Financial Services Report

Looking Ahead

Near Term

• The House will consider a series of Financial Services related measures this week, including H. J. Res. 88, that would disapprove of the Department of Labor’s (DOL) recently finalized conflict of interest rule for financial advisers. Additionally, a bill to help startup companies enjoy greater access to angel investors (H.R. 4498), and another that would revise the process for cutting duties on imports of manufacturing resources (H.R. 4923) are scheduled to be voted on.
• The Senate will bring its first appropriations bill to the floor this week as it considers and aims to complete work the Energy and Water Development spending bill (H.R. 2028) before hopefully moving on to the Commerce-Justice-Science funding bill. 

Further Out

• The CFPB has announced a field hearing in New Mexico that will take place on May 5^th where the Bureau is expected to issue its proposed rulemaking on the use of pre-dispute arbitration clauses in consumer financial services contracts.

 
The Past Week

Legislative Branch
House
House Panel Advances Disapproval Resolution of DOL Fiduciary Rule; Sets Up Floor Consideration
House Republicans are quickly moving a resolution disapproving the Department of Labor’s fiduciary rule through the legislative process, with the measure (H. J. Res. 88) passing an Education and the Workforce Committee markup on Thursday. The resolution – which would nullify the Labor Department’s recently completed rule on retirement investment advice – was passed on a strict party-line vote in committee. The bill will come up before the full House this week, under a rule.  While passage is guaranteed, the question is whether any Democratic members vote for it and if so, would it bring the tally to a veto proof threshold. 
 
Capital Markets Subcommittee Holds SEC Oversight Hearing
On April 20, the House Financial Services Committee's Subcommittee on Capital Markets and Government Sponsored Enterprises held a hearing entitled “Continued Oversight of the SEC's Offices and Divisions.”  During the hearing members on both sides of the aisle asked a series of questions about various pending SEC initiatives, including the pay ratio rules, the SEC’s efforts to put forward a harmonized fiduciary rule, the coordination (or lack thereof) between the SEC and the DOL on the DOL’s recent fiduciary rule efforts and insider trading.
 
Senate
Shelby Asks for GAO Report on FHFA Market Impact
On Monday, Senate Banking Committee Chairman Richard Shelby (R-AL) sent a letter to the Government Accountability Office (GAO) asking for additional insight into the Federal Housing Finance Agency’s (FHFA) conservatorship over the government-owned corporations Fannie Mae and Freddie Mac. The FHFA – which was granted conservatorship in September 2008 in the midst of the housing giants’ failures – has been accused of maintaining control over Fannie and Freddie for longer than necessary. Sen. Shelby’s letter asks for “meaningful data regarding the market impact of FHFA’s decisions,” and asserts that the FHFA has taken a “more active” role in the mortgage market in recent years.
 
Senate Dems Request ‘Fintech’ Analysis from GAO
On Monday, Senate Democrats Sherrod Brown (D-OH), Jeff Merkley (D-OR), and Jeanne Shaheen (D-NH) wrote to the head of the Government Accountability Office (GAO), requesting an updated report on a GAO report from 2011 that looked at Peer-to-Peer (p2p) lending.   Much this industry now falls under the rubric of financial technology, or “Fintech” lending and also goes by the nomenclature of marketplace lending. The three senators – who are the top Democrats on the Banking Committee, Financial Institutions Subcommittee, and Small Business Committee, respectively – want an update to a 2011 report from the agency on the growth of the Fintech marketplace, particularly the online lending sector, and this request follows up on earlier efforts by the three Senators in this space.
 
Isakson Introduces Resolution Rebuking Fiduciary Rule
On Monday, Sen. Johnny Isakson (R-GA) introduced a resolution – along with 32 other Republican cosponsors – disapproving of the Department of Labor’s (DOL) recently finalized conflict of interest rule for retirement advisers. The bill mirrors a similar effort by Rep. Phil Roe (R-TN) in the House (see above), the resolution seeks to formally rebuke the DOL rule per the provisions of the Congressional Review Act, which allows rules to be nullified by Congressional resolution if the resolution is signed by the President or if Congress is able to override a presidential veto.  Since the enactment of the CRA in 1996, there is only one instance of a resolution becoming law.  Most recently, Congress tried to enact a CRA in response to an NRLB decision in in 2015, but it failed on a veto by President Obama.
 
Select Highlights from the Administration
Consumer Financial Protection Bureau (CFPB)
CFPB Report Suggests Online Lending Leads to Bank Fines
On Wednesday, the Consumer Financial Protection Bureau (CFPB) released a report suggesting that half of all consumers that had taken out an online loan paid an average of $185 in bank penalties. The 18-month study involving 330 online lenders suggested that issues arise when lenders have the authority to debit bank accounts of borrowers automatically. The report may help to inform rules that the Bureau is currently considering on the payday lending industry.    
 
Federal Reserve
U.S. Financial Regulators Ask Banks to Have Plan for ‘Brexit’
On Wednesday, it was reported that the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) are insisting that U.S. banks prepare for the consequences of the United Kingdom (UK) leaving the European Union (EU) this summer. A public referendum on whether the UK should remain or leave the EU is due in June, and the federal regulators want U.S. banks to specify how to handle uncertainties should British voters elect to leave. Specifically, U.S. regulators, along with the Bank of England, want banks to decide whether they will still offer financial services in continental Europe from a non-EU Britain.
 
U.S. Regulators Target Executive Pay, Clawbacks
On Friday, U.S. regulators announced a new series of restrictions on how, and how much, Wall Street bankers are able to be paid. The rules would require large financial firms to defer payment of at least half of executives’ bonuses for four years and require a minimum period of seven years for firms to “clawback” bonuses if executive actions ultimately harm the institution. Additionally, all clawbacks are subject to disclosure requirements. Industry stakeholders were reportedly surprised by the strictness of the rules, but most expect the long-term effect to manageable.
           
 
Next Week’s Schedule
 
On Tuesday at 10:00am in 215 Dirksen, the Senate Finance Committee will hold a hearing on business Tax Reform.
 
On Wednesday at 10:00am in 2128 Rayburn, the House Financial Services Monetary and Policy and Trade Subcommittee will hold a hearing entitled, ““How Can the U.S. Make Development Banks More Accountable?”