HFSC Markup Outlines Pushback on FI Regulation in Wake of SCOTUS Decision 

Posted by Ryan Fitzgerald on May 17, 2024

On Thursday morning, the U.S. Supreme Court (SCOTUS) ruled to uphold the funding mechanism of the Consumer Financial Protection Bureau (CFPB) in a 7-2 decision written by Justice Clarence Thomas, and supported by Justices Coney Barrett, Kagan, Kavanaugh, Jackson, Sotomayor, and Chief Justice Roberts. The dissenting opinion was authored by Justices Samuel Alito and Neil Gorsuch. The decision was definitely a victory for consumer protection hawks on Capitol Hill. 

Almost simultaneously with the announcement of the SCOTUS ruling, the House Financial Services Committee (HFSC) was marking up several pieces of legislation that would take steps to push back on perceived regulatory overreach in many different areas within several agencies related to financial services, which are further outlined below.  

The GoWest Advocacy Team has been closely monitoring the pent-up frustration of several Members of Congress, mostly Republicans, toward the CFPB, NCUA, Federal Reserve, SEC and other financial services regulatory agencies regarding the overabundance of rules they have handed down over the last six to eight months.  Even HFSC Ranking Member, Rep. Maxine Waters (D-CA-43) noted this fervor stating during the hearing, “Republicans must have been aware of the likely outcome of this morning’s Supreme Court decision, as there is a significant number of thoroughly developed bills that seek to attack the oversight of the CFPB financial regulation that are before us today.”  

The GoWest Advocacy team is currently digging into the various bills, policies and issues that were introduced in the past few days and marked up during Thursday morning’s HFSC markup. We have provided some quick highlights of two bills that specifically speak to this pushback against financial service regulation, knowing that the legislation is relatively partisan and would likely have some serious challenges of being passed by Congress, especially if they were to make it to the Senate.  

The fervor of legislation that calls for regulatory flexibility for community-based financial institutions, whether it is agreed upon or not, does outline an opportunity for GoWest and our advocates to showcase the need for more operational flexibility for credit unions to serve their members in the most advantageous way possible. As such, the GoWest Advocacy team will be looking for ways to approach this issue in a bi-partisan manner and we know that we have a host of supporters on both sides of the aisle that we can work with going forward. 

On an exciting bi-partisan note, legislation introduced by Rep. Brittany Pettersen (D-CO-7) and Rep. John Rose (R-TN-6), the CDFI Transparency Act (H.R. 3161), was successfully marked up during the hearing and moved through the committee. This legislation would require the CDFI Director to testify before Congress on annual basis if the Chair of the germane committee so requests it, which would increase transparency in the CDFI program. There was positive discussion during the markup regarding the importance of CDFIs for communities and the need to fully understand the recent reformulation of the program, as well as the quizzical need for CDFIs to reapply to act as a CDFI and serve their communities. GoWest has been supportive of this legislation and Representative Pettersen’s leadership in this area. We will continue to help move this transparency effort forward as we work to bolster and aid our important CDFI credit unions.        

Additional examples of Bills that were marked up and successfully considered during Thursday’s hearing, mostly along party lines: 

Bank Resilience and Regulatory Improvement Act (H.R. 8337)  

Includes a section on Financial Institution Regulatory Tailoring, which would increase the asset thresholds for financial institutions in several regulatory areas including: 

• CFPB Supervision asset threshold for supervised financial institutions would be increased from $10 Billion to $50 Billion. 

• Debit Card Interchange Covered Entities, under the Durbin Amendment, asset threshold levels would be increased from $10 Billion to $50 Billion.

• Leverage and Risk-Based Capital Requirements for institutions with an asset threshold of $10 Billion would be increased to $50 Billion. 

• Qualified Mortgage Requirements for the Truth in Lending Act would be increased from $10 Billion to $50 Billion. 

• The Volker rule for covered entities would be increased from $10 Billion to $50 Billion.  

The Bank Resilience and Regulatory Improvement Act was passed out of committee on 24-22 vote, along party lines.  

Clarity in Lending Act (H.R. 8338) 

UDAAP Clarification and Effort to Curtail Usage 

This legislation includes directives and language that would require the CFPB to specially clarify and set specific definitions around when and how the use of the Dodd-Frank standard known as UDAAP can be utilized. UDAAP or the “unfair, deceptive, or abusive acts” standard has been utilized by the CFPB as the basis for the reasoning to move several of their recent rules forward.   

HMDA for Business Limitations 

H.R. 8338 also includes a section that would provide financial institutions with a three-year period in which to comply with the small business reporting requirements outlined by the CFPB.   It also provides a two-year safe harbor for financial institutions without fear of penalties for failure to comply and establishes a new standard threshold of 500 credit transactions for small business in order for them to be required to report. 

The Clarity in Lending Act was passed out of committee on 27-22 vote, along party lines.   

Additional bills that were included in the markup are as follows: 

• H.R. 758, the “Promoting Access to Capital in Underbanked Communities Act”

• H.R. 8339, the “SEC Reform and Restructuring Act”

• H.R. 4551, the “Protecting Investors’ Personally Identifiable Information Act”

• H.J. Res. 100, Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Securities and Exchange Commission relating to “Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure.”

• H.R. 8302, the “HUD Evaluation and Optimization Act of 2024”

• H.R. 3507, the “Yes in My Backyard (YIMBY) Act”

• H.R. 7480, the “Disabled Veterans Housing Support Act”

• H.R. 8340, the “Housing Unhoused Disabled Veterans Act” 

Posted in Advocacy on the Move, Federal Advocacy.