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From Banking and Finance Law Daily,June 9, 2017

Industry examines potential impact of Financial CHOICE Act after House passage

By Colleen M. Svelnis, J.D.

After the House of Representatives passed legislation that would overhaul and replace the Dodd-Frank Act, reaction poured in from both Congress and the banking industry. The Financial CHOICE Act (H.R. 10) is an effort to "rein in" the Dodd-Frank Act; provide regulatory relief to community banks and access to credit for consumers; eliminate "too big to fail;" cut the deficit by $24 billion over the next 10 years; and restructure the Consumer Financial Protection Bureau. The bill was passed in a 233 to 186 roll call vote, with no Democrats voting in favor of the bill and one Republican voting against the bill (see Banking and Finance Law Daily, June 8, 2017).

"We will make sure there is needed regulatory relief for our small banks and credit unions, because it’s our small banks and credit unions that lend to our small businesses that are the jobs engine of our economy and make sure the American dream is not a pipe dream," said Financial Services Chairman and bill sponsor Jeb Hensarling (R-Texas). The Congressional Budget Office estimated that the legislation could reduce the deficit by $33.6 billion over 10 years and that the bill’s regulatory relief would benefit community banks and credit unions. The nation’s largest banks would be unlikely to raise enough capital to meet the bill’s requirement for substantial regulatory relief, the CBO reported.

Amendments included. The Financial CHOICE Act also includes the following amendments:

  • Proposed by Rep. Jeb Hensarling (R-Texas), revises provisions subjecting certain Federal Deposit Insurance Corporation and National Credit Union Association functions to congressional appropriations, relating to appointments of positions created by H.R. 10, and providing congressional access to non-public Financial Security Oversight Council information.
  • Proposed by Rep. Joseph Hollingsworth (R-Ind), allows closed-end funds that are listed on a national securities exchange, and that meet certain requirements to be considered "well-known seasoned issuers."
  • Proposed by Rep. Lloyd Smucker (R-Pa), expresses the sense of Congress that consumer reporting agencies and their subsidiaries should implement stronger multi-factor authentication procedures when providing access to personal information files to more adequately protect consumer information from identity theft.
  • Proposed by Rep. Martha McSally (R-Ariz), requires the Treasury Department to submit a report to Congress regarding its efforts to work with federal bank regulators, financial institutions, and money service businesses to ensure that legitimate financial transactions along the southern border move freely.
  • Proposed by Rep. Ken Buck (R-Colo), requires the General Services Administration to study the Consumer Law Enforcement Agency’s real estate needs due to changes in the agency’s structure. It would then authorize the GSA to sell the current building if the real estate needs have changed and there is no government department or agency that can utilize the building.

Floor debate. During floor debate, Rep. Maxine Waters (D-Calif) called the Financial CHOICE Act "one of the worst bills I have seen in my time in Congress," asserting that it "guts" the CFPB and removes "essential" Dodd-Frank protections for consumers and investors. She stated that it is instead "a vehicle for Donald Trump’s agenda to deregulate and help out Wall Street. It destroys nearly all of the important policies we put in place in the Dodd-Frank Wall Street Reform and Consumer Protection Act to prevent another financial crisis and protect consumers." Waters also issued a statement after the hearing declaring it "shameful that Republicans have voted to do the bidding of Wall Street at the expense of Main Street and our economy."

Representative Nancy Pelosi (D-Calif) delivered remarks on the floor of the house in opposition to the bill. According to Pelosi, after the financial crisis, "we enacted the strongest Wall Street consumer financial protections in history, critical reforms to protect hard-working Americans and to insist on accountability from Wall Street. She extolled the CFPB, pointing out that it has returned "nearly $12 billion worth of compensation to 29 million wronged Americans, many of them seniors, many of them servicemembers." Pelosi stated that this bill "will undo these safeguards, eviscerate the Consumer Bureau and take our country back to the days of massive taxpayer bailouts."

Pelosi also held a press conference to state her opposition to the Amendment and to the Financial CHOICE Act. Pelosi stated that Dodd-Frank included "the strongest Wall Street consumer financial protections in history."

Industry groups respond. Rob Nichols, president and CEO of the American Bankers Association called the vote an "important step toward making much-needed regulatory reforms that will allow banks to better serve their customers and communities." He noted that the bill would have "been much stronger had a provision to repeal the Durbin Amendment been retained in the bill."

Independent Community Bankers of America (ICBA) President and CEO Camden R. Fine issued a statement praising the ICBA-supported legislation’s community bank regulatory relief, stating that it will "enhance economic and job growth." Fine stated that "Meaningful regulatory relief for the nation’s community bank is needed to improve lending and strengthen economic growth at the local level."

Financial Services Roundtable (FSR) called the legislation "an important step to advancing needed reforms to modernize the financial regulatory system in ways that promote greater economic growth while better protecting consumers." FSR CEO Tim Pawlenty stated that the House "has taken the lead in efforts to modernize the financial regulatory system to advance the goal of boosting the economy without sacrificing important consumer and taxpayer protections."

Consumer Bankers Association (CBA) President and CEO Richard Hunt believes that "any reforms made to the CFPB should begin with the restructuring of the bureau’s leadership" to institute a five-person bipartisan commission heading the bureau. The CBA stated this will "provide balance and stability to consumers and the economy." Hunt urged the Senate to consider "the benefits of a commission at the CFPB." "Congress can provide relief by implementing policies geared toward growing the economy and boosting consumer confidence."

Lisa Donner, executive director of Americans for Financial Reform, issued a statement on the passage stating that "Lawmakers who voted for this bill are granting Wall Street megabanks and predatory lenders a license to defraud ordinary Americans, and to put our economic security at risk for the narrow, short-term gains of a tiny elite. Consumers, investors and anyone who felt the impact of the financial crisis and recession will want to fight to ensure that not just the whole bill, but the set of dangerous proposals it includes, die in the Senate."

Ed Mierzwinski, Consumer Program Director at U.S. PIRG also responded to the bill passage. Mierzwinski stated that the bill will "leave the successful CFPB as an unrecognizable husk incapable of doing its job to protect consumers, homeowners, older Americans, students, servicemembers and veterans."

Companies: American Bankers Association; Americans for Financial Reform; Consumer Bankers Association; Financial Services Roundtable; Independent Community Bankers of America; U.S. PIRG

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