By Rick Finley For The Virginian-Pilot

RURAL VIRGINIA is still struggling to recover from the Great Recession. Eighty-five of Virginia’s 133 counties and cities have shed jobs since 2007. Our state’s southern and western regions are facing particularly dim economic prospects. Nearly half of their residents rated the economy as “poor” or “not so good” in a recent Washington Post poll.

Well-intentioned but overly restrictive regulations on financial institutions deserve some of the blame. Federal officials put these measures in place after the financial crisis to protect Americans from Wall Street’s predatory behavior. But the rules have hobbled many of the credit unions and community banks that are so vital to small towns and medium-size cities across Virginia.

Thankfully, U.S. Sens. Tim Kaine and Mark Warner are working to advance a bill that seeks to ease this regulatory burden. It’s one of the most bipartisan pieces of legislation we’ve seen in a long time, and if it becomes law, it will help rejuvenate communities throughout Virginia that the economic recovery has left behind.

Big banks helped cause the 2008 financial crisis. For years, they pushed mortgage loans onto customers who were unlikely to be able to pay them back. The banks packaged these loans and sold them to investors. When people failed to keep up with their payments, a chain reaction of defaults followed — one that nearly broke the global financial system.

To prevent risky lending practices from ever again wrecking the economy, Congress passed the Dodd-Frank Act in 2010. Regulators subsequently wrote thousands of pages of rules fleshing out and clarifying the law’s provisions.

As leaders from both parties now acknowledge, Dodd-Frank’s central flaw is its indiscriminate treatment of all lenders — including the credit unions and community banks that had virtually nothing to do with the 2008 crisis. The burden of complying with these complicated rules has hamstrung Virginia’s smaller financial institutions and diminished their ability to help communities bounce back from the Great Recession.

Take the regulation that requires lenders to stringently evaluate a borrower’s ability to repay a mortgage. This mandate makes sense for large banks with a history of giving loans to borrowers with questionable prospects for repaying them.

But it makes little sense for credit unions, which are small, member-owned institutions. Credit union members put their own money at risk when they make loans. So they have a strong incentive to lend responsibly.

Further, since only members can borrow from credit unions, they tend to know far more about their borrowers than a larger bank does. This knowledge allows them to make sensible lending decisions without the need for onerous federal oversight.

Dodd-Frank’s regulations cost Virginia’s 140 credit unions $478 million a year — and another $144 million in lost revenue. Not only is that a direct cost borne by Virginia’s 2.6 million credit union member-owners, but it’s also money that can’t be lent out to small businesses looking to hire more workers or families hoping to purchase homes.

The bill championed by Kaine and Warner — SB 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act — would undo much of this damage.

For starters, it would exempt small financial institutions that don’t make many mortgages from rules requiring them to disclose all sorts of information on those mortgages. Collecting and reporting that data can be very expensive and time-consuming — and thus raise the cost of credit for consumers.

The act also would allow credit unions to classify loans made to small-scale landlords purchasing one- to four-unit properties as real estate loans, rather than business loans. That distinction matters because credit unions can only lend a certain percentage of their assets to businesses.

This change could free up an estimated $4 billion for credit unions to lend to small businesses across the country. It would also put credit unions on equal regulatory footing with banks — and thus increase competition, to the benefit of consumers.

Common-sense regulatory reform for credit unions and community banks would inject new life into communities all over Virginia. It’s time for the rest of the Senate to join Kaine and Warner and hold Wall Street accountable without hindering small financial institutions.

Rick Finley is CEO of WJC Federal Credit Union in Damascus.