InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
House Financial Services Committee Approves Budget Views and Estimates for FY2018
On March 1, the House Financial Services Committee met in open session and voted, along party lines, to approve its Budget Views and Estimates for Fiscal Year 2018. Among other things, the plan calls for advancing “legislative proposals—including the Financial CHOICE Act—to replace the failed aspects of the Dodd-Frank Act with free-market alternatives that end bailouts, restore market discipline, ensure that the financial system is more resilient, pare back unnecessary and burdensome regulations, encourage capital formation and economic growth, and protect consumers by preserving financial independence and consumer choice.” In addition, the Committee intends to advance legislation to place the non-monetary policy activities of the independent agencies within the Committee’s jurisdiction on the appropriations process. The Committee voted down, along party lines, a series of amendments submitted by the Democratic members.
House Financial Services Committee Chairman Called for End of CFPB; Senate Banking Committee Ranking Member Responds
In a February 10 blog post, House Financial Services Committee Chairman Jeb Hensarling called for the abolition of the CFPB, and recommended that the President “immediately fire CFPB Director Richard Cordray.” Specifically, Rep. Hensarling expressed his belief that the CFPB is “arguably the most powerful, least accountable agency in U.S. history,” and his concern that the agency “defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process.” For these reasons, Rep. Hensarling stated he believes that “even with good policy, the CFPB would still be unconstitutional.” Ultimately, he argued that the CFPB “must be functionally terminated,” which he said could be achieved by ending the Bureau’s funding through a reconciliation bill.
The same day, Senate Banking Committee Ranking Member Sherrod Brown issued a statement responding to Rep. Hensarling’s proposal to abolish the Dodd-Frank Act. Senator Brown’s response noted, among other things, that “71 percent of Americans approve of the [CFPB]’s mission,” and that “[t]he Hensarling proposal would transform the Bureau from an effective watchdog into a toy poodle.”
Legislation Introduced in Both Houses Seeking to Curb Authority of the CFPB and Other Financial Regulators
On February 14, Senator Mike Rounds, a member of the Senate Banking Committee, introduced S. 365, which seeks to amend the Consumer Financial Protection Act of 2010 to bar the transfer of funds from the Board of Governors of the Federal Reserve System to the CFPB. The bill also would require the CFPB to turn over all penalties it obtains to the United States Treasury. Sen. Rounds also reintroduced the “Taking Account of Institutions with Low Operation Risk (TAILOR) Act” (S. 366)–a bill intended to ease regulatory burden on local banks and credit unions. Specifically, the TAILOR Act would require financial regulators to take into consideration the risk profile and business models of individual financial institutions and tailor those regulations accordingly. The TAILOR Act also would require regulators–including the OCC, the Fed, the FDIC, the NCUA and the CFPB–to conduct a review of all regulations issued since the 2010 passage of the Dodd-Frank Act and revise any regulations that do not conform to the TAILOR Act’s requirements. In addition, the regulatory agencies would be required to provide an annual report to Congress outlining the steps they have taken to tailor their regulations.
On February 15, Senator David Perdue (R-Ga.), along with Sens. John Barrasso (R-Wyo.), John Boozman (R-Ark.), Ted Cruz (R-Tex.), Steve Daines (R-Mont.), Mike Enzi (R-Wyo.), Joni Ernst (R-Iowa), John Hoeven (R-N.D.), Johnny Isakson (R-Ga.), Ron Johnson (R-Wis.), John Kennedy (R-La.), Mike Lee (R-Utah), Rand Paul (R-Ky.), Marco Rubio (R-Fla.), and Thom Tillis (R-N.C.), have introduced legislation S. 387 to amend the Consumer Financial Protection Act so that the CFPB would be subject to the regular appropriations process.
Senator Ted Cruz and Representative John Ratcliffe also introduced legislation in their respective chambers that would abolish the CFPB. The pair of bills–S. 370 and H.R. 1031–would “eliminate the Consumer Financial Protection Bureau by repealing title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Consumer Financial Protection Act of 2010.” As explained by Senator Cruz in a joint press release, the proposed legislation would give “Congress the opportunity to free consumers and small businesses from the CFPB’s regulatory blockades and financial activism, which stunt economic growth.”
Meeting to Approve the Authorization and Oversight Plan of the Committee on Financial Services
On February 7, the House Financial Services Committee adopted, by a voice vote, its Authorization and Oversight Plan of the Committee on Financial Services for the 115th Congress. Among other things, the Oversight Plan identifies the Committee’s intention to focus on the following areas of oversight during the upcoming Congress: the Dodd-Frank Act, capital markets, housing, insurance, and monetary policy and trade. The document also describes anticipated actions relating to the oversight and authorization of agencies or programs under the Committee’s jurisdiction.
OCC Proposes Final Revisions to Stress Test Information Collection
On February 2, the OCC requested comment on proposed revisions to an existing information collection entitled “Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions with Total Consolidated Assets of $50 Billion or More Under the [Dodd-Frank Act].” The agency is also giving notice that it has sent the collection to the OMB for review. This information collection is related to the conduct of annual stress tests that the Dodd-Frank Act requires of certain financial companies, including national banks and federal savings associations. Comments on the current notice must be received by March 6, 2017.
OCC, FDIC, and Fed Release Stress Test Scenarios for 2017
On February 3, the Fed announced the release of the “Supervisory Scenarios” to be used by banks and supervisors for the 2017 Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress test exercises and also issued instructions to firms participating in CCAR. The Fed also published three letters that provide additional information on its stress-testing program. The three letters describe: (i) the Horizontal Capital Review for large, noncomplex companies; (ii) the CCAR qualitative assessment for U.S. intermediate holding companies of foreign banks, which are submitting capital plans for the first time; and (iii) improvements to how the Fed will estimate post-stress capital ratios.
On February 3, the OCC similarly released economic and financial market scenarios for 2017 that are to be used by national banks and federal savings associations (with total consolidated assets of more than $10 billion) in their annual Dodd-Frank Act-mandated stress test. On February 6, the FDIC released its stress test scenarios, working in consultation with the Fed and OCC.
The three sets of supervisory scenarios provide each agency with forward-looking information for use in bank supervision and will assist the agencies in assessing the covered institutions’ risk profile and capital adequacy.
Special Alert: President Signs Executive Order Calling For Review of Financial Regulations
On February 3, President Trump signed an executive order (the Executive Order) directing the Treasury Secretary and the heads of the member agencies of the Financial Stability Oversight Council (FSOC) to review financial laws and regulations—including the Dodd-Frank Act and regulations implementing that law—thereby setting into motion a process by which the 2010 financial law could be significantly scaled back.
Under the Executive Order, the Secretary of the Treasury – who has yet to be confirmed – has 120 days to review and report to the President which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements promote the “core principles” listed below and those that do not. The core principles include:
- restoring public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework
- fostering economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry
- enabling American companies to be competitive with foreign firms in domestic and foreign markets
- advancing American interests in international financial regulatory negotiations and meetings
- preventing taxpayer-funded bailouts, and
- empowering Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth
Click here to read full special alert
* * *
If you have questions about the order or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.
CFPB and Attorney General of Virginia Take Action Against Pawnbroker for TILA Disclosures
On February 2, the CFPB and the Attorney General of Virginia filed a lawsuit and proposed stipulated final judgment against a Virginia pawnshop for deceiving consumers about the actual annual costs of its loans. This complaint is one of many similar lawsuits filed recently against several Virginia pawnbrokers (see November 11 and December 23 Infobytes posts). The complaint alleges violations of TILA, the Dodd-Frank Act, Virginia’s pawnbroker statutes, and the Virginia Consumer Protection Act. The proposed stipulated final judgment orders the company to pay over $56,000 in restitution, forfeit over $17,000 in ill-gotten gains, and pay a $5,000 civil penalty.
"Dismantling Dodd-Frank" a Top Priority for House Financial Services Committee
On January 28, House Financial Services Committee Chairman Jeb Hensarling issued a statement in which he said, “Fulfilling the Trump Administration's pledge to dismantle Dodd-Frank this year is essential to leveling the playing field, building a healthy economy and offering every American greater opportunities to achieve financial independence.” The statement also references the Financial CHOICE Act—legislation presented by Republicans on the Financial Services Committee as a proposed Dodd-Frank Act replacement. The statement echoed comments earlier that day from President Trump that Congress should make financial regulatory reform a priority.
CFPB Releases Independent Audit of its Operations and Budget
In accordance with its obligations under the Dodd-Frank Act, the CFPB released an Independent Audit of Selected Operations and Budget for the Bureau’s fiscal year 2016. The audit report—which is dated December 16, 2016—was prepared by KPMG LLP for the purpose of evaluating the CFPB’s: (i) budget process relative to Bureau policies and procedures regarding budget formulation, execution, and monitoring; (ii) inventory and asset management practices, policies, and procedures; (iii) frequent traveler stipend program; and (iv) corrective actions taken to resolve the findings included in the Bureau’s 2015 Independent Audit (also completed by KPMG). KPMG concluded generally that adherence to asset management policies and procedures needs to be improved and that certain additional controls should be adopted. The report offers several recommendations addressing the deficiencies, which the Bureau’s Acting Chief Financial Officer agreed with and is “already preparing to implement.” The report also noted that the CFPB had “partially” but not completely remediated the deficiencies KPMG had identified in its 2015 audit.