79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–530 

FEDERAL SAVINGS ASSOCIATION CHARTER FLEXIBILITY 

ACT OF 2017 

JANUARY 29, 2018.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 1426] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 1426) to amend the Home Owners’ Loan Act to allow Federal savings associations to elect to operate as national banks, and 

for other purposes, having considered the same, report favorably 

thereon without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

Introduced by Representative Keith Rothfus on March 8, 2017, 

H.R. 1426, the ‘‘Federal Savings Association Charter Flexibility Act 

of 2017’’ amends the Home Owners Loan Act (12 U.S.C. 1464) to 

permit a federal savings association to elect to operate subject to 

supervision by the Comptroller of the Currency (OCC) with the 

same rights and duties of a national bank. Unless the OCC otherwise notifies the institution, the election is effective 60 days after 

the date on which the OCC receives the notice. The bill also requires the OCC to issue a rulemaking that clarifies the required 

documentation and timeline for the election process, and one that 

requires the federal savings association to identify assets and subsidiaries that do not conform to those required of a national bank. 

Finally, the bill requires the OCC to establish a transition process 

that permits an electing Federal savings association to bring any 

assets that do not conform to national bank requirements after notice of election into conformance, or the ability to justify the 

grandfathering of such assets and subsidiaries. 

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BACKGROUND AND NEED FOR LEGISLATION

The Office of the Comptroller of the Currency (OCC) charters 

and regulates and the Federal Deposit Insurance Corporation 

(FDIC), insures both federal savings associations and national 

banks. Each institution has different structures and different lending and investment powers. 

The Home Owners Loan Act (HOLA) [12 U.S.C. 1461 et seq.] created the Federal savings associations charter. These institutions 

serve local community-based and do not have shareholders. Because they are non-stock institutions, federal savings associations 

are built on the foundation of pledged deposits (similar to long 

term certificates of deposit) that provide the capital to operate. 

Federal savings associations specialize in real estate financing, and 

are subject to several specific lending constraints. 

Federal savings associations historically enjoyed several advantages not accorded to national banks, including: 

(1) consolidated supervision under the Office of Thrift Supervision (OTS); 

(2) broad interstate branching authority; 

(3) liberal branching rights; and 

(4) the absence of uniform regulatory holding company capital requirements. 

In order to qualify for these benefits, HOLA requires that federal 

savings associations be subject to statutory commercial lending limits and restrictions under the so-called qualified thrift lender 

(‘‘QTL’’) test. The QTL test requires that at least 65 percent of a 

savings associations portfolio assets must be comprised of mortgage 

and consumer-related assets. While the Dodd-Frank Act eliminated 

many of the benefits provided to federal savings associations, the 

HOLA restrictions remain. 

National banks are for-profit business corporations owned by private investors and governed by a board of directors chosen by the 

stockholders. Unlike federal savings associations, national banks 

enjoy the ability to engage in a wider range of lending activities because they are not required to focus on a particular area of lending 

and investment, and do not have specific asset-type lending constraints. Additionally, national banks are provided significant benefits in the form of federal pre-emption. The OCC has the authority 

to pre-empt state statutes and regulations, which means that national banks can operate under a single set of laws and regulations, 

rather than to comply with multiple sets of state laws and regulations that may or may not be consistent. 

As discussed above, HOLA constrains federal savings associations in their ability to pursue certain activities. Under current 

law, the only option for federal savings associations that want to 

offer products and services outside of these HOLA restrictions is to 

expend human and financial resources to convert to a national 

bank charter. This is a particularly burdensome process for smaller 

associations, as they must first convert to stock form before they 

can convert their charter. 

In testimony on April 23, 2015, OCC Senior Deputy Comptroller 

Toney Bland, proposed several legislative measures to reduce the 

regulatory burden on banks, including a proposal to add a new section to HOLA that would give federal savings associations the flexiVerDate Sep 11 2014 07:01 Jan 30, 2018 Jkt 079006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR530.XXX HR530
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1https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=398896 

bility to exercise national bank powers without changing their 

charters.1 This legislative change would give the institutions the 

ability to exceed the commercial and consumer loan limits that 

apply under HOLA, but retain their charters and corporate forms, 

and continue the treatment as federal savings associations for purposes of consolidation, merger, dissolution, conservatorship, and receivership. 

Because the OCC already supervises both the national bank and 

federal savings association charters, the regulator can maintain 

safe and sound operation of institutions that elect to operate as national banks under its proposal. The OCC bases its proposal on the 

model used in Massachusetts, which permits all state-chartered financial institutions, regardless of charter type, to exercise the 

same basic set of powers. 

HEARINGS

The Committee on Financial Services held a hearing examining 

matters relating to H.R. 1426 on April 26, 2017 and April 28, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

January 17 and 18, 2018, and ordered H.R. 1426 to be reported favorably to the House as amended by a recorded vote of 55 yeas to 

0 nays (Record vote no. FC–138), a quorum being present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House with amendment. The motion was agreed to 

by a recorded vote of 55 yeas to 0 nays (Record vote no. FC–138), 

a quorum being present. 

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Insert graphic folio 5 HR530.001

Representative Yea 

Mr. Hensarling--------------· )\ 

Mr. McHenry _________________ _ 

Mr. King_ ••.•..••••••......... 

Mr. Royce (CA) -----------···· )\ 

Mr. Lucas.................... X 

Mr. Pearce------------------- X 

Mr. Posey.................... X 

Mr. Luetkemeyer.............. )\ 

Mr. Huizenga •••••..•.•...... )\ 

Mr. DuffY..................... )\ 

Mr. St1vers ....•..•........•.• 

Mr. Hultgren .....••.......••. X 

Mr. Ross..................... X 

Mr. Pittenger_________________ X 

Mrs. Wagner ----------------- X 

Mr. Barr--------------------- )\ 

Mr. Rothfus ------------------ X 

Mr. Messer-------------------

Mr. Tipton.................... X 

Mr. Williams ··--------------- X 

Mr. Poliquin------------------ X 

Mrs. Love----------------·--- )\ 

Mr. Hill---------------------- X 

Mr. Emmer---------------···· X 

Mr. Zeldin ................... .X 

Mr. Trott·····---------------- X 

Mr. Loudermilk............... X 

Mr. Mooney (WV)______________ X 

Mr. MacArthur·------·-······· 

Mr. Davidson····--------·-··· 

Mr. Budd .••••.••••..•..•..•.• 

Mr. Kustoff (TNL ...•.....•.. 

Ms. Tenney ....••....•........ 

Mr. Hollingsworth .•......•.... 

X 

X 

X 

X 

X 

X 

Record vote no. FC-138 

Nay Present Representative Yea Nay Present 

Ms. Maxine Waters (CA) ....... )\ 

Mrs. Carolyn B. Maloney (NYL X 

Ms. Velazquez................ )\ 

Mr. Sherman................. X 

Mr. Meeks.................... )\ 

Mr. Capuano----------------- X 

Mr. Clay _____________________ _ 

Mr. Lynch-------------------- X 

Mr. David Scott (GA) ---------- )\ 

Mr. AI Green (TX) ------------- X 

Mr. Cleaver................... X 

Ms. Moore.................... X 

Mr. Ellison .•..•.•••.•••..•... .X 

Mr. Perlmutter --------------- X 

Mr. Himes.................... X 

Mr. Foster.................... X 

Mr. Kildee ..•........•........ X 

Mr. Delaney.................. )\ 

Ms. Sinema ...............•.• X 

Mrs. Beatty.................. X 

Mr. Heck..................... )\ 

Mr. Vargas------------------- X 

Mr. Gottheimer •.............. X 

Mr. Gonzalez (TX) ------------- X 

Mr. Cnst --------------------- X 

Mr. Kihuen --------··········· X 
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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 1426 will permit a federal savings association to elect to operate subject to supervision by the Comptroller of the Currency (OCC) with the same 

rights and duties of a national bank. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, January 26, 2018. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1426, the Federal Savings 

Association Charter Flexibility Act of 2017. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Sarah Puro. 

Sincerely, 

KEITH HALL, Director. 

Enclosure. 

H.R. 1426—Federal Savings Association Charter Flexibility Act of 

2017 

H.R. 1426 would permit financial institutions known as federal 

savings associations to increase their commercial or consumer lending above the limits in current law without changing their charters. The bill also would require the Office of the Comptroller of the 

Currency (OCC) to issue a rule concerning this new authority. 

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Under H.R. 1426, institutions that choose to increase their lending would be known as covered savings institutions. Using information from the OCC, CBO estimates that no more than 10 percent 

of the roughly 325 federal savings associations nationwide might be 

interested in becoming a covered savings institution under the provisions of the bill. Those institutions hold less than 0.1 percent of 

the assets at banks. Because the OCC would continue to regulate 

those institutions under the bill, CBO expects that regulatory costs 

to the agency would not increase. In addition, CBO estimates that 

establishing such authority would not change the likelihood of failure for any institution that converts its charter. 

H.R. 1426 also would require the OCC to issue a rule to implement the new authority for federal savings associations. Using information from the agency, CBO estimates that it would cost $1 

million to complete the rulemaking process. Costs incurred by the 

OCC are recorded in the budget as an increase in direct spending. 

However, the OCC is authorized to collect fees from the institutions 

it supervises to cover administrative expenses; those fees are recorded as reductions in direct spending. Thus, the net effect on direct spending would be insignificant. 

Because enacting H.R. 1426 would affect direct spending, pay-asyou-go procedures apply. Enacting the bill would not affect revenues. 

CBO estimates that enacting H.R. 1426 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year periods beginning in 2028. 

H.R. 1426 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act. 

The CBO staff contact for this estimate is Sarah Puro. The estimate was approved by H. Samuel Papenfuss, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the proVerDate Sep 11 2014 07:01 Jan 30, 2018 Jkt 079006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR530.XXX HR530
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visions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The 

Committee estimates that the bill requires one directed rulemaking 

within the meaning of such section. The rulemaking requires the 

Comptroller of the Currency to establish streamlined standards 

and procedures that clearly identify required documentation or 

timelines for an election. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 1426 as the ‘‘Federal Savings Association 

Charter Flexibility Act of 2017.’’ 

Section 2. Option for Federal savings associations to operate as a 

covered savings association 

This section amends Section 5 of the Home Owners Loan Act to 

permit Federal savings associations to elect to operate with the 

rights and duties of national banks without changing their charters, by submitting a streamlined election notice to the OCC. The 

application is considered approved 60 days after the date on which 

the OCC receives the notice, unless the OCC otherwise notifies 

them. The bill also requires the OCC to issue a rulemaking that 

clarifies the required documentation and timeline for the election 

process, and one that requires the federal savings association to 

identify assets and subsidiaries that do not conform to those required of a national bank. Finally, the bill requires the OCC to establish a transition process for bringing any assets of an electing 

Federal savings association that do not conform to national bank 

requirements after notice of election into conformance, or the ability to justify the grandfathering of such assets and subsidiaries. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, 

8 

and existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

HOME OWNERS’ LOAN ACT 

* * * * * * * 

SEC. 5A. ELECTION TO OPERATE AS A COVERED SAVINGS ASSOCIATION. 

(a) DEFINITION.—In this section, the term ‘‘covered savings association’’ means a Federal savings association that makes an election 

approved under subsection (b). 

(b) ELECTION.— 

(1) IN GENERAL.—Upon issuance of the rules described in subsection (f), a Federal savings association may elect to operate as 

a covered savings association by submitting a notice to the 

Comptroller of such election. 

(2) APPROVAL.—A Federal savings association shall be 

deemed to be approved to operate as a covered savings association on the date that is 60 days after the date on which the 

Comptroller receives the notice under paragraph (1), unless the 

Comptroller notifies the Federal savings association otherwise. 

(c) RIGHTS AND DUTIES.—Notwithstanding any other provision of 

law and except as otherwise provided in this section, a covered savings association shall— 

(1) have the same rights and privileges as a national bank 

that has its main office situated in the same location as the 

home office of the covered savings association; and 

(2) be subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to such a national bank. 

(d) TREATMENT OF COVERED SAVINGS ASSOCIATIONS.—A covered 

savings association shall be treated as a Federal savings association 

for the purposes— 

(1) of governance of the covered savings association, including 

incorporation, bylaws, boards of directors, shareholders, and 

distribution of dividends; 

(2) of consolidation, merger, dissolution, conversion (including conversion to a stock bank or to another charter), conservatorship, and receivership; and 

(3) determined by regulation of the Comptroller. 

(e) EXISTING BRANCHES.—A covered savings association may continue to operate any branch or agency the covered savings association operated on the date on which an election under subsection (b) 

is approved. 

(f) RULEMAKING.—The Comptroller shall issue rules to carry out 

this section— 

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(1) that establish streamlined standards and procedures that 

clearly identify required documentation or timelines for an election under subsection (b); 

(2) that require a Federal savings association that makes an 

election under subsection (b) to identify specific assets and subsidiaries— 

(A) that do not conform to the requirements for assets 

and subsidiaries of a national bank; and 

(B) that are held by the Federal savings association on 

the date on which the Federal savings association submits 

a notice of such election; 

(3) that establish— 

(A) a transition process for bringing such assets and subsidiaries into conformance with the requirements for a national bank; and 

(B) procedures for allowing the Federal savings association to provide a justification for grandfathering such assets and subsidiaries after electing to operate as a covered 

savings association; 

(4) that establish standards and procedures to allow a covered savings association to terminate an election under subsection (b) after an appropriate period of time or to make a subsequent election; 

(5) that clarify requirements for the treatment of covered savings associations, including the provisions of law that apply to 

covered savings associations; and 

(6) as the Comptroller deems necessary and in the interests 

of safety and soundness. 

* * * * * * * 

Æ