WASHINGTON, D.C. — The Small Business Credit Availability Act (H.R. 3336) is legislation intended to ensure community banks can continue to responsibly manage risk and provide credit to America’s small businesses, including farmers and ranchers.

It passed the U.S. House by a vote of 312-111 in late April. The bill, introduced by Rep. Vicky Hartzler (R-Mo.), had earlier passed the House Agriculture Committee with unanimous support, with its promise to clarify regulations that unintentionally burden important sources to credit to consumers and businesses.

“For many farmers, ranchers and other small businesses across the country, the commodity and Farm Credit bank serve as the lifeline for their operations. Those businesses count on receiving a loan or a line of credit to buy new equipment or hire new employees,” said Hartzler.

“But, some regulations within the Dodd-Frank Act could put that support in jeopardy because it would make it more expensive or nearly impossible for those community banks to use important risk management tools such as derivatives. Further, some proposed regulations would burden small lenders with costly new regulations designed only for the largest Wall Street banks.”

The committee held a public hearing in October 2011 to review several legislative proposals amending Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, concerned with its potential negative impacts on businesses and the economy. It was signed into law by President Obama on July 21, 2010.

“We are facing widespread and potentially severe unintended consequences from these regulations that will have a direct effect on our economic recovery,” stated Ag Committee Chair Frank Lucas (R-Okla.) during the public hearing last October. “Businesses across the country, including our farmers and ranchers, need to prepare for the new regulations and related costs now. They will not be able to wait for Congress to act.”

In summary, the bill seeks to restore Congressional intent by exempting small banks, credit unions, nonprofit cooperative lenders and farm credit institutions from costly clearing requirements under Dodd-Frank – according to proponents of H.R. 3336 – while ensuring banks can continue to provide risk management tools to their borrowers.

“With an already fragile economy, it’s so important that we do all we can to encourage economic activity rather than stifle it,” said Hartzler. “Having access to credit is critical for economic growth.”

Addressing the House in support of H.R. 3336 April 25, Lucas said small banks pose little risk to the nation’s financial system.

“Within the banking system, 96 percent of the national value of derivatives is held by the five largest banks. The very small remaining percentage of the derivatives exposure in our financial system is spread across hundreds of small institutions,” he testified. “That’s why Congress never intended for these community lenders to be regulated the same as the largest global financial institutions.”

During deliberations, both Republican and Democratic supporters of the act argued Dodd-Frank regulations imposed on larger banks are necessary due to larger credit risks the institutions pose, but identical rules are not appropriate for smaller rural companies.

“The revision of Dodd-Frank is essential to farmers, manufacturers and small and rural businesses wanting to expand and create new jobs. Many of these businesses are often overlooked by large national banks and might not have access to competitive loans,” Hartzler said, as reported by The Hill’s Floor Action Blog.

“Although Dodd-Frank was supposed to reduce the power of big banks, it has actually had the exact opposite effect. My bill helps to reverse this trend and keep lending decisions closer to home.”

Under Dodd-Frank, derivatives contracts including credit-default swaps are to be publicly traded on exchanges, but allows the Commodity Futures Trading Commission freedom to permit smaller banks to continue to conduct swaps independently. H.R. 3336 would write the intention into law, defining small banks’ exemptions and rights.

The bill now moves to the Senate.