CFPB Sets Up ABA-Advocated Rural Designation Appeal Process

The Consumer Financial Protection Bureau today issued a final rule establishing a process by which businesses and individuals can appeal the bureau’s designation of a rural area. The final rule implements a regulatory relief measure, long advocated by ABA, that Congress passed in December. Under the rule, the CFPB will begin accepting appeals on March 31.

The Dodd-Frank Act gave the CFPB discretionary authority to exempt certain loans from the qualified mortgage rule for banks serving areas that it deems “rural” or “underserved.” Given the CFPB’s struggle to appropriately define what constitutes rural, and the significant impact that the designation — or lack thereof — can have on small lenders and their customers, ABA urged Congress to mandate a formal process by which banks can appeal for rural status. When the measure was first proposed in 2014 through a collaboration with an ABA member banker, the Kentucky Bankers Association and Rep. Andy Barr (R-Ky.), ABA was the only banking trade group that testified in favor of it on Capitol Hill.

“This legislatively mandated appeals process brings needed meaningful relief to rural bank customers, facilitating the provision of credit in areas that need it the most,” said ABA EVP Bob Davis. “Thanks to grassroots efforts by bankers and bipartisan congressional leadership, bankers in demonstrably rural areas have a way to get the regulatory relief the law provides for them.”

To request rural status, banks must submit supporting information from federal and state agencies, including the U.S. Census Bureau, the Office of Management and Budget, the Department of Agriculture and the state banking supervisor about whether the area in question is designated as rural and describing its population density in comparison with other CFPB-designated rural areas nearby. The bureau said it would issue interpretive guidance on the term “rural area” before March 31.

The bureau will publish complete applications in the Federal Register within 60 days of receiving them, collect public comments for at least 90 days and make a final determination at most 90 days after the comment period closes. Due to a two-year sunset on the process included in the legislation, applications must be received before April 8, 2017.