WASHINGTON — Two House Financial Services Committee members introduced a bipartisan bill late last week that is designed to give lenders breathing room when new disclosure rules go into effect on Aug. 1.
The bill would shield lenders from regulatory enforcement actions and private lawsuits through yearend if they make a good faith effort to comply with the Consumer Financial Protection Bureau's new rule. The bill would shield banks, thrifts, credit unions and nonbank mortgage lenders and title companies.
"It provides a safe harbor for those who are trying to follow in good faith," said Rep. Brad Sherman, D-Calif., one of the co-authors of the bill. "But this is a shakedown cruise. The ship has got to launch on Aug. 1.If it there is a thing that goes wrong there, you got to fix it."
The bill, which is co-authored with Rep. Steve Pearce, R-N.M., was introduced late Friday. It is directed at the CFPB's rule combining the mortgage disclosures of the Real Estate Settlement Procedures Act and the Truth-in-Lending Act.
Lenders have argued that changing the disclosures is a massive undertaking and asked the CFPB for more time. They have also asked the agency for a grace period similar to what Pearce and Sherman are seeking.
"This legislation will allow credit unions to make a good-faith effort to comply with the regulation without the fear of potential enforcement actions or lawsuits," said Brad Thaler, vice president of legislative affairs at the National Association of Federal Credit Unions in a recent post about the bill online.
The American Bankers Association also supports the bill, according to a spokesman.
Rep. Randy Neugebauer, R-Texas, has urged CFPB to act unilaterally and institute a "hold harmless" period from Aug. 1 through Dec. 31 for lenders that make a good faith effort to implement the new mortgage disclosures. But the CFPB so far has not agreed to his request.
"The CFPB should be taking steps to ensure that the roll out on Aug. 1 happens as smoothly as possible," Neugebauer said in a written response to American Banker. "Frankly, I have been disappointed the CFPB has not taken steps to provide additional market certainty. A safe harbor, as proposed by Reps. Pearce and Sherman, would be a step in the right direction."
The Texas congressman chairs the House financial services financial institutions subcommittee.
Sherman said he hopes the CFPB will support the bill.
"If they supported this bill, it would move much more quickly," he said.