. 18266, 18270-71 (‘Joint Statement’).! I agree with this analysis and intend that “appro- priate corrective actions” under Section 155 be construed in line with the Joint Statement’s guidelines. CREDIT SCORING SYSTEMS Section 156 amends the Equal Credit Opportunity Act to clarify that credit decisions based solely on an empirically derived, dernon- strably and statistically sound credit scoring system, as defined by the Federal Reserve Board in regulations prescribed under this title (12 C.F.R. Pt. 202,“Regulation B”), shall be in compliance with the non-discrimination requirement under ECOA (subsection (a)) as long as the system does not use any category protected under subsection (a), does not use the functional equivalent of such a cat- egory, and does not use any criterion that has a discriminatory ef- fect on any such a category unless the useof thecriterion is justi- fied by business necessity and there in noless discriminatory alter- native available. This provision is consistent with the Federal Re- serve Board's current interpretation concerning the use of credit scoring systems for credit decisions. Credit scoring systems treat all applicants objectively and there- fore generally avoid the risk of disparage treatment. There may be instances, however, when individual discretion may be used in con- junction with the use of a credit scoring system and therefore lend opportunity for the disparate treatment of applicants. I firmly be- lieve that it was not the intent of the Committee to shield such treatment from analysis under ECOA. Only those decision made solely based on a credit scoring system should be deemed to be in compliance with ECOA underthis section. The Committee accepted, by a vote of 29 to 17, my amendment that clarifies that credit scoring systems are not immuneto a dis- criminatory effect analysis. As the Federal Reserve Board has rec- ognized, the ECOA may prohibit a practice that, although neutral on its face and not intended to discriminate, has a disproportion- ately negative effect on a prohibited basis if the practice is not jus- tified by business necessity with no less discriminatory alternative 'The Task Force is composed of the top officials from each of the ten agencies with respon- sibilities for fair lending enforcement—the Department of Housing and Urban Development, OFf- fice of Federal Enterprise Oversight, Department of Justice, Office of the Comptroller of the Currency, Office of Thrift Supervision, Board of Governors of the Federal Reserve System, Fed- eral Deposit Insurance Corporation, Federal Housing Finance Board, Federal Trade Commis- sion, and the National Credit Union Administration. 272 296 available. See Appendix D to Part202, Sect ion 202.6, 12 C.F.R. Sec 202, Supp. 1 (1995). DISPARATE IMPACT By a vote of 32 to 15, the Committee ap proved my amendment to strike provisions added at Subcommit tee that would have lim- ited the use of disparate impact theory in fair housing and lending cases. In doing so, the Committee, on an overwhelming and biparti- san basis, has spoken strongly about p reserving a fundamental civil rights protection against policies tha t have discriminatory ef- fects on applicants, whether or not intent c an be proven. MAURICE HINCHEY. 273 ADDITIONAL VIEWS OF CONGRESSMAN KENNETHE. BENTSEN,JR. ; House Resolution 1858 is a flawed bill. While it could have been a good piece of legislation providing needed regulatory relief, pro- tecting consumerinterests, and continuing our commitment to com- munity reinvestment, the final bill failed to do so, For that reason, I could not support the legislation. I believe the Committee failed to find the appropriate balance be- tween regulatory relief and consumer needs with respect to disclo- sure and reinvestment. While I support addressing “Rodash,” RESPA,lender liability under Superfund, as well as streamlining the financial regulatory process, this bill strayed from its original purpose by going too far in removing consumer safeguards and cur- tailing the Community Reinvestment Act of 1977 (“CRA”). I agree with the concept of “self-compliance” and “safe harbor” for CRA. Banks that make a good faith effort to invest in the com- munities from which they receive deposits and reach out to tradi- tionally underserved areas deserve to be rewarded. However, the Committee's approach does not necessarily reward such behavior, but rather it rewards all behavior. I attempted to amend Sections 123 and 125 which would have raised the rating threshold for self-compliance and safe harbor from “satisfactory” to “high satisfactory.” The Committee provision for the lower threshold of a “satisfactory” rating exempted far too many institutions and would reward them for less than satisfactory behavior in some categories. This concept of “high satisfactory” was originally suggested by members of the Board of Governors of the Federal Reserve and discussed in the May 5, 1995 publication of the new rules relating to CRA. A new category would have ensured that banks that truly excel at meeting CRA—and there are many, including many in my hometown of Houston—would be rewarded based upon good performance in all categories of at least “satisfac- tory.” Unfortunately, the Committee chose to reward ninety-five percent of all banks even if they receive a low satisfactory rating on lending and even lower ratings on service and investment. I could not support that, and I believe the Administration will also find it hard to support. The Committee also chose to change the Truth in Lending Act by limiting disclosure relating to adjustable rate mortgage loans. Under the Committee's bill, a lender would only haveto tell a bor- rowerthat adjustable rates fluctuate, rather than provide historical data on adjustable rate mortgages. During the last ten years, such rates have fluctuated within a band of 600 basis points and within the last three years a band of 300 basis point. That is considerable volatility to be described only in rhetorical terms. Every day, sophisticated investors and institutions purchase ad- justable rate mortgage instruments in the primary and secondary (257) 274 298 markets relying in part on substantial histori cal data. Yet the Committee believes that individual homebuyers wh o may not trade in the mortgage market do not need even the si mplest ahd most readily available historical data in order to und erstand the interest rate risk associated with such floating rate instru ments. I com- pletely disagree with that proposition, and I believe t his Committee revisit this issue upon learning of the number of c onsumers who end up with products they did not understand d ue to a lack of proper disclosure. If its is good for institution al investors, it should be good for individual borrowers. This bill had the opportunity to be good legislation , but it failed. We made strides toward addressing the banking and insurance question, albeit in a symbiotic way. The Com mittee came close to engaging in a full-fledged discussion of the prope r role for banks in the insurance market. Yet, on the one hand, while we gave banks in certain states more insurance powers , with the other hand we took most of those powers away. After st udying this issue over the last six months, I have become convinced that we should consider affiliation. We should try to determine wh etheraffiliation will increase benefits to purchasers of insuranc e while protecting the professional criteria of insurance brokerage. Consumer protec- tion and professionalism should not be viewed a s mutually exclu- sive in this instance. insurance agents and bro kers bring knowl- edge of both product and rules to the market which benefit the consumer. Finally, as presented to the Committee , the moratorium on the Comptroller of the Currency is unevenly drafted, since it curtails institutions, not powers, thus exacerbat ing not only the in- tac an uneven niaving field ety r * o e t surance puwe1 yucotivn, vue Guise os among barks. I support finding ways to eliminate unnecessary and redundant regulations for banks. I have supportedlegislative efforts to rewrite Glass-Steagall which will make banks more compe titive and ensure that consumers can buy new products to meet the ir financial needs. I believe we must maintain a balance betw een protecting the consumer and giving banks needed flexibility to adapt to the mar- ketplace. Regulations need to be reasonable and fa ir-minded. Con- gress should regularly exercise its prerogative to re view regulations and make appropriate change to reflect the chan ging marketplace. In fact, I would argue that the financial marketplac e is changing faster every day. Through court decisions and state actions, federal regulations are falling behind the marketplace. The financial mar- ket is producing new financial products that bene fit both consum- ers and the banks that supply them. We addressed issues which needed relief, but th e Committee went beyond reasonableness and reported a bill w hich rolls back too much. For that reason, I could not support the bili in its cur- rent form. KENNETH E. BENTSEN,Jr. 275 APPENDIX COMMITTEE ON COMMERCE, Washington, DC, July 17, 1995. Hon. JAMES A. LEACH, Chairman, Committee on Banking and Financial Services, Rayburn House Office Building, Washington, DC. DEAR CHAIRMAN LEACH: On June 29, 1995, the Committee on Banking and Financial Services ordered reported H.R. 1858, the Fi- nancial Institutions Regulatory Relief Act of 1995. A numberof provisions of H.R. 1858 as approved by the Banking Committee fall within the jurisdiction of the Commerce Committee. These include, but are not limited to, provisions amending the Gov- ernment Securities Act, provisions pertaining to a lender'sliability for environmental hazards, provisions affecting the regulation and sale of insurance and affiliation among different service providers, and provisions that may apply to registrants’ obligations to provide certain information pursuant to the Securities and Exchange Act of 1934, I have appreciated your willingness to address my concerns with many of the provisions of H.R. 1858 that fall within the jurisdiction of the Commerce Committee. In view of your desire to move this legislation to the Floor in an expeditious fashion, I do not intend to seek a sequential referral of H.R. 1858. I would appreciate, how- ever, your commitment that the agreements worked out between our staffs will be effected without the need for separate amend- ments by the Commerce Committee on the House Floor. Please be advised that my agreement not to seek a sequential re- ferral is based on an understanding that this waiver will be with- out prejudice to the Commerce Committee's jurisdictional claims over H.R. 1858 and similar bills that may be offered in the future and that the Commerce Committee's jurisdiction will be protected through the appointment of conferees should H.R. 1858 go to con- ference. I appreciate your cooperation in these matters and would further appreciate the inclusion of this letter in the Banking Committee's report on H.R. 1858. Sincerely, THOMAS J. BLILEY, Jr., Chairman. (259) 276 260 COMMITTEE ON BANKING AND FINANCIAL SERVICES, Washington, DC, July 17, 1995. Hon. THoMas J. BLILEY, Jr., Chairman, House Commerce Committee, Washington, DC. DEAR MR. CHAIRMAN: Thank you for your letter of July 17, 1995, regarding a bill reported by the Committee on Banking and Finan- cial Services, H.R. 1858, Financial Institutions Regulatory Relief Act of 1995. I appreciate the interest that the Committee on Commerce has in this important legislation. As your letter indicates, the Commit- tee could be successful in asserting a right to a sequential referral of H.R. 1858. Therefore, I am most appreciative of your decision not to request such a referral in the interest of accommodating consid- eration of thebill. You have my assurance that the agreements worked out by our respective staffs concerning changes to Title III will be included in a manager's amendmentas wetakethebill to the House floor. You also have my commitment to work together to achieve a mutually satisfactory resolution of the insurance and securities issues within the jurisdiction of the Commerce Committee. In addition, I will also support your Committee’s request _to seek conferees on these mat- ters within the jurisdiction of the Commerce Committee. Thank yeu for your cooperation in this matter and for your sup- port of this legislation. Sincerely, JAMES A. LEACH, Chairman. COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, . Washington, DC, July 12, 1995. Hon. JAMES A. LEACH, Chairman, Committee on Banking and Financial Services, Raybu rn House Office Building, Washington, DC. DEAR Mr. CHAIRMAN: Thank you for the information that on June 29, 1995, the Committee on Banking and Financial Ser vices ordered reported, H.R. 1858, the Financial Institutions Regulato ry Relief Act of 1995. I believe that the Committee on Transport ation and Infrastructure clearly has a right to sequential referral of Title Lil of this bill, relating to liability of lenders and others under var- ious Federal environmental laws. Title III includes detailed criteria and requirements for liabili ty of lenders, fiduciaries, and Federal agencies under Federal enviro n- mental law. The bill expansively defines Federal environment al law to include specific statutes, Federal implementing regulation s, and state-delegated laws and regulations. H.R. 1858 also explici tly addresses liability under the Comprehensive Environmental R e- sponse, Compensation and Liability Act (“Superfund”), the Oil Po l- lution Act, and the Clean Water Act. As you know, the Transportation and Infrastructure Committee has jurisdiction over Superfund, the Oil Production Act and the Clean Water Act. Lender liability under Superfund is of particul ar interest and concern to the Committee. We are currently worki ng 7 261 on a comprehensive bill to reauthorize and reform Superfund—the law that has generated much of the debate over lenderliability. This year, we held six hearings on Superfund; much of the testi- mony focused on lenderliability and specifically on the provisions in H.R. 3800, Superfund legislation reported by this Committee last year. In the interest of accommodating the schedule for consideration of H.R. 1858, I do not intend to request a sequential referral of the bill to the Committee. However, I would appreciate receiving assur- ances that the agreements worked out between our respective staffs will be effected to our satisfaction without the need for a Floor amendment by this Committee. Meanwhile, my action here is not intended to waive the Committee's jurisdiction over this mat- ter, and should this legislation go to a House-Senate Conference, the Committee on Transportation and Infrastructure will request to be included as conferees on any provisions within this Commit- tee’s jurisdiction. With kind personal regards, I remain Sincerely, BUD SHUSTER, Chairman. COMMITTEE ON BANKING AND FINANCIAL SERVICES, Washington, DC, July 17, 1995. Hon. BUD SHUSTER, Chairman, Committee on Transportation and Infrastructure, Washington, DC. DEAR MR. CHAIRMAN: Thank you for yourletter of July 12, 1995, regarding a bill reported by the Committee on Banking and Finan- cial Services, H.R. 1858, the Financial Institutions Regulatory Re- lief Act of 1995. I appreciate the interest that the Committee on Transportation and Infrastructure has in this important legislation. I agree that your Committee has a right to sequential referral of Title III of H.R. 1858. Therefore, I am most appreciative of your decision not to request such a referral in the interest of accommodating the schedule for consideration of thebill. You have my assurance that agreements worked out by ourre- spective staffs will be included in a manager’s amendment as we takethe bill to the House floor and that I will support your request to be conferees on Title III of thebill. Thank you for your cooperation in this matter. Sincerely, JAMES A. LEACH, Chairman. 278 EXHIBIT D 492 Bill Summary & Status - 104th Congress (1995 - 1996)- S.650- CRS Summary - THOMAS(Library of... The Library of Congress > THOMAS Home > Bills, Resolutions > Search Results Bill Summary & Status 104th Congress (1995 - 1996) S.650 CRS Summary ABOUT SUMMARIES NEW SEARCH | HOME | HELP| © Back to Bill Summary and Status Print Subscribe Share/Save S.650 Latest Title: Economic Growth and Regulatory Paperwork Reduction Act of 1995 Sponsor: Sen Sheiby, Richard C. [AL] (introduced 3/30/1995) Cosponsors (28) Latest Major Action: 12/14/1995 Placed on Senate Legislative Calendar under General Orders. Calendar No. 272. Senate Reports: 104-1 SUMMARYASOF: 3/30/1995--Introduced. (There is 1 other summary) TABLE OF CONTENTS: Title I: Reductions in Government Overregulation Subtitle A: The Home Mortgage Process Subtitle B: Amendments to the Community Reinvestment Act of 1977 Subtitle C: Payment of Interest Act Title II: Streamlining Government Regulation Subtitle A; Eliminating Unnecessary Regulatory Requirements and Procedures Subtitle B: Eliminating Unnecessary Costs and Paperwork Burdens Subtitle C: Eliminating Unnecessary Reporting Requirements Subtitle D: Regulatory Microma nagement Title III: Regulatory Impact on Cost of Credit and Credit Availability Subtitle A: Lowering Compliance Costs to Promote Credit Availability Subtitle B: Disincentives to Risk-Taking Subtitle C: Miscellaneous Nonsupervisory Reforms thomas.loc.gov/cgi-bin/bdquery/z?d104:SNO0650:@@@D&summ2=0& 47 319 279 AN9N2 Bill Summary & Status - 104th Congress ( 1995 - 1996) - S.650 - CRS Summary - THOMAS(Library of... Economic Growth and Regulatory Paperwork Reduc tion Act of 1995 - Title I: Reductions in Governme nt Overregulation - Subtitle A: The Home Mortgag e Process - Part I: Regulatory Simplification a nd Uimuimey ~ Anus Lae eton Landing Act (TT AY and the Raal Fstat e Settlement Procedures Act (RESPA) to require the Board of Governors of the Federal Reserve System (the Board) to: (1) elimi nate, modify, or simplify disclosure requirements if such action results in uniformity with other statutory disclosure requirements relating to credit transacti ons; and (2) proscribe imposition of any disclosure requirement unlessits effect is to eliminate, modify , or simplify any disclasure required under this Act. (Sec. 103) Exempts from TLA disclosure requirements transactions that the Board determines: (1) are not necessary to effectuate its purposes; or (2) do not provide a measurable benefit in the form of useful ft _|-informationor consumerprotection.“ | NESTEOE O een ine wmmnnnesrernma on san (Sec. 104) Amends RESPAto repeal requirements th at: (1) a federally related mortgage lender disclose to a mortgage loan applicant the servicing of any such m ortgages the lender has assigned, sold or transferred during the most recent three calendar ye ars; and (2) a lender that does not service federally related loans similarly disclose any intention to assign , sell or transfer such servicing. Repeals the mandate for mode! disclosure statements. , Excises from the definition of "federally related mortg age joan" any loan secured by a subordinate lien on residential real property (thereby removing second m ortgages from RESPA requirements). Directs the Board to ensure that regulations pertaining to the business credit exemption from RESPA jurisdiction include all business credit exempted from th e TLA. Part II: Clarifications to Reduce Costs and Regulat ory Burdens - Amends the TLA to exemptfrom its disclosure requirements any credit transactions involvi ng consumers with an annual earned Income of more than $200,000 or having net assets In excess of $1,000,000 at the time of the transaction. (Sec. 112) Revises disclosure requirements for adjust able rate home mortgages to permit as an alternative to the currently required tableillustration , a statement that a monthly payment mayincrease or decrease significantly due to annual percentage r ate increases. Grants creditors the option of disclosing, in any vari able interest rate residential mortgage transaction that is not an open endcredit plan,either a state ment that the monthly payment may change substantially, or an historical example illustrating t he effects of interest rate changes implemented — aaa edingn ta tha laan nranram OCU aire ee eee e (Sec. 113) Excludes from the determination of the finance charge for any consumer credit transaction fees imposed by third party closing agents (including se ttlement agents, attorneys, escrow and title companies) that are neither expressly required nor retained by the creditor (thereby exempting such amounts from TLA disclosure requirements). Exempts from the computation of a finance charge,i f they are otherwise itemized and disclosed, certai n: (1) taxes on security instruments or evidences of indebtedness; and (2) fees for preparation of loan - related documents and attending or conducting settlement. (Sec. 114) Exempts from the right of rescission cer tain refinancings or consolidations of debt that are secured by a lien on a consumer's principal dwelli ng. . (Sec. 115) Permits finance charge disclosures for certain consumer credit transactions secured byreal property or a dwelling to vary within an accuracy tol erance range of $100. Sets guidelines for per diem interest rate disclosures consumer credit tra nsactions. (Sec. 116) Shields a creditor or assignee from liabi lity in connection with disclosures of: (1) certain fe es and charges; and (2) finance charges that fall wit hin certain statutory tolerance limits. (Sec. 117) Modifies the guidelines delimiting an obl igor's period of rescission to preclude a consumerf rom asserting rescission in any action after the earlier of: (1) expiration of the three-year period beginni ng on the transaction consummation date; or (2) the da te of the sale of the property securing an extensi on of credit, (Sec. 118) Modifies assignee liability guidelines to provide thata violation is apparent on the face of the disclosure statementif the disclosure does not use the format required by law. Prescribes guidelines under which the servicer o f a consumer obligation arising from a consumer credit transaction shall not be treated as the assig nee of such obligation. thomas.loc.gov/egi-bin/bdquery/z?d104:SN0085 0:@@@D&summ2=0& 2t7 320 280 419/12 Bill Summary & Status - 104th Congress (1995 - 1996) - S.650 - CRS Summary - THOMAS(Library of... (Sec. 119) Repeals the bonafide personal financial emergency condition placed upon exercise of the Board's authority to modify or waive rescission rights arising from a consumer credit transaction. Subtitle B: Amendments to the Community Reinvestment Act of 1977 - Amends the Community Reinvestment Act of 1977 (CRA) to prohibit the appropriate Federal regulatory agency, in the course of examining a financial institution, from imposing recordkeeping or reporting requirements that do not have the effect of eliminating, streamlining, or reducing regulatory burdens upon suchinstitution. (Sec, 132) Exempts small-sized banks with total assets under $250 million from CRA jurisdiction. (Sec. 133) Prescribes guidelines under which each appropriate Federal regulatory agency shall: (1) publish its examination schedule; and (2) provide opportunity for community comment. Authorizes the agency to reconsider, upon request, the rating of an institution. . (Sec. 134) Defines a "special purpose bank" as one that does not generally accept deposits from the public in amounts fess than $100,000, such as a credit card bank ora trust bank, Mandatesthat, in assessing the record of special purpose banks in meeting community credit needs, the appropriate Federal regulatory agency: (1) take into consideration the nature of the businesses of such banks; and (2) develop standards under which they may be deemed to comply with CRA requirements consistent with the specific nature of such businesses, Requires the agency,In assessing anyfinancial institution, to give positive consideration to investments and loans madeby such institutions that provide benefits to distressed communities, regardless of whether or not the communities are located within the service area of the financial institution. Subtitle C: Paymentof Interest Act - Amends the Federa! Deposit Insurance Corporation Improvement Act of 1991 to retitle the Truth in Savings Act as the "Paymentof Interest Act". Repeals: (1) the finding of the Congress that uniform disclosure of interest and fees charged on consumer deposit accounts strengthens consumer ability to make informed decisions and verify deposit accounts; and (2) the stated purposeof the Truth in Savings Act requiring clear, uniform disclosure of interest rates payable on deposit accounts and the fees assessable against them. Declares instead that: (1) the Truth in Savings Act created unnecessary paperwork, compliance, and liability burdens for depository institutions without enhancing consumer ability to make informed decisions; and (2) the purpose of the Paymentof Interest Act is to repeal unnecessary disclosure ' requirements while retaining the requirement that interest be paid on the full amount of principal in the account for each dayof the stated calculation period at the interest rate disclosed by the depository institution. Repeals: (1) the uniform disclosure requirements for interest rates and fees, including annual percentage yields, minimum account and time requirements, and interest penalties; and (2) the proscription against misleading descriptions of free or no-cost accounts, and misleading or inaccurate advertisements. Repeals current law that a depository institution: (1) maintain and distribute a schedule of fees, interest rates, and accountrestrictions written in readily understood format for each class of accounts being offered; (2) notify account holders of any changesin the schedule; and (3) clearly and conspicuously disclose with each periodic statement to account holders the annual percentage yield earned, the amount of interest earned, the amountof fees or charges imposed, and the numberof days in the reporting period. Repealscivil liability guidelines governing class actions. Modifies depository institution liability regarding: (1) notification and adjustment for errors; and (2) continuing and subsequent depository institution failure to pay interest. Title Il: Streamlining Government Regulation - Subtitle A: Eliminating Unnecessary Regulatory Requirements and Procedures - Amends the Bank Holding CompanyAct of 1956 (BHCA) to setforth financial and managerial criteria under which an acquisition of shares by a bank holding company, ora merger or consolidation between registered bank holding companies, shall be deemed to be approved. (Current law requires prior Board approval). (Sec. 202) Amends the Federal Deposit Insurance Act (FDIA) to set forth conditions under which prior approval is not required for any merger, consolidation, asset acquisition, or liabilities assumption, involving only insured depository institutions subsidiaries of the same depository institution holding company. (Sec. 203) Permits any insured depository institution to participate in optional conversion transactions thomas.loc.gov/cgl-bin/odquery/z?d 104:SN00650:@@@D4asumm2=0& 3/7 321 , 281 4iSiN2 Bill Summary & Status - 104th Congress (1995 - 1996) - 5.650 - CRS Summ ary - THOMAS(Library of... between members of the Bank Insurance Fund and the Savings Associati on Insurance Fund without the prior written approval of the responsible agency. Repeals: (1) agency guidelines for approval; and (2) the monhibitinn ancinck trancartinne urhich racilt in the transfer from one Federal deposit insurance fund to the other. Makes the sole criterion for authorization of a conversion transa ction without approval that tne acquiring, assuming, or resulting depository institution will meet all applic able capital requirements upon consummation of the transaction. (Sec. 204) Amends the Revised Statutes, the Federal Reserve Act (FRA), and th e FDIA to delineate conditions under which prior approval is not required for banks under their pu rview to establish and |operateabranchorseasonalagency, (Sec. 205) Amends the Home Owners' Loan Act to remove from its regulatory pu rview a bank holding company subject to the BHCA. Revises the definition of "savings and loan holding company" to exclude a bank holding c ompany under BHCAjurisdiction. Provides that acquisition of a savings association by a bank holding company u nder BHCAjurisdiction obviates approval by the Director of the Office of Thrift Supervision. (Sec. 206) Amendsthe Revised Statutes to repeal the aggregate minimum capital requ irements imposed upon a national banking association andIts branches. (Sec. 207) Amends the Revised Statutes and the FDIA to exclude from the defin ition of "branch" an automated teller machine or remote service unit (thus exempting thoseentitie s from the approval requirements of such Acts). (Sec. 208) Amendsthe FRA to prescribe regulatory approval guidelines for inve stments in bank premises by well capitalized and well managed banks. (Sec. 209) Amends the BHCAto repealthe provision that shares transferred by a bank holding come to a transferee under its control are deemed to be under the holding compa ny's control (thus s specified approval requirements). (Sec. 210) Amends the FDIA to repeal the requirement that the appropriate Fed eral banking agency be notified prior to the appointmentor addition of a new director or senlor executive officer if the affected insured depository institution or depusiiury inatiiutien nuiding company: (1) h as boon chartered lees than two years; or (2) nas undergone a changein contro! within the preceding two y ears. Retains such prior notice requirement for troubled Insured depository institutions or depositor y institution holding companies only if the agency determines that prior noticeIs appropriate. Extends from 30 days up to 90 days the period during which,following notice, the agency may disapprove board ofdirectors or senior executive officer appointments by such institutions or companies. (Sec. 211) Amends the Depository Institutions Management Interlocks Ac t to revise the prohibition on dual service of managementofficials to raise the asset-size thresholds of the depository institutions or depository holding companies to which the prohibition applies. Authorize s Federal banking regulatory agencies to adjust such thresholds for inflation. Repeats the 20-year exempt ion from the dual service prohibition for certain grandfathered directors and managementofficials (th us permitting them to continue their dual service permanently). : Repeals the requirement that each appropriate Federal depository institutions regulatory agency:(1) review according to prescribed criteria the petition of a managementofficial to serve in more than one position (interlocking directorate); and (2) determine whether continuation of such dual service produces an anti-competitive effect. Repeals the criteria governing regulatory approval of management interlocks. (Sec. 212) Amendsthe FRA to exempt from its proscription against prefer ential terms in credit extensions to executive officers, directors, or principal shareholders {insider lending) any credit extensions made pursuantto a benefit or compensation program widely available to empl oyees of the member bank, Includes such credit extensions In the Board's authority to waive the pros cription against such preferential terms for certain executive officers and directors of controlling n onbank affiliates. Repeals the reporting requirement that: (1) an executive officer of a mem ber bank indebted to another bank submit a written report of such debt to the member bank's board o f directors; and (2) a member bank include in its statutory condition of report all loans made since its previous report. thomas.loc.gov/cgi-bin/bdquery/z?d104:SN00650:@@@D&as umm2=04 ay 322 282 49/12 Bill Summary & Status - 104th Congress (1995 - 1996) - S.650 - CRS Summary - THOMAS(Library of... Amends the FDIA to repeal Federal banking agency authority to require banks to disclose credit extensions madeto their executive officers or principal shareholders. Amends the Bank Holding Company Act Amendments of 1970 to repeal the requirement that bank executive officers and stockholders who own more than a ten percent controlling interest report to the bank's board of directors regarding any credit extensions made to them by a bank maintaining a correspondent account. (Sec. 213) Amends the Federal Financial Institutions Examination Council Act of 1978 to abolish the Appraisal Subcommittee. Amendsthe Financial Institutions Reform, Recovery, and Enforcement Act of 1989 to transfer the functions of the Appraisal Subcommittee to the Federal Financial Institutions Examination Council. (Sec. 214) Amends the FDIA to exclude automated teller machines and specified bank branches from the definition of "banking branch” (thus exempting them from Federal bank closure notification requirements). Makes such exemption retroactive to the effective date of the Federal Deposit Insurance Corporation Improvement Act of 1991. , (Sec. 215) Amends the International Banking Act of 1978 to replace the Board's authority to ordera foreign bank to terminate Its branch activities in the United States with authority to recommend to the appropriate Federal or State bank official that such branch's license be terminated. Revises the examination guidelines for foreign banks to: (1) direct the Board to rely upon reports of examinations made by the Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC), and State bank supervisors (currently the Board coordinates such examinations); and (2) subject a foreign bank to the same on-site examination schedules and cost-of-examination assessmentsas are imposed upon U.S. banks. Modifies procedural guidelines for Board review of foreign bank applications to establish a U.S. presence. Subtitle B: Eliminating Unnecessary Costs and Paperwork Burdens - Amends the FDIA to: (1) expand from 18 months to 24 monthsthe discretionary timeframe for mandatory on-site examinations of certain small-sized depository institutions; and (2) increase from $175 million to $250 million the asset-sizeceiling on the meaning of "small depository institution” which Federal banking agencies mayin their discretion determine for examination purposes, (Sec, 222) Amendsthe Right to Financial Privacy Act to require a Government authority to reimburse a financial institution for assembling or providing financial records pertaining to corporate customers. (Sec, 223) Directs the Federal Financial Institutions Examinations Council, and each Federal banking agency represented on it, to review and report to the Congress on Federal banking regulations at least every ten years to identify unnecessary regulatory requirements imposed upon insured depository . institutions.Requires the Council or the pertinent banking agency to eliminate unnecessary regulations to the extent appropriate. Subtitle C: Eliminating Unnecessary Reporting Requirements - Amends the Community Reinvestment Act of 1977 (CRA) to prohibit the imposition uponfinancial institutions of: (1) recordkeeping requirements that do not result in eliminating, streamlining or reducing regulatory burdens upon the institutions; or (2) ioan data collection and reporting requirements. Prohibits public disclosure of loan data by any Federal financial supervisory agency. : (Sec. 232) Amends the Federal Home Loan Bank Act (FHLBA) to exemptfinancial institutions meeting specified criteria from its community support requirements. (Sec. 233) Amends Federal monetary law to: (1) reduce mandatory identification procedures for monetary transactions; and (2) repeal identification reporting requirements regarding certain financial institution customers of depository institutions. (Sec. 235) Amends the Federal Deposit Insurance Corporation ImprovementAct of 1991 to repeal the mandate that: (1) insured depository institutions include information on small businesses and small farm lending in their annual reports of condition; and (2) the Board publish annually information on credit availability to small businesses, (Sec, 236) Amends the Home Mortgage Disclosure Act of 1975 to increase from $10 million to $50 million the maximum asset-size of institutions exempt from its purview. Authorizes the Board to exempt from the Act's disclosure requirements institutions whose asset-size is at least $50,000000 if the burden of compliance outweighs the usefulnessof the requisite Information. thomas.loc.gov/cgl-bIn/bdquery/z?d104:SN00650:@@@D&summ2=08& 57 323 283 4fi9ii2 Bilt Summary & Stalus - 104th Congress (1995 - 1996) - $.65 0 - CRS Summary - THOMAS(Library of ... Declares that a depository institution shall be deemed to have s atisfied the public availability requirements with respect to its mortgage loan transactions if it s branch offices provide notice of the - week te Been btn Fenn bh ¥ CEVGUGLINU YP MPEee WE meee treme ti em ee a hame affics (Sec. 237) Amends FDIA guidelines governing a changein co ntro! of insured depository institutions to repeal mandatory reporting by financial institutions (or affilia tes) of any loans secured by 25 percent or more of any class of shares of an insured depository institution (stock loans). Subtitle D: Regulatory Micromanagement - Amends the Revise d Statutes regarding national banking association director qualifications to extend to all such associat ions the Comptroller of the Currency's authority towaivecitizenship requirementsfora minority ofthe association's diféctots. Allows the Comptroller to waive State residency requirements, . (Sec. 242) Sets a deadline by which each Federal banking agenc y and the Nationa! Credit Union Administration Board must eliminate regulations which require i nsured depository institutions and credit unions to produce unnecessary internal written policies. (Sec. 243) Amends the FDIA to increase the number of members of the FDIC Board of Directors from five to six. Mandates that one director be appointed from among indi viduals serving as State bank commissioners or supervisors. Limits such appointmentto a s ingle two-year term served without compensation. Limits eligibility to serve as Chairperson or Vice C hairperson of the FDIC Board to residentially appointed directors. Title III: Regulatory Impact on Costof Credit and Credit Availabil ity - Subtitle A: Lowering , Compliance Costs to Promote Credit Availability - Amends FDIA gu idelines for improved accountability in financial managementto: (1) eliminate the use of an independent public accountant to detect and report violations of law by an insured depository institution or depositor y institution holding company; (2) alter independentaudit committee composition from one composedenti rely of outside directors independentof institution management, to one composed of a majority of such in dependentdirectors; and (3) require each appropriate Federal banking agency to exempt from the in dependentaudit committee requirement any Insured depository institution that has encountered hardshi ps in retaining competent directors on aren am naeibtna SUG CUTINTMLLOS. (Sec. 302) Amends the Equal Credit Opportunity Act and the Fair Ho using Act to prohibit an enforcing agency from acquiring or using reports generated by any cred itor-conducted review of lending operations iy duieiiine compliance with cuch Acts (hereby ancouraning creditors to self -test for compliance with the Acts). (Sec. 303) Amends the Home Owners' Loan Act to revise th e exemption from certain non-qualified thrift lender restrictions of specialized savings associations servi ng transient military personnel to repeala specified requirement with respect to the association's savi ngs and joan hoiding company. (Sec. 304) Repeals Federal savings association (association ) authority to issue credit cards or engagein credit card operations. Permits an association to deal in credit card loans or education loans without being subject to a percentage-of-assetslimitation. Raises from ten percent to 20 percent the percentage-of-assets- limitations ceiling placed upon commercial and agricultural loans offered by an association. Restricts loan a mounts exceeding ten percent of an association's total assets to loans made to small businesses . Repeals the five-percent-of-assets loan restriction upon educati on loans offered by an association. Expands the scope of “qualified thrift lender" to include a dome stic building and loan association. Redefines "qualified thrift investment" to cover, as assets includ ible withoutlimit, educational loans, small ~ business loans, and loans made through credit cards or credit c ard accounts. Removes the ten-percent-of-assets loan restriction placed upon certain personal, family, household or education loans. (Sec. 305) Amends the FRA, with respect to regulations gov erning payment system risk or intraday credit, to: (1) require them to include net debit caps appropriate to the credit quality of each Federal Home Loan (FHL) Bank (together with normal fees for daylight overdra fts); or (2) exempt FHL Banks from such regulations. thomas.loc.gov/cgl-bin/odquery/z?d104:SN00650:@@@D&summ2=0& 6/7 324 284 41912 Bill Summary & Status - 104th Congress (1995 - 1996) - S.650 - CRS Summary - THOMAS(Library of..; (Sec. 306) Amends the FHLBA to: (1) revise the location requirements for FHL Banks to provide for membership-based-on-convenience; (2) mandate that the FHL Banks contract annually for an annual audit with a single auditor; and (3) preclude the Board from participation in any audit or audit contracting process (other than to establish contract and accounting requirements). (Sec. 308) Amends the BHCAtolift the growth cap restrictions placed upon banks controlled by certain bank holding companies not statutorily treated as bank holding companies. Subtitle B: Disincentives to Risk-Taking - Amends the FDIA and the Federal Credit Union Act to: (1) reinstate the requirement of a showing of irreparable and immediate harm as a prerequisite to attachment of assets and other injunctive relief when the FDIC or the National Credit Union Administration Board acts as conservatoror receiver; and (2) confer oversight authority to prohibit removal of assets in cease and desist proceedingsif it results in immediate and irreparable harm. Subtitle C: Miscellaneous Nonsupervisory Reforms - Amends the TLA to hold a cardholderliable for unauthorized useof a credit card if the liability exceeds $50 and the cardholder fails to timely notify the card issuer of any unauthorized transaction that appears on the account statement. Amends the Electronic Fund Transfer Act to raise from $50 to $500 a cardholder'sliability for unauthorized electronic fund transfers if the cardholder substantially contributed to the unauthorized transfer, Including writing on or keeping with the card or other means of access a personal identification or other security code. Stay Connected with the Library All ways to connect » Find us on Subscribe & Comment Download & Play i fs} RSS & E-Mail Blogs Podcasts Webcasts iTunes U About | Press | Site Map | Contact | Accessibility | Le al | External Link Disclaimer | USA.gov ~"“Speech Enabled thomas.loc.gov/cgi-bin/bdquery/z?d104:SN00650:@@@D&summ2=0& VW 325 285 EXHIBIT E AUTHENTICATED 4 U.S. GOVERNMENT INFORMATION GPO Calendar No. 272 104TH CONGRESS ist Session REPORTSENATE | 104-185 ECONOMIC GROWTH AND REGULATORY PAPERWORK REDUCTION ACT OF 1995 COMMITTEE ON BANKING, HOUSING, 29-010 REPORT OF THE AND URBAN AFFAIRS UNITED STATES SENATE TO ACCOMPANY S. 650 TOGETHER WITH ADDITIONAL VIEWS DECEMBER 14, 1995.—Ordered to be printed U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1995 286 COMMITTEE ON BANKING, HOUSING , AND URBAN AFFAIRS ALFONSE M.,D'AMATO, New York, Chairma n PHIL GRAMM,Texas PAUL S. SARBANES, Maryland RICHARD C. SHELBY, Alabama CHRISTOPHER J. DODD, Connecticut CHRISTOPHER S. BOND,Missouri JOHN F. KERRY, Massachusetts CONNIE MACK,Florida RICHARD H. BRYAN,Nevada LAUCH FAIRCLOTH,North Carolina BARBARA BOXER,California ROBERT F. BENNETT, Utah CAROL MOSELEY-BRAUN,Illinois ROD GRAMS,Minnesota PATTY MURRAY, Washington PETE DOMENICI, New Mexico Howarp A. MENELL, Staff Director RoperT J. Grurrra, IJr., Chief Counsel PuiuE. BEcHTEL, Deputy Staff Director STEVEN B. HARRIS, Democratic Staff Directo r and Chief Counsel Epwarp M. MaALan, Editor SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND REGULATORY RELIEF RICHARD C. SHELBY, Alabama, Chairman ROD GRAMS,Minnesota RICHARD H. BRYAN, Nevada PETE DOMENICI, New Mexico CAROL MOSELEY-BRAUN,Illinois PHIL GRAMM,Texas CHRISTOPHER J. DODD, Connecticut ROBERT F. BENNETT, Utah JOHN F. KERRY, Massachusetts CHRISTOPHERS. BOND,Missouri BARBARA BOXER,California essere LEAT OD a UNEeaeay KATHLEEN L. Casey, Staff Director Douc.as Nappi, Counsel SaRAH BLOOM RASKIN, Democratic Counsel Martin J. GRUENBERG, Democratic Senior Counsel 008) 287 CONTENTS Introduction 2... Purpose and Summary .. History of the Letislation . Purpose and Scope ........cceees Title I—Streamlining the Home Mortgage Lending Process Title II—Streamlining Government Regulation .........cccc- Title Il]--Regulatory Impact on Cost of Credit and Credit Availability ..... Title [V—Fair Credit Reporting ......ccccccccsssesssssssesesssesseessstcccessesssecassaveesasces Title V—Asset Conservation, Lender Liability and Deposit Insurance Pro- tection " Title VI—Miscellaneous Clarifications, Studies and Reports Section-by-Section Analysis. .........cseccesceeeees Section 101. Coordination of TILA/RESPA... Section 102. Elimination of Redundant Regulators.. Section 103. General Exemptive Authority for Loans. Section 104. Reductions in Real Estate Settlement Procedures Act . Section 105. Co-branding and Affinity Group Endorsements..... Section 106, Exemption for Certain Borrower.0.......ccccccccesscereees Section 107. Alternative Disclosures for Adjustable Rate Mortgages Section 115. Restitution for Violations of Truth in Lending Act .......... . Section 201. Elimination of Certain Filing and Approval Requirements for Certain Insured Depository Institutions ......0.....ccccscseessseseeseeeeceeseees Section 202. Elimination of Redundant Approval Requirements for OAKARTransactions ........c.ccecceecceeseeseeteneseetseseeneeeacaeataeseseeeseceeseeesssasenasees Section 203. Elimination of Duplicative Requirements Imposed Upon Bank Holding Companies Under the Home Owners’ Loan Act .......06.000 Section 204. Elimination of Per Branch Capital Requirementfor National Banks and State Member Banks........0...-::::scee Section 205. Elimination of Branch Application Req matic Teller Machines ............scccccsssessesescsssssseecsrsesseteseeeseteeeeeesesteaeesateneares Section 206. Elimination of Requirement for Approval of Investments in Bank Premises for Well-Capitalized and Well-Managed Banks.......... Section 207. Elimination of Approval Requirementfor Divestitures ... Section 208. Streamlined Nonbanking Acquisitions by Well-Capitalized and Well-Managed Banking Organizations ............c.ccsee Section 209. Elimination of Unnecessary Filing for Officer a APpoirtments oo... ccc cscceeceses essen seeseecsenencueseasanenseeessesessacauasesescscessscseaacarseanes Section 210. Amendments to the Depository Institutions Management InterlockAct ..cscccccescecssescsesesesescenssesensssseossenseeseensceseneassesessestensseeessesaseceeouaes Section 211. Elimination of Recordkeeping and Reporting Requirements for OFFICOTS oo. eecceeeccecsesessce tees sseseesnsneaeassesenesessnsaeseatenesstsssasseseesassnaeesaseeeerees Section 212. Consolidation of Appraisal Subcommittee; Transfer of Func- THOS ooo. ceeescececcesecee eee tenes coecesesacearesenseceaseaeeaetanee Section 213. Section 214. Foreign Banks............ Section 215. Disposition of Foreclosed Assets .. Section 221. Small Bank Examination Cycle...... Section 222. Required Regulatory Review of Regulations Section 223. Identification of Nonbank Financial Institution Customers. ... Section 224. Repeal of Commercial Loan Reporting Requirements ............. Section 225. Increase in Home Mortgage Disclosure Act; Disclosure Ex- EMPCION oo. eeeccecce csc ceeenseeeeeseecseaceeesaecaaceeceseseasssssecsesseceeecassaaesatsaeeessaseseasasenss Section 226. Elimination of Stock Loan Reporting Requirement Section 227. Credit Availability Assessment.... Section 241. National Bank Directors .............. (III) 288 Iv Purpose and Scope —Continued Section 242. Paperwork Reduction Revie w 1...penne 28 Section 243. State Bank Representation o n Boar Section 244. Consultation Among Examin ers......... 29 Section 301. Audit Costs. .......-10re e e 29 Section 302. Incentives for Self-Testing.. . 29 Section 303. Exemption for Savings Insti tutions Serving vceuccutauuvacaeuauensuccsceneasessuessessseessneeeenenseneege es e uneesnee 29 . Qualified Thrift Investment Amen dments ..... 30 Section 305. Daylight Overdrafts by Fed eral Home Loan Banks 3 0 Section 306. Application for Membership in the FHLB System .. 30 Section 307, FHLB External Auditors ......sssss-s esceeerisse ” 31 Section 308. Limited Purpose Bank...... .eu1c 3] Section 309. Collateralization of Advance s to Members ..... 31 Section 310. Increasing Limit on Tota l Advances by the to Non-QTL Institutions ........s ceersesceete 31 Section 311. Fair Debt Collection Practi ces 3 1 Section 401. Short Title .. ve 31 Section 402. Definitions .. te 31 Section 403. Furnishing Consumer Rep POSES .oe-esssssssccenseerentesrcsneressennennnensccensrtanaee neases terenee 34 Section 404. Use of Consumer Reports f or Prescreening keting; Prohibition on Unauthorized or U ncertified Use of Information . 36 Section 405. Consumer consent required to furnish consumer report con- taining medical information: furnishing consumer reports for commer- Gial tramsactiOns oo... ccc. esesceecesessesecsesesnsee esetseesseseenenenrapenansurnasgse ereseee 39 Section 406. Obsolete information n formation contained in consumer FEPOLtS .oeessessecsessesreesecneeeereescienreertittes . = 39 Section 407. Compliance procedures 41 Section 408. Consumer disclosures .... ....csssseeserereee reese . 41 Section 409. Procedures in case of the disputed accuracy of any informa- tion in a consumersfile .......ceecess es 43 Section 410. Charges for certain disclos ures... 46 Suction 411, Duties of ucere of cans umer reports . 46 Section 412. Civil liability sees 30 Section 413. Responsibilities of pe rsons who furnish 1 to consumer reporting ABeEMCiES «0...e er . 4 9 Section 414. Investigative consumer Fe POFts «...0.-s ester vee 51 Section 415. Increased criminal penalt ies for obtaining information under false pretenses ........0+-. vee 52 Section 416. Administrative enforcement. se 52 Section 417. State enforcementof Fair Credit Reporting Act 53 Section 418. Federal Reserve Board aut hority........... 54 Section 419. Preemption of State law . ....0-.---es 94 Section 420. Action by FTC and Federal Reserve Board 55 Section 421. Amendment to Fair Debt Co llection Practices Act .. 56 Section 422. Furnishing consumer repo rts for certain purposes ee 96 Section 423. Disclosure of information and consumer reports to FBI for counter-intelligence purposes.... 57 Section 424. Effective dates .........- 57 Section 425. Relationship to other law - 58 Section 501. Short title ......c:eseessereesees 58 Section 502. Federal Deposit Insurance Act amendment 58 Section 503. CERCLA amendment........ -.ssseretetrees 58 Section 504. Solid Waste Disposal Act ame ndments 60 Section 505. Effective date .......-0-+6 60 Section 601. Electronic Fund Transfer A 60 Section 602. Treatment of claims arising ABTEEMENES --...eeeseeesteeenseeeeneeeessenecen tennert es 60 Section 603. Fictitious financial instrume nts.. 60 Section 604. Amendmentsto the truth i n Savings Act 60 Section 605. Consumer Leasing Act amen dments.... 61 Section 606. Credit union study..... 61 Section 607. Report on the recon on of differences between regu- latory accounting principles and gener ally accepted accounting prin- 61 CHPLS o.eesseeecseeeceeee cece eres eee neet 289 Vv Page Purpose and Scope —Continued Section 608. State-by-State and metropolitan area-by-metropolitan area study of bank fees oiiceececeseeceeseecaececaeeeecesaerenenecnatanseneens 61 Section 609. Prospective application of gold clauses in contracts 61 Regulatory impact statement..., 62 Changesin existing law ... 62 Cost of the legishation oo... ee seessceseecesecesesesescescassssensescusensecceansens . 62 Additional views of Senator Grams............. Additional views of Senators Mack, Faircloth, 290 Calendar No. 272 REPORT SENATE 104-185 104TH CONGRESS Ist Session ECONOMIC GROWTH AND REGULATOR Y PAPERWORK REDUCTION ACT OF 1995 DECEMBER 14, 1995.—Orderedto be printed Mr. D'AMATO, from the Committee on Banki ng, Housing, and Urban Affairs, submitted the following REPORT together with ADDITIONAL VIEWS [To accompany S. 650] INTRODUCTION On September 27, 1995 the Senate C ommittee on Banking. Housing, and Urban Affairs ordered reporte d a bill, the “Economic Growth and Regulatory Paperwork Reduct ion Act of 1995,” to en- hance access to capital for both consumers and business, and there- by increase economic growth by reducing the regulatory burden im- posed upon financial institutions and fin ancial service providers consistent with safety and soundness, c onsumer protection and other public policy goals. The Committee v oted to report the biil to the Senate by voice vote. PURPOSE AND SUMMARY OF NEED FO R LEGISLATION The purpose of the legislation is to stre ngthen our nation’s finan- cial institutions and to increase their competi tiveness. This legisla- tion is intended to allow financial institutio ns to devote additional resources to productive activities, such as making loans, rather than to compliance with unnecessary reg ulations. While no one regulation can be singled out as being the most burdensome, and most have meritorious goa ls, the aggregate bur- den of banking regulation ultimately affects a bank's operations,its profitability and the cost of credit to customer s. 29-010 291 2 Senators Shelby and Mack recognized this mounting problem and have been trying to roll back unnecessary regulations since the 102nd Congress, when they introduced S. 1129, the Regulatory Ef- ficiency for Depository Institutions Act. While this bill was not en- acted into law, someof its provisions were included in other legisla- tion. In the 103rd Congress, Senators Shelby and Mack introduced S. 265, the Economic Growth and Regulatory Paperwork Reduction Act of 1993. Portions of S. 265 were includedin Title III of the Rie- gle Community Development and Regulatory Improvement Act of 1994. S. 650 is a continuation of this effort to streamline and ra- tionalize current laws and regulations that effect our nation's fi- nancial institutions. HISTORY OF THE LEGISLATION On March 30, 1995, Senators Shelby and Mack introduced 5. 650, the “Economic Growth and Regulatory Paperwork Reduc- tion Act of 1995.” The bill was cosponsored by Senator D'Amato, the Chairman of the Committee on Banking, Housing, and Urban Affairs, Senators Bryan, Bennett, Faircloth, Bond, Gramm and Senate Majority Leader Dole. As introduced, the bill amended a variety of different banking laws in a number of ways, including streamlining disclosure re- quirements, eliminating duplicative regulation, unnecessary filing and recordkeeping requirements, and removing outdated barriers on the provision of financial services. The Subcommittee on Financial Institutions and Regulatory Re- lief (the “Subcommittee”) held hearings on S. 650 on May 2 and May 3, 1995. Testifying before the Subcommittee on May 2 were: Federal Reserve Governor Susan Phillips, Federal Deposit Insur- ance Corporation Chairman Ricki Tigert Helfer, Treasury Assistant Secretary for Financial Institutions Richard S. Carnell, Comptroller of the Currency Eugene A. Ludwig, and Office of Thrift Supervision Acting Director Jonathon Fiechter. On May 3rd, the Subcommittee heard testimony from three pan- els representing the views of the Department of Housing and Urban Development; the financial services industry; and commu- nity and consumer groups. Testifying before the Subcommittee on the first panel was the Secretary of the Department of Housing and Urban Development Henry G.Cisneros. The Secretary was followed by a second panel consisting of. James M. Culberson, Jr., Chairman of the Board of First National Bank and Trust, Asheboro, North Carolina on behalf of the Amer- ican Bankers Association; Richard Mount, President and CEO of Saratoga National Bank, Saratoga, California on behalf of the Independent Bankers Association of America; Billy Don Anderson, President and CEO of Valley Federal Savings Bank, Sheffield, Ala- bama on behalf of America’s Community Bankers; Ralph Rohner, Dean of Catholic University School of Law, Washington, D.C. on behalf of the Consumer Banker's Association; Warren R. Lyons, President of AVCO Financial Services, Irvine, California on behalf of the American Financial Services Association; and John Davey, Senior Vice President of Draper & Kramer, Inc, Chicago, Illinois on behalf of the Mortgage Bankers Association. 292 3 Testifying before the Subcommittee on the thi rd panel were the following representatives of consumer and community groups: Michelle Meier, Counsel for the Consumer's Un ion on behalf of the Consumers Union and Consumers Federat ion of America, Washing- ton, D.C.; Frances Smith, Director of Consume r Alert, Washington, D.C.; Tess Canja, Memberof the Board of Directors of the Amer- ican Association of Retired Persons, Port Charlo tte, Florida; George Butts, Executive Board Member of ACORN, Philadelphia, Penn- sylvania; Gale Cincotta, Chairman of National People’s Action, Chi- cago, Illinois; Irvin Henderson, Chairman of t he National Commu- nity Reinvestment Coalition, Washington, D. C.; Allen Fishbein, Chairman of the Center for Community Chang e, Washington, D.C. Also testifying on the third panel were Cather ine Bessant, Senior Vice President of NationsBank, Washington, D.C. and Benson F. Roberts, Vice President for Policy of Local Init iatives Support Coa- lition, Washington, D.C. On September 27, 1995 the Senate Commit tee on Banking, Housing and Urban Affairs (the “Committee”) considered and or- dered reported S. 650. The Committee accept ed, by voice vote, a Committee Print in the form of a substitute o ffered by Chairman D'Amato. During the Committee's considerat ion of this bill, an amendment offered by Senator Shelby was ad opted by voice vote. Most of these new provisions can be found in Titles IV, V and VI of the bill. The Committee also adopted amendments, by voice vote, that: substantially amend the Fair Credit Report ing Act (“FCRA"); in- crease the systemwide vap un Pedcrat Hom e Lean Rank advances to members that are not “Qualified Thri ft Lenders” from 30 to 40 per cent of total advances; permit credit card banks to take depos- its of less than $100,000 for the purpose of s ecuring a depositor's credit card: exemptcertain stored value devic es from the Electronic Fund Transfer Act; provide the Federal Home Loan Bank System with greater flexibility to accept certain fed erally-guaranteed sec- ondary mortgages as collateral for Federal H ome Loan Bank ad- vances; provide for a study of credit union regulation; and clarify existing FDIC and RTCpolicy regarding pa yment of damages for breach of contracts. PURPOSE AND SCOPE OF THE LEGISLAT ION The bill as ordered reported by the Committee contains six Titles that substantially amend a numberof statut es. While the bill is amendatory in nature, it does have a unifyi ng goal and basic pur- pose: to minimize unnecessary regulatory impe diments for lenders, in a manner consistent with safety and soun dness, consumer pro- tection, and other public policy goals, so as to p roduce greater oper- ational efficiency. The Committee hopes that t he removal of unnec- essary regulatory compliance requirements will permit financial in- stitutions to focus more of their resources on their core business— lending—and thereby enhance access to capita l for both consumers and businesses (particularly smaller businesse s that are more de- pendent on credit for growth and operating f unds). Following is a title-by-title summary of the certain salie nt issues in S. 650 as or- dered reported by the Committee. 293 4 Title I’ Streamlining the home mortgage lending process Title I substantially amends the two Federal laws that directly implicate the home mortgage lending process: The Truth in Lend- ing Act (“TILA”) and the Real Estate Settlement Procedures Act ("RESPA"). These laws require disclosures related to the terms of the loan agreement. Some of those disclosures need to be modern- ized to reflect the current marketplace and to eliminate unneces- sary burdens, particularly on small lenders. Lenders do not bear the compliance cost of implementing TILA and RESPA alone; these costs are passed on in the form of higher credit costs, so indirectly borrowers ultimately pay these costs. The Subcommittee heard testimony regarding the effect of compliance costs on consumers,! the potential for “information overload” that results from the enormous amountof detail required to be disclosed under the law,? and the significant amount of time required to complete the paperwork.’ In addition, the Subcommittee heard tes- timony about the need to ensure that consumers continue to re- ceive necessary and adequate disclosure.4 While the Committee believes that both these laws were passed for commendable purposes and do provide certain necessary consumer protections, the disclosure requirements of TILA and RESPA could be improved by streamlining and integration. Rather than attempting a wholesale revision and integration of these two laws, the Committee decided to provide greater flexibility at the regulatory level to accomplish the samegoals. The bill as ordered reported from Committee centralizes much of the rulewriting authority for TILA and RESPA disclosures in the Federal Reserve Board. Currently, the Federal Reserve Board writes the implementing regulations for TILA and the Department of Housing and Urban Developmentis responsible for rulemaking under RESPA.The bill as reported consolidates much of the rule- making authority for both laws in the Federal Reserve Board, and ‘“The consumer resents me taking the time to explain all these forms. Also, because of the additionalcosts in terms of time and paper imposed by these regulations, we have had to imple- ment a processing fee for our real estate loans of $100 which we did not previously charge.” Testimony of James M. Culberson, Jr. on behalf of the American Bankers Association, Hearing on S.650 before the Financial Institutions and Regulatory Relief Subcommittee (“S.650 Hear- ing’), May3, 1995. (hereinafter, “ABA testimony”) “The lengthy and complex disclosures required under both the Real Estate Settlement Proce- dures Act and the Truth in Lending Act mean that the average consumeris at a loss. He or she will find it almost impossible to discriminate among essential information, useful informa- tion, and useless information. When every possible term and contingency and relationship have to be disclosed, and disclosed at different times using different forms, consumers suffer “infor- mation overload.” Without a clear idea of what's critical and what's peripheral, they may “blank out” and fail to assimilate the essential. * * *” Testimony of Francis B. Smith, representing ConsumerAlert, 5.650 Hearing, May 3, 1995 (hereinafter, “Consumer Alert Testimony”.) 3"More time is spentfilling out RESPA disclosures for real estate application than is spent addressing the customer's real needs. By the time all the paperwork is completed, applicants are so overwhelmed that they sign the documents without reading them.” ABA Testimony, supra note 2. 4"I found two pieces of paper that were related to the consumerprotection laws that S. 650 will seriously eviscerate—the Truth in Lending statement and the HUD-1 settlement statement that was used to walk the parties through the mortgage transaction, two documents in a mound of over 107 pieces of paper that have Been criticized today. The other documents protect the private parties, including the lender and the settlement attorneys by requiring the borrower to sign documents immunizing them from future liability. I think that this problem, the mountains of paperwork, is a problem that this Committee should look at, not by eviscerating the modest consumer protection laws that just begin to address the problem but by moving forward on true reform legislation * * *” Testimony of Michelle Meier, on behalf of Consumer's Union and Consumer Federation of America, S. 650 Hearings, May 3. 1995. (Hereinafter, “Consumer's Union Testimony”) 294 5 provides the Fed with the authority to elimina te, simplify, modify and improve the disclosure requirements of T ILA and RESPA where greater uniformity in disclosures can be obtained, in further- ance of the purposes of these two laws. This i ntegration of rule- making to obtain uniformity in the disclosur e requirements was supported by a number of witnesses that testif ied before the Sub- committee. Chairman Helfer of the Federal Depo sit Insurance Cor- poration said in her testimony that: (w)e believe that granting the Federal Reserve Board the authority to conform TILA with RESPA, wherep ossible, will reduce regulatory burden for financial instit utions and avoid confusion and complexity for consumers.® The OCCgenerally supported “the overall goal of simplifying and coordinating Truth-in-Lending and Real Estate Settlement Proce- dures Act disclosures,” ® but did not support th e approach taken in the legislation. The Department of Treasury al so did not support the approach that S. 650 adopted, but suppor ted the goal, stating that: Action to harmonize the workings of the Truth in Lend- ing Act and RESPAis clearly appropriate. Eli minating du- plicative and needlessly burdensome disclosure s anda un- workable requirements in the home mortgage lending rocess would reduce the cost of Ioan o riginations and re- ieve consumers from information overload * * * Indeed, we believe that simplifying, consolidating, an d coordinat- ine all the disclosures required in the home pur chase and finance process and eliminating Neediess reyuicincines would best serve the interests of consumers and the indus- try.7 Another witness voiced strong supportfor: Coordinating the disclosures and reducing the complexity of disclosures required under the Real Estate Settlement Procedures Act and TILA. It is important th at Congress give the bank regulatory agencies statutory guidance to Timit the extent of disclosures required unde r TILA and RESPA and to coordinate them with one anot her. As the immense TILA compliance commentary demonst rates, ab- sent clear language from Congress to limit t he scope of compliance documentation, the rule and relat ed examiner guidance can easily become an overwhelming ly technical document.® The bill as ordered reported by the Committee provides the Fed- eral Reserve Board with the discretion to exem pt certain classes of loans from the requirements of TILA. The Comm ittee believes that there may be instances where the protections afforded under TILA do not provide a meaningful benefit to consumers . 5 Testimony of Ricki Helfer, Chairman, FDIC Board, S. 650 Hearings, May 2, 1995. (Herein - after “Helfer Testimony”.) 6 Testimony of Eugene A. Ludwig, Comptroller of the Currency, S. 650 Hearings, May 2, 1995. ’ Testimony of Richard $. Carnell, Assistant Secretary of the Treasury, S. 650 Hearings, May 2, 1995. 8 Testimony of Billy Don Anderson, on behalf of America's Community Bankers, S. 650 Hear - ings, May 3, 1995. 295 6 Another concern with respect to RESPAis the effect that Section 8 of that law has had on mortgagedelivery services. Section 8 was intended to prohibit the payment of kickbacks for referrals of set- tlement service business. This practice, which occurred in certain limited circumstances, ultimately inflated the settlement costs of borrowers. The “purposes” section of RESPA indicates that it was Congress’ intent to protect consumers from “unnecessarily high set- tlement charges caused by abusive practices that have developed in some areas of the country(,}" and to eliminate “kickback or referral fees that tend to increase unnecessarily the costs of certain settle- ment services.” Clearly, under-the-table payments for referrals from ostensibly unrelated parties are not acceptable. RESPA, however, provides limited guidance for determining whatconstitutes a prohibited pay- ment, and has been broadly construed by HUD.As result, some believe that Section 8 has impeded the modernization of mortgage marketing in a numberof ways. It has been suggested that Section 8 has discouraged vertical integration of the mortgage market, and impeded co-branding and affinity group marketing arrangements. The Committee is aware that consumers often are membersor cus- tomers of groups based on shared affinity, interest or hobby, or due to educational, vocational, professional, mercantile, or other com- mon interests. Examples of common interests can include univer- sity alumni, professionals, buyers’ clubs, and the like. Such affinity groups can use their endorsements and the right to feature, or co- brand, their name or other trademarks to negotiate lower costs or other benefits for financial and other products for their members. The Committee heard testimony from witnesses who raised con- cerns about the impact that RESPA has had on attempts to mod- ernize delivery systems for financial products.9 One specific concern that has been raised is the effect that Sec- tion 8 has had on equity loan marketing. Section 8 was enacted be- fore the growth of the home equity and mortgage refinancing mar- kets. Home equity loans and refinancings are typically marketed differently from home purchase loans—for instance, equity lending does not rely on real estate agents as an integral part of the mar- keting process. As one witness at the Subcommittee’s hearings noted: The lack of a real estate agent’s involvement in the home equity and refinancing situations has led to the de- velopment of other distribution and promotional channels by lenders in these businesses. The application of RESPA to these loans has severely hampered the developmentof these alternative loan distribution channels—muchto the detriment of both the industry and consumers.!° In light of these concerns, the bill as reported by the Committee incorporates provisions designed to permit co-branding and affinity group marketing, and exclude subordinate lien mortgages from Sec- tion 8 of RESPA. These provisions were included in order to allow °“(Qhere are serious questions to be considered, including, for example, the suggestion by some parties to real estate transactions that RESPA maybe stifling innovation and techno- logical advancement from which the public might benefit.” Testimony of Federal Reserve Board Governor Susan Phillips, S. 650 Hearings, May 2, 1995. (Hereinafter, “Phillips Testimony”.) ‘0 Statement of the American Financial Services Association, S. 650 Hearing, May 3, 1995. 296 7 greater flexibility in marketing mortgage -related products, while preserving the meaningful consumer di sclosures that RESPA pro- vides. It is worth noting that a driving c oncern that lead to the ex- pansion of RESPA to subordinate lien f inancings was the concern over certain abusive high-cost mortgag e lending practices.}! This consumer protection issue was agai n recognized as a concern and addressed in the “high cost mortgage” p rovisions that were enacted as part of the Riegle Community Develo pment and Regulatory Im- provementAct of 1994. Section 115 amends Section 108 of TILA . Section 108 prescribes the rules for account adjustmentsin situ ations where there is inad- equate disclosure of finance charges or t he annual percentage rate. TILA currently requires the federal finan cial supervisory agencies to order restitution to consumers of amo unts charged but not ade- quately disclosed. For loans consummate d before April 1, 1980, if the full reimbursement of underdisclos ed finance charges would have a significantly adverse impact on t he safety and soundness of the creditor, an agency could order parti al reimbursement not hav- ing such an impact. For loans consumm ated on or after April 1, 1980, the agency is required to order ful l reimbursement, but may permit payments over time in order to minimize the impact on the institution. In some cases where finance charg es are inadequately disclosed by a small lending institution, the super visory agency could be re- quired to order restitution in an amoun t far in excess of the insti- tution’s capital. The Committee believe s the relevant regulatory agency shoujd not ve peyuleu tO impose AL atically a restitution that would resuli in the failure of the i nstitution. Section 115 provides greater flexibili ty needed to reconcile consumer protection and safety and sou ndness concerns. This sec- tion will allow an agency to order parti al restitution if the agency made a factual determination that full restitution would cause the creditor to become undercapitalized. The Committee recognizes, however, th at GAAPrules as they are applied to regulatory reporting (ie., ca ll reporting) may also play a role in the regulator's determination of whether to order full or partial restitution. The total amountof restitution, whether full or partial and whether paid immediate ly or over time, must be booked by the institution in accordance with GA AP. Therefore, while pay- ment over time may benefit liquidity, an institution would, how- ever, still be required to follow GAAP. This change to TILA does not affect the GAAPrules. Title I: Streamlining government re gulation This Title contains provisions intended t o eliminate or revise var- ious application, notice and recordk eeping requirements that are currently required of insured deposito ry institutions or holding companies that control such institutions. In developing these provi- sions the Committee consulted extensive ly with the relevant regu- latory agencies. The provisions containe d in this Title will provide significant regulatory relief, consistent w ith safety and soundness 1H. Rep 102-760, 102d Cong., 2 Sess ., p. 159 (1992). 297 8 oversight. This Title will eliminate costly and time consuming pa- perwork requirements. Subtitle A: Eliminating unnecessary regulatory requirements and procedures This subtitle addresses regulatory filing requirements that may hamper the business operations of the affected institutions. These requirements may slow the implementation of such ordinary busi- ness decisions as executive hirings, product line expansion, busi-~ ness expansion, office premises purchase, or branch moves within a given neighborhood. ome current regulatory notice and application requirements govern activities that do not have any significant public policy im- plications. As a result, regulators tend to approve these applica- tions in the ordinary course. Nevertheless, there are delays and costs associated with preparation of the necessary paperwork and mandated review or notice periods. For instance, the bill as re- ported will eliminate, for ATMs and in certain other cases, the no- tice requirements for branch closure. The bill also eliminates the branch application requirement for ATM's. Federal Reserve Gov- ernor Phillips described this latter requirement as “an anachro- nism,” !2 and FDIC Chair Helfer testified that “(w)e do not see a compelling reason for an agency to approve thesefacilities in ad- vance or even to have prior notice of their establishment.” }3 Consistent with this approach, the Committee also incorporated several provisions that would eliminate certain application and ap- proval requirements that the Federal Reserve Board believes are unnecessary and impose undue burdens on both federal banking agencies and financial institutions. For example, the bill includes a provision that eliminates the approval requirement for routine entry into nonbanking activities that the Fed has already deter- mined to be permissible under the Bank Holding Company Act. Governor Phillips testified that this provision would eliminate the filing of notices to engage in nonbankingactivities by sixty percent or more.!4 The bill also would allow bank holding companies that have al- ready met the requirements of the Bank Holding Company Act to merge or consolidate their subsidiaries without seeking approval under the Bank Merger Act (BMA). The Committee agrees with the Board that eliminating this requirement will reduce unnecessary duplicative burden on institutions that have already received regu- latory approval to becomeaffiliates. Because these depository insti- tutions are already affiliates, the competitive effects of a merger of these institutions are de minimis. The appropriate Federal banking agencies already have adequate authority to take appropriate su- pervisory action to address supervisory, financial and other con- cerns. Moreover, the amendment made bythis section permits the appropriate Federal banking agency to require an application under the BMA in any case in which the agency believes, (based, for example, on concerns about financial condition, managerial, or CRA performanceof the institutions involved in the proposal), that 12 Phillips Testimony, supra, note 9. 13 Helfer Testimony, supra, note 5. 14Phillips Testimony, supra, note 9. 298 9 an application under the BMAis appropriate. Fi nally, the applica- tion requirementis only eliminated for a merger that is permissible under the interstate banking and branching prov isions enacted by the Riegle-Neal Interstate Banking and Branchin g Efficiency Act of 1994. Many regulatory mandates are redundant and the product of statutory accumulation. For instance, Secti on 202 clarifies that Oakar transactions do not require a duplicativ e application—the application required under the Bank Merger Act provides the same information that the appropriate regulatory agenc y needs to ana- lyze the transaction. Section 203 eliminates duplicative oversight of holding companies that control both banks and sav ings associations (and is a provision that both relevant age ncies—the Federal Re- serve Board and the Office of Thrift Supervi sion—endorsed). The bill amends Section 32 of the Federal Depos it Insurance Act to limit the circumstances in which regulators mu st receive 30 days advance notice of appointments of new directors o r senior executive officers. The advance notice is retained for ins titutions that are undercapitalized or otherwise in troubled conditi on. The notice re- quirementis eliminated for newly-chartered insti tutions and recent change-in-control situations. Thus, this advance notice is focused on circumstances that may raise capitalization concerns, whiie at the same time, the provision reduces the burde n of a requirement that the FDIC described as “an unnecessary i mpediment to the routine managementof depository institutions.” 15 Section 211 eliminates certain recordkeeping re quirements under Secuiun 22 uf ihe Pedoral Reserve Act that an nly to extensions of credit to executive officers and directors of dep ository institutions or their affiliates. As currently implemented i n the Federal Reserve Board’s Regulation O, the law generally requi res an annual survey of loans to top personnel. Nevertheless, many i nstitutions have felt compelled to conduct these surveys with greate r frequency to avoid an inadvertent violation due to new hirings or promotions. Some institutions’ compliance programs include mon thly Regulation O surveys. Section 211 of the bill as reported conta ins two provisions that should yield significant relief. The Federa l Reserve Board, which is responsible for promulgating and impl ementing Regula- tion O, supported both of these provisions in it s testimony before the Subcommittee. This section removes the restriction on officers , directors and principal shareholders of member banks particip ating in non-pref- erential benefit or compensation plans. This provi sion allows offi- cers, directors and principal shareholders to rec eive extensions of credit pursuant to a benefit or compensation pr ogram so long as the benefit or compensation program is widely av ailable to employ- ees of the member bank and does not give preferen ce to any officer, director, or principal shareholder of the memberba nk, or to any re- lated interest of such person, over other employe es of the member bank. Restricted access plans would continue to violate Section 22(h) of the Federal Reserve Act. Participation in such plans does not raise the safety-and-soundness concerns that underlie many of 15 Helfer Testimony, supra, note 5. 299 10 the restrictions and reporting requirements that apply to bankoffi- cers and directors. Section 211 also amends Section 22(h) of the Federal Reserve Act to provide the Federal Reserve Board with regulatory discretion to exempt certain directors and officers of subsidiaries of companies that control member banks from the loan-tracking requirements of Regulation O. The Committee believes that maintaining updated records of the identities of all these persons, and their related in- terests, represents a substantial recordkeeping burden. For large banks, this would mean tracking hundreds of directors and execu- tive officers on a national and international basis. In those situa- tions where the executive officer or director of a subsidiary of a company that controls a member bank does not have authority to participate, and does not participate, in major policymaking func- tions of the member bank andthe assets of such subsidiary do not exceed 10 percent of the consolidated assets of a company that con- trols the member bank and such subsidiary (and is not controlled by any other company), the Committee believes that the costs of complying with these recordkeeping requirements outweigh the benefits of Regulation O's application. The bill as ordered reported by the Committee strikes a balance between these legitimate regulatory burden problems and the safe- ty and soundness concerns that arise in connection with any pro- posed modification of Section 22 of the Federal Reserve Act or Reg- ulation O. The Federal Reserve Board's exemptive discretion is therefore limited by two conditions: the officer and director in ques- tion must not have a policymaking role in the member bank; and the assets of the affiliate must not exceed 10% of the consolidated assets of the holding company. In providing this discretion, the Committee's intent is to provide significant recordkeeping and loan-tracking relief, in a manner consistent with safety-and-sound- ness protections. The bill makes certain improvements to the International Bank- ing Act of 1978 as amended by the Foreign Bank Supervision En- hancement Act of 1991 (FBSEA). FBSEA was enacted in response to certain criminal scandals involving foreign banks in the 1980's, most notably the BCCI scandal. FBSEA strengthened federal regu- lation of foreign banks’ operations in the United States by, for the first time, requiring the Federal Reserve Board to review all for- eign bank applications for branches and agencies. FBSEA set forth standards to guide the Board’s review, the most significant of which. was to determine whether the foreign bank applicant is sub- ject to comprehensive supervision or regulation on a consolidated basis by the appropriate authorities in its home country. If a for- eign bank is not subject to such supervision, the Fed could not ap- prove its application to operate branches and agencies in the United States. While the FBSEA’s intent (to improve supervision of foreign banks operating in this country) clearly remains a public policy pri- ority, the implementation of the law has made it impossible for for- eign banks from many countries to enter the United States through branches and agencies. Concern over this and the prolonged ap- proval process prompted some Members of the Banking Committee in September 1994 to request a report by the FRB on its implemen- 300 ll tation of the FBSEA. The FRB respond ed to this request on Janu- ary 20, 1995 with a report on foreig n bank applications under FBSEA including information regarding the processing of applica- tions by the FRB andstepsit had take n to streamline the process and make it more transparent. In its report the FRB noted that the pro visions of FBSEA require the FRB to make a positive determi nation that a particular foreign bank currently is subject to compreh ensive consolidated super- vision before the FRB can approve an application for branches or agencies in the United States. Th e U.S. standard, it noted, was stricter than the minimum standar ds for the supervision of inter- national banks proposed by the Basle Committee on Banking Su- pervision. The FRB noted it might be a ppropriate to amend FBSEA so as to provide itself with some flexib ility on the comprehensive consolidated supervision or regulation s tandard as embodied in the Basle standards if the foreign bank's home country was actively working toward meeting those standa rds. This legislation was drafted with the help and approvalof the Board’s staff to give the Board discretion on this standard witho ut sacrificing the safety of the U.S. banking system. Other amen dments to the International Banking Act in this bill are intended to streamline and improve the coordination of exams consistent with diligent and efficient over- sight of foreign bank activities, and to ensure that foreign banks continue to receive parity of treatment with domestic banks with regard to the cost and frequency of exam inations. oO t2r1. D. TH WUELL ae nae ting rnnecessary regulatory burdens This subtitie is intended to provide r elief from many of the data collection and data production require ments that impose significant burdens on depository institutions, particularly smaller institu- tions. Again, the Committee's param ount concern in considering the provisions of this subtitle was regu latory relief, consistent with safety and soundness. The pill as rep orted reflects the safety-and- soundness concerns that the Treasury, OCC, the Federal Reserve Board and the OTSvoiced regarding th e expansion of the examina- _ tion cycle for small banks to 24 month s. Section 223 of the bill as ordered repor ted eliminates a 1992 law (31 U.S.C. 5327) mandating that the Treasury Department issue regulations requiring each depository in stitution to identify all non- bank financial institution custome rs (such as broker-dealers, in- yvestment bankers and currency exchang ers). While the Treasury grappled with imp lementing the 1992 law, Congress enacted the Money Launderin g Suppression Act of 1994. The 1994 law requires the registrat ion of non-banks that are money transmitters with the Treasur y Department. The Con- ference Report accompanying the 1994 l aw expresses the Conferees’ opinion that “money transmitters” (whic h provide, among other ac- tivities, check cashing, currency exchan ges, money transmitting or remittance services, or issue or red eem money orders) are “particu- larly vulnerable to money laundering s chemes because their level of compliance with the Bank Secrecy Ac t is generally lower” than 301 12 depository institutions’!6 Treasury is currently developing the money transmitter registration form and the identification, by de- pository institutions, of non-bank financial institution customers is no longer necessary. If Treasury, acting through FinCEN, attempts to implement the 1992 law requiring depository institutions to report non-bank cus- tomers to the government, the Treasury rapidly will be overloaded by unnecessary newreports. Also, since the existing definition “Fi- nancial Institutions” is extremely broad, the government will again be faced with many reports on legitimate entities that are not use- ful to law enforcement. The elimination of the requirementthat de- pository institutions provide another layer of routine reports has broad support. In fact, the Director of FinCEN has indicated that his Agency is proceeding toward completion of the money transmit- ter registration requirement and believes that the 1992 law is no longer necessary. Therefore, the Committee has approved elimi- nation of this potentially burdensome mandate and remains op- posed to any modification of the “identification” law short of com- plete repeal for the reasons expressed above. S. 650 as introduced eliminated the $3000 monetary instrument identification requirement of Section 5325 of the Bank Secrecy Act. In 1988, Congress passed a law requiring banks to retain informa- tion on individuals that purchase certain monetary instruments with over $3000 in cash. In 1990, the Treasury Departmentfinal- ized a regulation requiring banks to record information on these purchases and retain them in a centralized log for five years. All of the information was to be made available to law enforcement upon request. In the four years of the regulations’ existence, there is little evidence that banks were ever asked to provide these logs to law enforcement. Therefore, in 1994 Treasury's FinCEN elimi- nated the log requirement. FinCEN undertook this action because it believed that “almost all of the information required . . . is kept in the normal course of business.” It also pointed out that the elimination of the log requirement reflected “a judgment that records already kept by the industry effectively meet law enforce- ment needs (to monitor and check for possible money laundering).” The Committee fully supports the efforts made by FinCEN in 1994, to substantially reduce the bank requirement that all cash purchases of travelers checks, bank checks and cashiers checks over $3000 be recorded in a centralized log for five years. However, concern over the law's mandate that a purchaser's identification be verified forced many institutions to continue to use these logs. Sec- tion 234 of S. 650 as introduced eliminated the statutory mandate that gave rise to the monetary log requirement. This provision was included due to concerns that the elimination of the monetary log regulation (while a major regulatory reduction) might not obviate the need to maintain the information that the statute mandated in some form. Since S. 650's introduction, FinCEN has expressed its belief that this confusion can be addressed by clarifying ambiguities as to whether verification information can be recorded directly on the purchased instrument. If an institution can verify and record the 16H. Rep. 103-652, 103rd Cong., 2d Sess. (1994). 302 13 identification offered by the purchaser w ithout recording that infor- mation on a separate database or docum ent, ambiguity would be resolved. The Committee concurs with th at regulator's assessment and has therefore eliminated the provis ion that would have re- pealed Section 5325. The Committee urg es FinCENto fully address the uncertainties that remained after th e repeal of the monetary instrumentlog. The bill as reported provides significant relief for small deposi- tory institutions from the data collectio n and reporting require- ments of the Home Mortgage Disclosure A ct (‘HMDA’). During the Subcommittee hearings on 5. 650, a number of industry witnesses and regulators testified to the burden th at HMDA compliance im- oses on small institutions. The dispro portionate burden that HMDAplaces on small institutions w as acknowledged by the Con- gress that enacted this law when it inc luded a small bank exemp- tion. The $10 million asset-size thresho ld has not been increased since the law’s enactment over twenty years ago, despite the effect of inflation and a general upward trend in asset size within the in- dustry over that time. The $50 million threshold contained in this bill will only slightly diminish the volume of loan data reporte d. As FDIC Chair Helfer testified, raising the threshold would ex empt 33% of FDIC-regu- lated institutions, but only 6% of the loa n data; she testified that “the resulting cost savings to smaller ins titutions, however, would be material.” 17 The increase of the HMD A threshold to $50 million was supported by both the FDIC and t he Federal Reserve Board, the twa nrimaryfederal regulators of sm all banks, but was opposed by Treasury and HUD. The change in th e tnresnoia applies ww dc- pository institutions only and is i n no way ineant to change the current threshold that is used for non- depository lending institu- tions. Both the FDIC and the Federal R eserve Board also supported the repeal of Section 477 of FDICIA wh ich requires an annual re- port on small business and small farm loans. The Committee be- lieves the costs of producing this report are unnecessary in light of other existing requirements that manda te the reporting of similar data. Eliminating section 477, therefore, does not affect the public availability of this kind of lending data. Section 477 replicates, in large part, the requirements of Section 1 22 of FDICIA which man- dates the collection of call report data on credit availability for small businesses and small farms. Subtitle C: Regulatory micromanagement Title Il of the bill also includes a provision that requires at least one of the twe appointed members of the FDIC Board have State bank supervisory experience. This prov ision originally required that one of the appointed membersbe a st ate bank supervisor. This requirement could be problematic in that the laws of many states precludestate office holders from serving in federaloffice. In addi- tion, the original provision raised successio n questions with respect to supervisors who lost or left their st ate position, and concerns were voiced that the significant responsibi lities of state supervisor i Helfer Testimony, supra, note 5. 303 14 would limit the state supervisor's ability to focus on their FDIC re- sponsibilities. The Committee wanted to address these concerns while still ensuring that the FDIC Board include a member with state bank regulatory expertise and sensitivity to the issues con- fronting the dual banking system. The Committee believes that the current Section 243 strikes a proper balance between these con- cerns. Title [1I: Regulatory impact on cost of credit and credit availability This Title contains a series of amendments to various laws and regulations that impose limitations on the manner in which deposi- tory institutions, and other financial intermediaries, conduct their business. Certain regulations are necessary for safety-and-sound- ness, anti-discrimination, or other public policy purposes. This Title seeks to preserve these vital safeguards. In considering the provi- sions of this Title, the Committee sought the advice and comments of the regulatory and enforcement agencies in order to assure that the amendments would not weaken their ability to pursue nec- essary public policy goals. Section 301 amends certain provisions governing the scope and mechanics of the independent audit function for insured depository institutions. This provision eliminates the independent auditor at- testation requirementfor safety and soundness compliance, and al- lows the agencies the discretion to waive the requirement that all members (but not less than a majority) of the independent audit committee be outside directors in the case of hardship. The accountant’s attestation for compliance with safety and soundness requirements imposes significant costs on banks. The at- testation review process duplicates the regulatory examination pro- cedures. The Treasury Department, the Federal Reserve Board, the OCC and the FDIC support this provision. The provision leaves in- tact the independent auditor attestation requirement for internal controls, as that second review is seen as ensuring the integrity of the safety and soundness exams conducted by regulators. Many smaller institutions in less populated areas have difficulty recruiting and retaining competent outside directors to sit on their independent audit committees. This provision allows the appro- priate Federal banking agency to waive the requirement that the committee be comprised entirely of “outside directors” (but no fewer than a majority of outside directors) if the agency determines that the institution has encountered hardships in retaining and recruit- ing a sufficient number of competent outside directors to serve on the internal audit committee of the institution. In determining hardship, the agency must consider such factors as the size of the institution, and whether the institution has made a good faith ef- fort to elect or name additional competent outside directors to the board of directors of the institution who may serve on the internal audit committee. The Treasury Department, the Federal Reserve Board, OCC, OTS and FDIC all support the general intent of this provision. This section also authorizes regulators to designate certain infor- mation included in the annual managementreport privileged and confidential. The granting of such a designation does not alter or provide an exemption from any requirement underthe federal se- 304 15 curities laws, or any rules and regulations promulgated there- under, to file audited financial statements and th e complete reports of independent auditors. Section 302 creates a civil and administrative enforcement privi- lege for “self-tests” conducted by a financial in stitution to deter- mine fair lending compliance under the Fair Ho using Act and the Equal Credit Opportunity Act. The purpose of this provision is to encourage institutions to undertake candid an d complete self-tests for possible fair lending violations and t o act decisively to correct any discovered problems. The privilege ensures that such self-test efforts will not be used against an institution if that institution has undertaken remedial action. This provision d oes not change the mandatory referral requirement for “pattern or practice” violations of ECOA or FHA.This privilege augments, an d does not supplant, other evidentiary privileges that may attach to the results of a self- test, such as the attorney-client privilege. Waiv er of the self-testing privilege does not constitute a waiver of any o ther privilege that may be available. A report or result of a self-te st is considered priv- ileged if a creditor conducts or authorizes an independent third party to conduct a self-test of any aspect of a cr edit transaction by 4 creditor, in order to determinethelevel or effe ctiveness of compli- ance; and has identified any possible violations o f this title and has taken, or is taking, appropriate corrective ac tion to address the possible violations. The privilege can be lost or waived where a p erson with lawful access to the results voluntarily releases the m. This refers to offi- cers. emplovees or contractors of financial institu tion who are au- thorized to review and handletheself-test r esuits, Uc privacege 16 not waived by inadvertent or unauihuriz ed release of the results, such as by someone breaking into the lender's paper or electronic files. The privilege can also be waived if a pe rson with lawful ac- cess cites or uses the results to counter c harges that the lenderis not in compliance with the law. Moreover, self -test results may be obtained in the narrow context of assessing an appropriate sanction for violations already {or concurrently) adjud icated or admitted; this should not be construed as authorizi ng expansive “fishing ex- pedition” discovery demands at the outset of lit igation or adminis- trative enforcementactions. A department, agency or civil litigant may cha llenge a privilege asserted under this section in a judicial or administrative law forum of competent jurisdiction (including proc edures to handle the privilege challenge confidentially). Substantially similar regulations from the Boa rd and HUD are essential for this privilege to operate consistent ly under both stat- utes, but broad consultation amongaffected depa rtments and agen- cies is to be part of the regulation writing proc ess. Creditors and other lenders may invoke this privilege for self- tests that were un- dertaken prior to this section’s enactment, but n ot if a formal com- plaint has beenfiled involving matters covered by the self tests, or the privilege has been waived underthe rules o f this section. Section 304 contains amendments to various stat utory provisions that unduly restrict the portfolio holdingsof thr ifts, including the “Qualified Thrift Lender” test. The mortgage ma rket has changed dramatically in recent years, and there is a dimi nished need for in- 305 16 stitutions focused almost entirely on home lending; currently, thrifts only originate about 25% of home mortgages. These new provisions are intended to give thrifts the ability to diversify their portfolios, in a manner consistent with their established lines of business. Greater portfolio diversity will promote healthier and more profitable portfolios. Chairman Greenspan and OTS Director Fiechter support providing thrifts with greater flexibility to invest in other products. The Treasury Department is also supportive of greater flexibility for certain thrifts. Title II] contains a numberof provisions intended to streamline and improve the business operations of the Federal Home Loan Banks and the FHLB system. Section 305 would require that the FHLBsreceive the same treatment for daylight overdrafts incurred through their use of the Fedwire as all other users of the Fedwire. The Federal Reserve established daylight overdraft rules in order to diminish concerns about the potential for a systematic crisis due to the default on an overdraft position. Because short-term intraday overdrafts are inevitable, the Federal Reserve Board has established “net debit caps,” which allow Fedwire users a certain level of overdraft activity prior to the imposition of overdraft fees. These caps are based on the capital and credit quality of the user. The current daylight overdraft rules require the FHLB system to pay fees for daylight overdrafts without the benefit of net debit caps. Thus, the FHLBs are treated as if they pose more risk than other Fedwire users, and ignores the AAA-rated credit quality that the FHLB system and the individual banks enjoy. Section 306 explicates the FHLBs’ authority to approve applica- tions for membership. Prior to approving applications of CAMEL 3, 4, or 5-rated institutions, however, the FHLB must notify the Fed- eral Housing Finance Board (FHFB). This provision was included in recognition of the significant role that the individual banks cur- rently play in the membership screening process (currently the FHFB authorizes the FHLBs to carry out this responsibility for most CAMEL 1 and 2-rated institutions). Each FHLB has exten- sive credit policies and procedures in place to protect itself and the FHLB system from risk. The provision does not alter existing mem- bership requirements regarding financial condition. Section 307 will allow the FHLBs to jointly select external audi- tors rather than the FHFB. The provision does not alter the FHFB's ability to examine the banks or establish independent audit contract requirements to ensure consistency in financial re- porting. Section 309 will provide the Federal Home Loan Banks with greater flexibility in accepting appropriate collateral for advances. With respect to collateral requirements for advances the primary concern has been, and continues to be, assuring that System ad- vances are secured with collateral that will provide sufficient pro- tection against a possible default. The Committee believes that subordinate mortgages on improved residential property that have a secure form of credit enhancement do provide a sufficiently se- cure collateral source. Section 310 increases the Systemwide cap on advances to members that are not Qualified Thrift Lenders from 30% to 40%. This amendment was adopted in recognition of the changing nature of the System’s membership (the System may 306 17 reach this 30% limit sometime during the 1996 calendar year), and to allow the system to continue to fulfill its rol e as a source of li- quidity for home financing while proposals for mo dernizing the Sys- tem are considered. Currently, 16 percent of t he total advances of the Federal Home Loan Bank system go to n on-qualified thrift lenders (i.e., banks). However, the Feder al Home Loan Bank sys- tem currently has more members that are banks than savings asso- ciations. Once the 30 percent limit is exceeded, non-qualified thrift lenders who are members of the Federal Home Loan Bank system will not be able to get advances from the sys tem to permit them to originate mortgages. The Committee believe s that the System continues to play an importantpolicy role in p roviding community- based lenders with economical wholesale credi t and related assist- ance. Section 308 eliminates the 7 percent cap o n the annual asset growth of limited purpose banks, and allows limited purpose banks to take deposits under $100,000 for the purpose of securing a credit card. The growth cap, enacted in the Competit ive Equality Banking Act of 1987, was intended as a temporary me asure. At the time it was enacted, it was expected that Congress w ould shortly legislate in the area of bank powers. While banks ha ve received additional powers and authorities through both legislat ive and regulatory ac- tion, the restriction on financial service provi ders’ growth remains in place. Section 308 also clarifies that limit ed purpose credit card banks may accept collateral in connection wi th the issuance of se- cured credit cards. A secured credit card is a credit card for which the borrower nas posted culiaicial, Such GS & COVINgS OF time de- posit, to secure credit advances. Such prog rams provide needed credit to consumers who might otherwise be u nable to qualify, in- cluding persons attempting to establish a credit history and indi- viduals who previously have had credit probl ems. The amendment would also protect the safety and soundnes s of limited purpose credit card banks by clarifying that there is no restriction on such institutions accepting collateral for their exten sions of credit. Title III includes two amendments to the Fa ir Debt Collections Practices Act. Both changes provide needed c larification of the stat- ute. The first amendmentclarifies the requ irements of Section 807(11). This subsection requires debt collect ors to disclose clearly in all communications madeto collect a debt o r to obtain informa- tion about a consumer, that the debt collecto r is trying to collect a debt and is contacting the consumer for tha t purpose. The FTC staff has interpreted this subsection to require this disclosure only in the first communication with the debtor. Nevertheless, some Courts have interpreted this language as requi ring the inclusion of this disclosure in every communication. This c onstruction of the statute has resulted in numeroustechnical viol ations. The FTC has recommended narrowing this requiremen t to the initial commu- nication, oral or written, in its last sever al reports to Congress on the FDCPA. The second provision amends Section 80 9(b) of the FDCPA.This provision of the FDCPA provides that a cons umer has 30 days to requesta verification of a debt, and if such veri fication is requested the collector must cease collection activities. The FTC has rec- 307 18 ommended that Congress clarify that collection activity may take place without a verification request. Title IV: Fair credit reporting Title IV of the bill as ordered reported contains a series of amendments to the FCRA. The provisions of this Title are derived from S. 709, a bill introduced by Senators Bond and Bryanearlier this Congress, and is substantially similar to S. 783, a bill amend- ing the FCRA, that the Committee reported and the Senate passed during the 103rd Congress.!8 A number of problems in the FCRA's implementation and interpretation have arisen in the years since the law's enactment. Manyof these problems are a result of ambi- guities in the statute; other problems have arisen as the credit re- porting industry has grown in the wake of information technology advances that have occurred over the last twenty years. To generalize, the chief concerns that are implicated by the FCRA are: 1. the accuracy of consumer reports and problems asso- ciated with resolving disputed information; 2. the privacy concerns raised by unfettered access to consumers reports; 3. operational concerns implicated by differing statutory schemes regulating the credit reporting industry at the state level; and 4. ambiguities as to what constitutes a “consumer report” for the purposes of the FCRA that have hampered the business operations of both credit reporting bureaus and credit report users. Currently, the FCRA requires that credit reporting agencies reinvestigate disputed information in a “reasonable period of time.” Many consumers have complained in the past about time delays in resolving disputes. These delays can often lead to an unwarranted denial of credit. The industry has made a serious effort to address these concerns, and has used available technology to expedite the resolution of disputes. Title IV would establish a_ specific reinvestigation time schedule for disputed information. The FCRA prohibits credit bureaus from providing consumerre- ports to users that do not have a “permissible purpose” for obtain- ing the report; however, there is no correlative permissible purpose obligation imposed on credit report users. Title IV specifies that users of credit reports establish, on general or specific basis, a per- missible purpose for obtaining a credit report. While Title IV would clarify the circumstances under which a credit report may be obtained, it would also clarify that credit bu- reaus may provide certain products, such as “prescreened”lists,19 direct marketing mailing lists and credit reports provided for com- mercial purposes, consistent with the FCRA. By so doing, Title IV clarifies ambiguities that currently exist as to when and howcredit bureaus may provide such products. Similarly, Title IV will clarify that affiliates within a Holding Company structure can share any application information (last year’s bill was limited to credit appli- cations) and consumerreports, consistent with the FCRA. Under 18See, S. Rep. 103-209, 103rd Cong., 1st Sess. (Star print). Congressional Record, May 2-4, 1994 (S 4965-4984; S 5026-5046; S 5129-5146). '9"Prescreened”lists are mailing lists used to market financial products, particularly credit cards. These lists are compiled by screening credit bureau records for individuals who meetcer- tain specifications established by the requesting party. This Title would allow consumers to “opt- out" of inclusion in this process and provides safeguards againstthe disclosure of consumer-spe- cific credit history information. 308 19 current law, such information can be d eemed a “consumer report” and the information sharing entity can be deemed a “consumerre- porting agency,” thereby implicating all the restrictions of the FCRA. Theaffiliate sharing provisions of this Title will allow affili- ates to share such information without being deemed a consumer reporting agency. Title [V also clarifies the circumstance s in which a furnisher of information to a credit bureau can be liable for providing inac- curate information. S. 783 adopted a “known or should have known” standard; Title IV attempts to p rovide greater certainty for information furnishers, and liability a ttaches only when the fur- nisher is actually notified of an inaccura cy. This provision exempts information furnishers from civil liabili ty for providing inaccurate information in circumstances where the mandated notice has not been provided by the consumer. Title V: Asset conservation, lender lia bility and deposit insurance protection Title V contains provisions that woul d amend Federal banking and environmentallaw to clarify the l iability of lenders for environ- mental clean-up of property that sec ures financing. This title will also clarify the liability of federal agen cies that assume the owner- ship of foreclosed coritaminated proper ty through conservatorships or receiverships. The problem of massiv e potential liability, particu- larly for clean-ups undertaken pursua nt to the CERCLA,or as it ic mare ecammonly known, the “Superfund”law ,is largely the result of case law that has limited the “secur ed cregitor excuipued’ cor tained in CERCLA.?° ‘Anotherline of case lawhas stripped lenders of the secured cred- itor protection contained in Superfun d when lenders have fore- closed on coliateralized property—the reby stripping the exemption of its value by denying creditors their right to remedy default by exercising their security interest.2! As a result, lenders risk being targeted as convenient “deep pockets,” and subject to substantialli- ability for remedial costs, not becaus e they caused environmental contamination or did not take proper precautions, but simply be- cause they exercise a security inte rest. Costs for environmental clean up by ba nks can easily be $10 mil- lion to $100 million. They average $ 30 million.22 Many lenders have altered their lending practi ces to avoid potential draconian joint and several liability for Superf und clean-ups. Many small businesses and potential homeowners do not receive financing be- cause lenders fear potential liability. 88% of banks changed their lending procedures in an effort to av oid environmentai liability, 62.5% have rejected loan applications on the possibility of environ- mental liability; 45% discontinued fi nancing of certain types of 20 The Eleventh Circuit Court of App eals deemed a secured creditor liab le merely because it had the capacity to influence a borro wer's environmental disposal decisio n. U.S. v. Fleet Factors Corp., 901 F.2d 1550 (11th Cir. 1990) . (cert. denied, 498 USS. 104 (1991). 21 See, U.S. v. Maryland Bank & Trust Co., 632 F.Supp. 573 (D.Md. 1986); Guidice v. BFG Electroplating and Manufacturing C o., 732 F.Supp. 556 (W.D. Pa. 1989). 22 Anderson, Eugene and Jordan Stanzler. “Insurers May Cover To xic—Waste Cleanups.” American Banker; May 9, 1990. 309 20 loans (service stations, chemical business). One-third of the mem- bers of the Petroleum Marketers Association had loans denied.23 The Senate passed similar legislation in 1991 as part of S. 543, the Federal Deposit Insurance Corporation Improvement Act. The Senate approved a lenderliability amendment to the Federal Hous- ing Enterprises Regulatory Reform Act of 1992. Last year, the Banking and Environment Committees worked together and craft- ed language for inclusion in the Superfund Reauthorization bill. It is the hope of the Committee that the staffs of these two Commit- tees will be able to continue to cooperate on this issue. The provisions contained in Title V are closely modeled on the final language agreed to in that Superfund bill, with several ad- justments. Most significantly, this bill would clarify lender liability rules not only with respect to Superfund, but also with respect to the underground tank provisions of the Solid Waste Disposal Act. In this regard, this bill is similar to the lender liability provisions (Title II) of S. 1124 that Senators D'Amato, Shelby, Bond, Bennett and Domenici offered last year. The need for remedial legislation has become more pressing in light of the Supreme Court's denial of certiorari in Kelly v. Environmental Protection Agency.24 This case effectively precluded the EPA’s handling of the lenderliability problem through rulemaking. Title VI: Miscellaneous clarifications, studies and reports Title VI includes a number of regulatory clarifications, studies, and statutory improvements that are intended to provide more cost-effective delivery of financial services. These provisions were among those that the Committee adopted during its September 27th mark-up. Section 601 clarifies that stored value devices, such as certain “smart cards”, are not subject to requirements of the Electronic Fund Transfer Act (“EFTA”) to the’ éxtent that such de- vices are used as a cash equivalent such as when they are used as media for the storage of monetary value and to deliver funds for the payment for goods or services. Transactions in which value is “downloaded” onto a stored value card from an asset account would be subject to the EFTA to the extent that any such transfer from an accountis currently subject to this law. The Committee intends this clarification to allow the development and utilization of this nascent cash-equivalent technology, and not to diminish any pro- tections that may attach to credit and debit cards as currently used to access consumer credit and asset accounts, respectively. The Committee believes that as the private sector continues to develop stored value card technology, it should also attempt to educate cus- tomers on the prudent use of this technology. For multipurpose cards that involve stored value features as well as debit card or credit card features, the clarification set forth in Section 601 ap- plies only to the stored value feature and does not affect the appli- cation of existing law to the debit card or credit card features of the card. Section 602 of the bill clarifies Section 11 of the Federal Deposit Insurance Act to make explicit what is already implicit by virtue 23Letter dated July 24, 1991 to John Fogarty, EPA from Edward Yingling on behalf of the American Bankers Association, commenting on CERCLAruling. 2415 F.3d. 1100 (4th Cir. 1994}. 310 21 of the text and structure of the statute and the underlying regula- tions (particularly the provisions concerning administrative claims and the priority of administrative expe nses). It is the intent of this provision to give meaning and legally-bin ding effect to current FDIC and RTC policies which provide that any breaches of con- tracts entered into by the FDIC or RTC asr eceiver after appoint- ment will be paid as administrative expens es of the receivership. This provision is also consistent with ex isting interpretations and policies of the federal banking agencies. Sinc e this provision makes no change in current law as interpreted and a pplied, the substance of this provision should apply in pendinglitig ation, appeals and ad- ministrative actions. Section 603 closes a loophole in counterfeit l aw. Fictitious finan- cial instruments are not reproductions of ac tual negotiable instru- ments: rather the instruments themselves a re fictitious.25 Federal prosecutors have determined that the manuf acture, possession, or utterance of these instruments does not vio late the counterfeit or bank fraud provisions contained in chapte rs 25 and 65 of the United States Code. Fictitious financial instruments have caused hundreds of millions of dollars in losses to financial institutions, mutual funds and pri- vate individuals. The National Council of Ch urches and the Salva- tion Army are amongst the organizations th at have lost significant sums of money in such schemes. In recent years, tax rebellion and militia groups, such as the Posse Comitatus and its splinter groups such as We the People and the Juris Christ ian Assembly fund their activities with fictitious financial instrume nts. Organized crime syndicates in west Alrica ttave uscd Mc uuisus + inctrimments to finance drug smuggling operations. This legislation also corrects a drafting er ror made when Con- gress passed the Counterfeit Deterrence Act of 1992. While at- tempting to raise criminal penalties imposed for counterfeiting, Congress actually lowered these penalties. This provision will re- store counterfeiting sentences in accordanc e with Congressional in- tent in 1992. Section 604 ofthe bill as ordered reported a mends the Truth-in- Savings Act, while retaining most of the d isclosure requirements that benefit consumers. The overwhelming majority of depository institutions did provide most of the discl osures Noquired under Truth in Savings prior to the law’s enactmen t, and continue to pur- sue good-faith complianceefforts. In fact, the i ndustry spent nearly $500 million modifying compliance program s and disclosure mate- rials to ensure that TISA's technical manda tes were met. In light of the fact that TISA compliance has been integrated into the in- dustry's compliance programs, the Committe e decided to retain the APY and other TISA disclosures. Nevert heless, the Committee is mindful that the requirements of TISA comp liance present a vari- ety of potential technical pitfalls, and atten dant liability. In light of these continuing concerns, the Committee decided to amend the law so that it would have an administrative remedial enforcement scheme. 25 Fictitious financial instruments have be en called many names, including “Prime Bank Notes”, “Prime Bank Derivatives”, “Prime Bank Guarantees", “Japanes e Yen Bonds”, “Indo- nesian Promissory Notes”, “U.S. Treasury War rants”, and Philippine Victory Bonds”. 311 22 SECTION-BY-SECTION ANALYSIS Section 101. Coordination of TILA/RESPA Section 101 provides the Federal Reserve Board (the Board) with the authority to modify the disclosure requirements of the Real Es- tate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) in order to achieve uniformity between the two laws. The purpose is to streamline, integrate and improve regulations, thereby reducing costs to lenders (including timing and content re- quirements) and improving the quality of disclosures. Section 102. Elimination ofredundant regulators Section 102 of the bill would transfer RESPA rulewriting author- ity to the Board with the exception of Sections 8 and 9 of RESPA, which prohibit referrals, kickbacks and unearned fees and directed purchasesoftitle insurance, respectively. This section clarifies that the appropriate federal banking regulators maintain enforcement authority over financial institutions’ compliance with RESPA and that the Department of Housing and Urban Development (HUD) retains both rulewriting authority over Sections 8 and 9 of RESPA and general enforcement authority over non-financial institutions. Section 103. General exemptive authority for loans Section 103 provides the Board with the discretion to exempt from some of the requirements of TILA certain classes of loans that do not provide a “meaningful benefit” to consumers in the form of useful information or protection. Factors for consideration: by the Board include: the size of the loan, the sophistication of the borrow- ers, whether the loan is secured by a principal residence, and whetherthe goal of consumer protection would be undermined. Section 104, Reductions in Real Estate Settlement Procedures Act Section 104 amends RESPAto clarify that the notice regarding sale of loan servicing does not have to include an estimate of the percentage of loan servicings the lender expects to sell annually. The provision also exempts subordinate lien mortgages from Sec- tion 8 of RESPA andclarifies that the definition of the term “busi- ness credit” under RESPAshall be the same as under TILA. Section 105. Co-branding andaffinitygroup endorsements Section 105 clarifies that Section 8 of RESPA does not prohibit endorsements by persons or affinity groups not otherwise involved in providing settlement services in connection with a settlement transaction. Section 8 would still prohibit the payment of referral fees to settlement service providers. Section 106. Exemption for certain borrowers Section 106 gives the Board the authority to allow sophisticated borrowers to waive the disclosures required under TILA. Sophisti- cated borrowers are defined as individuals with net assets in excess of $1,000,000 or annual earned income of more than $200,000. The Board has the authority to increase both thresholds for inflation. The provision also requires that the waiver be handwritten, dated and signed. 312 23 Section 107. Alternative disclosures for adjust able rate mortgages This provision would allow lenders (i n consumer credit trans- action not under an open-end plan) to ch oose between providing consumers with a 15 year historical table c harting fluctuations in interest rates. based on a $10,000 loan, or disclosing to the consumerthe fact that annual percentage r ates may increase or de- crease substantially as well as what the maximum interest rate and payment would be based on a $10,000 l oan. Section 115. Restitution for violations of Tru th in Lending Act Section 115 provides regulators with the dis cretion to determine the appropriate restitution remedy to be imposed on an institution for TILA violations, consistent with safety an d soundness.The pro- vision gives regulators more discretion in im posing full restitution when such restitution plan would force an institution to become undercapitalized. The provision would allow regulators a choice be- tween ordering partial restitution and ord ering full restitution to be paid out over time to avoid adverse impact . Section 201. Elimination of certain filing and approval require- ments for certain insured depository institut ions Section 201 would allow bank hoiding co mpanies that seek to merge or consolidate _existing subsidiar ies to do so without seeking approval under the Bank Merger Act (BMA) unless required to do so by the responsible agency within 10 day s after receipt of notice of the proposed transaction. Under current law, banks owned by the same hank halding companies must seek approval fro m the ap- propriate federal banking agency for the surviving Insuivutiuiw under the BMA before merging subsidiary banks. Approval under the BMA is based on standards identical t o those already applied under the BHCA whenthe bank holding co mpany acquired (either at the time of the merger or previously) the subsidiary banks. Section 202. Elimination of redundant app roval requirement for OAKARtransactions Under current law, the merger of a bank and a savings associa- tion requires approval under two separate statutory provisions that apply the identical statutory review factors —the Bank Merger Act and the Oakar Amendment. This provision would remove the dupli- cative approval requirements under the Oa kar amendmentfor the merger of a bank and a savings association i f approval was already sought under the BMA. The provision does not alter other provi- sions of the Oakar Amendmentrelating to p aying of assessments into the appropriate insurance fund or req uirements that institu- tions meet capital requirements. Section 203. Elimination of duplicative req uirements imposed upon bank holding companies under the Home Ow ners’ Loan Act Currently, bank holding companies that ow n savings associations are subject to duplicative review, examinat ion and reporting re- quirements under the Bank Holding Compan y Act (BHCA) and the Savings and Loan Holding Company Act (S LHCA). This provision would eliminate the application of the SL HCA to bank holding companies that are subject to the BHCA.It does not alter any re- 313 24 quirements applicable to savings associations that are controlled by bank holding companies. The provision also ensures that OTS has a consultive examination role and a cooperative enforcement role with the Federal Reserve Board over bank holding companies that control savings associations. Section 204. Elimination of per branch capital requirement for na- tional banks and State member banks Section 204 strikes the requirement that national and state member banks have aggregate capital in an amount no less than the aggregate minimum capital that would be required if each branch were a separately chartered national bank. Modern bank- wide capital requirements have made these branch-related capital rules obsolete. Section 205. Elimination of branch application requirements for automatic teller machines Section 205 clarifies that an “ATM” or “remote service unit” is not considered a “branch” for purposes of federal bank branching laws andis therefore not subject to prior approval requirements or geographic restrictions. Section 206. Elimination ofrequirement for approval of investments in bank premises for well capitalized and well managed banks Section 206 would allow well-capitalized and well-managed banks to invest an amountless than or equal to 150% of the bank’s capital and surplus in bank premises without prior federal ap- proval. The bank would be required to provide notice to the appro- priate federal regulator within 30 days of the investment. Current law allows banks to invest up to 100% of capital in bank premises without prior federal approval. Section 207. Elimination ofapproval requirementfor divestitures Section 207 eliminates the presumption that a bank holding com- pany controls those shares that it divests of any company to a third party that is financed by a subsidiary of the BHC, or where there is an officer or director common to the company and the investor. Although the presumption was intended to prevent sham divestitures, the Board believes it can detect sham transactions through the examination process without the application burden the presumption imposes on the banking industry. Section 208. Streamlined nonbanking acquisitions by well-capital- ized and well-managed banking organizations Section 208 permits well-capitalized and well-managed bank holding companies, without prior approval, to commence permis- sible nonbanking activities and to make acquisitions of companies engaged in permissible nonbanking activities that are limited in size. The Board would still receive advance notice so that it may require an application if it chooses and both the Federal Trade Commission (FTC) and the Department of Justice (DOJ) would con- tinue to receive notice for purposes of conducting competitive anal- ysis of any proposal. 314 29 Section 209. Elimination of unnecessary fil ing for officer and direc- tor appointments Section 209 narrows the requirement that any newly chartered or troubled institutions, or institution that h as undergone a change in control in the last two years, file a notice 3 0 days before appoint- ing a new officer or director. The provision would only require prior notice and approval for troubled institutions. Section 210, Amendments to the Deposito ry Institutions Manage- ment Interlocks Act Section 210 restores the authority of federal banking agencies to grant additional exemptions from the prohibi tions onofficer and di- rector interlocks between unaffiliated bank ing organizations, as long as the exemption wouldn't result in a mo nopoly or substantial lessening of competition. Also, the asset thresholds that provide an exemption for banks and bank holding c ompanies from the prohibi- tions on managementinterlocks are als o increased from $1 billion to $2.5 billion and $500 million to $1.5 bi llion, respectively. This section would further give the federal bankin g agencies the author- ity to adjust these thresholds annually to account for inflation or market changes. This section also eliminates the termination date on grandfathered interlocks. Section 211, Elimination of recordkeeping a nd reporting require- ments for officers Section 211 makes several changes to the p referential lending re- ane of 22(h) of the Federal Reserve Act. Without chang ing any of the core restrictions on insider lending, section 2ii wwuutu : allow executive officers, directors, or princ ipal shareholders to rc- ceive extensions of credit pursuant to a benefit or compensation program thatis widely available to employ ees of the member bank and does not give preference to such execut ive officers, directors or principal shareholders over other employee s of the member bank. Section 211 would also allow the Board to ex empt from the restric- tions of section 22(h) executive officers and directors of subsidiaries that control member banks, if such executiv e officers and directors do not have authority to participate, and do notparticipate in major policymaking functions of the member bank; and the assets of such affiliate do not exceed 10 percent of the consolidated assets of a company that controls the member ban k and such subsidiary (andis not controlled by any other company). Section 212. Consolidation of Appraisal Sub committee; transfer of functions Section 212 would consolidate the administra tive functions of the Appraisal Subcommittee into the Federal Financial Institutions Exam Council (FFIEC). The Appraisal Su bcommittee of the FFIEC was created in 1989 to develop and monit or state licensing and reg- ulation of real estate appraisers. While the Su bcommittee is estab- lished within the FFIEC and the subcom mittee’s members are ap- pointed from staff of the bank regulatory age ncies and HUD,the subcommittee’s administrative functions have been managed inde- pendently of the FFIEC due to the appropria ted nature of the $5 million dollar start-up loan provided to the su bcommittee from the 315 26 Treasury. This section would also require that the subcommittee repay the outstanding amount on the Treasury loan by the year 1998 and phases out the grant authority to the Appraisal Founda- tion in that sameyear. Section 213. Branch closures Section 213 would clarify the branch closure notice requirements of Section 42 of the FDIA. This section largely codifies exceptions already adopted in an interagency policy statement on branch clo- sures promulgated by the federal banking agencies. Underthis sec- tion, excluded from the notice requirements are: ATM’s; and reloca- tions of branches or consolidations of one or more branches into an- other branch so long as the relocation or consolidation occurs with- in the immediate neighborhood and does not substantially affect the nature of the business or customers served. Branches closed in connection with emergency acquisitions or branches receiving other assistance from the FDIC are also excepted from the notice require- ments. Section 214. Foreign banks Section 214 gives the FRB greater discretion in considering for- eign bank applications. The FRB would no longer be compelled to deny an application solely because a bank is not subject to consoli- dated comprehensive supervision or regulation, a standard which exceeds the current international standard. The FRB is given the discretion to approve an application, with such conditions as it deems appropriate, as long as the homecountry is actively working toward and making progress in establishing arrangements for the comprehensive consolidated supervision or regulation of the appli- cant foreign bank. In addition, if the appropriate authorities in the home country are not making demonstrable progress in establish- ing arrangements for comprehensive consolidated supervision or regulation of such foreign bank, the FRB can terminate the foreign bank's state agencies or branches and recommend termination of its federal branches and agencies located in the United States. In approving an application under this provision, the FRB is re- quired to consider whether the foreign bank has adopted andis im- plementing procedures to combat money laundering. The FRB may also take into account whether the home country of the foreign bank is developing a legal regime to address money laundering or is participating in multilateral efforts to combat money laundering. These amendments have two overarching goals. The first is to strike an appropriate balance between preserving prudently firm statutory standards and correcting unwarranted barriers to entry in the current approval process. The second is to encourage further progress toward comprehensive consolidated supervision by coun- tries that do not currently accord such supervision. This section also makes changes in current law to ensure the United States continues to provide parity of treatment for foreign branches and agencies of foreign banks with respect to exam fees. After the expiration of a three year moratorium, the International Banking Act requires the FRB to charge foreign banks with respect to the exams it conducts of their branches and agencies. Under this section, the FRB may only assess and collect foreign bank exam 316 27 fees to the same extent it would charge st ate chartered member banks. Since the FRB does not presently ch arge state chartered member banks for their exams, it has express ed concern that cur- rent law will lead to disparate treatment bet ween state chartered member banks and foreign banks. The fore ign banks would be charged twice and state member banks only once for their exami- nations. This section also changes current law that requires annual on site examinations of foreign banks by prov iding they should be examined on site as frequently as would a na tional or state char- tered bank by its appropriate regulator. These amendments do not preclude regulators from conducting on-site ex aminations more fre- quently if they deem it necessary. Finally, ast rict time table is set up for final action by the FRB on foreign ba nk applications. The FRBis required to act within 180 days of recei pt of the application. The FRB mayextend this period for 180 days after providing notice of and the reasonsfor the extension. Section 215. Disposition offoreclosed assets Section 215 provides bank holding companie s with the same flexibility as national banks by providing the Board with the au- thority to approve applications to hold forec losed stock an addi- tional five years. Under current law, bank ho lding companies are accorded up to five years to dispose of forecl osed assets. National banks, however, can hold foreclosed stock or re al estate up to 10 years. The five-year extension would be dep endent on the bank holding company showing the Board a good faith attempt to dis- nace af the farerlased assets or a demonstratio n that disposing of the foreclosed shares during the initial five year period would have been detrimental to the bank hoiding company. Section 221. Small bank examination cycle Section 221 provides the federal banking agen cies with the au- thority to examine Camel2 institutions of up t o $250 million in as- sets every 18 months. Current law allows fe deral banking regu- jators the discretion to examine Camel1 institu tions of up to $250 million and Camel 2 institutions up to $100 mil lion (or up to $175 million after September 1996) on an 18-month exam cycle. Section 222. Required regulatory review ofregulat ions Section 222 requires the FFIEC and the appropriate federal banking agencies to review all banking regulati ons every ten years to identify outdated or unnecessary regulatory requirements. After formal notice and comment, the FFIEC or th e appropriate federal banking agency is then directed to publish the c omments, eliminate any unnecessary regulations and report to Cong ress a summary of the comments and any need for legislative change . Section 223. Identification of nonbank fi nancial institution cus- tomers Section 223 eliminates a 1992 law that authori zed Treasury to issue a regulation requiring each insured deposit ory institution to identify any customer that is a non-bank fi nancial institution (broker-dealers, investment bankers, currency ex changers, etc). The Money Laundering Suppression Act of 1994 requ ires specified non- 317 28 bank financial institutions to register with Treasury, thus making, in large part, the 1992 law unnecessary and duplicative. Section 224. Repeal of commercial loan reporting requirements Section 224 repeals Section 477 of FDICIA that requires the Board to annually report data on small business and small farm loans. Section 225. Increase in Home Mortgage Disclosure Act; disclosure exemption Section 225 would increase the current exemption for small de- pository institutions (banks, thrifts, and credit unions) from $10 million to $50 million. Additionally, the provision would allow de- pository institutions to keep HMDAinformation at its homeoffice, give notice in its branches of the information's availability and pro- vide the information within 15 days of request by a consumer. Section 226. Elimination ofstock loan reporting requirement Section 226 eliminates the requirement that domestic financial institutions and their affiliates file consolidated reports on exten- sions of credit that are secured, in the aggregate, directly or indi- rectly by 25% or more of any class of shares an insured depository institution. This provision would still apply to foreign banks (branches and agencies thereof) and theiraffiliates. Section 227. Credit availability assessment Section 227 requires the Board to conduct a study on small busi- ness lending every five years in consultation with the federal bank- ing regulators, the Administrator of the Small Business Adminis- tration and the Secretary of Commerce and report to Congress on its findings. Section 241. National bank directors Section 241 provides Comptroller with the authority to waive the residency requirement on national bank directors. As a general matter, current law requires that a majority of a national bank’s directors must be residents of the state in which the bank is lo- cated. Section 242. Paperwork reduction review This section amends Section 303(a) of the Community Develop- ment and Regulatory Improvement Act to further provide that the federal banking regulators conduct a review of the extent to which existing regulations require insured depository institutions and credit unions to maintain unnecessary internal written policies and eliminate those requirements where appropriate. Section 243. State bank representation on Board of Directors of FDIC Section 243 provides that one of the appointed board members of the FDIC must have state bank supervisory experience. 318 29 Section 244. Consultation among examiners This provision requires consultation between safe ty and sound- ness and compliance examiners within an agency. The federal banking agencies are encouraged to appoint a “chief examiner” when examining an institution for compliance t o ensure consulta- tion among examiners and to resolve in consistencies in rec- ommendations. Section 301. Audit costs This provision would eliminate the independent auditor attesta- tion requirement for safety and soundness comp liance, and allow the agencies the discretion to waive the require ment that all mem- bers of the independent audit committee be out side directors (but not less than a majority) in the case of hardship. Factors to be considered include the size of the i nstitution, and whether the institution has made a good faith effort to elect or name additional competent outside directors. Se ction 301 also pro- vides federal banking regulators with the discr etion to designate certain information in annual managemen t reports as privileged and confidential. Section 302 creates a privilege for self-tests condu cted by a finan- cial institution to determine fair lending complia nce under the Fair Housing Act (FHA) and the Equal Credit O pportunity Act (ECOA). A report or result of a self-test (as that term is defined b regula- tiane of the Rnard and HUD for purposes of ECOA and FHA,re- spectively) is considered privileged if a creditor con ducts, or auc~ izes an independentthird party to conduct, a s eif-tesi of any aspect of a credit transaction by a creditor, in order to determine the level or effectiveness of compliance with FHA or ECOA; and hasidenti- fied any possible violations of this title and has taken,or is taking, appropriate corrective action to address the possi ble violations. The provision would protect the results of a self-te st from discov- ery pursuantto a civil suit or from being used by regulators or fed- eral enforcement agencies in enforcing FHA or E COA. Theprivi- lege may be waived by the creditor if the self- test results are of- fered in defense or if the self-test results are v oluntarily released or referred to in that specific proceeding. In additi on, the report or results of a self-test are not privileged from discl osure whenthe re- port or results of the self-test are sought in conjunction with an ad- judication or admission of a violation for the sol e purpose of deter- mining an appropriate penalty or remedy. The pu rposeof the privi- lege is to encourage lenders subject to ECOA and FHAto under- take candid and thorough self-evaluations in orde r to identify and correct possible violations early and thus to elimi nate fair lending problemsattheir roots. Section 303. Exemption for savings institutions serv ing military per- sonnel Section 303 expands the exception from the Qu alified Thrift Lender test for savings institutions that primar ily serve military personnel (including widows, divorced spouses, and current or former dependents). The provision would amend the existing ex- 319 30 emption to eliminate the current date restriction on when the hold- ing company must have acquired control of the savings institution. Section 304. Qualified thrift investment amendments Section 304 would amend the Home Owner's Loan Act to provide thrifts more investment flexibility in becoming Qualified Thrift Lenders. Under current law, a savings association must meet both the QTL test and the IRS thrift tax test. Both tests have the same goal of encouraging residential mortgage lending, although their re- quirementsdiffer. In order to meet the QTL test, savings associations must hold at least 65% of their portfolio assets in specified assets or “qualified thrift investments.” Qualified thrift investments under HOLA in- clude mortgages, home equity loans, mortgage-backed securities, Federal Home Loan Bank steck and within specified limits, consumer loans. Savings Associations that fail to meet the QTL test are subject to severe activities restrictions, branching limits, dividend limits and restrictions on FHLBS advances. In order to qualify under the IRS thrift test, a savings associa- tion must maintain 60% of its total assets in specified assets such as mortgages, and governmentsecurities. Failure to meet the IRS thrift test results in adverse tax consequences such as limitations on the availability of the bad debt reserve deduction and recapture of existing bad debt reserves. Becauseof the differences between the twotests, savings associa- tions must track their investments to ensure compliance under the different requirements of both tests. Given the fact that both tests are intended to achieve the same goal, the Committee believes that meeting oneof the tests should be sufficient to qualify for the bene- fits that attach to the QTLtest. Section 304 provides more flexibility to thrifts in meeting these requirements by allowing savings association to qualify as QTL lenders by meeting either the QTL test or the IRS thrift test. In addition, the section expands the type and amount of investments that can be counted toward the qualified thrift lender test by: (1) eliminating the current limitations on credit card and educational loans under section 5(c) of HOLA; (2) increasing the amount of small business loans thrifts can make from 10% to 20% of total as- sets; and (3) allowing consumer credit card loans, education loans and small business loans to be counted as qualified thrift invest- ments for purposes of the 65% portfolio asset requirement. Section 305. Daylight overdrafts by Federal Home Loan Banks Section 305 requires the Board to establish net debit caps for daylight overdrafts incurred by FHLBs consistent with the credit quality of each FHLB and calculated in the same manneras fees for other users. Alternatively, the Board may exempt the FHLBs from fees and penalties for daylight overdrafts. Section 306. Application for membership in the FHLB System Section 306 grants the FHLBsthe authority to approve all appli- cations for membership. Prior to approving an application of a CAMEL-rated 3, 4 or 5 institution, the FHLB must notify the Fed- eral Housing Finance Board (FHFB). Individual banks currently 320 31 provide the FHFB with the relevant infor mation used in the analy- sis of approving prospective members. Th is section does not affect section 6(h) of the Federal Home Loan B ank Act. Section 307. FHLB external auditors This provision allows the FHLBsto jointly select external audi- tors rather than the FHFB. Section 308. Limited purpose bank Section 308 eliminates the 7 percent grow th cap on the annual asset growth of limited purpose banks. Th e section also allows lim- ited purpose banks to take deposits under $ 100,000 for the purpose of securing a credit card. The Bank H olding Company Act currently provides an exemption from the definitio n of “bank” for limited purposecredit card banks that, among ot her things, engage only in credit card operations, have only one of fice that accepts deposits and do not accept deposits under $100,000. Section 309. Collateralization of advances to members Section 309 will allow FHLBs to a ccept second mortgages that are insured by the federal government as primary collateral for ad- vances. Under current law, FHLBs can a ccept secondary mortgages as collateral, but only in amounts equal to 30% of the capital of the memberbank. Section 310.Increasing limit on total advan ces by the FHLB system lO MUHGa we isha alan liewnit Section 310 increases, from 30% to 40%, the iimit en the agere- gate amount of advances by the Fed eral Home Loan Bank system to members that are not qualified thrift l enders. Section 311. Fair debt collection practices This provision clarifies that the Fair Deb t Collection Practices Act requires a debt collector to disclose cle arly in the first written communication with the debtor that the debt collector is trying to collect a debt and is contacting the consu mer for that purpose. The provision also clarifies that unless a verif ication request is made, collection activity may take place durin g the 30 day period in which a consumer may make a request for a verification of the debt. Section 401. Short title Sections 401 through 426 comprise “the Co nsumer Reporting and Reform Act.” Section 402. Definitions Adverse action A prior interpretation issued by the FTC [55 Fed. Reg. 18,826 (May 4, 1990)] holds that actions tak en in connection with credit, employment, or insurance may constitut e adverse actions, but other actions taken pursuant to a per missible purpose, such as a refusal to cash a check, rent an apartment, or open a new account, 321 32 do not. The language adopted by the Committee eliminates this distinction. Section 402(a) of the Committee bill adds to section 603 of the Fair Credit Reporting Act new subsection (k) which sets forth the definition of the term “adverse action.” Section 603(k) provides that for purposes of the FCRA, when used in connection with action in- volving credit based in whole or in part on a consumerreport, the term “adverse action” has the same meaning as the definition of “adverse action” set forth in the Equal Credit Opportunity Act. Under Section 603(k), “adverse action” also includes a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or any amountof, any insurance, in connection with the underwriting of insurance. This portion of the definition applies to adverse deter- minations with respect to existing insurance or applications for new insurance. The definition also covers a denial of employment or any other employment decision that adversely affects any current or prospec- tive employee. In addition, the definition covers a denial or can- cellation of, an increase in any charge for, or any other adverse or unfavorable change in the termsof, any license or benefit described in section 604(a)(3)(D). : Finally, the definition includes an action taken in connection with an application made by, or transaction initiated by a consumerif that action is adverse to the interest of the consumer. The term also includes an adverse change made to the terms of an account as the result of a review performed under section 604(a) (3}(E) (ii). However, the definition does not cover situations such as those where a creditor obtains consumer reports on its cus- tomers in connection with a review of its credit or other portfolio and, in connection with the review, a consumer's account is not changed, or is changed in a way that is not less favorable to the interest of that consumer, even if the accounts of other consumers are changed in a more favorable manner. Likewise, failure to in- clude a consumer in a prescreening solicitation does not constitute adverse action. Firm offer Credit or insurance providers who obtain prescreened lists must provide a “firm offer” of credit or insurance to all consumers on the list. Section 402(b) of the bill adds to section 603 of the FCRA new subsection (1) which defines the term “firm offer of credit or insur- ance.” This definition is necessary because sections 404(a) and 411(b) of the bill set forth new requirements for prescreening which, among other things, provide that prescreening must involve a “firm offer of credit or insurance.” Under section 603(1), an offer of credit will be deemedto be a “firm offer of credit” if the creditor making the offer will honor the offer if the consumer meetsthecri- teria the creditor has established for the credit being offered. Under the definition, a creditor may withdraw the offer of credit if the consumer does not qualify for the credit. For example, the creditor may withdrawthe offer of credit if the consumer does not meet the criteria used to select the consumerfor the offer of credit 322 33 (i.e., those criteria used by the consumer re porting agency or agen- cies that performed the prescreening to sele ct those consumers who would receive the offer). In addition, the cre ditor may withdraw the offer of credit if the consumer does notsatis fy any othercriteria es- tablished by the creditor before the consum er was selected for the offer, When a consumerrespondsto theof fer, the creditor may re- view a consumer report on the consum er, information provided in the consumer's application or response, an d any other information bearing on the creditworthiness of t he consumer to determine whether the consumer meets the criteria for the credit product being offered. A creditor that utilizes prescreening in c onnection with credit products secured by collateral may conditi on the offer of credit on the consumer furnishing the collateral that secures the credit. For example, a creditor that uses prescreen ing to offer consumerscredit card accounts secured by deposits may condi tion the offer of credit on the consumerestablishing the deposit a ccount that secures the credit and executing a security agreemen t. If the consumer re- spondsto the offer of credit but fails to satisfy the security require- ments for the credit account, the creditor may withdraw the offer of credit. However, the creditor must indi cate to the consumer in the offer the type of security required for th e secured credit product being offered. The definition created by new subsectio n -(l) also provides the same flexibility for prescreening involvi ng insurance. Under the definition, a firm offer of insurance may b e withdrawnif it is deter- mined tai a wuisumer responding te the offer does not meet the criteria established for the insurancebeing offered. , Credit or insurance transaction that is not initiated by the consumer This term is used throughout the Com mittee bill to describe prescreening transactions. Section 402(c) of the bill adds to sec tion 603 of the FCRA new subsection (m) which clarifies the scope of the phrase “credit or in- surance transaction that is not initiated b y the consumer”for pur- oses of the prescreening provisions set f orth in the bill. Section 603(m) makesit clear that the prescreenin g provisions of the FCRA do not apply where a consumer report is o btained by a creditor in connection with reviewing or collecting an existing account of the consumer for safety and soundness purpo ses, even if the creditor subsequently decides to change the c redit available to the consumer. Thus, for example, a credit ca rd issuer may obtain a consumer report on a consumer in co nnection with its regular an- nual or other review of the consumer's c redit card account, and may decide to offer to the consumer a higher credit amount or an additional or improved product, such as a g old card. Consumer report Section 402(e) facilitates the sharing of information among enti- ties related by common ownership or affili ated by corporate control by excluding certain information from the definition of “consumer report.” 323 34 The definition of “consumer report” set forth in section 603(d) of the FCRA is amended by expressly excluding from that definition the sharing of certain types of information amongrelated entities. Under section 603(d)(A), the definition of “consumer report” does not include any communication of information amongentities relat- ed by common ownershiporaffiliated by corporate control if the in- formation consists of the transactions or experiences between one of the entities and the consumer to whom the informationrelates. Thus, section 603(d)(A) makes it clear that the so-called “experi- ence information exception” to the definition of “consumer report” exempts from the scope of the FCRA any communication of such information among related entities regardless of whether the infor- mation is communicated directly from one related entity to another or is furnished through another related entity, so long as each of the entities is related by common ownership or affiliated by cor- porate control, In addition, section 603(d)(A) makes it clear that the term “consumer report” does not cover the sharing amongrelated enti- ties of any other types of information provided that it is clearly and conspicuously disclosed to the consumer that information may be shared among such entities and the consumer is given the oppor- tunity to direct that the information not be shared among such en- tities. This provision clarifies that the communication of consumer report information, application information and any other informa- tion among affiliated entities is not a consumer report provided that the sharing is disclosed to the consumer and the consumeris afforded the opportunity to opt out of the sharing. Employment agency communications Section 402(f) of the Committee bill adds to section 603 of the FCRA new subsection (0) which excludes from the definition of consumer report certain communications by employment agencies. Nationwide consumer reporting agency Section 402(g) of the Committee bill adds to section 603 of the FCRA new subsection (p) which sets forth the definition of a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis. This term is used in various pro- visions throughout the Committeebill. Section 403. Furnishing consumer reports; use for employment pur- poses USE OF REPORTS FOR BUSINESS PURPOSES Section 403 amendssection 604 of the FCRA concerning the per- missible purposes required to access a consumer report. Under cur- rent law, consumer reporting agencies may furnish reports, pro- vided that the user has a legitimate business need in connection with a transaction involving the consumer. This section provides that consumer reports may be furnished in connection with busi- ness transactions initiated by the consumer. Current law also allows users to obtain a consumer report “in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the exten- 324 35 sion of credit to, or review or collection of an account of, the consumer.” This section also allows cons umer reports to be fur- nished in connection with the review of acc ounts that are not credit accounts. For example, the Committee inten ds this section to pro- vide a depository institution with the ability to procure a consumer report in connection with a non-credit accou nt, such as a deposit account. Like creditors, banks and others m ay need to consult a consumer's report in order to determine whether the consumer's current account terms should be modified. F or example, the institu- tion may provide more favorable pricing ter ms after consulting the report. The permissible purpose created by t his provision, however, is limited to an account review for the purp ose of deciding whether to retain or modify current account terms. It does not permit access to consumer report information for the pu rpose of offering unre- lated products or services. This section also amends the “legitimate busi ness purpose” provi- sion to allow consumer reporting agenc ies to furnish information in connection with direct marketing transact ions, provided that the consumer has not opted out through the s ystem established under section 404. Use ofreports for employment purposes Section 604 of the FCRA permits employer s to obtain consumer reports pertaining to current and prospecti ve employees. The Com- mittee is concerned, however, that this prov ision may create an im- proper invasionof privacy. Section 403 of t his bill requires that em- nlavers provide prior written disclosure to curre nt and prospective employees that their consumer reports may be procured in cunicc tion with their employment. Further, emplo yers mist obtain a spe- cific or general written authorization prior t o procuring such a re- ort. P Section 403 prohibits a consumer report ing agency from provid- ing a report for employment purposes unle ss the person obtaining the report certifies to the agency that the r equired disclosures have been provided to the employee and that the information from the report will not be utilized in violation of Fed eral or state equal em- ployment opportunity laws. Further, the age ncy must include with the report a summary of the consumer's ri ghts under the FCRA. The Committee is also concerned that the ab ility of employers to obtain consumer reports on current and pros pective employees may unreasonably harm employeesif there are errors in their reports. Therefore, the Committee bill requires that e mployers, before tak- ing an adverse action based on a consumerre port, provide the cur- rent or prospective employee with a copy of the report, a descrip- tion of the individual's rights under the FC RA, and a reasonable opportunity to respond to any information t hat is disputed by the consumer. The Committee does not intend to require that employ- ers await the results of a formal, 30-day reinvestigation by the consumer reporting agency before t aking action based on a consumer report. Rather, the Committe e bill specifies that a rea- sonable opportunity need not exceed five b usiness days from the date of the receipt of the report by the co nsumer. However, the Committee does expect that employers wil l consider information provided by the consumer within the fi ve-business day period. 325 36 This section provides an exception from the employer's obligation to provide a reasonable opportunity to respond if the employer has a reasonable belief that the consumer has engaged in fraudulent or criminal activity. The Committee intends this exception to apply only to situations where the employer believes that the fraudulent or criminal activity is ongoing and directly related to the employ- ment involved. In contrast, the section is not intended to eliminate the opportunity to respond in instances where a consumeris denied employment or a promotion because that consumer's report indi- cates a past history of fraudulent or criminal activity. Section 404. Use of consumer reports for prescreening and direct marketing; prohibition on unauthorized or uncertified use of in- formation Section 404(a) permits the use of consumerreport information for prescreeningand direct marketing purposes. Both direct marketing and prescreening are activities in which consumer reporting agen- cies use their credit files to create and sell lists of consumers who meet specifications provided by third parties seeking to offer goods or services. Because these lists are created based on the consumer report files maintained by the agency, the lists themselves are cur- rently considered a series of consumer reports under the FCRA. Therefore, the recipient must have a permissible purpose under the FCRA. To date, the FTC has taken a narrow view of the extent to which the use of consumer report information for prescreening or direct marketing purposes is permissible. This section expands the ability of consumer reporting agencies to use consumer report information for prescreening and direct marketing. At the same time, however, the bill mandates that consumerreporting agencies create and maintain a system to allow consumers to “opt out” of the prescreening and direct marketing processes. By opting out, consumers can prohibit consumer report- ing agencies from releasing their names or other information about their reports for prescreening and direct marketing. Prescreening The Committee seeks to balance any privacy concernscreated by prescreening with the benefit of a firm offer of credit or insurance for all consumers who meetthe criteria for the credit or insurance being offered. While the direct marketing portion of section 404 limits consumer reporting agencies to providing lists that are not based on credit limit, credit payment history, credit balance, or negative information, the Committee understands that such factors must be considered in order to market credit or insurance. For this reason, the prescreening section of the Committee bill allows credit and insurance providers to obtain credit bureau data for credit and insurance transactions not initiated by the consumer based on this more sensitive information. In exchange for allowing credit and in- surance providers to obtain credit bureau data based on more sen- sitive information, however, the section requires that the credit or insurance provider make a “firm offer,” as defined in the bill, of credit or insurance to all consumers who meetthecriteria for the credit or insurance being offered. 326 37 Section 404(a) of the bill adds to se ction 604 of the FCRA new subsection (c) which sets forth th e conditions under which a consumer reporting agency may furnish a consumer report on a consumer to the person requesting t he report in connection with a credit transaction thatis not initiated by the consumer. Undersec- tion 604(c)(1)(A), a consumer reporting agency may furnish a consumer report in connection with such a credit transaction if the consumer authorizes the agency to provide the report to the person obtaining the report. For purposes of thi s provision, a consumer can authorize the furnishing of the rep ort by notifying the consumer reporting agency directly, by not ifying some other entity designated by the consumer reporting age ncy for that purpose, or by providing authorization to the user of t he report. If a consumer provides such an authorization, the agenc y may furnish a full consumer report on the consumer. Section 604(c)(1)(B) permits the furni shing of a consumer report in connection with a credit transaction tha t is not initiated by the consumer where the transaction consists of a “firm offer of credit or insurance,” and, in accordance with t he new prescreening opt- out requirements set forth in this Act, the consumer reporting agency has established a notification sys tem which permits the consumer to be excluded from considerat ion for such transactions, and the consumer has notelected to be so ex cluded. Section 604(c)(2) specifies the informatio n that a consumer re- porting agency may furnish to a cred itor in connection with arnerraenina First. under section 604(c) (2)(A), th e creditor may re- eats rc uv ceive the name and address of each consu mer in comnmecitul wiui the prescreening. Second, 604{c)(2)(B) permits a credit or to receive an identifier for each consumer, such as a numberor code , provided that the identi- fier is not unique to that particular con sumer and is used for the purpose of verifying the identity of the consumer. For example, a consumer reporting agency may fur nish in connection with prescreening part of the social security nu mber for each consumer. Thus, the creditor may use that number to verify that consumers responding to a prescreened offer were included in the prescreening. This could be accomplished by matching the partial social security number provided by the c onsumer reporting agency to the corresponding portion of the so cial security number fur- nished by the consumeron the response to the offer. Third, 604(c)(2)(C) provides that a creditor may receive any “other information pertaining to a consum er that does not identify the relationship or experience of the consumer with a particular creditor or other entity.” Under (c) (2)(C}, a consumer reporting agency could not provide a creditor with a full credit report on prescreened consumers until a consu mer actually responds to the creditor's offer. However, (c)(2)(C) doe s permit a creditor to receive other information to enable the creditor to determine how much credit to offer each consumer while protec ting consumer privacy by ensuring that the prescreened report does not identify the consum- er's specific credit relationship or experie nce with particular credi- tors or other entities. 327 38 Direct marketing Section 404 allows consumer reporting agencies to sell lists for direct marketing transactions not initiated by the consumer. The agency may use a limited amount of information in a consumer's file to create a list, provided that the consumerhas notnotified the consumer reporting agency in writing or by telephone through the opt-out procedure that the consumer does not consent to such use. The information that may be provided to the user of the list, how- ever, is limited to the names and addresses of specific consumers. Further, the names and addresses may not be furnished if doing so would disclose “credit payment history, credit limit, credit bal- ance, or any negative information pertaining to the consumer.” This second provision effectively limits the criteria which may be used by the consumer reporting agency to select consumers for di- rect marketing lists to criteria that do not disclose those items. The Committee intends this provision to safeguard the most sen- sitive credit information in the consumer's file. The direct market- ing provisions of the bill do not apply to “credit or insurance trans- actions that are not initiated by the consumer.” Opt out The Committee is aware that some consumers may find that di- rect marketing and prescreening entail an undesirable invasion of their privacy. Therefore, while this section facilitates prescreening and direct marketing, it creates an “opt-out” procedure through which a consumer mayelect to have his or her name excluded from any list provided by the consumer reporting agency under section 604 (0)(1) (B) and section 604(d)(1)(B) of the FORA. Section 404 provides that a consumer may prevent his or her name from appearing on prescreening or direct marketing lists fur- nished under section 604(c)(1)(B) or section 604(d)(1)(B) by notify- ing a consumer reporting agency in writing or by telephone that the consumer does not consent to the furnishing of his or her consumer report in connection with such transactions. Consumer reporting agencies providing prescreening or direct marketing lists must maintain toll-free telephone numbers for consumers to use to notify the agency of their desire to opt-out. In addition, those consumer reporting agencies that compile and maintain files on a nationwide basis, as defined in the bill, must establish a joint noti- fication system to enable consumers to opt-out of lists created by all such agencies operating nationwide with one telephonecall. The Committee intends that, to make this system effective, such agen- cies must publicize the existence and purpose of this joint system in newspapers with nationwide circulation. The consumer's election to opt out will be effective for 2 years following the consumer's noti- fication of the consumer reporting agency, or permanently, if the consumer specified in writing. Use ofinformation obtained from reports Section 404(b) prohibits any entity from obtaining consumer re- port information without a permissible purpose. Further, the Com- mittee bill requires users to certify that purpose. These require- ments are intendedtofill a gap in existing law. While current law prohibits consumer reporting agencies from providing a consumer 328 39 report to a user wholacks a permissible pur pose,it is not a viola- tion of current law to obtain the report wit hout a permissible pur- pose unless the user knowingly employs false pretenses in doing so. This situation has frustrated consumers, en forcement authorities and the consumerreporting agencies by mak ing it difficult to pre- vent the improper obtaining of consumer rep orts. By providing an affirmative obligation for users to have a pe rmissible purpose, the Committee intends to provide the FTC, the state law enforcement authorities, and private citizens with recour se against those who unlawfully access consumer reports, regardl ess of whether or not the user acted under false pretenses. Specifically, the bill provides that a person mayuse or obtain in- formation from a consumerreport only if the consumer report was obtained for one of the permissible purposes s et forth in section 604 of the FCRA and is within the scope of the certification between the person and the provider of the report. T he bill, however, does not require separate certifications for each request, but only that the request be within the scope of the applic able certification agree- ment. Thus, a person who obtains a cons umer report will be in compliance with new section 604(f) if the per son obtains the report for one of the permissible purposes set forth in section 604, and the report is covered under the person's certifi cation agreement with the provider of the consumer report. Section 405. Consumer consent required to fu rnish consumer report containing medical information; furnishing consumer reports for commercial transactions Section 405 of the bill amends section 004, LiKE peLiuinslbic pur poses section of the CRA, to require a c onsumer reporting agency to obtain consumer consent before it furnishes a consumer report containing medical information for employm ent purposes or in con- nection with a credit er insurance transactio nor a direct. marketing transaction. This section works in tand em with section 603(i) of the FCRA which defines the term “medical inf ormation” as medical in- formation or records obtained “with the con sent of the individual to whom it relates.” Together, these two s ections protect critical consumer privacy rights in the area of medi cal information by re- quiring consumer consent for the collection and the furnishing by a consumer reporting agency of medical information about a consumer. It is not the intent of this s ection, however, to prohibit consumer reporting agencies from furnish ing information in a consumer report about the medical payment history of consumers. Section 406. Obsolete information and information contained in consumer reports The Committee intends that consumer repor ts contain timely as well as accurate information. Section 406 limi ts the length of time that information may be included in a cons umer report and clari- fies the type of information that may be repor ted. Seven year reporting period Current law generally prohibits consu mer reporting agencies from including in a consumer report accounts placed for collection or charged to profit and loss which antedate the report by more 329 40 than seven years. The Committee is concerned that this seven year limitation is ineffective. In some cases, the collection action occurs monthsor even years after the commencementof the preceding de- linquency. Under these circumstances, the consumer reporting agency may maintain the information for seven years beginning on the date that the collection action is first reported. Consequently, the consumer report may contain such information even if the de- linquency commenced more than seven years before the date on whichthe report is provided to a user. The Committee bill specifies that the seven-year period with re- spect to information concerning a delinquent account charged to profit and loss, placed for collection, or subjected to a similar ac- tion, may begin no more than 180 days after the commencement of the delinquency immediately preceding the collection, charge to profit or loss, or similar action. A creditor is under no obligation to place a delinquent account for collection within a specified pe- riod, or initially to report the delinquency. If a collection or similar action is reported, however, the seven year reporting period will commence not later than 180 days after the beginning of the delin- quency rather than on the date of any subsequent action. The Com- mittee intends this requirement to apply only to information fur- nished to a consumer reporting agency more than 455 days after enactment of the Consumer Reporting Reform Act. Information re- ported to the consumer reporting agency prior to that date will be unaffected. Additional information on bankruptcy Section 406 requires consumer reporting agencies to include in any report containing information regarding an individual who has filed bankruptcy, an identification of the chapter of Title 11 of the United States Code under which the consumerfiled if that informa- tion is provided to the agency by the source of the information. The Committee is aware that many creditors look more favorably upon Chapter 13 filings than filings under other Chapters of Title 11, and this provision ensures that such information is available to such a creditor. In cases where the bankruptcy was withdrawn by the consumerprior to a final judgment this section also requires the agency to indicate in the report, upon receipt of documentation certifying such withdrawal, that the filing was withdrawn. Indication of closure of account The Committee is also concerned that consumer reports may not reflect the current status of accounts that have been voluntarily closed by consumers, or may improperly suggest that an account was closed because the consumer did not meet the account's terms. The Committee bill requires creditors to inform consumer reporting agencies when a consumer voluntarily closes a credit account and specifies that the consumer reporting agencies must indicate such information in any subsequent consumer reports containing infor- mation about such account. This provision applies only to credit ac- counts which are closed solely as a result of a voluntary request by the consumer. This provision does not cover, for example, an ac- count which is closed by a creditor as a result of a consumer's de- 330 41 linquencies or other abuse of the acco unt, even if the consumer also asks to have the accountclosed. Indication of dispute by consumer The Committee bill also provides that, i f a consumer reporting agency is notified pursuantto section 623( a)(3) that information re- garding a consumer that was furnished to the agency is disputed by the consumer, the agency must i ndicate that fact in each consumerreport that includes the disput ed information. Section 407. Compliance procedures Section 407 imposes significant new du ties on consumer report- ing agencies with respect to certain providers and users of consumer report information. Section 407 requires consumer re- porting agencies to provide a notice to providers and users of consumer report information outlining the requirements of the FCRA. Section 407 also imposes duties upon th ose persons or businesses who procure consumerreports for the pu rposeof reselling the infor- mation. Such “resellers” are, by defi nition, consumer reporting agencies, and the Committee intends t hat they be subject to all the applicable requirements of the FCRA. I n addition, the section pro- vides that a person or business may no t procure a consumer report for the purpose of reselling the informa tion unless the person dis- closes to the consumer reporting agenc y providing the report the identity of the ultimate user and the per missible purpose under which the report will be resold to the Uilimaic uo, Tad poreen procuring the reportfor resale mus t esiablish and maintain reason- able procedures to identify the ultimat e user of the information, to certify the user’s purpose for obtainin g the information, to certify that the information will be used for n o other purpose, and to ver- ify such information once it has been p rovided to the consumer re- porting agency. Section 408. Consumer disclosures All information in the consumer's file r equired to be disclosed Under current law, consumer reportin g agencies must provide a consumer, upon request and proper ide ntification, with the nature and substanceofal! information ( except medical information) in its files on the consumer. This provision ha s been interpreted to allow consumer reporting agencies to comply by furnishing consumers with summaries of their reports. The Co mmittee is concerned that such summaries do not provide consume rs sufficient access to their reports. Therefore, section 408 explicitly requires consumer report- ing agencies to provide, upon request, a ll information in the con- sumer's file. The Committee intends thi s language to ensure that a consumer will receive a copy of that consumer’s report, rather than a summary of the information cont ained therein. This provi- sion also clarifies that the FCRA do es not require a consumer re- porting agency to make any disclosures to a consumer regarding credit scores, risk scores, or any oth er scores or predictors relating to the consumer. 331 42 More information concerning recipients ofreports required Section 408 also requires that consumer reporting agencies pro- vide to consumers an identification of those persons or businesses (including each end-user identified under section 607(e)(1)) that procured such consumer's report (1) for employment purposes with- in the previous two years and (2) for other purposes within the pre- vious year. The latter provision expands current law, which re- quires an identification of all persons who have procured the con- sumer's report for non-employment purposes during the preceding six months. Section 408 also requires the consumer reporting agen- cy to provide the name (including the trade name, if applicable) and address of each recipient of the report, as well as the recipi- ent’s telephone number, if requested by the consumer. Information regarding prescreening inquiries The section requires consumer reporting agencies to provide con- sumerswith a record of all recipients of prescreened lists that iden- tified that consumer provided by the agency during the previous year. Summary ofrights Section 408 requires that consumer reporting agencies include with each disclosure provided to a consumer under section 609 of the FCRA a written summary of the consumer's rights under the FCRA and, if the consumer reporting agency operates nationwide, a toll-free telephone number at which personnel are accessible to consumers during normal business hours. The summary of rights must include a description of the FCRA and the rights of the consumer, an explanation of how the consumer may exercise his or her rights, a list of all Federal agencies responsible for enforcement of the FCRA,including the address and telephone numberof each agency, and a statement that the consumer reporting agency is not required to remove accurate derogatory information from a consumer report. The summaryof rights also must include a state- ment that the consumer may have additional rights under state law and that the consumer may wish to contact a state or local consumer protection agency or state attorney general to learn of those rights. The FTC will prescribe the specific form and content of the disclosure. Form of disclosures to consumer Section 408 requires consumer reporting agencies to makeallre- quired disclosures to consumers in writing. If the agency elects to provide disclosures in an alternative form, it may also do so as long as the consumerauthorizes the disclosure, furnishes proper identi- fication, and specifies the form of disclosure. The provision further specifies that such non-written disclosures may be made to the consumer in person, by telephone, by electronic means, or by any reasonable meansavailable from the agency. Simplified disclosure To ensure that consumers understand their reports once they re- ceive them,this section provides that the consumer reporting agen- cies must, within 90 days of enactment, develop a form which shall 332 43 maximize the comprehensibility and stand ardization of such disclo- sures. The Committee does not intend the maximization standard to be interpreted as a perfection standard. However, the Committee expects that report information will be pr ovided in a form that can be understood by the average consumer . Section 409. Procedures in case of the disp uted accuracy of any in- formation in a consumer's file The Committee is aware that the consu mer reporting system handles almost two billion pieces of data per month and will never be perfectly accurate. Mistakes will occur, and not all of them can be prevented. Section 409 is the heart of th e Committee's efforts to ensure the ultimate accuracy of consumer r eports by placing impor- tant requirements upon consumer re porting agencies after inac- curacies have been detected. Therefore, se ction 409 is designed to ensure that consumersare able to address problems andcorrect er- rors in a timely fashion. Nothing in section 409 or any other sectio n is intended to require consumer reporting agencies to arbitra te disputes between consum- ers and credit grantors as to completenes s or accuracy of informa- tion in the consumer's file. Reinvestigation procedures Section 409 requires consumer rep orting agencies te reinvestigate disputed information and to r ecord the current status of that information within the later of 30 da ys after receipt of the Initial natica of the dismite from the consumer or 15 days after re- ceipt of additional relevant information fro m the consumer concerh- ing the dispute. The latter provision will en sure that an agency has a minimum of 15 days to consider any ad ditional information pro- vided in the course of the reinvestigation period. The Committee does not intend this provision to suggest that a consumer has any obligation to submit additional infor mation, however, or that the failure to submit such additional informa tion should be construed against the consumer. Promptnotice of dispute to furnisher of info rmation Once a consumer informs a consumer reporting agency of a dis- pute, the consumer reporting agency mus t notify the furnisher of the information within five business days. This five business day notification requirement is intended to pro vide the furnisher with sufficient time within the 30 day reinvest igation period to inves- tigate and verify the information. Determination that dispute is frivolous or ir relevant The section allows a consumer reporting ag ency to terminate a reinvestigation if the agency reasonably dete rmines that the dis- pute by the consumer is frivolous or irrel evant. The Committee does not intend to permit consumer rep orting agencies to use this determination as a shield from the reinvestig ation requirement. Not later than five business days after maki ng a determination that a dispute is frivolous or irrelevant , the agency must mail a written notice to the consumerindicatin g such determination, con- taining the reasons for the agency's determina tion. The notice also 333 44 must identify information required to investigate the disputed in- formation. The identification of such information may consist of a standardized form describing the general nature of such informa- tion. The Committee expects that a consumer will be afforded an opportunity to respond to those concerns that led the consumerre- porting agency to makeits determination. The Committee recognizes that a consumer may submit informa- tion after a reinvestigation that is substantially similar to informa- tion that the consumer has submitted during the reinvestigation process. The Committee expects that the consumer reporting agen- cy may not consider a subsequent submission in such cir- cumstances. Consideration of consumer information In conducting the reinvestigation, the agency must consider any relevant information furnished by the consumer during the 30 day period. If the consumer submits additional information more than 30 days after the initial dispute is filed, the Committee expects that such information will be treated as a new dispute. Deletion ofinaccurate or unverifiable information If the reinvestigation reveals that the information being disputed is inaccurate or cannot be verified within the 30 to 45 day time pe- riod mandated by this section, the agency must delete the informa- tion. The information deleted shall consist solely of the information that was disputed by the consumer and shall not include any por- tion of the same item that was not disputed. This section further requires consumer reporting agencies to maintain reasonable proce- dures to ensure that such information does not reappear in the con- sumer's file or on subsequent reports furnished to users. Reinsertion ofpreviously deleted material The Committee is aware that consumers experience considerable frustration when previously deleted information reappears. In addi- tion to requiring consumer reporting agencies to establish proce- dures to prevent the deleted information from reappearing, section 409 prohibits a consumer reporting agency from reinserting infor- mation in the consumer's file following a deletion unless the fur- nisher of information certifies that the information is completed and accurate. Within five business days of the reinsertion, the agency must no- tify the consumerof the reinsertion in writing or by other means if authorized by the consumer and acceptable to the agency. As partof, or in addition to, the notification, the agency must provide to the consumer, in writing, a statement that the information has been reinserted, that the consumer has the right to add a state- mentto the file disputing the accuracy or completeness of the infor- mation in the file, and the name, business address, and telephone numberof the furnisher of the information. Notice of results ofreinvestigation Regardless of the outcome of the reinvestigation, the consumer reporting agency must provide to the consumer a written notifica- tion of the results within five business days of completing the 334 45 reinvestigation. The notification must include the following: (1) a statement that the reinvestigation is compl eted; (2) a consumerre- port that is based on the consumer'sfi le as thatfile is revised fol- lowing the reinvestigation; (3) a des cription or indication of any changes made to the report as a result of the reinvestigation; (4) a notification that the consumer has the right to add a statement to the file disputing the information, and (5) a notification of the consumer’s right to request that the a gency furnish either notifica- tion of the modification or a summary of the statement submitted by the consumer to any person designate d by the consumer who has received a copy of the consumer's re port for employment pur- poses in the previous two years or for o ther purposes within the previous six months. In addition, if the reinvestigation results in finding that the dis- puted information is accurate and comple te, the notification must include an indication that the consum er may request a description of the procedure used to make the findin g and the name, business address, and telephone numberof the furnisher of the information. The Committee assumes that the con sumer may be dissatisfied be- cause the information has not been chang ed and believes that such a situation will be best resolved by enabl ing the consumer fo con- tact directly the furnisher of that inform ation. At the same time, if the information is found to be inaccurat e and then corrected, the consumer is unlikely to be interested in the procedure used to make the finding or the name and addres s of the furnisher. In the avant that the consumer desires such informa tion, the consumer may receive it upon request, and the consumer reporting ageiury must provide the information within 15 days of receiving such re- quest. Expedited dispute resolutionxPE The consumer reporting agency need not comply with paragraphs (2), (6) and (7) of section 611 (a) if the agency deletes the disputed information from the consumer's file within three business days of being notified of the dispute, promptly notifies the consumer by telephone, provides written confirmation of the deletion and a copy of a consumerreport on the consumer that is based on the consum- er's file after the deletion within five business days after making the deletion, and including in the telephone notice, or in a written notice accompanying the confirmation and the consumerreport, a statement of the consumer's right to request under subsection (d) that the agency furnish notifications under that subsection. In this situation the agency's telephone contact with the consumer and provision of a consumer report on the consumer eliminates the ne- cessity to provide written notification of the outcome of the reinvestigation. The Committee believes that this provision will ease any compliance burden on reporting agencies who may choose to simply delete certain information rather than go through the reinvestigation process. The Committee assumes that such a dele- tion will benefit the overwhelming majority of consumers because a consumeris unlikely to dispute positive information. 335 46 Section 410. Charges for certain disclosures Reasonable charges Section 410 allows a consumer reporting agency to impose a rea- sonable charge for making a disclosure pursuant to section 609 (which shall not exceed $8), and certain provisions of section 611 (which shall not exceed the charge imposed on each designated re- cipient for a consumer report). The section prohibits charges for any other notification or disclosure required by this title. Free consumer reports The Committee believes that consumers must have access to their report information in order to identify problems. Section 410 expands the circumstances under which a consumer is entitled to a free report. The section enhances a consumer's right to a free report when an adverse action is taken based on a consumer report. For 60 days following the consumer's receipt of notice of an adverse action, that consumeris entitled to a free copy of his or her report upon written request. This provision amends current law, which prohibits a charge for a consumerreport only for 30 days following an adverse action. The section also provides that a consumerreporting agency must provide a free consumer report to a consumer who hasre- ceived notification from a debt collection agency affiliated with the consumer reporting agency stating that the consumer's credit rat- ing may be or has been adversely affected. Finally, the section allows a consumer to obtain a free copy of that consumer's report once during any 12-month period if the consumercertifies in writing that the consumer is unemployed and intends to apply for employment within 60 days, is a recipient of public welfare, or has reason to believe that the file contains inac- curate information dueto fraud. Section 411. Duties of users of consumer reports Adverse actions The Committee is concerned that consumers are often unaware of their rights in the event of an adverse action. The FCRA cur- rently requires that a user who takes an adverse action in connec- tion with a consumer report must notify the consumer against whom such adverse action has been taken and supply the name and address of the consumer reporting agency that provided there- port. The Committee believes that such information is incomplete, however, in that it fails to inform the consumerof his or herrights, including the right to a free report for 60 days after an adverse ac- tion has been taken. Section 411 requires a user of a consumer report who takes an adverse action based in whole or in part upon that report to pro- vide several disclosures to the consumer. The user must provide the following in written or electronic form: a notice of the adverse action; the name, address, and telephone number (includinga toll- free number if the agency operates nationwide) of the agency that furnished the report; a statement that the consumer reporting agency did not make the decision to take the adverse action; a no- 336 AT tice of the consumer's right to a fre e copy of the report for 60 days, upon written request, from the agency t hat furnished the report, and a notice of the consumer's right to d ispute with the agency the accuracy or completeness of any info rmation in the report fur- nished by the agency. Disclosures for prescreening and direct m arketing The Committee is aware thebill expan ds the ability of consumer reporting agencies to provide cons umer reports for the purpose of prescreening and direct marketing. At t he same time, the Commit- tee bill offers consumers the opportun ity to opt-out and prohibit consumer reporting agencies from f urnishing information to users for prescreening or direct marketing. To further protect consumers, this section requires that a notice of t he consumer’s right to. opt- out be included with any prescreening o r direct marketing solicita- tion. The Committee understands that consumers will not receive notification of their right to opt out unti l they receive a solicitation. Prescreening disclosure Section 411 adds to section 615 of the FCRA new subsection (d) which imposes certain requirement s on creditors that, in connec- tion with a credit transaction that is no t initiated by the consumer, engage in prescreening by using a co nsumer report obtained for that purpose. Section 615(d) applies o nly when a prescreened list is obtained from a consumer r eporting agency under section 604 (c)(1)(B). Section 019(G)(i) pruvides that & orcc: report in connection with a credit transaction which is not initiated by the consumer and which consists o f a firm offer of credit must, whenproviding a written solicitation t o the consumer in connection with the transaction, clearly and consp icuously include on or with the solicitation a statement that inform ation contained in the con- sumer’s consumer report was used in selecting the consumer for the solicitation. The statement also must disclose that the consumer received the offer because the consumer satisfied the cri- teria for creditworthiness under which the consumer wasselected for the offer. This disclosure provision d oes not require the creditor to disclose any of the criteria establish ed by the creditor, but sim- ply reflects the fact that, based on the i nformation available to the creditor (typically through consumer r eporting agencies or demo- graphic firms) at the time the prescr eening was conducted, the consumer appeared to meet such c riteria. The statement included on or with the s olicitation also must indi- cate, to the extent applicable, that the credit may not be extended if the consumer respondsto the offer an d does not meetthecriteria used to select the consumer for the offe r, or does not satisfy other applicable criteria, or does not furnish any collateral required by the creditor. This disclosure will be req uired for creditors who, as is permitted under this bill, obtain a ne w consumer report on each consumer responding to the offer and re view that report as. well as information provided by the consumer (e .g., the consumer's employ- ment status and income) and other information bearing on credit- worthiness to determine whether the c onsumer actually meets the ar whoa uses a consumer 337 48 criteria established by the creditor for the offer. This disclosure is intended to avoid misleading consumers. Finally, the statement on or with the solicitation must disclose that the consumer has the right to prohibit information contained in the consumer's file with any consumer reporting agency from being furnished for prescreening purposes and either that the consumer may exercise that right by notifying the joint notification system established by the nationwide consumer reporting agencies under section 604(e)(6), or, in the case of prescreening performed by a consumer reporting agency not covered by the joint notifica- tion system, by contacting that agency's notification system. The statement must include the address andtoll-free telephone number of the appropriate notification system. Section 615(d)}(3) requires that a creditor who is subject to section 615(d)(1) must maintain a record of the criteria used by the credi- tor to determine whether to extend credit in connection with solici- tations covered by section 615(d)(1), until the end of the 3-year pe- riod beginning on the date the particular solicitations are transmit- ted to consumers. The bill also establishes similar requirements for a person who uses a consumerreport that is provided to the person undersection 604(c)(1)(B) in connection with an insurance transaction that is not initiated by the consumer. Direct marketing disclosure This section imposes similar disclosure requirements upon enti- ties obtaining consumer report information under section 604(d)(1)(B) for direct marketing. Such a direct marketing solicita- tion must include a clear and conspicuous written statement indi- cating that the information concerning the consumer was provided by a consumer reporting agency and that the consumer has the right to opt-out by contacting the consumer reporting agency in writing or by telephone, thereby prohibiting a consumer reporting agency from using the consumer’s information in the future for di- rect marketing transactions. Further, the disclosure must provide the name, address andtoll-free number of the consumer reporting agency. Section 412, Civil liability Section 412 amends the sections of the FCRA pertainingto civil liability for willful and negligent non-compliance with the Act. In a situation where a person negligently violates the FCRA, a consumeris entitled to recovery in an amount equal to actual dam- ages sustained by the consumeras a result of the failure to comply with the FCRA. In cases of willful non-compliance, the consumer is entitled to recover either: (i) the actual damages sustained by the consumer as a result of the failure to comply with the FCRA; or (ii) damages in an amount ranging from $100 to $1,000. Section 412 also provides that a natural person who obtains a consumer report under false pretenses or knowingly without a per- missible purpose may be held liable for actual damages sustained by the consumer, or $1,000, whichever is greater. In addition, sec- tion 412 provides that a consumer reporting agency is entitled to recover from any person who obtains a consumerreport from the 338 49 agency under false pretenses or knowing ly without a permissible purpose an amount equal to actual d amages it sustained as a re- sult of the improper obtaining of the repo rt or $1,000, whichever is greater. The Committee is aware of concerns exp ressed by furnishers of information and the consumer reporting agencies that these provi- sions will result in unwarrantedlitigatio n. At the same time, the Committee does not want to disadvantag e consumers who have been wronged. To balance the rights of c onsumers with those of consumer reporting agencies and furnish ers, section 412 provides that the prevailing party may recover rea sonable attorney's fees on a finding by the court that an unsucces sful pleading, motion, or other paper filed in connection with a civil liability action under FCRA was filed in bad faith or for purp oses of harassment. The Committee intends this provision to apply to both plaintiffs and de- fendants. Section 413. Responsibilities of persons who furnish information to consumer reporting agencies Currently, the FCRA contains no require ments applying to those entities which furnish information to con sumer reporting agencies. Section 413 imposes certain obligations up on those furnishers of in- formation to consumer reporting agencies. The Committee believes that bringing furnishers of information u nder the provisions of the FCRA is an essential step in ensuring the accuracy of consumer re- port information. General This section provides that an entity shall not furnish any infer- mation to a consumer reporting agency if the person knows that the information is incomplete or inaccurate. Section 413 adds toe the Fair Credit Reporting Act new section 623 which sets forth the responsibilities of those entities that regu- larly furnish information to consumer reporting agencies. Section 623(a)(1) provides that a person may not furnish any information to a consumer reporting agency if the person “Iknaws' that the in- formation is incomplete or inaccurate. Section 623(a)(1) is intended to provide protection to a consumer in the circumstance where such a person actually knows that information furnished by that person to a consumer reporting agency is inaccurate. Section 623(a)(1) is intended to provide protection without having a chilling effect on the free flow of credit information. For example, if a person deter- mines through an internal audit that information in its records on a consumer is wrong, that information may not be furnished to a consumer reporting agency. Similarly, if a consumer uses proce- dures reasonably established by a creditor to notify the creditor that information furnished to a consumer reporting agency by the creditor is inaccurate, and the information in fact is inaccurate, the creditor may not subsequently furnish the information to a consumer reporting agency. On the other hand, section 623(a)(1) does not apply where a consumer attempts to notify the creditor of an error without using procedures established by the creditor for such notifications. For example, section 623(a)(1) would not apply to a creditor if a consumer makes a notation on a payment stub 339 50 claiming a consumerreporting error or indicates to one of a retail credit grantor’s sales clerks that information furnished by the cred- itor to a consumer reporting agency is erroneous. Under suchcir- cumstances, the creditors would not “know”that the information is incomplete or inaccurate. Duty to correct and update This section requires any furnisher of information to correct and update information previously furnished to a consumer reporting agency that the furnisher determines is inaccurate. This provision creates an affirmative obligation for furnishers of information to correct such information where the furnisher determines that the information is wrong. Duty to provide notice of continuing dispute If any information provided by a furnisher continues to be dis- puted by a consumer, the furnisher of that information must in- clude with that information a notice of the dispute. This provision applies to information that is disputed under section 611 of the FCRA (amendedby section 409 of the Committeebill). Duty to provide notice of closed accounts Section 413 requires a person who regularly and in the ordinary course of business furnishes information to a consumerreporting agency concerning a consumer who has a credit account with that person to notify the agency when the accountis voluntarily closed by the consumer. This provision is intended to complement the new requirement of section 605 of the FCRA (as amended by section 406 of the Committee bill) that a consumer reporting agency indi- cate in a consumerreport if an account has been voluntarily closed by the consumer. Under this provision, the information must be furnished with the information regularly furnished by the person to the consumer reporting agency for the period in which the ac- count is closed. This provision applies only to credit accounts which are closed solely as a result of a voluntary request by the consumer. This provision does not cover, for example, an account which is closed by a creditor as a result of the consumer's delin- quencies or other abuse of the account, even if the consumer also asks to have the accountclosed. Duty to provide notice of delinquency of accounts This provision requires a creditor, when furnishing information concerning a delinquent account being placed for collection, charged to profit or loss, or subjected to a similar action, to within 90 days after furnishing the information, notify the agency of the month and year of the commencement of the delinquency that imme- diately preceded the action. The creditor is under no obligation to place the delinquent accountfor collection within a specified period, or initially even to report the delinquency. If the creditor later com- mences a collection action, however, and provides such information to a consumer reporting agency, the creditor must provide the month and year of the delinquency immediately preceding the ac- tion. This information will provide the consumer reporting agency with a reference date which it must use to determine obsolescence 340 51 under section 605 of the FCRA (as amended by section 406 of the Committeebill). Likewise, if an account is placed for collectio n with several dif- ferent collection agencies, the reporting period will begin upon the same reference period.This requirement appli es only to information furnished more than 455 days after enactment these provisions. In- formation which is reported prior to that tim e will be unaffected by this provision. Duties offurnishers upon notice of dispute In addition to the duties of furnishers of information concerning the initial provision of information, under sec tion 623(b), a person who has furnished information on a consu mer to a consumer re- porting agency which subsequently is disput ed by the consumer under section 611 of the FCRA must compl ete an investigation with respect to the disputed information and report to the consumer reporting agency the results of that investigation before the end of the 30-day period set forth in 611(a)(1)(A), or the addi- tional 15-day period set forth in sectio n 611(a)(1)(B), whichever is applicable. In addition, the person must re view relevant informa- tion submitted to the consumer reporting ag ency by the consumer and provided to the person in accordance with section 611 (a) (2). Limitations Section 623(c) limits the remedies avail able for, and enforcement powers with respect to, violations of sec tion 623(a). Section 623(c) provides that only wae agesmics sted in cogt ion 621 are authorized to bring any action for a viclation of section 623{a). Actions brought by such agencies for violations of section 6 23(a) may be brought only under section 621. No private right of action may be brought ‘for any violation of section 623 (a). Section 414. Investigative consumer reports Section 414 of the bil! establishes new requirements for inves- tigative consumer reports. Under the F CRA, “investigative consumer report” is a defined term. Generall y, it is a consumer re- port that contains information on a consume r’s character, general reputation, personal characteristics, or mo de of living obtained through interviews with neighbors, friends , or associates of the consumer or with others who may have kno wledge concerning the items of information contained in the report. B ecause an “investiga- tive consumer report” is a consumerrepo rt, all requirements in the FCRA apply to these reports. Section 414 of the bill affords con- sumers new protections with respect to these reports because of the subjective nature of the information they may contain. The bill amends section 606 of the FCRA, which generally pro- vides that a person may not procure or cause to be prepared an in- vestigative consumer report unless the con sumer is provided cer- tain written disclosures. Under the bill, cons umer reporting agen- cies may not prepare or furnish an inv estigative consumer report unless they have received a certification fr om the person who re- quested the report that the required disclos ures have been or will be made. 341 52 The bill further amends section 606 to prohibit consumerreport- ing agencies from making an inquiry for the purpose of preparing an investigative consumer report on a consumer wherethe inquiry, if made by an employer or prospective employer, would violate any applicable federal or state equal employment opportunity law or regulation. Consumer reporting agencies are also prohibited from furnishing an investigative consumer report that includes public record information—such as records of arrests, convictions or tax liens—unless the agency has verified the accuracy of the informa- tion within the 30-day period ending on the date the report is fur- nished. This general rule for investigative consumer reports that contain public record information is not intended to affect the ap- plicability of section 613 of the FCRA which creates a special rule for all consumer reports that contain public record information, where such reports are furnished for employment purposes. Section 414 of the bill further amends section 606 to prohibit a consumer reporting agency from preparing or furnishing an inves- tigative consumer report containing information adverse to the consumer obtained through personal interviews with neighbors, friends, or others who have knowledge of such item of information unless (1) the agency has followed reasonable procedures to obtain confirmation of the information from an additional source that has independent and direct knowledge of the information or (2) the per- son interviewed is the best possible source of the information. This provision is intended to help guard against unsubstantiated infor- mation in investigative consumer reports. For example, if a consumer reporting agency preparing an investigative report is in- formed by a consumer's neighbor that the consumer fails to pay rent on time, the agency would have to make reasonable efforts to obtain confirmation of that information from a person with inde- pendent and direct knowledge—in this case the consumer's land- lord. Section 415. Increased criminal penalties for obtaining information under false pretenses Section 415 of the bill increases the criminal penalties that may be imposed under sections 619 and 620. Section 619 imposes pen- alties on persons who obtain information from a consumerreport- ing agency underfalse pretenses. Section 620 provides for penalties against any officer or employee of a consumer reporting agency who knowingly or willfully provides information from the agency's files to a person not authorized to receive such information. Section 416. Administrative enforcement Section 416 amends the administrative enforcement section of the FCRA (section 621) to enhance the FTC’s enforcement author- ity with respect to entities within its jurisdiction. By providing the FTC with the power to enforce provisions of this title in the same manner as if the violation had been a violation of any FTC trade regulation rule, the Committee gives the FTC the authority to seek civil money penalties for violations of the Act, unless other excep- tions apply. This authority is consistent with the FTC's authority to seek civil penalties under the Equal Credit Opportunity Act and the Fair Debt Collection Practices Act. 342 53 However, section 416 limits the authority of the FTC t o seek, and the courts to impose, any civil penalty on a person for a violation of section 623(a) (1). Specifically, no civil penalty may be imposed on a person for a violation of section 623(a)(1) un less: (i) the person has been enjoined from committing the violation, or ord ered not to commit the violation, in an action brought by or on behalf of the FTC: and(ii) the person has violated the injunction or o rder. More- over, no civil penalty may be imposed for any vio lation occurring before the date of the violation of the injunction or order. This section also clarifies that enforcement of the FC RA in con- nection with entities that are subject to enforc ement under section 8 of the Federal Deposit Insurance Act will be con ducted by the regulatory authorities specified in the Federal Depo sit Insurance Act. Section 417. State enforcementofFair Credit Reporting A ct Section 417 amends section 621 of the FCRA by ad ding a new subsection (c) that permits state officials to enfo rce the FCRA. This subsection is intended to enhance the states” ability to address consumerreporting issues within each state. State attorneys gen- eral are frequently the first governmental agency t o which consum- ers turn when they experience consumer reporting p roblems. Section 621{c)(1)(A), as added by the bill, per mits the chief law enforcement officer of a state, or an official or agency designated by a state, to bring an action to enjoin violations off the FCRA. Under section 621(c}(1)(B), any such state of ficial may also bring an action unm velail uf its rosidonts to recover dama ges for which a defendant is Hable te such residents under the c ivil liability pro- visions of the FCRA as a result of a negligent or willful violation of the FCRA or damagesof not more than $1,000 for each such vio- lation. The Committee intends that no action broug ht by a state of- ficial under section 621(c)(1)(B) will be deem ed a class action by virtue of the state seeking to recover damages on b ehalf of its resi- dents. Although section 623(c), as added by the bill, bars private citi- zens from bringing suit against furnishers of informa tion for viola- tions of certain duties imposed on them, this bar doe s not apply to an appropriate state official who brings an action, under section 621101)(B), on behalf of state residents for v iolations of section 623(a) (2), (3),(4) or (6). In such actions, the state could recover damages, which would be awarded toits injured citiz ens, for which the furnisher would have been liable to those citiz ens under the FCRA butfor section 623(c). Actions brought under 621(¢)(1)(A) and 621( c)(i)(B) may be brought in any appropriate United States district co urt or in any other court of competent jurisdiction. Any action th at may be brought under section 621(0 is in addition to wha tever actions and remedies may be available understate law. Under section 621(c)(2), as amended by the bi ll, a state is re- quired to serve written notice to the FTC or the appropr iate federal regulator prior to filing an action under 621() V C) or 621(c)(1)(B). If prior notice is not feasible, the state must serve s uch notice im- mediately upon instituting the action. The FTC or ap propriate reg- 343 54 ulator may appear as an intervenor in any state’s action and my file appeals. Section 621 (c)(3) provides that, for purposes of bringing an action under section 621(0, nothing in the section shall prevent the chief law enforcement officer of a state or an official or agency des- ignated by a state from exercising the powers conferred on these officials by state law to conduct investigations, administer oaths or affirmations, or to compel the attendance of witnesses or the pro- duction of evidence. Under section 621{c)(4), whenever the FTC or other appropriate federal regulator has instituted a civil action for violation of the FCRA, no state may, during the pendency of the action, bring an action under section 621(c) against any defendant named in the FTC's or regulator's complaint for any violation of the FCRA alleged in the complaint. Section 621(c)(5) provides that a state may not bring an action under section 621(c) against a person for a violation of section 623(a)(1) unless the person has been enjoined from committing the violation, in a action previously brought by the state under section 621(c)(1)(A), and the person has violated the injunction. In any ac- tion brought by a state for the violation of such an injunction, the state may not recover any amounts for any violation incurred be- fore the date of the violation of the injunction on which the action is based. Section 418. Federal Reserve Board authority Section 418 of the bill adds to section 621 a new subsection (e) which gives authority to the Federal Reserve Board to issue inter- pretations of the FCRA with respect to financial institutions or to the holding companies and affiliates of such institutions, in con- sultation with other specified federal banking regulatory agencies. Section 419. Preemption of State law Section 419 amendssection 623 of the existing FCRA, redesig- nated as section 624 by this Act. Section 624 provides that certain provisions of the FCRA preempt any corresponding provisions of state law. Morespecifically, under section 624, no state or local au- thority may impose any requirement, prohibition or other provision with respect to any subject matter regulated under Section 604(c) or (e) relating to prescreening. Section 604 (c) and {e), among other things, provide that a consumer reporting agency may furnish prescreened lists in connection with a firm offer of credit or insur- ance, provided that the consumer reporting agency has established the opt-out notification system required under section 604 and the consumer has not opted out. Section 604 also specifies the informa- tion that a consumer reporting agency may furnish on a prescreened list. Section 624 also preempts any state or local provi- sion relating to the definition of “firm offer of credit or tnsurance” set forth in the Act. In short, under section 624, any state or local authority is precluded from employing or establishing any provi- sions relating to any aspect of prescreening. Section 624 also preempts any state or local law relating to the subject matter of section 611, regarding the time periods for reinvestigation of consumer disputes and the notices established for 344 55 such reinvestigation, except that such pree mption does not apply to any state law in effect on the date of enactm entof this Act. in addition, section 624 completely preem pts any state or local provision relating to the subject matter of section 615(a) and (b), regarding the duties of a person who take s any adverse action with respect to a consumer. Similarly, section 6 24 preempts any state or local provision relating to section 615(d), regarding the duties of a person who uses a consumer report in connection with any credit or insurance transaction that is not in itiated by the consumer and that consists of a firm offer of credit or in surance. Further, section 624 preempts any state or local provisio n relating to the subject matter of section 615(e), regarding the duti es of a person who uses a consumer report in connection wit h any direct marketing trans- action that is not initiated by the consumer. Moreover, section 624 preempts any state or local provision relat- ing to the subject matter of section 605 rela ting to information con- tained in consumerreports, except that su ch preemption does not apply to any state law in effect on the date of enactment of this Act. In addition, section 624 preempts any sta te or local law with re- spect to the exchange of information amo ngaffiliated persons and preempts any state or local law with resp ect to the form and con- tent of any disclosures required to be mad e under section 609(c). Finally, section 624 preempts any state or local law relating to sec- tion 623(b)(2), except that such preempti on does not apply to any state law in effect on the date of enactment of this Act. By preemptng state aud lucal provis ions relating fo the subiect matter reguiaied by these provisions of the FCRA, section 624 es- tablishes the FCRA as the national un iform standard in these areas. This section recognizes the fact t hat credit reporting and credit granting are, in many aspects, national in scope, and that a single set of Federal rules promotes oper ational efficiency for in- dustry, and competitive prices for consum ers. However, section 624 does not supersede any settlement, agre ement, or consent judg- ment between any state attorney general and any consumerreport- ing agency in effect on the date of enactm entof this Act, and does not supersede any provision of sta te law which is enacted after January 1, 2004, states explicitly that th e provision is intended to supplement this Act, and gives greater protection to consumers than is provided underthis Act. Section 420. Action by FTC and Federal Res erve Board While the Committee has included preem ption provisions in order to provide for national uniformity in ma ny of the disclosures and procedures required by the provisions in t his bill, the Commit- tee is concerned that consumers must be pro tected adequately and that the protections should continue to evo lve as technology and the economy change. Therefore, section 420 provides that the FTC may, after opportunity for comment and c onsultation with state and Federal agencies, impose on entities subj ect to FTC jurisdiction more stringent requirements than thos e created by several of the sections of this bill that are preempted by s ection 419. In particu- lar, the FTC may impose more stringent requi rements in the areas 345 56 of reinvestigation time periods, adverse action disclosures, prescreening disclosures, and the notices of consumers”rights. The Committee has provided the FTC with the authority to mod- ify these provisions to ensure that the disclosures and procedures required by the bill remain effective to the greatest extent prac- ticable. The Federal Trade Commission has suggested, for instance, that the 30 day reinvestigation period may be unnecessarily long in the future as technology allows reinvestigations to be accom- plished more quickly. The Committee has included this provision to enable the Commission to shorten the 30-day period if it becomes necessary. Any modifications adopted by the FTC apply only to en- tities within the jurisdiction of the FTC. The bill also authorizes the FRB to impose more stringent requirements on persons de- scribed in paragraphs(1), (2), of (3) of section 621(b) of the FCRA ~ or on the holding companies and affiliates of such persons. Additionally, the Committee understands that states have the power to protect their own citizens, including protection from abuses in the credit reporting industry. Therefore, the FCRA, as amended by the Committee bill will not infringe upon the rights of states to legislate more stringent requirements thatfall outside the scope of those areas specifically preempted to the extent such re- quirements are not inconsistent with any provisions of the FCRA. Section 421. Amendment to Fair Debt Collection Practices Act This provision amends Section 807(11) of the Fair Debt Collec- tion Practices Act. It is intended to harmonize inconsistent judicial interpretations regarding Section 807(11). A similar provision was included in S. 783, as reported by the Committee during last Con- gress, and the current language was the productof negotiations be- tween House and Senate Banking Committee staff. Many of the provisions agreed by the staffs during these negotiations were in- cluded in S. 709 as introduced this Congress. Most of these provi- sions were likewise incorporated in Title IV of this bill; the provi- sion incorporated in Section 421 was amongstthese provisions. Section 422. Furnishing consumer reports for certain purposes Section 422 sets forth a provision that allows agencies authorized by law to enforce child support orders to obtain consumer reports for the purpose of establishing child support obligations and deter- mining the appropriate level of payments. The Committee believes that this provision will result in a more efficient and cost-effective process for obtaining reports against parents who fail to provide court-ordered child support payments. This provision further provides that the person who is the sub- ject of the consumer report must be provided 10 days prior written notice that the report will be requested, and also provides that consumerreports obtained in furtherance of establishing child sup- port payment obligations cannot be used or shared by the state or local agency for any other proceedings. In addition, the provision requires that the state or local agency take steps to maintain the confidentiality of consumerreports. 346 57 Section 423. Disclosure of information and consumer rep orts to FBI for counter-intelligence purposes This section creates a new section 625 which grants the Fe deral Bureau of Investigation the authority to obtain cert ain information about a consumer when investigating foreign counterinte lligence activities. Since the late 1980's, the FBI has been seeking each ye ar to in- clude in the House and Senate intelligence authorizatio n bills a “national security letter” exemption from the FCRA to r equire consumer reporting agencies to provide the FBI with cons umerre- ports of suspected terrorists upon a certification by the Di rector of the FBI or the Director’s designee. The House and Senate commit- tees have repeatedly refused to grant the FBI this extra ordinary authority. Because of the recent and notorious terror ist activities in the United States, the Committee believed that giving the FBI ad- ditional, but limited, authority to obtain consumer infor mation and reports on certain suspects would be appropriate on a te mporary and experimental basis. This section is intended to afford the FBI more ready acc ess to consumer information, but only upon a certification or, if seeking a consumer report, a showing in court that: (1) the c onsumerinfor- mation is necessary for the conduct of an authorized forei gn coun- terintelligence investigation and,if seeking more than id entifying information (which requires a different showing), (2) there ar e spe- cific and articulable facts giving reason to believe that the consumer about whom information is sought is a foreig n power or an agent of a foreign power and is engaging or has engaged in international terrorism or clandestine intelligence acuvit ies Ula involve or may involve a violation of criminai statutes. With new section 625, the Committee did not extend to the FBI unchecked authority to seek consumer information on suspected ind ividuals, as would be the case under the national security letter exemption, but rather gave the agency a streamlined process for o btaining such information where warranted. Furthermore, in response to the FBI's stated concerns abo ut leaks in the course of counterintelligence investigations, t he Com- mittee provides that court actions to obtain consumer repor ts under section 625 be conducted in camera. Section 625 instructs the FBI to report to the House and S enate intelligence committees and banking committees on a semia nnual basis about the use of this section. The FBI's authority t o obtain consumer information and reports under section 625 e xpires 5 years after the date of enactment of these amendments t o the FCRA. Section 424, Effective dates Section 424 sets forth the effective dates for amendments made by this title. In addition, section 424(c} provides that any p erson or other entity that is subject to the requirements of the Act may, at its option, comply with any provision of this Act prior to the effec- tive date of the relevant provision, provided that such person com- plies with each of the corresponding provisions of the Act whic hre- late to that particular provision. For example, this section would allow creditors to voluntarily comply with the prescreening provi- 347 58 sions of the Act prior to the effective date of the Act, provided that the credit bureau which furnishes the prescreening list complies with all applicable prescreening requirements of the Act and the Sia. furnishes the prescreening notice required under section 615(d). Section 425. Relationship to other law Section 425 provides that noneof the provisions of this title shall supersedeor otherwise affect section 2721 of title 18, United States Code. Section 501, Short title Section 502. Federal Deposit Insurance Act amendment Section 502 amends the Federal Deposit Insurance Act to clarify that federal banking agencies are not subject to strict liability for the release of hazardous substances on property acquired through receivership, conservatorship, liquidation, winding up the affairs of an insured depository institution or its subsidiary, or through criminal, civil or administrative enforcement proceedings. An agen- cy may be held liable if it caused or contributed to the release of the hazardous substance. Federal banking agency liability under state law is limited to the value of the agency's interest in the property. Further, the agency may negotiate with the State for a settlement of property. This section also provides that the immunity of the federal bank- ing agency extends to first subsequent purchaser of the property; unless the purchaser would otherwise be liable due to a prioror af- filiated relationship with the property; a failure to take reasonable steps to stop the release or threatened release to protect the public health and safety; or the fact that subsequent purchasers caused or contributed to the release of the hazardous substance on the . property. If, however, a federal or state environmental agency or- ders the federal banking agency to remediate or take corrective ac- tion due to the subsequent purchaser’s failure to take reasonable steps to do so, the subsequent purchaser must reimburse the fed- eral banking agency for the cost of the clean-up (to the extent that the clean-up increased the fair market value of the property). In addition, neither the federal banking agency or the subse- quent purchaser may be subject to a lien for damages existing at the time of the transfer of the property. The federal banking agen- cy is exempted from any law requiring the agency to grant any cov- enants to remediate pursuant to their acquisition of a property. Section 503. CERCLA amendments Lender liability Section 503 clarifies the liability of lenders under CERCLA or Subtitle I of the Solid Waste Disposal Act for the release or threat- ened release of a hazardous substance on property: held or con- trolled by the lender through foreclosure; subject to a security in-- terest; or held, subject to control, pursuant to terms of a lease or’ extension of credit. Lenders are only liable for the actual benefit conferred upon the lender by the removal of the hazardous sub- 348 59 stance. This limitation does not apply, ho wever, if the lender caused or contributed the release of the hazar dous substance. This section also directs the Administrator of the Environmental Protection Agency, after consultation with the FDIC, to publish guidelines 180 days from enactment of this se ction to assist lenders in developing adequate procedures to evalua te environmental risk and damageof property before extending credit . Fiduciary liability CERCLAis also amended toprovide that fid uciaries may not be held liable for damages in excess of the asset s held in the fiduciary capacity that are available to indemnify the fiduciary. This limita- tion does not apply where a person is liable under CERCLA inde- pendentof any action or ownership as a fidu ciary. A fiduciary may also be personally liable when its failure to exercise due care caused or contributed to the release of the h azardous substance. A fiduciary may not, however, be held personall y liable for: undertak- ing action directed by an on-scene coordinat or or undertaking cor- rective action; addressing the problemsof the hazardous substance by lawful means; ending the fiduciary rel ationship; including a term or condition relating to compliance with environmental law in the fiduciary agreement; monitoring or unde rtaking inspection of the property; providing financial or other advi ce to involved parties; or altering the terms and conditions of the financial relationship. Fiduciaries are also notliable for declining to take any of these ac- tions. Detinition of owner or vper aus The section defines the term “owner or opera tor” under CERCLA as excluding the United States, its department s, agencies, instru- mentalities, or any conservator or receiver app ointed by them. Ex- empt entities must acquire the property by receivership, conservatorship, liquidation, in connection with the exercise of any seizure or forfeiture, or pursuant to law, and m ust not participate in managementthatresults in the release of hazardous substances. Individuals not participating in management are excluded from the definition of “owner or operator” even if they hold an indicia of ownership in the property primarily for the purpose of protecting their security interest. “Owner or operator” a lso does not include persons whe did not participate in managemen tof a vessel or facil- ity prior to the foreclosure even if subsequent t o foreclosure meas- ures are taken to preserve, protect or prepare t he vessel or facility for resale as long as the divestment takes pla ce in a commercially reasonable time and under commercially reason able terms. Definition ofparticipation in management The section clarifies that “participation in mana gement” requires action in management or organizational affairs , not just having in- fluence or the unexercised right to control. It i ncludes a person who exercises decision-making control over enviro nmental compliance, is responsible for hazardous substance h andling, or exercises day- to-day decision-making control with respec t to environmental com- pliance or other operational aspects. “Participa tion in management” does not include: action taken prior to the cre ation of the security 349 60 interest; holding or releasing such interest; including a condition for environmental compliance in a contract; monitoring or under- taking terms and conditions on a credit agreement; monitoring in- spections of the facility; requiring or conducting action to correct the release of a hazardous material; agreeing to alter the terms of the credit or security interest; or exercising other remedies for breach, so long as these activities do not rise to the levelof “partici- pating in management”. Section 504. Solid Waste Disposal Act amendments Section 504 amends the Solid Waste Disposal Act to incorporate by reference the changes made by section 503 to CERCLA regard- ing lender andfiduciary liability and the definition of “owner or op- erator”. Section 505. Effective date The amendments made by these sections are applicable to any claim not finally adjudicated as of the date of enactment. Section 601. Electronic Fund Transfer Act clarification Clarifies that the Electronic Fund Transfer Act (EFTA) does not apply to stored value cards or value stored on such cards to the ex- tent that such devices are used as a cash equivalent. Transactions where the card is actually used to access an “account” (as defined in the EFTA) to load value onto the card would continue to be sub- ject to the EFTA. For multipurpose cards that offer both stored value and debit card features, this section applies only to the stored value feature and does not affect the application of existing law to the debit card or credit card features of the card. Section 602. Treatment of claims arising from breach of post-ap- pointment agreements Section 602 clarifies that any final judgment for monetary dam- ages for breach of contract entered against a federal banking agen- cy shall be considered to be an administrative expense of the con- servator or receiver if the agreement was made after the appoint- ment of the agency as administrator. Section 603. Fictitious financial instruments This provision criminalizes the production and sale of phonyfi- nancial instruments and designates counterfeiting as a Class B fel- ony. Section 604. Amendments to the Truth in Savings Act Section 604 repeals sections 268 and 271 of the Truth in Savings Act (TISA). Section 268 of TISA required institutions to makeperi- odic statements of account information to consumers including APY, interest earned, fees imposed, and the numberof days in the reporting period. Section 271 of TISA provided for civil liability (in- dividual and class actions) for violations of TISA. TISA compliance remains subject to administrative enforcement, with violations sub- ject to administrative action. This section also exempts non-auto- mated credit unions from the requirements of TISA. Section 604 further eliminates the requirement that institutions provide subse- 350 61 quent account disclosures for automatically renewable time depos- its with a term of 30 days or less. The Com mittee is aware of the Board's implementations of Section 266(a)(3) in Regulation DD, dealing with the timing and content of di sclosures for renewable time deposits. By adopting this amendment, Congress does not in- tend to alter or raise questions about the appropriateness of the Board's rules in Regulation DD for tim e accounts with a term ex- ceeding 30 days. Section 605. Consumer Leasing Act amendmen ts Section 605 provides the Federal Reserve Boa rd with the author- ity to adopt appropriate regulations, comment ary, and model forms to provide useful information to the con sumer on leasing. The sec- tion also revises the advertising provisions o f the Consumer Leas- ing Act to require clear and conspicuous d isclosure of lease terms when a lease is promoted through an adver tisement. If the lease advertisement states the amount of any payment or states that no initial payment is required, the advertiseme nt must also state the fact that the transaction is a lease, t he total initial payments re- quired, whether a security deposit is required, the number, amounts and timing of scheduled payments and any charges that may be imposed at the end of a lease term . Owners or personne: of the medium in which the advertisement appeared are notliable for violations of these advertising requiremen ts. Section 606. Credit union study Cantinn ANB renuires the Secretary of the Treasury in coordina - tion with the Federal Reserve Board, the FU L, tne UCC aud ine National Credit Union Administration to c onduct a study and re- view of the oversight and supervisory pract ices of the NCUAre- garding the National Credit Union Share Ins urance Fund. Section 607. Report on the reconciliation of d ifferences between reg- ulatory accounting principles and generally accepted accounting principles Section 607 requires each appropriate banki ng agency to submit a report within 180 days to the Banking C ommittees of the House and Senate detailing those actions they are taking to conform the requirements of GAAP and RAPas they app ly to reports and state- ments filed with the agency. Section 608. State-by-state and metropolitan area-by-metropolitan area study of bank fees Section 608 amends Section 1002 of FIR REA to require the Beard to study bank fees at the state and me tropolitan statistical area level to identify any discernible national trend in the cost and availability of retail banking services and fees . Section 609. Prospective application ofgold clauses in contracts Section 609 concerns gold clauses in re al estate contracts. Gold clauses are sometimes used in real es tate contracts to specify that paymentis to be tendered in gold or in a dol lar amount equivalent to gold. In 1933, gold clauses were made u nenforceable. In 1977, the Congress permitted gold clauses to be us ed again in real estate 351 62 contracts. This provision would clarify that the ban on gold clauses continues for those contracts prior to 1977 and cannot be revived, through assignments or novations, unless the parties specifically agree toit. . REGULATORY IMPACT STATEMENT In compliance with paragraph 11(b) of rule XXVIof the Standing Rules of the Senate, the Committee makes the following statement regarding the regulatory impact ofthe bill. 5. 650 significantly reduces the regulatory paperwork and report- ing burdens on financial institutions by eliminating, modifying, streamlining and improving various regulatory and statutory re- quirements. Manyofthebill's provisions would also lower the cost of regulation by decreasing the numberof applications that must be processed and reviewed by federal banking regulators. CHANGESIN EXISTING LAW In the opinion of the Committee, it is necessary to dispense with the requirements of paragraph 12 of the rule XXVI of the Standing Rules of the Senate in order to expedite the business of the Senate. COST OF THE LEGISLATION The Committee has requested from the Congressional Budget Of- fice an estimate of the costs which would be incurred in carrying out S. 650. Due to unforseen delays at the Congressional Budget Office, however, it is the Committee's view that it is impracticable to obtain a cost estimate in accordance with the requirements of subparagraphs(1) and (2) of rule XXVI(11)(a) at this time. U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, December 14, 1995. Hon. ALFONSE M. D'Amato, Chairman, Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, DC. DEAR MR. CHAIRMAN: As requested, CBO is preparing a cost esti- mate for S. 650, the Economic Growth and Regulatory Paperwork Reduction Act of 1995, as ordered reported by the Senate Commit- tee on Banking, Housing, and Urban Affairs on September 27, 1995. We have not completed our analysis of the bill yet, but we will complete and transmit the cost estimate as soon as possible. We expect to provide the estimate no later than December 22, 1995, but will make every effort to complete it earlier in the week. If you have any further questions, we will be pleased to answer them. The staff contacts are Mary Maginniss and Mark Booth. Sincerely, JUNE E. O'NEILL, Director. 352 ADDITIONAL VIEWS OF SENATOR ROD GRAMS As a strong supporter of regulatory paperwork re duction, I was pleased to support S. 650. This legislation is entitl ed the “Economic Growth and Regulatory Paperwork Reduction Act of 1995,” and with good reason. The provisions in this bill will go a long way in r educing the reg- ulatory burden which is currently preventing e ntrepreneurs from having access to the credit they need to create job s. By passing this legislation, we have made a major step forward in removing these obstacles to economic growth. There are, however, some outstanding problems left unaddressed by the Banking Committee, problems which I ho pe we will take up in the near future. For example, one of the biggest obstacles to credit availability is the Community Reinvestment Act (CRA). The C RA wasoriginally designed to help financial institutions meet th e credit needs of their local communities. But as well inte nded as that goal may have been in 1977, the CRA hasresulted in just t he opposite. The additional paperwork burden, reporting re quirements, and increased examinations that come from the CRA have made it even more difficult for banks and thrifts to do the jo b they're supposed to do. Nowhere is that trend more evident than in the case of small community banks. These banks, the neighbo rhood institutions which are the foundation ofour financial system, have found it in- creasingly difficult to meet the requirement of th e CRA and remain in business. Ironically, it’s these very sameinstitutions whi ch have done the best job in lending to their communities in th e first place. If a small community bank does not do business in it s local community, it goes outof business. In other words, for small banks, community lending is not a convenience; it means survival. During the Committee markup of S. 650, I offer ed an amend- ment which would have exempted small banks— those with assets under $250 million—from CRA requirements. Giv en the consensus of the Banking Committee not to include CRA p rovisions in the bill, I withdrew that amendment. I do, however, continue to urge the Banking Co mmittee to ad- dress CRA reform during the 104th Congr ess. If we are serious about expanding community lending and preserv ing smail cormmu- nity banks, something must be done to curb t he excesses of the CRA. Along the same lines, I also offered an amendm ent during the Committee markup which would have added a fi ve-year sunset pro- vision to five separate laws: the CRA, the Trut h in Lending Act, the Truth in Savings Act, the Home Mortgage D isclosure Act, and the Real Estate Settlements Procedures Act. (63) 353 64 I offered this amendment because I do not believe laws passed by Congress should beleft on the books for eternity without further review and examination. If a law serves a purpose and does so ef- fectively, it should and will be reauthorized by Congress.If not, the law and the regulations promulgated under that law should expire. Unfortunately, Congress has repeatedly failed to meet its respon- sibility to taxpayers and consumers in reviewing the laws it passes. The U.S. Code is filled with outdated statutes which servelittle or no purpose, and some even have a negative impact on consumers and taxpayers. I believe it is the job of all authorizing committees to regularly review the laws already on the books before they pass newones. Sunsetting laws does not mean repealing them. Laws would only expire if Congress failed to meet its responsibility to reexamine and renew these statutes within a specified period of time. If Congress is willing to do its job, sunset doesn’t have to meanlights out. What it would guarantee is that every law passed by Congress will be reviewed again, that mistakes will be corrected, that bad laws will be forced to expire and good laws allowed to continue. Nothing sums up the arguments for sunsetting laws better than the response by Federal Reserve Chairman Alan Greenspan to a question I posed: “If a law is sound, it will be repassable after a period of time. It should not just go on unnoticed.” Truer words were never spoke. In the name of good government, I will continue my efforts to ensure that laws under the jurisdiction of the Banking Committee and all other authorizing committees will not go forward without a sunset. Rop GRAMS. 354 ADDITIONAL VIEWS BY SENATORS MACK, FAIRCLOTH, BEN- NETT, oie GRAMS, ON THE CONSUMER REPORTING RE- FORM ACT The intention of this bill is to roll back some o f the unnecessary regulatory burdens faced by our nation’s fina ncial institutions in order to make them more competitive. This legi slation is a good ef- fort to free up our financial institutions from r egulations unrelated - to safety and soundness that. cause these institutions to focus on compliance with federal regulations rather than serving their cus- tomers. The Consumer Reporting Reform Act (CRRA) wh ich amends the Fair Credit Reporting Act was added to S. 650 in the Senate Bank- ing Committee by voice vote. Although a few of the provisions of the CRRA provide some regulatory relief from t he Fair Credit Re- porting Act, on balance the CRRA adds new bu rdens and increases liability for credit grantors that voluntarily pro vide information to credit bureaus. This legislation does not belon g en a bill intended to eliminate unnecessary burdens imposed on f inancial institutions. While the Consumer Reporting Reform Act pa ssed the Senate in the 103rd Congress, no hearings have been h eld in the 104th Con- gress. Unless the burdens imposed by the C RRA are significantly PeGUCed, Lilest pruyisiuns Should net be inclu ded in any regulatory +tt is ultimately sent to the President for his sig nature. CONNIE MACK. LAUCH FAIRCLOTH. ROBERT F. BENNETT. Rop GRAMS. _i2.f€ bl varelicf bill tha O (65) 355 EXHIBIT F 104TH CONGRESS REPORT 2d Session HOUSE OF REPRESENTATIVES 104-863 MAKING APPROPRIATIONS FOR THE DEPARTMENT OF DE- FENSE FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1997, AND FOR OTHER PURPOSES SEPTEMBER 28, 1996.—Ordered to be printed Mr. LIVINGSTON,from the committee of conference, submitted the following CONFERENCE REPORT [To accompany H.R. 3610] The committee of conference on the disagreeing votes of the. two Houses on the amendmentof the Senate to the bill (H.R. 3610) “making appropriations for the Department of Defense for thefis- cal year ending September 30, 1997, and for other purposes,” hav- ing met, after full and free conference, have agreed to recommend and do recommendto their respective Houses as follows: That the House recede from its disagreement to the amend- ment of the Senate, and agree to the same with an amendment, as follows: In lieu of the matter stricken and inserted by said amendment, insert: DIVISION A That the following sums are appropriated, out of any money in the Treasury not otherwise appropriated, for the several departments, agencies, corporations and other organizational units of the Govern- mentfor the fiscal year 1997, and for other purposes, namely: TITLE I—OMNIBUS APPROPRIATIONS Sec. 101(a) For programs, projects or activities in the Depart- ments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1997, provided as follows, to be effec- tive as if it had been enacted into law as the regular appropriations Act: 27-409 103 356 2 AN ACT Making appropriations for the Departments of Commerce, Justice, ana State, the Judiciary, and related agencies for the fiscal year ending September 30, 1997, and for other purposes : TITLE I—DEPARTMENTOF JUSTICE GENERAL ADMINISTRATION SALARIES AND EXPENSES For expenses necessary for the administration of the Depart- mentof Justice, $75,773,000 of which not to exceed $3,817,000 is for the Facilities Program 2000, to remain available until expended: Provided, That not to exceed 43 permanent positions and 44 full- time equivalent workyears and $7,477,000 shall be expended for th e Department Leadership Program exclusive of augmentation that oc- curred in these offices in fiscal year 1996: Provided further, Tha t not to exceed 41 permanent positions and 48 full-time equiva lent workyears and $4,660,000 shall be expended for the Offices of Legis - lative Affairs and Public Affairs: Provided further, That the latt er two aforementionedoffices shall not be augmented by personnel de- tails, temporary transfers of personnel on either a reimbursable o r non-reimbursable basis or any other type of formal or in, orma l transfer or reimbursement of personnel or funds on either a tem - porary or long-term basis. For an additional amount, for enhancements for the Office of Intelligence Policy and Review and security measures, $3,600,000 ; of which $2,170,000 is for security enhancements: Provide d, That the entire amount is designated by Congress as an emergency re- quirement pursuant to section 251(b)(2)(D)G) of the Balanced Bu dg- st and Emoraencs Noficit Control Act of 1985. as amended.cu ana amengency 1% COUNTER-TERRORISM FUND For necessary expenses, as determined by the Attorney General, $9,450,000, to remain available until expended, to rei mburse any Department of Justice organization for (1) the costs incurred in re es- tablishing the operational capability of an office or facility whi ch has been damaged or destroyed as a result of the bombing of the Alfred P, Murrah Federal Building in Oklahoma City or any do- mestic or international terrorist incident, (2) the costs of providing support to counter, investigate or prosecute domestic or inter- national terrorism, including payment of rewards in connection with these activities, and (3) the costs of conducting a terrorism threat assessment of Federal agencies and their facilities: Provide d, That funds provided under this heading shall be available on ly after the Attorney General notifies the Committees on Appropri a- tions of the House of Representatives and the Senate in accor dance with section 605 of this Act. For an additional amount for necessary expenses, as deter- mined by the Attorney General, $20,000,000, to remai n available until expended, to reimburse any Department of Justice orga niza- tion for (1) the costs incurred in reestablishing the operational capa- bility of an office or facility which has been damaged or dest royed as a result of any domestic or international terrorist incid ent, or (2) the costs of providing support to counter, investigate or p rosecute domestic or international terrorism, including payment of rewards 104 357 405 (A) collecting, processing, maintaining, transmitting, or reporting data about financial events; (B) supporting financial planning or budgeting activi- ties; (C) accumulating and reporting costs information; or (D) supporting the preparation of financial statements. (6) MIXED SYSTEM.—The term “mixed system” means an information system that supports both financial and nonfinancial functions of the Federal Government or com- ponents thereof. SEC. 807. EFFECTIVE DATE. This title shall take effect for the fiscal year ending September 30, 1997. SEC. 808. REVISION OF SHORTTITLES. (a) Section 4001 of Public Law 104-106 (110 Stat. 642; 41 U.S.C. 251 note) is amended to read as follows: “SEC. 4001. SHORT TITLE. “This division and division E may be cited as the ‘Clinger- Cohen Act of 1996’.”. (6) Section 5001 of Public Law 104-106 (110 Stat. 679; 40 U.S.C. 1401 note) is amended to read as follows: “SEC. 5001. SHORT TITLE. “This division and division D may be cited as the ‘Clinger- Cohen Act of 1996’.” (c) Any reference in any law, regulation, document, record, or other paper of the United States to the Federal Acquisition Reform Act of 1996 or to the Information Technology Management Reform Act of 1996 shall be considered to be a reference to the Clinger- Cohen Act of 1996. This Act may be cited as the “Treasury, Postal Service, and General Government Appropriations Act, 1997”. LITLE II—ECONOMIC GROWTHAND REGULATORYPAPERWORK REDUCTION SEC. 2001. SHORT TITLE; TABLE OF CONTENTS; DEFINITIONS. (a) SHORT TiITLE.—This title may be cited as the “Economic Growth and Regulatory Paperwork Reduction Act of 1996”. (b) TABLE OF CONTENTS.—Thetable of contents for this title is as follows: TITLE II—ECONOMIC GROWTHAND REGULATORY PAPERWORK REDUCTION Sec. 2001. Short title; table of contents; definitions Subtitle A—Streamlining the Home Mortgage Lending Process Sec. 2101. Simplification and unification of disclosures required under RESPA and TILA for mortgage transactions. Sec. 2102, General exemption authority for loans. Sec. 2103, Reductions in Real Estate Settlement Procedures Act of 1974 regulatory urdens. Sec. 2104, Waiver for certain borrowers, Sec. 2105, Alternative disclosures for adjustable rate morigages. 105 358 481 ment of the final rule made after the date of enactment of this subparagraph.”. SEC, 2504. LENDER LIABILITY RULE. (a) IN GENERAL.—Effective on the date of enactment of this A ct, the portion of the final rule issued by the Administrator of t he Envi- ronmental Protection Agency on April 29, 1992 (57 Fe d. Reg. 18,344), prescribing section 300.1105 of title 40, Code of Federal Regulations, shall be deemed to have been validly issued und er au- thority of the Comprehensive Environmenial Response, Co mpensa- tion, and Liability Act of 1980 (42 U.S.C. 9601 et seq.) and to have been effective according to the terms of the final rule. No ad ditional judicial proceedings shall be necessary or may be held w ith respect to such portion of the final rule. Any reference in that porti on of the final rule to section 300.1100 of title 40, Code of Federal Regula- tions, shall be deemed to be a reference to the amendmen ts made by this subtitle. (b) JUDICIAL Review.—Notwithstanding section 113(a) of the Comprehensive Environmental Response, Compensation, an d Li- ability Act of 1980 (42 U.S.C. 9613(a)), no court shall have jur isdic- tion to review the portion of the final rule issued by the A dminis- trator of the Environmental Protection Agency on April 29, 19 92 (57 Fed. Reg. 18,344) that prescribed section 300.1105 of title 40, Code ofFederal Regulations. (ec) AMENDMENT.—No_ provision of this section shail be con- strued as limiting the authority of the President or a delegee of the President to amend the portion of the final rule issued by the Ad- ministrator of the Environmental Protection Agency on A pril 29, 1999 (K7 Fed. Reg. 18.344), prescribing section 300.1105 oftitle 40, Code of Federal Regulations, consistent with the amendmen ts made by this subtitle and other applicable law. (d) JUDICIAL Review.—Noprovision of this section shall be c on- strued as precluding judicial review of any amendment o f section 300.1105 of title 40, Code of Federal Regulations, made a fter the date of enactmentof this Act. SEC, 2505. EFFECTIVE DATE. The amendments made by this subtitle shall be applicable with respect to any claim that has not been finally adjudicated as of the date of enactmentof this Act. Subtitie F—Miscelianeous SEC. 2601. FEDERAL RESERVE BOARD STUDY. (a) STUDY OF ELECTRONIC STORED VALUE PRODUCTS.— (1) Srupy.—The Board shall conduct a study of electronic stored value products which evaluates whether provisions of the Electronic Fund Transfer Act could be applied to such produc ts without adversely impacting the cost, development, and op er- ation of such products. (2) CONSIDERATIONS.—In conducting its study under para- graph (1), the Board shall consider whether alternatives to reg- ation under the Electronic Fund Transfer Act, such a s allow- ing competitive market forces to shape the development an d op- 106 359 483 tion, to transmit, transport, ship, move, transfer, or attempts or causes the same,to, from, or through the United States, any false or fictitious instrument, document, or other item appear- ing, representing, purporting, or contriving through scheme or arti- fice, to be an actual security or other financial instrument issued under the authority of the United States, a foreign government, a State or other political subdivision of the United States, or an orga- nization, shall be guilty of a class B felony. “(b) For purposes of this section, any term used in this section that is defined in section 513(c) has the same meaning given such term in section 513(c). “(c) The United States Secret Service, in addition to any other agency having such authority, shall have authority to investigate of- fenses under this section.”. (2) TECHNICAL AMENDMENT.—The analysis for chapter 25 of title 18, United States Code, is amended by inserting after the item relating to section 513 the following: “814, Fictitious obligations.”. SEC. 2604. AMENDMENTS TO THE TRUTH IN SAVINGS ACT. (a) REPEAL.—Effective as of the end of the 5-year period begin- ning on the date of the enactment of this Act, section 271 of the Truth in Savings Act (12 U.S.C. 4310) is repealed. ; (6) ON-PREMISES DISPLAYS.—Section 263(c) of the Truth in Savings Act (12 U.S.C. 4302(c)) is amended— (Ll) by striking paragraph (2); (2) by striking “(1) IN GENERAL.—”: and (3) by redesignating subparagraphs (A) and (B) as para- graphs(1) and (2), respectively, and indenting appropriately. (c) DeposiTorY INSTITUTION DEFINITION.—Section 274(6) of the Truth in Savings Act (12 U.S.C. 4313(6)) is amended by inserting before the period “, but does not include any nonautomated credit union that was not required to comply with the requirements of this title as of the date of enactment of the Economic Growth and Regu- latory Paperwork Reduction Act of 1996, pursuant to the determina- tion of the National Credit Union Administration Board”. (dq) TimzE DEPOsITS.—Section 266(a)(3) of the Truth in Savings Act (12 U.S.C. 4305(a)(3)) is amended by inserting “has a maturity of more than 30 days” after “deposit which”. SEC. 2605. CONSUMER LEASING ACTAMENDMENTS. (a) CONGRESSIONAL FINDINGS AND DECLARATION OF PUR- POSES.— (1) FINDINGS.—The Congress finds that— (A) competition among the various financial institu- tions and other firms engaged in the business of consumer leasing is greatest when there is informed use of leasing; (B) the informed use of leasing results from an aware- ness of the cost of leasing by consumers; and (C) there has been a continued trend toward leasing automobiles and other durable goods for consumer use as an alternative to installment credit sales and that leasing product advances have occurred such that lessors have been unable to provide consistent industry-wide disclosures to fully account for the competitive progress that has occurred. 107 360 484 (2) PuRPOSES.—The purposes of this section are— (A) to assure a simple, meaningful disclosure of le asing terms so that the consumer will be able to comp are more readily the various leasing terms available to the consumer and avoid the uninformed use of leasing, and to p rotect the consumer against inaccurate and unfair leasing pr actices; (B) to provide for adequate cost disclosures that reflect the marketplace without impairing competition and the de- velopment of new leasing products; and (C) to provide the Board with the regulatory autho rity to assure a simplified, meaningful definition and dis closure of the terms of certain leases of personal property for per- sonal, family, or household purposes so as to— (i) enable the lessee to compare more readily the various lease terms available to the lessee; (ii) enable comparison of lease terms with credit terms, as appropriate; and (iii) assure meaningful and accurate disclosures of lease terms in advertisements. (6b) REGULATIONS.— 1) IN GENERAL.—Chapter 5 of the Truth in Lendi ng Aci (15 U.S.C. 1667 et seq.) is amended by adding at the end the following new section: “SEC. 187, REGULATIONS. “(q) REGULATIONS AUTHORIZED,.— “(1) IN GENERAL.—The Board shall prescribe regu lations to update and clarify the requirements and definit ions applicable 2 Ianon dieeInenree and contracts. and any other issues specift- cally related to consumer leasing, to the extent that the Board determines such action to be necessary— “(A) to carry out this chapter; “(B) to prevent any circumvention of this chapter; or “(C) to facilitate compliance with the require ments of the chapter. “(2) CLASSIFICATIONS, ADJUSTMENTS.—Any regula tions pre- scribed under paragraph (1) may contain classi fications and differentiations, and may provide for adjustmen ts and excep- tions for any class of transactions, as the Boa rd considers ap- propriate. “(h) MODEL DISCLOSURE.— “(1) PUBLICATION.—The Board shall establish and publish model disclosure forms to facilitate compliance w ith the disclo- sure requirements of this chapter and to aid th e consumer in understanding the transaction to which the subje ct disclosure form relates. “(2) USE OF AUTOMATED EQUIPMENT.—In_ establishing model forms under this subsection, the Board sha ll consider the use by lessors of data processing or similar aut omated equip- ment. “(3) USE OPTIONAL.—A lessor may utilize a model disclo- sure form established by the Board under this subsection for purposes of compliance with this chapter, at th e discretion of the lessor. 108 361 776 SECTION 101(a) DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED AGENCIES APPROPRIATIONS ACT, 1997 The conferees on H.R. 3610 agree with the matter inserted in this subsection of this conference agreement and the following de- scription of this matter. This matter was developed through nego- tiations on the differences in the House and Senate versions of H.R. 3814, the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1997, by mem- bers of the appropriations subcommittee of both the House and Senate with jurisdiction over H.R. 3814. The legislative intent in the House and Senate versions of H.R. 3814 is set forth in the ac- companying House report (H. Rept. 104-676) and the accompany- ing Senate report (S. Rept. 104-353). TITLE I—DEPARTMENTOF JUSTICE GENERAL ADMINISTRATION SALARIES AND EXPENSES The conference agreement includes $79,373,000 for General Administration, instead of $78,493,000 as proposed in the House bill and $70,653,000 as proposed in the Senate-reportedbill. Of the amount provided $3,600,000 is designated by the Congress and the President as emergency requirements pursuant to section 251(b)(2)(D)G) of the Balanced Budget and Emergency Deficit Con- trol Act of 1985, as amended. The conference agreement assumes that fundingis provided in accordance with the House and Senate reports with the following exceptions: Counterterrorism initiative-—The conference agreement pro- vides $3,600,000, the full amount requested by the Administration in its recent budget amendment, to address the increasing threat of domestic and international terrorism. Included in the amount provided is $1,430,000 for the Office of Intelligence Policy and Re- view and $2,170,000 for security enhancements of the Main Justice building andfield offices. The conference agreement also provides $4,700,000 for Federal drug testing initiatives to be administered by the Attorney General in conjunction with the Federal Judiciary, and $2,000,000 for addi- tional staffing for the Office of Professional Responsibility for inves- tigations of allegations of attorney misconduct. The conference agreement includes a provision, as proposed in the Senate-reported bill, that limits the number of positions and amounts for the Department Leadership program, but does not in- clude a provision, as proposed in the Housebill, that eliminates funding for the Office of the Associate Attorney General. The con- ference agreement also includes a provision as proposed in the Sen- ate-reported bill, that freezes legislative and public affairs activi- ties at fiscal year 1995 levels and prohibits these activities from being supplemented by reimbursable and non-reimbursable details. Similar provisions are included under other Departmentof Justice programs as well, in order to ensure that scarce resources are tar- geted to crime-fighting activities. These limitations are not in- 109 362 1177 TITLE X—FEDEKAL FLNANULAL MANAUIVLEULNA IMPROVEMENT The conference agreement does not include any language es- tablishing uniform accounting systems, standards, and rep orting systems in the Federal government. TITLE II-ECONOMIC GROWTH AND REGULATORY PAPERWORK REDUCTION Title IL of the conference report makes a number of changes to Federal banking laws in order to remove unnecessary and redun- dant regulations imposed on the nation’s financial insti tutions without affecting safety and soundness or consumer prote ctions. The title also provides clarity as to when and to what ext ent lend- ers and fiduciaries are liable under Federal environmental laws. In addition, Title II makes a number of reforms to the Fair Cred it Re- porting Act and provides new consumer protections with reg ard to the credit repair industry. Finally, the title calls for the capi taliza- tion of the Savings Association Insurance Fund (SAIF) throug h a one-time assessment on deposits insured by the SAIF. SUBTITLE A—STREAMLINING THE HOME MORTGAGE LENDI NG PROCESS Subtitle A substantially amends the two Federal laws that di- rectly affect the home mortgage lending process: The Truth in Lending Act and the Real Estate Settlement Procedures Act. Thes e laws require disclosures related to the terms of a mortgage ag ree- ment. The sections in this subtitle modernize these home lendin g acts to rellect tne technulugical develupimieiits im tho current mor ketplace and to eliminate unnecessary burdens. SUBTITLE B—STREAMLINING GOVERNMENT REGULATION Subtitle B contains provisions intended to eliminate or revise various application, notice and recordkeeping requirements t hat are currently required of insured depository institutions or holdi ng companies that control such institutions. These provisions pr ovide significant regulatory relief by eliminating costly and time co nsum- ing paperwork for banks and savings associations, without sac rific- ing safety and soundness. SUBTITLE C—REGULATORY IMPACT ON COST OF CREDIT AND CREDIT AVAILABILITY Subtitle C amends various laws and regulations that impose limitations on the manner in which depository institutions, and other financial intermediaries, conduct their business. SUBTITLE D—-CONSUMER CREDIT Subtitle D includes “The Consumer Credit Reporting Reform Act” and the “Credit Repair Organizations Act.” The Cons umer Credit Reporting Reform Act amends the Fair Credit Reportin g Act to address a number of problems that have arisen since its e nact- ment. Many of these problems are a result of ambiguities in the 110 363 1178 statute; other problems have arisen as the credit reporting industry has grown in the wake of information technology advances that have occurred over the last twenty years. The Credit Repair Orga- nizations Act provides new consumerprotections with regard to the credit repair industry. SUBTITLE E—ASSET CONSERVATION, LENDER LIABILITY, AND DEPOsIT INSURANCE PROTECTION This subtitle incorporates the “Asset Conservation, Lender Li- ability, and Deposit Insurance Protection Act.” It amends Federal environmental laws to clarify the liability of lenders and fiduciaries for environmental clean-up of property that secures financing. SUBTITLE F—MISCELLANEOUS Subtitle F includes a number of regulatory clarifications, stud- ies and statutory improvements that are intended to provide more cost-effective delivery of financial services. SUBTITLE G—DEPosIT INSURANCE FUNDS Subtitle G incorporates the “Deposit Insurance Funds Act of 1996”, which provides for the capitalization of the savings associa- tion insurance fund (SAIF) to its designated reserve ratio. The SAIF insures the deposits of savings associations and is adminis- tered by the Federal Deposit Insurance Corporation. Under this subtitle the FDIC is given the authority to assess a one-time spe- cial assessment on ali SAIF-insured deposits, including those held by SAIF members and those banks which have purchased SAIF de- posits. In addition, effective January 1, 1997, the assessment base for payments on the interest on obligations issued by the Financing Corporation (FICO) is to be expanded to include all FDIC-insured institutions, i.e., banks and thrifts. Beginning January 1, 1997 and ending December 31, 1999, banks will pay a FICO-assessment rate one-fifth of that paid by thrifts. After December 31, 1999, banks and thrifts will pay the $780-$800 million FICO interest obligation on a pro rata basis. — Subtitle G raises $3.1 billion in Fiscal Year 1997. TITLE IIJ—COMPETITIVE BIDDING FOR SPECTRUM Title III requires the Federal Communications Commission (the Commission) to assign by means of competitive bidding, con- sistent with international agreements, licenses for wireless sub- scription services for portions of the electromagnetic spectrum lo- cated at 2305-2320 megahertz and 2345-2360 megahertz. The Commission, in adopting procedures for the assignment of licenses in this band, must: (1) seek to promote the mostefficient use of the spectrum; and (2) take into account the needs of public safety radio services. The Commission must also commence the competitive bid- ding for the assignment of the licenses for these frequencies by April 15, 1997. In order to meet the deadlines imposed by this sec- tion, the FCC is permitted to waive certain statutory notice and comment timetables. All revenue generated from the assignment of 111 364 1198 CONFERENCE TOTAL—WITH COMPARISONS The total new budget (obligational) authority for the fiscal year 1997 recommended by the Committee of Conference, with compari- sons to the fiscal year 1996 amount, the 1997 budget estimates, and the House and Senatebills for 1997 follow: New budget (obligational) authority, fiscal year 1996 ........cssees$ 579,522,607,669 Budget estimates of new (obligational) authority, fiscal year 1997 608 ,191,881,110 House bill, fiscal year 1997 .....csccsscceescsonssesnetenesseerenceeerssansanenrareneecaes 604 ,917,517,710 Senatebill, fiscal year 1997 ........-:ssccecceereerertees ... 601 ,684,170,710 Conference agreement,fiscal year 1997 .......ssssseeeseerrerttscessr eernenens 610,961,282,710 Conference agreement compared with: New budget(obligational) authority, fiscal year 1996 oeecseereee +31,43 8,675,041 Budget estimates of new (obligational) authority, fiscal year YOOT ..eccccscccscccscsssnecescconcscsenesseesedcsessscresanaesesesaepsesnsedesessenaeaeneasntes +2, 769,401,600 +6,043,765,000 +9,277,112,000 Housebill, fiscal year 1997..... tee Senate bill, fiscal year 1997 ....csccssonseseseseneesreseseensenecsectesasnanenes BILL YOUNG, JosEPH M. McDADE, Bos LivINGSTON, JERRY LEWIS (except for chapter 6 of title V of division A), JOE SKEEN, DAVE HOBSON, HENRY BONILLA, GEORGE R. NETHERCUTT, dr., ERNEST ISTOOK, JOHN P. MURTHA, NorM DICKS, CHARLES WILSON, Woo. DILL1m, MARTIN OLAV SABO, Davip OBEY, Managers on the Part of the House. TED STEVENS, THAD COCHRAN, Petre V. DOMENICI, CHRISTOPHER S. BOND (except for chapter6 oftitle V of division A), MitcH MCCONNELL, CONNIE MACK, RICHARD C. SHELBY, Mark O. HATFIELD, DANIEL K. INOUYE (with reservation), Fritz HOLLINGS, J. BENNETT JOHNSTON, ROBERT BYRD, PATRICK J. LEAHY, FRANK R. LAUTENBERG, Managers on the Part of the Senate. cy VY 112 365 EXHIBIT G September 28, 1996 This iegislation will maintain the authority of State securities regulators to police wrong- doing. In addition, the legislation ensures thal the SEC mandate to protect American inves- tors and the public interest as well as the long-term stability of our major markets re- mains intact. This is a most important point. While there is room to fine tune the regulatory functions of the SEC, reforms must never be structured in such a way that they undermine consumerconfidence. This bill, H.R. 3005, does not seek to great- ly limit inspections of brokerage firms who have violated SEC rules orrelieve firms of li- ability for recommending unsuitably risky in- vestments to institutional clients. The bill also modifies previous language that would have eliminated the requirement in current law that investors be sent a prospectus and informed of the risks they face before they buy newly offered securities by requiring the SEC to move forward with its study of this issue. Mr. Speaker, there is undoubtedly a need to monitor mutual fund regulation to fully account for the constantly evolving size, complexity, and investment opportunities of our Nation'sfi- nancial markets. While mutual funds have grown by more than 20 percent annually throughout the 1980's and into the 1990's, Congress has not addressed the issue of fund regulation since 1970. This bill updates our securities laws and will support and improve the industry. | urge my colleagues to approve the conference report on H.R. 3005. | yield back the balance of mytime. Mr. FIELDS of Texas. Mr. Speaker, I yield back the balance of my time. The SPEAKER pro tempore (Mr, DREIER). The question is on the motion offered by the gentleman from Texas (Mr. FIELDS] that the House suspend the rules and agree to the conference report on the bill, H.R. 3005. The question was taken; and (two- thirds having voted in favor thereof) the rules were suspended and the con- ference report was agreedto, A motion to reconsider was laid on the table. GENERAL LEAVE Mr. FIELDSof Texas. Mr. Speaker,I ask unanimous consent that all Mem- bers may have5 legislative days within which to revise and extend their re- marks on the conference report to ac- company H.R.3005. The SPEAKERpro tempore. Is there objection to the request of the gen- tleman from Texas? There was no objection. CONFERENCE REPORT ON H.R. 3610, DEPARTMENT OF DEFENSE AP- PROPRIATIONS ACT, 1997 Mr. LIVINGSTON. Mr. Speaker, pur- suant to the previous order of the House, I call up the conference report on the bill (H.R. 3610) making appro- priations for the Department of De- fense for the fiscal year ending Sep- tember 30, 1997, and for other purposes. The Clerk read the title of the bill. The SPEAKER pro tempore. Pursu- ant to the order of the House of today, the conference report is considered as having been read. CONGRESSIONAL RECORD — HOUSE (For conference report and state- ment, see prior proceedings of che Houseof today.) The SPEAKERpro tempore. The gen- tleman from Louisiana [Mr. LIvING- STON] and the gentleman from Wiscon- sin (Mr. OBEY] each will control 30 min- utes, The Chair recognizes the gentleman from Louisiana [Mr. LIVINGSTON]. CENERALLEAVE Mr. LIVINGSTON.Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their re- marks and include extraneous material on the conference report to accompany H.R. 3610 and that I may include tab- ular and extraneous material, The SPEAKERpro tempore. Is there objection to the request of the gen- tleman from Louisiana? There was no objection. Mr. LIVINGSTON. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, today I am pleased to bring before the House the Omnibus Consolidated Appropriations Act of 1997 that will fund the remaining ap- propriations bills for thé full fiscal year and allow us to go home. I want to say up front that the proce- dure that we were forced to follow was less than desirable. That procedure was initially caused by the other body's in- ability to complete consideration of five appropriation bills. We also had to address the demandsof the Clinton ad- ministration to increase domestic spending. But the House was able to get its work done. We passed all of our bills promptly this summer, al! 13 appro- priations bills. That would not have been the case without the dedicated, steadfast, and conscientious effort of all of the Members of the House, but most especially my friend the gen- tleman from Wisconsin, DAVID OBEY, the ranking minority member of the committee, as well as all of the sub- committee chairmen; all of the rank- ing members of subcommittees; all of the members of the Committee on Ap- propriations; and especially, the dedi- cated staff, majority and minority; the gentleman who sits next to me, the chief clerk of the Committee on Appro- priations, Jim Dyer; the gentleman that sits next to him, Dennis Kedzior; Fred Mohrman, whois not here tonight but who helped get us started in the 104th Congress; Scott Lilly, the rank- ing minority clerk over there sitting next to the gentleman from Wisconsin (Mr. OBEY): and all of the other dedi- cated staff, many of whom have not even slept a single minute over the last 3 or 4 days to prepare this bill. They have done just an incredible job against overwhelming odds, bearing a tremendous work load, and I can tell them all that I am deeply appreciative of their efforts. Because of them we were able to get our work done. Now the procedure we used to de- velop this conference report is brought H12051 about because someofthebills got sty- mied on the other side. But in order to come to closure on these matters as well as to address the needs for in- creased funding for antiterrorism pro- grams, the drug Initiative, disaster as- sistance for Hurricane Fran, wlidfires in the West, and to consider the de- mands of the administration for fund- ing certain programs, we had ta com- bine all of these remaining bills into one legislative agenda, one legislative package, which sits before you so the trade-offs could be made and the pack- age could be viewed as a balanced one. As many of the Members know, the administration asked for additional do- mestic spending that would be offset by cuts in the defense appropriations bill. That was unacceptable to me, and it was unacceptable to the gentleman from Florida, BILL YouNG, the chair- man of the Subcommittee on National Security, We both insisted that no further cuts be made to the level of funding in the defense bill and that other offsets must be found to pay for their wish list of domestic spending. We refused to cut defense further. Mr. YOUNG put together a good de- fense appropriations bill that provides for a strong national defense and meets the needs of American servicemen, and women whether they be in Bosnia or flying over Iraq or Saudi Arabia or Ku- wait or elsewhere all around the globe. In a minute I will be happy to yield to the gentleman from Florida [Mr. YOUNG], so he can explain the portion of the blll that relates to the national defense. But in the meantime, I want to say that this appropriation measure carries full-time funding for 6 complete bills, virtually half of the budget of the United States Government. It includes the Subcommittee on Commerce, Jus- tice, State and Judiciary; the Depart- ment of Defense, the Subcommittee on Foreign Operations, Export Financing and Related Programs; the Subcommit- tee on the Interior; the Subcommittee on Labor, Health and Human Services and Education; and the Subcommittee on Treasury, Postal Service, and Gen- eral Government. In addition to augmenting various programs in these annual spending bills, we are providing funding for the antiterrorism program of some $981 million, we are giving $8.8 billion for a drug initiative to combat drug abuse and to interdict the inflow of drugs into this country, and we are providing nearly $400 million for relief from dis- asters such as Hurricane Fran. The sizable offsets included in the bill, for example, from the BIF/SAIF program that we will hear about the gentleman from lowa [Mr. LEACH] and the gentlewoman from New Jersey {Mrs. ROUKEMA] and the spectrum sale both fully fund the deficit impact in any spending in this bill. [ wantto reiterate, this bill does not add to the deficit. In fact, this bill completes our final step in the 104th Congress toward securing some $53 bil- lion in cumulative savings under the 366 H12094 rule for the type of disclosure that must be in- Alidadt ta advarticinn $of consumer leases. This special rule recognizes thatall of the required disclosure cannot be provid ed in a short spoken advertisement. Instead it re- quires that radio advertisements for cons umer leases refer the listener to either an 800 num- ber or a written advertisement in orderto ob- tain additional information. Title It also includes a House provision to require bank regulators to take appropriat e ac- tions to prevent depository institutions and de- pository institution holding companies fro m fa- cilitating or encouraging the shifting of d epos- its from SAIF deposits to BIF deposits. It is the intent of Congress that this provision be inte r- preted and implemented by the FDIC wit h great care to ensure that Constitutiona lly-pro- fected free speech in the commercial market- place is not abridged. Furthermore Section 2702 requires that the FDIC impose a special assessment o n SAIF- assessable deposits. This paymentis due on the first business day of the first month begin - ning after the date of the enactmentof this act and is to be paid to the FDIC on the latter of the first business day of the first month b egin- ning after the date of enactment or suc h other gate as the FDIC chooses, but notlater than 60 days after the enactmentdate. Giventh e fi- quidity and regulatory difficulties that accru e to institutions with the presentation of a sudden large liability, it is the intent of Congress th at the FDIC provide institutions the maximu m latitude possible within the 60-day context to pay their speciai assessmeni. Section 2301 amends certain pro visions governing the scope and mechanics of the audit functions for insured depository ins titu- tions. This provision eliminates the in depend- ent auditor attestation requirement for safel y ana 3 tm and allows the agencies the discretion to waive the requ ire- ment that all members—but not less than a majority—of the independent audit committe e be outside directors In the case of h ardship. Factors weighing in favor of a decision to grant a waiverinciude, but are not limited t o, the following: that the institution is small , that qualified outside independent director s are un- available, that the institution is clo sely held, and-orthat the institution is well-man aged. Further, Section 2615 prohibits Gover nment- Sponsored Enterprises {GSEs} from cer tain kinds of associations with banks, credit unions and thrifts. However,it is the congres sional in- tent that Subsection 2615(a) would not pre- clude a GSE from sponsoring or prov iding fi- nancial support to an insured credit union es- tablished by a GSE with a field of membershi p comprised of the GSE's present a nd former full-time. employees. The fact thal a f ew such employees may also be customers of t he GSE should not preclude such sponsorsh ip or fi- nancial support. I'd also like to comment on the provisi on of the bill which clarifies the liability o f financial institutions with regard to a 19 92 Environ- mental Protection Agency rule. Under this pro- vision, lenders would be financially liable for environmental clean up costs only if they actu- ally participated in the managementof the firm which allegedly caused the pollu tion. The mere holding of a financial interest or having ownership of the properly as 4 resu lt of a fore- ciosure does not make the lender liable. Finally, | worked for inclusion in this bill of bank modernization language and within such eadia - aamyplianca CONGRESSIONAL RECORD—HOUSE context—preferably full-blown Glass-Ste agall reform, but at a minimum greater holding co m- pany ang oeunun cu jus + ~ : ported by the independent insurance agent s which would require all parties, including banks, which sell general insurance pro ducts to be State licensed. Regrettably these pro- posals have proven to be so controversial th at agreement on them could not be reach ed in time for them to be includedin this bill. These issues are not going away and will be addressed in the next session of the Con- gress. | realize partisanship hallmarks many end- of-the-session issues, but based on the con- tent and context of this legislative packa ge, ! would hope support would come from bot h sides for final passage of the Title 1! provi- Ae wee sions. In this regard, | am somewhat bewildered by the complaints from some quarters about process. Most of the provisions before the House today have been reported out of the House Banking and Financial Services Com- mittee following extensive hearings. This Title, for instance, Includes numerous sections or amendments offered by the minority side. Fur- ther changes were made within the past 24 hours in negotiations with the executive branch. Indeed, the BIF-SAIF section, arguably the most Important in the bill, is basically picked up from legislation passed by the House a year ago and then reworked by the committee this past summer. The principal change from the provisions approved by the committee in July is the deletion of a Democratic-sponsored amendment to shift part of the FICO cost sharing to the taxpayer. That provision has been struck from the bill. Members of this Congress can go back to their constituents and report that they have addressed the last ae ing enact of the savings and loan de- bacle without any further taxpayer accountabil- ity. Yrhe other major portion of the Title incor- porates regulatory relief measures approved by the committee last year.it is my view that ihe House Banking Committee went further than was judicious in early approaches to reg- ulatory relief and that a number of provisions in earlier bills were properly pared back with my support becauseof administration and mi- nority member concerns, Let me stress in this regard that in putting this legislation together, there has been far more minority Input than on any piece of legislation considered in any of my years in the minority. This is solid non-partisan legislation, Less extensive than | would have liked, but none- theless of historic dimensions. The provisions will have lasting affects, but most importantly, failure to act would have led to serious Gisintermediation in the financial community, failure of the SAIF, and new taxpayer liability for S&L losses. This banking title, on the other hand, provides a basis for long-term banking modernization based on the existence of the strongest financial industry insurance fund in the Nation's history. Indeed, absent a calam- ity, with passage ofthis legislation America’s insured financial institutions will reach an his- torical first—a prefunded insurance fund capa- ble of regenerating itself ad infinitum, with in- terest retumslikely to cover all normallosses in the system as well as normal asset growth. America’s bank customers, as well as our competitive international financial position, are well served. September 28, 1996 Mr. OBEY. Mr. Speaker, I yield 1 minute to the gentleman from Min- woe- N42 Virarral Mr. VENTO. Mr. Speaker, I rise in support of this conference.I think it is nothing short of a great victory for us to came to a compromise after the struggle last year, and I want to com- mend my friend and colleague from Wisconsin [Mr. OBey] for the g reat work he did in helping us with the pro- visions dealing with BIF-SAIF. I follow in line with the remarks of our chairman, the gentleman from Iowa, Congressman JIM LEACH, in terms of recognizing the prob lem today. All of us are together in terms of trying to solve this problem in terms of BIF-SAIF and providing some streamlining and regulatory measures. ‘These are reasonable, they are rea- soned, and I think they are a positive step in the right direction. Hopefully, next year we will be able to do this on our own without relying on the strength of the appropriation bill and working this out in the Hause. This has been a tough measure to compromise on and to come to agree- ment on. I appreciate the patience of all who have worked on it. I want to commend the Clinton administration for standing up for consumers and making certain that the price of and the cost of this was not borne by reduc- tion in terms of 30 years of consumer law, which happened to be undone and upset by a lot of misunderstandings and action that were proposed in ear- Her iterations of this bill. So I rise in support of this conference and ask my colleagues to support it. “Mls Gnaabar | rica In exprass mv supcort for title [I of this bill, the Banking Committee's productin this bill. Mr. Speaker, although | would haveliked t o proceed this Congress on broader approaches addressing financial services modernizati on, the future of the deposit insurance funds , the merging of regulators; the issues of charter re - form; and other power's issues, in the end, this product before the House today is an im- portant step forward and one which is the r e- sult of a tremendous amount of work and seemingly nonstop negotiations over its innu- merable iterations. This bill importantly recognizes that Con- gress must act today to resolve the different ial between bank and S&L deposit insurance pre- miums. The so-called BIF-SAIF solution, i n- cluding charter reform modernization is basi- cally a product of bipartisan work of the Fina n- cial Institutions Subcommittee in 1995 that ended up in the failed Republican budget bil. Manyotherpieces ofthis bill’s title tt began in separate initiatives of the respective Banking Committees of the House and Senate. These key policy provisions that we will hopeful ly pass tonight envisions that the 105th Con- gress will act on charters, but this measu re merges the funds and provides a pro rala FICO bond payment sharing and puts it in place regardless of the merger issue because all insured: depositories, both bank insur ance and savings association insurance fund will become a part of the one FDIC deposit base. Mr. Speaker, this Congress needs to move BIF-SAIF this year. SAIF institutions have 367 September 28, 1996 been moving forward with plans to work them- selves out from under a 23-basis point dif- ferential. Many SAIF-insured institutions have been seeking, in fact, to form national banks. Congress needs to act now while we can be- fore it is too late and the SAIF deposit base erodes and the taxpayers of this country are once again liable. The banking and thrift in- dustries have worked in good faith over the courseof this Congress to achieve the product and policy in this measure, and hopefully this initiative will finally bring to conclusion the re- pair to the deposit insurance funds, Nevertheless, no groupis entitled to a prize or reward of relaxed consumer protections or safely and soundness regulation for address- ing and accepting the responsibility to assure a solvent deposit insurance fund. By recogniz- ing somelimits and a need to have bipartisan agreement on provisions, we werefinally able to finally move forward. To that end the Clin- ton administration advocacy for streamlining and regulatory reform has averted the loss of many key consumerprotection laws and poli- cies. In addition to BIF-SAIF,title II of this legis- lation provides the lender environmentalliabil- ity relief provisions, that is relief provisions for financial institutions which foreclose on prop- erties involving hazardousortoxic materials.It also provides for many tempered regulatory burden relief provisions the result of com- promises.Title |! includes provisions clarifying the tax or deposit insurance covered status of retirement certificates of deposit. It includes Fair Credit Reporting Act, a measure that has passed both the House and Senate in the past, that will provide improved privacy protec- tions for consumers and remedies for the risk and experience electronic muggings,the crime of today and tomorrow that we must do much more to arrest. This final agreement represents a victory of sorts for those of us who wanted to pass regu- latory burdenrelief for financial institutions but did not unravel consumer protection taws of the past 25 years nor the potential safety and soundness of financial institutions. This bill provides regulatory streamlining, burden relief and sensible improvements in policy without harming key consumer laws nor jeopardizing the safety and soundness of financial institu- tions backed by the Federal deposit insurance fund. With improvements being made until the very end, the banking package before us was excised of manyprovisions that gave me great pause and to which | was opposed. Provisions which would have weakened the Community Reinvestment Act, Consumer Leasing, Truth in Savings, Truth in Lending, Rent to Own, the Home Mortgage Disclosure Act, high-cost mortgagesprotections, and a numberof highly controversial Real Estate Settlement Proce- dure Act changes have finally been set aside as we receive the final package tonight. In previous forms, this legislation would have re- laxed restrictions on permissible insider lend- ing, weakened the legal responsibilities for outside directors of financial institutions, lim- ited the ability of regulators to recover funds from the officers offailed institutions, and even weakened the role of independent audit com- mittees, fortunately these policies were also removed, | want to recognize the importantrole of the Clinton administration in reaching many of these final compromises which eluded us for CONGRESSIONAL RECORD —HOUSE so long this session, | would have hoped that committee members could have accomplished more but { want to thank the Members and staff of the Banking Committee who | have worked with throughout this process and am pleased we have a product. We have here a adequate product, a compromise, a lesson leamed. While | think this title is imperfect, on the whole, the package deserves our support. I remain hopeful that the committee will in the future regain a better comity and bipartisan- ship as we reconvenefor the 105th Congress. Mr. LIVINGSTON. Mr. Speaker, I yield 3 minutes to the gentleman from Illinois [Mr. PORTER], the distinguished chairman of the Subcommittee .on Labor, Health and Human Services, and Education of the Committee on Appropriations who has done an out- standing job in thatfield. Mr. PORTER. Mr. Speaker, I begin my remarks by commending my chair- man and his outstanding staff led by Jim Dyer. No one has worked harder to perfect this bill. They have done an outstanding job for the Congress and for the American people. T want to thank my wonderful staff, headed by Tony McCann. I thank the gentleman from Wisconsin, Davip OBEY, and his fine staff for their co- operation in bringing this bill to fru- ition. Mr. Speaker, our section of the omni- bus bill continues Congress’ initiative to terminate duplicative and ineffec- tive programs. There are 13 new termi- nations in addition to the 100 that we achieved last year. We have frozen or reduced many administrative accounts. At the same time, we have increased funding for programs that work for people and that are a high priority for our country. For example, with respect to biomedical research through the Na- tional Institutes of Health, we have in- creased spending by $820 million, a 6.5- percent increase, and $371 million above the President's request. We have in that section of the bill preserved the principle that science, not politics, should decide how the money is best spent, there is no ear- marking in the bill by disease and no line item for AIDS. However, we appro- priate directly to the Office of AIDS Research to support. that importantre- search. The bill preserves NIH and gives it a substantial increase, because basic re- search can only be organized and sup- ported through government. Research that is conducted by our universities and academic medical centers across the United States pays for itself thou- sands of times over in terms of health care cost savings. Biomedical research is an area where welead the world both in the basic research and the applied research through the biotech and phar- maceutical industries of our country. Studentaid in the bill is increased by $1.3 billion more than requested in the President's 1997 budget; and we in- crease Pell grants under the Repub- Hean Congress by 15 percent, whereas in the previous Congress they went down by 3 percent. The maximum Pell H12095 grant 1s increased from $2,470 to $2,700 In this bill, the highest maximum ever; the largest single increase ever in one year, Work-study is increased by over $200 million to $830 million, $15! million more than the President's request. Per- kins loans are increased by $65 million over the President's request. TRIO pro- gramsare increased by $37 million, toa Cotal of $500 million. Head Start is increased by over $400 million to almost $4 billion. Special education, championed by the chair- man of the authorizing committee, the gentleman from Pennsylvania, BILL GOODLING, increased by almost $800 million to $3.8 billion. Mr. Speaker, there ts a summary of highlights of the bill available. I com- mend the work of my subcommittee members of both sides of the aisle and my chairman. We have fashioneda bill that meets the needs of the American people and does so in a fiscally respon- sible manner. Mr. OBEY. Mr. Speaker, I yield 1 minute to the gentlewoman from Texas {Ms. JACKSON-LEE]. (Ms. JACKSON-LEE of Texas asked and was given permission to revise and extend her remarks.) Ms. JACKSON-LEE of Texas. Mr. Speaker, I want to add my appreciation to the gentleman from Wisconsin [Mr. OBEY] and the gentleman from Louisi- ana [Mr. LIVINGSTON] for their coopera- tive effort and to briefly acknowledge that today we can stand here and say that we are not going to shut the Gov- ernment down.A great difference and a strike for balance over divisiveness. The American people are the bene- factors of this process. Let me make several points regard- ing this legislation that represent a positive change. I would like to note, and that now the youth in Houston and around the Nation will have summer jobs, and we will have turned. the cor- ner from classifying the summer youth program as baby-sitting jobs and have over $800 million in that program through this appropriation bill. Rather than continue to build Jail cells, we will now have increased mon- eys in the Pell Grant Program, some $577 million. And, yes, through the Ryan White funding, we will be able to take home $450 million for emergency assistance, $470 million for comprehensive care, and $70 milllon for early intervention. I am concerned, however, that we do not have enough dollars for the census effort that will be very important to some of our urban centers, and would hope we will have an Opportunity to remedy that. And, lastly, I would say that we need to consider the spectrum sale so that we would do it in a reasonable manner that would appropriately utilize this valuable resource for the benefit of America, [rise to express my views on this {m- portant omnibus appropriations bill that funds the Departments of Com- merce, Defense, Education, Health and 368 EXHIBIT H William J. Clinton: Statement on Signing the Omnibus Consolidated Appr... http://www.presidency.ucsb,edwws/printphp?pid=5202 | The American Presidency Project John T. Woolley & Gerhard Peters + University of California at Santa Barbara return to original document ¢ William J. Clinton Statement on Signing the Omnibus Consolidated Appropriations Act, 1997 September 30, 1996 |have signedinto law H.R. 3610,the fiscal year 1997 omnibus appropriations and immigration reform bill. This bill is good for America, and | am pleased that my Administration could fashion it with the Congress on a bipartisan basis.It movesus further down the road toward our goal of a balanced budgetwhile protecting, not violating, the values we share as Americans—opportunily, responsibility, and community. Specifically, the legislation restores needed fundsfor education andtraining, the environment, sclence and technology, and law enforcement; fully funds my anti-drug and counter-terrorism initiatives; extends the Brady Bill so that those who commit domestic violence cannot buy handguns; provides needed resources to respondto fires in the western part of the Nation and to the devastation brought by Hurricanes Fran and Hortense; and Includes landmark immigration reform legislation that cracks down on illegal immigration without punishing legal immigrants. Thebill restores substantial sums for education andtraining, furthering my agenda oflife-long education to help Americans acquire the skills they need to get good jobs in the new global economy. it provides the funds through which Head Start can serve an additional 50,000 disadvantaged youngchildren; fulfills my request for the Goals 2000 education reform program, enabling States to more quickly raise their academic standards and implement innovative reform, increases funding for the Safe and Drug-Free Schools program, helping States reduce violence and drug abusein schools; provides most of my request for the Technology Literacy Challenge Fund to help States leverage technology funds;fulfills my requestfor Title 1, education for the disadvantaged; and provides the funds to enable well over a half-million young people to participate In the Summer Jobs program. Forcollege students, | am pleased thatthe bill fulfills my request for the largest Pell Grant college scholarship awardsin history and expands the numberof middle- and low-income students who receive aid by 126,000—to 3.8 million. | am also pleased that the bill fully funds my Direct Lending program, enabling more students to take advantage of cheaper and mereefficient loans. For the environment, the bill provides funds to support the Environmental Protection Agency's early implementation of two major new environmentallawsthat | signed thls summer—the Safe Drinking WaterAct, and the Pesticide and Food Safety Law. In addition,the bill provides additional funds for energy conservation and to help finish the cleanup of Boston Harbor and help prevent beachclosures. , At the same time, the bill does not contain anyof the riders that would have affected managementof the Tongass National Forest in Alaska, national Native Americantribal rights, the interior Department's managementof subsistencefishing in Alaska, long-term managementof the Elwha Dam in Washington State, and the issuance of emergency-efficiency standards for appliances. | am, however, disappointed the Congress did not adopt my proposal to repeal the 1995 salvagetimberrider and restore the application of environmental lawsto salvage logging on Federallands. For research and technology, thebill promotes economic growth by continuing needed Federal support for advanced technology. It restores funding for the Commerce Department's Advanced Technology Program,providing resources for new grants to support innovative technology companiesacrossthe Nation. It also provides a sizeable increase for the National Institutes of Health, which will enable NIH to expandits critical research Into new ways totreat breast cancer, AIDS, and other diseases. | am also pleasedthatthe bill provides nearly $1 billion for Ryan White AIDS treatmentgrants, including funds to help States purchase a newclass of AIDS drugscalled "protease inhibitors” and otherlife-extending medications. And the Congressalso fully funded my requestfor the Department of Housing and Urban Development's program that provides housing assistance for people with AIDS. For law enforcement, the bill provides $1.4 billion to ensure that my program to put 100,000 more police on the streets of America's communities by the year 2000 proceeds on schedule;with this bill, we will have provided funding for 64,000 ofthe 1 of 3 185 11/19/2008 6:21 PM 369 William J. Clinton: Statement on Signing the Omnibus Consolidated Appr... http://www.presidency.ucsb,edu/ws/print.php?pid=52021 100,000 thatI called for at the start of my Administration. Thebill also increases f unds for Justice Department law enforcement programs,for the FBI's crime-fighting efforts, and for new Federalprisons. As | ha d urged, thebill also extends the Brady Bill to ensuré that those who commit domestic violence cannot purchase guns. Finally, | a m pleasedthat the Congress provided a modestincrease for the Legal Services Corporation, which ensuresthat those whol ack the meansstill have access to ourlegal system. tam also pleased thatthe bill provides a $1.4billion increase in funding for anti-d rug programs.It doubles funding for Drug Courts, increases fundsfor drug interdiction efforts by the Defense, Transportat ion, and Treasury Departments, and provides the resources to expand the Drug Enforcement Administration's domestic efforts al ong the Southwest border and elsewhere. Thebill also includes strong language about drug testing that my Administration had prop osed, requiring thatlocalities have drug-testing programsin place for thelr prisoners and paroleesin orderto qualify for State and local prison grants. And it includes funding for the drug testing of Federal, State, and local arrestees. For counterterrorism,the bill funds myrequest for over $1.1 billion to fight terrori sm and to improve aviation security and safety.It enables the Justice and Treasury Departments to better investigate and prosecutete rrorist acts, and it provides funds to implement the recommendationsof Vice President Gore's Commission on Aviation Safet y and Securlty and the Federal Aviation Administration’s recent 90-day safety review. Thesefunds will enable us to hire 300 m ore aviation security personnel, deploy new explosive detection teams, and buy high-technology bomb detection equipment to scre en luggage. Thebill also gives my Administration the authority to study the use of taggantsin black and smokeless powd er; taggant technology holds the promise of allowing the detection andidentification of explosives material. : I hereby designate as an emergency requirement, as the Congress has already done,th e $122.6 million in fiscal 1996 funds and the $230.68 million in fiscal 1997 funds for the Defense Departmentfor antiterrorism, coun terterrorism, and security enhancement programsin this Act, pursuantto section 251(b)(2)(D)(I) of the Balanced Budget an d Emergency Deficit Control Act of 1985, as amended. This bill also funds the Nation's defense program for anotheryear;it fully funds my defe nse antiterrorism and counter-narcotics efforts as well as the Cooperative Threat Reduction program, and at my insistence it p rovides a substantial amount of the funding for my dual-use technology program. Butit also provides about $9billion more than | p roposed for defense,including a substantial amountfor weaponsthat are not even in the Defense Department's future pla ns and were not requested bythe service chiefs. Thisbill is part of a plan by the majority in the Congressthat adds funds fo r investments now and reduces them in the future. | continue to believe that my long-rangeplan is morerational. It provides suffic ient funds now while increasing them at tha tuen af the eantuns whan new technologies will becomeavailable. {am pleased that the Congress has provided the minimum acceptabie ieveis ior certain key i nternational affairs programs, such as the U.S. contribution to the International Development Association and the Korean Pen insula Energy Development Organization andforinternational peacekeeping operations andarrears. | also commend th e Congress for providing at least a modest increase In funding Internationa! family planning programs and for dropping mis guided Mexico City restrictions, and for funding bilateral economic assistance without rescinding prior-year appropriations. In ad dition, the Congress has facilitated the Middle East peace process by authorizing U.S.participation in the Middle East Developme nt Bank. Nevertheless, | must note that the overall funding levelfor international affairs programsis well below what we need to assu re that we can achieve ourforeign policy objectives. Thisbill, however, does more than fund major portions of the Governmentfor the next fiscal year. It also includes landmark immigration reform legislation that bullds on our progress of the last 3 years. It stren gthens the rule of law by cracking down on illegal immigration at the Border, in the workplace, andin the criminaljustice system— without punishing thoseliving in the United Stateslegally. Specifically, the bill requires the sponsors of lega! immigrants to take added responsibili ty for their well-being. And it does not include the so-called Gatlegly amendment, which | strongly opposed and which would have allowed States to refuse to educate the children ofillegal immigrants. At my insistencethebill does notinclude the proposed o nerous provisions against legal! immigrants, which would have gone beyond the welfare reform law. am pleased that the Congress provided 7 additional months of food assistance for nee dy Immigrants, including benefits for many elderly and children. This step will provide some help to individuals and States in prepa ring for the dramatic restriction of access to benefits that legal immigrants will face under the welfare reform bill. tam, however, extremely concerned about a provisionin this bill that could lead t o the Federal Government waiving the Endangered SpeciesAct and the National Environmental Policy Act in order to expeditiously construct physical barriers and roads on the U.S. border. | know the Attorney General shares my 2 of 3 186 11/19/2008 6:21 PM 370 William J. Clinton: Statement on Signing the Omnibus Consolidated Appr... http://www.presidency.ucsb.edu/ws/print.php?pid=5202! commitment to those important environmentallaws and will make every effort, in consultation with environmental agencies, to implement the immigration law in compliance with those environmental! laws. | am also concerned about a provision that imposes a new “intent requirement"In unfair immigration-related employment cases that could place hardships on someU.S.citizens and permanentresidents. | have asked the Attorney General to take steps to alleviate any potential discrimination that this provision causesagainst U.S.citizens and authorized workers—particularly Hispanics and Asian-Americans who,by their appearance or accent, may appearto beforeign. Finally, | will seek to correct provisionsin this bill that are inconsistent with international principles of refugee protection, including the imposition of rigid deadlines for asylum applications. The bill also makes important changesin the Nation's banking laws. It assures the continued soundness of the bank and thrift ~ deposit insurance system, andit includes significant regulatory relief for financial institutions. At my insistence, the bill does not erode the protection of consumers and communities. | commend Senators Baucus and Bingamanfor raising the awarenessofthe issue of the proper accounting of highwaytrust fund receipts. In next year's reauthorization of the Intermodal Surface Transportation and Efficiency Act, my Administrationwill rely on a baseline thattreats all States fairly and equitably. The bill includes a Government-wide program to enable agencies to offer buyouts, through Decernber 31, 1997, of up to $25,000 to employeeseligible for early or regular retirement. Manyof these workers stayon for years after they can retire, so buyoutswill serve as an incentive for them to leave. Buyouts are an important tool to help Federal managers downsize their agencles as we continue to move toward a balanced budget—withoutrelying solely on reductions-in-force (RIFs). | am disappointed that one of my priorities—a ban on physician "gag rules"—wasnot included. Several States have passed similar legislation to ensure that doctors havethe freedom to inform their patients of the full range of medical treatment options, and | am disappointed that the Congress wasnot able to reach agreementon this measure. Nevertheless,this bill is good for America. As | have said, it moves us downthe path toward a balanced budget while protecting our values.It provides the needed resourcesto fight domestic and international terrorism. And It cracks down on illegal immigration while protecting tegal immigrants. !am pleased tosign it. William J. Clinton The White House, September30, 1996. Citation: John T. Woolley and Gerhard Peters, The American Presidency Project [online]. Santa Barbara, CA: University of California (hosted), Gerhard Peters (database). Available from World Wide Web:(http://www.presidency.ucsb.edu/ws/?pid=52021). © 1999-2008 - Gerhard Peters - The American Presidency Project 3 of 3 187 11/19/2008 6:21 PM 371 PROOF OF SERVICE I am a resident of the State of California, over the age of eighteen years, and not a party to the within action. Mybusiness address is REED SMITH LLP, 355 South Grand Avenue, Suite 2900, Los Angeles, CA 90071-1514. On July 16, 2012, I served the following document(s) by the method indicated below: MOTION FOR JUDICIAL NOTICE; EXHIBITS IN SUPPORT OF MOTION FOR JUDICIAL NOTICE (FILED CONCURRENTLY WITHANSWER BRIEF ON THEMERITS) [_] _ by transmitting via facsimile on this date from fax number 213.457.8080 the document(s) listed above to the fax number(s) set forth below. The transmission was completed before 5:00 PM and wasreported complete and withouterror. The transmission report, whichis attached to this proofof service, was properly issued by the transmitting fax machine. Service by fax was made by agreementofthe parties, confirmed in writing. The transmitting fax machine complies with Cal.R.Ct 2003(3). [Xx] _ by placing the document(s) listed above in a sealed envelope with postage thereon fully prepaid, in the United States mail at Los Angeles, California addressed as set forth below. I am readily familiar with the firm’s practiceofcollection and processing of correspondence for mailing. Underthat practice, it would be deposited with the U.S. Postal Service on that same day with postage thereonfully prepaid in the ordinary course of business. I am aware that on motionofthe party served, service is presumed invalidifthe postal cancellation date or postage meter date is more than onedayafter the date of deposit for mailing in this Declaration. [] _ by placing the document(s) listed abovein a sealed envelope(s) and by causing personal delivery of the envelope(s) to the person(s) at the address(es) set forth below. A signed proof of service by the process server ordelivery service will be filed shortly. [_] by personally delivering the document(s) listed above to the person(s) at the address(es) set forth below. [] _ by placing the document(s) listed above in a sealed envelope(s) and consigningit to an express mail service for guaranteed delivery on the next business day followingthe date of consignmentto the address(es) set forth below. A copy of the consignmentslip is attached to this proof of service. [_] _ by transmitting via email to the parties at the email addresseslisted below: PLEASE SEE ATTACHEDSERVICELIST. I declare underpenalty of perjury under the lawsofthe State of California that the aboveis true and correct. Executed on July 16, 2012, at Los Angeles, California. PROOF OF SERVICE SERVICE LIST Harold Rose v. Bank ofAmerica, et al., S199074 Court of Appeal Case No. B230859 (Los Angeles Superior Court Case No. BC433460) Henry H. Rossbacher (SBN 60260) James Cahill (SBN 70353) Talin K. Tenley (SBN 217572) The Rossbacher Firm 811 Wilshire Boulevard, Suite 1650 Los Angeles, CA 90017-2666 Telephone: 213.895.6500 Facsimile: 213.895.6161 Email: h.rossbacher@rossbacherlaw.com j.cahill@rossbacherlaw.com t.tenley@rossbacherlaw.com Clerk for the Hon. Jane Johnson Los Angeles Superior Court Central Civil West 600 S. Commonwealth Avenue, Dept. 308 Los Angeles, CA 90005 Telephone: 213.351.8601 Clerk, Court of Appeal Second Appellate District Division Two 300 S. Spring Street 2nd Floor, North Tower Los Angeles, CA 90013-1213 Appellate Coordinator Office of the Attorney General Consumer Law Section 300 South Spring Street Fifth Floor, North Tower Los Angeles, CA 90013 Telephone: 213.897.2000 Office of the District Attorney Appellate Division 320 W. Temple St. #540 Los Angeles, CA 90012 Telephone: 213.974.5911 Attorneys for Plaintiffs and Appellants Harold Rose and Kimberly Lane Case No. BC433460 Case No. B230859 Served Pursuant to Bus. & Prof. Code 17209 and Rule 8.29 Served Pursuant to Bus. & Prof. Code 17209 and Rule 8.29 _2- PROOF OF SERVICE
