Lately, so much has been happening in Washington, D.C. that it feels impossible to keep up. Every day is a whirlwind of new developments. The Smart Campaign has been keeping its eye on one bill in particular: H.R. 10, the Financial CHOICE (Creating Home and Opportunity for Investors, Consumers and Entrepreneurs) Act of 2017. Among its other provisions, the Financial CHOICE Act threatens to disarm the Consumer Financial Protection Bureau (CFPB) and compromise the well-being of financial service consumers in the United States.
Introduced by House Representative Jeb Hensarling (TX-5) in April, the CHOICE Act, according to its sponsors, would loosen the allegedly burdensome and complicated regulations put in place by the Dodd-Frank Act of 2010 with the stated goal of increasing financial services access for small businesses and spurring economic growth. These small businesses are said to be having a difficult time getting loans from small banks due to Dodd-Frank, and the CHOICE Act would purportedly lessen these difficulties and allow more small banks to lend to small businesses.
However, from where the Smart Campaign is sitting, the CHOICE Act looks quite different.
If passed, the CHOICE Act would, among other things:
- Repeal the rule that prohibits banks from using depositors’ funds to trade on their own accounts. This would allow banks to own hedge funds, bringing back the speculation that fueled the collapse of 2009.
- Rollback oversight of and penalties on credit rating agencies and insurance companies – again, reintroducing some of the market features that led to the collapse.
- Exempt banks that agree to increase their capital from “stress tests” every two years.
- Revoke the qualitative tests that evaluate banks’ plans for managing capital and risk.
While these provisions address major structural issues in the financial system – adding significant risk – we at the Smart Campaign are especially focused on the provisions that directly affect consumers. For example, the Act would remove requirements that guided how much credit card networks can charge retailers for debit card transactions.
More broadly, the most damaging effect the CHOICE Act would have on consumers is crippling the Consumer Financial Protection Bureau (CFPB) by limiting – and in some cases eliminating – its enforcement and rulemaking authority through the following:
- Requiring the CFPB to get congressional approval before taking enforcement action against financial institutions.
- Restricting the Bureau’s ability to write rules regulating financial companies.
- Revoking the CFPB’s authority to conduct education campaigns.
- Preventing the CFPB from publishing complaints it collects from consumers about financial services.
- Allowing the President of the United States to fire the CFPB’s director at will.
In its six short years of existence, the CFPB has helped provide $12 billion to 29 million American consumers. Dismantling the CFPB would leave the nation’s consumers vulnerable and enable some of the irresponsible behavior toward consumers that triggered the previous financial crisis.
The CHOICE Act is not a friend of small business or consumers. Several groups have come out against the bill, including Consumers Union, which says it puts individuals at risks while protecting big banks and “shady lenders.” The Retail Industry Leaders Association, which includes major retailers like Apple, has come out against the bill’s provisions related to debit card swipe fees. The U.S. Public Interest Research Group opposes the CHOICE Act, citing its rollback on protections for all consumers, most notably students, service members, and veterans. Perhaps most impressive, Attorneys General of 20 states have sent a letter to Congress defending the CFPB, writing that they “oppose any effort to curtail its authority.”
Although the bill passed in the House of Representatives in June and has moved to Committee in the Senate, there are still many steps before the bill survives to pass in Congress as a whole. In the meantime, opponents will be calling and writing Senators to tell them they oppose financial deregulation that puts consumers’ money at risk.
At the Smart Campaign, we support watchdog agencies like the CFPB because they embody the values we work to integrate into the global financial inclusion industry. Values like transparency, responsible pricing, and the right to mechanisms for complaint resolution are important because they work together to empower clients, as well as safeguard fair markets. We believe American consumers deserve better than the Financial CHOICE Act.
Image credit: Onasill ~ Bill Badzo via Flickr
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