Helping Expand Lending Practices in Rural Communities Act

Floor Speech

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Mr. BARR. Madam Speaker, I want to thank the chairman of the Financial Institutions 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 this 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 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, D.C. It is a simple, pragmatic, and bipartisan solution that 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 the people in the communities who know those characteristics of those communities.

A few weeks ago, I was visiting with constituents in a rural county in my district, Bath County, in a country general store. And 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, Kentucky, in my district, is very much a rural area.

Amazingly, however, the Consumer Financial Protection Bureau in Washington does not recognize Bath County as rural. Instead, the bureaucrats at the CFPB improperly designated Bath County as nonrural. Now, there are plenty of similar examples throughout the country of the CFPB oddly and incorrectly designating undeniably rural areas as nonrural, 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 versus nonrural distinction matters. Well, here is why: the CFPB imposes more stringent lending rules and restrictions on local financial institutions based in nonrural 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, the 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 our committee, the Financial Services Committee, in the House in June, Commissioner Vice stated:

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 been made clear by the regulators themselves. But it has also been made clear to me by a community banker in Bath County, a community banker who has 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. This young man, Thomas Richards, testified before our committee in December.

He said:

Unnecessary restrictions on balloon loans will lead to some qualified borrowers not receiving the credit that they deserve, and 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 that his small, little community bank in Bath County, Kentucky, had survived the great economic changes over the centuries. It had survived the Great Depression, it survived the stagflation of the late 1970s and the early 1980s, and it even survived the financial crisis in 2008. But he said that the greatest single threat facing his small, community bank in rural Bath County, Kentucky, was the avalanche of red tape coming out of Washington 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 straitjackets.

These loans are vital to all kinds of individuals in rural America, from businessowners 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 they can get to work each day. At its core, balloon loans are common throughout rural America because they offer consumers 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 backing in Kentucky has always been about relationship banking. It is about truly knowing your customer and having that development of trust, so that the banker knows whether or not the customer can repay that loan.

H.R. 2672 is necessary because it preserves the best traditions of rural community banking, which are now being jeopardized by the Consumer Financial Protection Bureau's incorrect rural designations throughout the country.

Really quickly, what does the bill exactly do? This bill creates a petition process in which individuals within a State could petition the Bureau to have it reconsider an improper designation of nonrural status 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 would like to see switched from nonrural 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, and 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 CFPB must consider when evaluating an application. In addition to the local input of the applicant, these factors include population density; a written opinion provide by the State's bank supervisor; and criteria used by the Census, OMB, and the Department of Agriculture for properly classifying geographic areas as either 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 Bureau shall then publish in the Federal Register an explanation of the factors it relied on in making its ultimate determination.

Once again, I am 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 of the other cosponsors of the 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 the chairman of the Kentucky Department of Financial Institutions--again, the top banking regulator in Kentucky, Commissioner Charles Vice.

This is a commonsense and simple bill, and I appreciate the opportunity to present it here today. I urge my colleagues to support this simple reform piece of legislation, and I urge the support and immediate passage of this legislation.

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