Insights

Financial Services Report

May 31, 2016

Looking Ahead
Near Term

  • Both the House and Senate are in Recess this week.
  • The CFPB is expected to announce a Notice of Proposed Rulemaking (NPRM) for it long awaited small dollar lending rule on June 2nd
  • The Fed is expected to announce a NPRM for its insurance capital standards rules on June 3rd

Further Out

  • House Financial Services Chairman Jeb Hensarling is expected to unveil his alternative to Dodd-Frank on June 7th. 
  • The FTC will hold a workshop on FinTech on June 9th
  • The OCC will hold its own forum on FinTech on June 23rd. 

The Past Week
 

Legislative Branch
House
House Committee Advances Puerto Rico Bill
On Wednesday, the House Natural Resources Committee passed a bill (H.R. 5278) intended to address Puerto Rico’s ongoing debt crisis by installing a federal oversight board and allowing the island territory to restructure its debt. The measure, which was approved on a 29-10 vote, is the result of a compromise struck by House Speaker Paul Ryan (R-WI) and the White House earlier this month. During consideration of the measure, Committee leadership were able to successfully defeat contentious policy riders from the more conservative members that may have endangered the deal with the Obama Administration. The bill now heads to the House floor, though it remains unclear whether the bill can get through the Senate and to the President’s desk before Puerto Rico’s next round of debt payments is due on July 1.
 
House Appropriators Advance Financial Services Approps Bill with SEC Cuts
On Wednesday, the House Appropriations Financial Services Subcommittee approved the fiscal 2017 Financial Services spending bill, which included cuts to a number of agencies and a $50 million reduction to the Securities and Exchange Commission (SEC) budget. The bill also included numerous policy riders, including one that would prevent the SEC from studying or adopting a political spending disclosure rule and create an Office of the Advocate for Small Business Capital Formation within the agency, as well as several related to the structure and agenda of the CFPB.  Although the mark-up last about twenty minutes, with no Democrats offering amendments, the minority party spoke out strongly against the bill, with Rep. Nita Lowey (D-NY) calling the cuts to the SEC’s budget “particularly egregious.” 
 
House Financial Services Committee Task Force Holds Hearing on Stopping Terror Finance
On Tuesday, the House Financial Services Task Force to Investigate Terrorism Financing held a hearing entitled, “Stopping Terror Finance: A Coordinated Government Effort.” The primary witness for the hearing was Director of the Financial Crimes Enforcement Network (FinCEN) at the Treasury Department, Jennifer Shasky, who described a regulatory framework to combat money laundering, particularly that benefitting terrorist organizations.
 
House Small Business Committee Holds Hearings on the Sharing Economy
The House Small Business Committee held a pair of hearings on Tuesday and Thursday entitled, “The Sharing Economy: A Taxing Experience for New Entrepreneurs.” The hearing served to highlight the growing importance of the so-called sharing economy, which focuses on peer-to-peer based access to goods and services, and how that could impact future efforts on tax reform.   
 
McHenry Leads Letter to GAO Asking for Study on FinTech
On Tuesday, a group of lawmakers led by House Deputy Whip Patrick McHenry (R-NC) sent a letter to the Government Accountability Office (GAO) requesting additional information on the regulation of emerging financial technology known as FinTech. The lawmakers cited a recent GAO report that described a fragmented regulatory environment leading to “inconsistencies in how regulators oversee similar types of institutions.” The letter, which follows a similar letter sent to the GAO by Senate Democrats last month, was signed by nine Republicans and Rep. Jared Polis (D-CO).  
 
Hensarling to Release Details of GOP Dodd-Frank Replacement on June 7
On June 7, House Financial Services Committee Chairman Jeb Hensarling (R-TX) will explain the details of a Republican alternative to the Dodd-Frank financial reform law in a speech for the Economic Club of New York. President Obama and Democrats in Congress are sure to block any concrete proposals Hensarling may put forward, but the Financial Services Chairman’s speech could serve as the basis for presumptive Republican nominee Donald Trump’s plan to replace the 2010 law. And while financial institutions have spent the last five years adjusting to the law, it is unclear how many are willing to replace Dodd-Frank with another new regulatory regime.
 
House Dems Urge Shelby to Confirm Ex-Im Nominee
On Monday, House Democrats sent a letter to Senate Banking Chairman Richard Shelby (R-AL), urging him to allow for a vote to put Mark McWatters on the Board of the Export-Import Bank. The bank’s charter was renewed in last year’s omnibus after an extended fight in Congress, but at least one of three vacancies on the Bank’s board must be filled before it can approve loans of $10 million or more.
 
Senate
Brown Asks FSOC to Outline Efforts on Shadow Banking
On Monday, Senate Banking Committee Ranking Member Sherrod Brown (D-OH) wrote a letter to Treasury Secretary Jack Lew, urging the Financial Stability Oversight Council (FSOC) to release its plans to regulate the so-called “shadow banking” sector. FSOC, which is made up of financial regulators from a number of different agencies, monitors systemic risk to the U.S. economy and has primarily conducted oversight of “systemically important” banks. In his letter, Brown asks for FSOC to ensure that oversight includes risks from nonbank financial companies and asks what processes FSOC uses to “systemically identify and monitor potential threats” from “less-regulated entities.”   
 
Senate Banking Holds Hearings on Iran Deal Sanctions
The Senate Banking Committee held a pair of hearings on Tuesday and Thursday entitled, “Understanding the Role of Sanctions Under the Iran Deal,” including discussions on Iranian access to the U.S. dollar and the Islamic Republic's further integration into the international financial system. Thursday’s hearing centered on remarks from Treasury Under Secretary for Terrorism and Financial Crimes Adam Szubin.
 
Select Highlights from the Administration
Consumer Financial Protection Bureau (CFPB)
CFPB CAB to Hold June 9 Field Hearing on Auto Lending, Small Dollar Loans
On Wednesday, the CFPB announced that its Consumer Advisory Board (CAB) will be holding a field hearing in Little Rock, Arkansas on June 9 to focus on auto lending education and payday lending. CFPB rules on payday lending are expected to be released at a separate field hearing this Thursday, and CFPB Director Richard Cordray is expected to lead a discussion on the proposed rule at the Little Rock event.
 
CFPB Releases Monthly Snapshot, Highlights Credit Reporting Complaints
On Tuesday, the CFPB released its monthly consumer complaint snapshot, indicating that consumers continue to file formal comments on incorrect information on their credit reports. The report noted that debt collection was the most-complained-about product in April, with over 7,000 filed on that issue alone last month.
 
Federal Deposit Insurance Corporation (FDIC)
FDIC ComE-IN Discusses Mobile Financial Services, Payment System Modernization
On Wednesday, a meeting of the Federal Deposit Insurance Corporation’s (FDIC) Advisory Committee on Economic Inclusion (ComE-IN), Committee featured an updated report on banks’ efforts to reach the underserved and mobile financial services (MFS), as well as a discussion payment system modernization. FDIC staff provided an update on payment system modernization, which should be complete by March 2018. On banking efforts to reach out to underserved individuals, Chairman Martin Gruenberg committed to providing “technical assistance” with programs recommended by FDIC staff.
 
Federal Reserve
Tarullo Speech Foreshadows Fed Release of New Insurance Regulations
The Federal Reserve Board of Governors is set to release long-awaited rules on supervision of the insurance industry at its meeting on this Friday, June 3. Fed Governor Daniel Tarullo previewed the rules in a speech last week.   In his speech, Tarullo appeared to throw cold water on the idea of imposing a European style model of regulation on American insurance companies in the near term, though he left the door open for future efforts.   Perhaps most interesting, was his announcement that there would be two different set of standards in the rule, one for systemically important insurance firms, and another for the other insurance companies under the Fed’s joint jurisdiction with state regulators. 
 
Federal Trade Commission
FTC Bans Hundreds of Mortgage Assistance and Debt Relief Operations
On Wednesday, the Federal Trade Commission added hundreds of debt relief operations to its list of “Banned Debt Collectors,” citing violations of laws designed to ensure consumers are informed of the terms of their relief. Nearly 300 firms have been banned, including many firms servicing student loans.
 
Next Week’s Schedule
The House and Senate are in Recess next Week