Have you ever seen so many financial institutions wanting to do business in rural areas?  The CFPB has provided yet another glimmer of hope for smaller financial institutions hoping to qualify as a small creditor.
The Bureau announced yesterday, March 2, 2016, a new application process for smaller financial institutions to submit a request to determine if areas not currently deemed “rural” may be able to receive this coveted designation under federal consumer financial law.
Under this application process, those financial institutions now outside rural counties or census blocks can apply to be designated as rural and may be eligible for specific exemptions and provisions within regulation, i.e. escrow exemption rules for higher-priced mortgage loans and balloon payment qualified mortgages under Truth in Lending Act.
“This step will allow the Bureau to consider whether there are smaller institutions that merit a designation as ‘rural’ lenders but do not qualify under current guidelines,” said CFPB Director Richard Cordray. “The Bureau is taking quick action to fulfill our responsibility to Congress and implement the law.”  This request can be traced back to the Fixing America’s Surface Transportation Act which had a provision titled HELP Rural Communities Act that contained amendments to TILA.
There will be no proposed rulemaking for this application process as it simply relates to the Bureau’s establishment of an application and internal procedure.  The final rule is effective today, March 3, 2016.  Applications will not begin to be accepted until March 31, 2016.
To request a rural designation by the CFPB, financial institutions will need to identify the area and the state in which it is located and provide information that will allow the CFPB to evaluate the application under the parameters established.  The Bureau currently expects to issue a notice before March 31, 2016 concerning the requirements for a financial institution to qualify.
Click here for a link to the notice released in the Federal Register.