Banking bill sent to Obama would allow counties labeled non-rural to petition for rural status

Congress has passed a bill creating a petition process for areas to be designated as "rural" by the Consumer Financial Protection Bureau, a designation that allows certain lending practices in areas that the agency considers under-served. Meanwhile, the agency has adopted rules that "would expand the definition of rural areas to include census blocks that are not in an urban area as defined by the Census Bureau," it said early this year.

The agency, created by the Dodd-Frank Wall Street Reform Act of 2010, originally defined "rural" in a way that excluded may rural counties. "While the CFPB recently undertook efforts to revise its definition, it once again neglected to allow input from rural communities themselves," Senate Majority Leader Mitch McConnelll, R-Ky., said in a news release. McConnell was a sponsor of the bill.

Democrat Charles A. Vice, commissioner of the Kentucky Department of Financial Institutions, said in the release that the bill “provides the needed flexibility for community banks to provide appropriate loan products to individuals living in rural areas.  Community banks are vital to Kentucky’s economy expansion and growth.”

The CFPB's rule changes would make it easier for banks and credit unions to "make loans to borrowers with high levels of debt," The Wall Street Journal reported. Jack Hartings, president of The People’s Bank Co. in Coldwater, Ohio, and chairman of the Independent Community Bankers of America, told the Journal that the changes would “allow us to expand the lending that we do to the individuals in our community that we know are good qualified credit (risks) but from a regulatory standpoint, fall out of that box.” Journal reporter Alan Zibel wrote, "Many borrowers in rural areas, he said, often have high levels of debt, including small-business owners and farmers who take out business loans as individuals."