When many small and community bankers serving rural and underserved areas prepare for their New Year’s Eve toast this year, they will be able to make a major New Year’s Resolution: make more home loans.  The Consumer Financial Protection Bureau (“CFPB”) has introduced welcome new rules scheduled to take effect next year, which will raise the loan threshold for the “small creditor” exemption from 500 to 2,000 loans.  The new rules will also exclude from the threshold requirement those loans that the creditor retains in portfolio.  According to an estimate from the CFPB, approximately seven hundred additional lenders will now be “small creditors.” 

            These changes are part of a broader effort by the CFPB to exempt more small lenders from the extensive regulatory compliance burdens of larger lenders.  As the CFPB recognized when it announced the rule, consumers should also benefit from these changes by gaining easier access to financing.  In connection with the expanded definition of small creditors, the rules will provide certain small lenders serving rural and underserved communities with more opportunities to enter into non-standard types of loans to meet the needs of customers in these communities.

            In addition to the new definition of “small creditor,” the CFPB has also expanded the definition of “rural” areas.  Now, a rural area includes any county or census block that has not been designated as “urban” by the U.S. Census Bureau.  Additionally, the rule provides safe harbors to lenders that have used Census Bureau or CFPB websites to determine whether a location is a rural or underserved area. 

            The rule balances the expanded exemption for lenders with several tighter restrictions.  For example, assets of a lender’s affiliates may now count toward the $2 billion asset cap that is used to determine whether a bank is a “small creditor.”  The period by which lenders are measured has also now changed, from any point in the previous three years to the previous calendar year.

            Nonetheless, these rules offer exciting new potential for community bankers.  Additionally, the rules are a sign that regulators and lenders can work together, all while protecting the best interests of consumers.