Congressman Andy Barr Speaks about H.R. 2672

Congressman Andy Barr spoke on the floor of the U.S. House of Representatives in support of his legislation, H.R. 2672, the Helping Expand Lending Practices in Rural Communities Act, or the HELP Rural Communities Act, which passed the House by a bipartisan voice vote on May 6, 2014.

I want to thank the Chairman of the Financial Institution Subcommittee for her leadership on this important legislation. I want to thank, also, my colleagues on the other side of the aisle who have joined us in a bipartisan way to advance the sensible legislative correction.

Madam Speaker, obviously, government bureaucrats don’t always know best. And they certainly don’t know our local communities better than we do.

That is why I introduced H.R. 2672, the Helping Expand Lending Practices in Rural Communities Act, or the HELP Rural Communities Act, which would help remedy a bizarre situation created by a flawed one-size-fits-all government regulation that is making life harder for millions of Americans, including my constituents in central and eastern Kentucky.

My legislation, the HELP Rural Communities Act, is about making the federal government more responsive to the people who know their communities better than regulators in Washington, DC. 

It’s a simple, pragmatic, and bipartisan solution which says that if federal bureaucrats are going to impose different rules based on the localized characteristics of an area, then they actually need to listen to the input of people in the community who know its characteristics.

A few weeks ago, I was visiting with constituents in a rural county in my district, Bath County, in a country general store. When I was sitting there talking to my constituents, a horse-drawn buggy passed by. Now, this is far from an uncommon occurrence. This was just another reminder that Bath County is very much a “rural” area.

Amazingly however, the Consumer Financial Protection Bureau in Washington does not recognize Bath County, Kentucky as “rural.” 

Instead, the bureaucrats at the CFPB have improperly designated Bath County as “non-rural.” 

Now there are plenty of similar examples throughout the country of the CFPB oddly and incorrectly designating undeniably rural areas as non-rural, which is why H.R. 2672, the HELP Rural Communities Act, enjoys broad bipartisan support and passed out of the Financial Services Committee by a vote of 55-1.

You may be wondering why this “rural” vs “non-rural” distinction matters – well here’s why: 

The CFPB imposes more stringent lending rules and restrictions on local financial institutions based in “non-rural” communities, than it does on financial institutions in rural communities. 

So, when the Bureau gets these “rural” designations wrong all throughout the country, the consequence is that it constrains the availability of credit, including for balloon loans, to rural customers of community banks and community credit unions. 

But don’t just take it from me.

Charles Vice, who is the top banking regulator in the Commonwealth of Kentucky, Commissioner of the Kentucky Department of Financial Institutions and the Chairman of the Conference of State Bank Supervisors, has emphasized the importance of preserving balloon loans in rural communities. 

In his testimony before the Financial Services Committee in June, Commissioner Vice stated that, “when used responsibly, balloon loans are a useful source of credit for borrowers in all areas.  Properly underwritten balloon loans are tailored to the needs and circumstances of the borrower, including situations where the borrower or property is otherwise ineligible for standard mortgage products.”

So the need for this legislation has also been made clear to me from the regulators themselves. But it has also been made clear to me from a community banker from Bath County, a community banker that's been part of his local institution for multiple generations. His father was the President of the community bank. His grandfather was the President of the community bank. And before that, his great-grandfather. And this young man, Mr. Thomas Richards, testified before our committee in December and he said that “unnecessary restrictions [on balloon loans] will lead to some qualified borrowers not receiving the credit that they deserve,” and that “from a small community’s standpoint, [these restrictions would be] devastating to the livelihood of that area.”

It was really interesting to hear Mr. Richards testify because he said his small little community bank in Bath County, Kentucky, had survived the great economic changes over the centuries. It survived the Great Depression. It survived the stagflation of the late 1970's, 1980's and even the financial crisis in 2008. He said the greatest single threat for his small community bank was the avalanche of red-tape coming out of Washington, D.C. in 2013 and 2014.

If left unfixed, these rules will block customers in rural communities from obtaining responsibly underwritten balloon loans. 

These are loans which Kentucky bankers throughout my district commonly use to provide credit to local customers who may not fit perfectly into Washington-dictated lending straightjackets. 

These loans are vital to all kinds of individuals in rural America – from business owners on Main Street who simply seek to preserve their business, to farmers preparing for the next planting season. 

A balloon loan can be the lifeline that finally helps a young family purchase a home, or it can help an individual repair their car so that they can get to work each day. 

At its core, balloon loans are common throughout rural America because they offer customers flexibility and help community banks and community credit unions mitigate interest rate risk. 

As you can see, these loans are tailored to the credit needs of the customer, which is why they are so popular throughout Kentucky. 

The tradition of community banking in Kentucky has always been about relationship banking – it’s about truly knowing your customer and having that development of trust so that the banker knows whether or not they can repay the loan. 

H.R. 2672 is necessary because it preserves the best traditions of rural community banking, which are now being jeopardized by the CFPB’s incorrect “rural” designations throughout the country.

Now really quickly, what does the bill actually do?

H.R. 2672 creates a petition process in which individuals within a state could petition the CFPB to have it reconsider an improper designation of “non-rural” for an area that is plainly “rural”.

Instead of limiting applicants to only being able to challenge a designation based on county lines, H.R. 2672 would give the applicant the flexibility to define the specified and bounded area that they want to see switched from “non-rural” to “rural” – in other words, we don’t want to lock people into using counties when they don’t have to.  This is important because county sizes can vary significantly throughout the country, particularly in western states. 

I want to thank my colleague and friend on the other side of the aisle, Congressman Hinojosa, for his contribution to this feature of the legislation.

The legislation specifies a number of commonsense factors that the CFPB must consider when evaluating an application.  In addition to the local input of the applicant, these factors include: population density; a written opinion provided by the State’s bank supervisor; and criteria used by the Census, the Office of Management and Budget, and the Department of Agriculture for classifying geographical areas as rural or urban.

Upon receiving an application, the CFPB is to provide for a 90-day public comment period and then grant or deny such applications within an additional 90 days. 

The CFPB shall then publish in the Federal Register an explanation of the factors it relied on in making its ultimate determination. 

Once again I'm pleased that this is a bipartisan bill. I want to thank especially Congressman Hinojosa for his input in helping to improve this legislation. I also want to thank all the other co-sponsors of this bill, which is endorsed by a broad coalition, including the Kentucky Bankers Association, The Conference of State Bank Supervisors, The Kentucky Credit Union League, The Credit Union National Association, The National Association of Federal Credit Unions, The American Bankers Association, The Independent Community Bankers of America, The National Association of Realtors, and CSBS Chairman & Kentucky Department of Financial Institutions Commissioner Charles Vice.

This is a commonsense and simple bill.  I appreciate the opportunity present it here today. I urge your support and the immediate passage of this legislation.

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