[House Report 113-346]
[From the U.S. Government Publishing Office]
113th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 113-346
======================================================================
CONSUMER FINANCIAL PROTECTION SAFETY AND SOUNDNESS IMPROVEMENT ACT OF
2013
_______
February 6, 2014.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 3193]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3193) to amend the Consumer Financial Protection
Act of 2010 to strengthen the review authority of the Financial
Stability Oversight Council of regulations issued by the Bureau
of Consumer Financial Protection, and for other purposes,
having considered the same, report favorably thereon without
amendment and recommend that the bill do pass.
Purpose and Summary
H.R. 3193, the Consumer Financial Protection Safety and
Soundness Improvement Act of 2013, amends the Dodd-Frank Wall
Street Reform and Consumer Protection Act (the ``Dodd-Frank
Act'') to improve the Financial Stability Oversight Council's
(FSOC) review of regulations of the Consumer Financial
Protection Bureau (CFPB) that may undermine the safety and
soundness of U.S. financial institutions.
Background and Need for Legislation
Under section 1023 of the Dodd-Frank Act, CFPB regulations
may not be set aside unless two-thirds of the FSOC's voting
membership votes to do so and the FSOC determines that the
regulation ``puts the safety and soundness of the United States
banking system or the stability of the financial system at
risk.''\1\ The supermajority threshold and the requirement that
the regulation have a pervasive negative effect on the entire
banking system are too stringent, especially when the
regulations in question have been crafted by a Federal agency
that lacks checks and balances in numerous other respects, and
when one of the members voting on whether to set aside a CFPB
regulation is the CFPB Director himself.
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\1\The FSOC is an inter-agency body created by the Title I of the
Dodd-Frank Act that is charged with identifying risks to the financial
stability of the United States, promoting market discipline, and
responding to emerging threats to the U.S. financial system. It is
chaired by the Secretary of the Treasury, and consists of ten voting
members, including the CFPB Director.
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H.R. 3193 changes the vote required to set aside a CFPB
regulation from two-thirds of the FSOC voting membership to a
simple majority, excluding the Director of the CFPB. It
modifies the standard for the FSOC's review to permit a CFPB
regulation be set aside if it is ``inconsistent with the safe
and sound operations of U.S. financial institutions.''
The legislation amends the time limits for the FSOC to
review and vote on CFPB regulations, by striking section 1023
of the Dodd-Frank Act, which requires that the FSOC vote within
the later of the following: (1) 45 days following the date of
filing the petition challenging the CFPB regulation, unless a
stay is issued; or (2) the expiration of a stay issued by the
FSOC.
Finally, the bill amends section 1022 of the Dodd-Frank Act
to specify that in prescribing a rule, the CFPB must consider
``the impact of such rule on the financial safety and soundness
of an insured depository institution.''
Hearings
The Committee on Financial Services' Subcommittee on
Financial Institutions and Consumer Credit held a hearing on
H.R. 3193 on October 29, 2013.
Committee Consideration
The Committee on Financial Services met in open session on
November 20, 2013, and ordered H.R. 3193 to be reported
favorably to the House without amendment by a recorded vote of
32 yeas to 25 nays (recorded vote no. FC-43), a quorum being
present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto.
1. A motion by Chairman Hensarling to report the bill (H.R.
3193) without amendment to the House with a favorable
recommendation was agreed to by a record vote of 32 yeas to 25
nays (recorded vote no. FC-43).
Record vote no. FC-43
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Representative Yea Nay Present Representative Yea Nay Present
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Mr. Hensarling...................... X ....... ......... Ms. Waters............. ....... X ..................................................................................
Mr. Bachus.......................... X ....... ......... Mrs. Maloney (NY)...... ....... X ..................................................................................
Mr. King (NY)....................... X ....... ......... Ms. Velazquez.......... ....... X ..................................................................................
Mr. Royce........................... X ....... ......... Mr. Watt............... ....... X ..................................................................................
Mr. Lucas........................... X ....... ......... Mr. Sherman............ ....... X ..................................................................................
Mr. Gary G. Miller (CA)............. X ....... ......... Mr. Meeks.............. ....... X ..................................................................................
Mrs. Capito......................... X ....... ......... Mr. Capuano............ ....... X ..................................................................................
Mr. Garrett......................... X ....... ......... Mr. Hinojosa........... ....... X ..................................................................................
Mr. Neugebauer...................... X ....... ......... Mr. Clay............... ....... ....... ..................................................................................
Mr. McHenry......................... X ....... ......... Mrs. McCarthy (NY)..... ....... ....... ..................................................................................
Mr. Campbell........................ ....... ....... ......... Mr. Lynch.............. ....... X ..................................................................................
Mrs. Bachmann....................... X ....... ......... Mr. David Scott (GA)... ....... X ..................................................................................
Mr. McCarthy (CA)................... X ....... ......... Mr. Al Green (TX)...... ....... X ..................................................................................
Mr. Pearce.......................... X ....... ......... Mr. Cleaver............ ....... X ..................................................................................
Mr. Posey........................... X ....... ......... Ms. Moore.............. ....... X ..................................................................................
Mr. Fitzpatrick..................... X ....... ......... Mr. Ellison............ ....... X ..................................................................................
Mr. Westmoreland.................... X ....... ......... Mr. Perlmutter......... ....... ....... ..................................................................................
Mr. Luetkemeyer..................... X ....... ......... Mr. Himes.............. ....... X ..................................................................................
Mr. Huizenga (MI)................... X ....... ......... Mr. Peters (MI)........ ....... X ..................................................................................
Mr. Duffy........................... X ....... ......... Mr. Carney............. ....... X ..................................................................................
Mr. Hurt............................ X ....... ......... Ms. Sewell (AL)........ ....... X ..................................................................................
Mr. Grimm........................... X ....... ......... Mr. Foster............. ....... X ..................................................................................
Mr. Stivers......................... X ....... ......... Mr. Kildee............. ....... X ..................................................................................
Mr. Fincher......................... X ....... ......... Mr. Murphy (FL)........ ....... X ..................................................................................
Mr. Stutzman........................ X ....... ......... Mr. Delaney............ ....... X ..................................................................................
Mr. Mulvaney........................ X ....... ......... Ms. Sinema............. ....... X ..................................................................................
Mr. Hultgren........................ X ....... ......... Mrs. Beatty............ ....... X ..................................................................................
Mr. Ross............................ X ....... ......... Mr. Heck (WA).......... ....... X ..................................................................................
Mr. Pittenger....................... X
Mrs. Wagner......................... X
Mr. Barr............................ X
Mr. Cotton.......................... X
Mr. Rothfus......................... X
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Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 3193,
among other things, modifies the standard under which the FSOC
may set aside a CFPB regulation.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
February 5, 2014.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3193, the Consumer
Financial Protection Safety and Soundness Improvement Act of
2013.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Susan Willie.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure.
H.R. 3193--Consumer Financial Protection Safety and Soundness
Improvement Act of 2013
Summary: H.R. 3193 would amend the statute that authorizes
the Financial Stability Oversight Council (FSOC) to delay
implementation or set aside final regulations developed by the
Consumer Financial Protection Bureau (CFPB). The bill also
would require the CFPB, when developing a new rule, to consider
the impact of the rule on the financial soundness of an insured
depository institution.
CBO estimates that enacting H.R. 3193 would increase direct
spending by $5 million over the 2014-2024 period; therefore,
pay-as-you-go procedures apply. CBO estimates that enacting
H.R. 3193 would not have a significant effect on revenues and
implementing the bill would not affect discretionary costs.
H.R. 3193 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would not affect the budgets of state, local, or tribal
governments.
Estimated cost to the federal government: The CFPB is
permanently authorized to spend amounts transferred from the
Federal Reserve; because that activity is not subject to
appropriation, CFPB expenditures are recorded in the budget as
direct spending.
CBO assumes that the bill will be enacted near the middle
of fiscal year 2014 and that spending will follow historical
patterns for the CFPB. H.R. 3193 would broaden the scope of
items the CFPB must consider when prescribing new rules under
consumer financial laws. Currently, the CFPB must consider both
the potential costs to consumers and the effect on certain
entities and consumers in rural areas. H.R. 3193 would direct
the CFPB to consider the impact of a potential new rule on the
financial safety or soundness of an insured depository
institution as well.
Based on information from the CFPB, CBO estimates that the
cost to enact H.R. 3193 would total $5 million over the 2014-
2024 period for additional staff costs associated with the new
rulemaking requirement. We expect that the cost in any given
year would not be significant.
The bill also would change the conditions under which the
FSOC would stay the effective date or set aside a regulation
developed by the CFPB. Based on information from the Treasury,
CBO estimates that enacting those provisions of H.R. 3193 would
not have a significant effect on direct spending or revenues.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays that are subject to those
pay-as-you-go procedures are shown in the following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 3193, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON NOVEMBER 21, 2013
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By fiscal year, in millions of dollars--
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2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2014-2019 2014-2024
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Statutory Pay-As-You-Go Impact....................... 0 0 0 0 0 0 0 0 0 0 0 3 5
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Note: Components may not sum to totals because of rounding.
Intergovernmental and private-sector impact: H.R. 3193
contains no intergovernmental or private-sector mandates as
defined in UMRA and would not affect the budgets of state,
local, or tribal governments.
Estimate prepared by: Federal Costs: Susan Willie; Impact
on State, Local, and Tribal Governments: Melissa Merrell;
Impact on the Private Sector: Paige Piper/Bach.
Estimate approved by: Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 3193 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Duplication of Federal Programs
Pursuant to section 3(j) of H. Res. 5, 113th Cong. (2013),
the Committee states that no provision of H.R. 3193 establishes
or reauthorizes a program of the Federal Government known to be
duplicative of another Federal program, a program that was
included in any report from the Government Accountability
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most
recent Catalog of Federal Domestic Assistance.
Disclosure of Directed Rulemaking
Pursuant to section 3(k) of H. Res. 5, 113th Cong. (2013),
the Committee states that H.R. 3193 does not direct any
rulemaking.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 3193 as the ``Consumer Financial
Protection Safety and Soundness Improvement Act of 2013.''
Section 2. Council voting procedure
This section changes the required 2/3 vote of the FSOC to
set aside a CFPB regulation to a majority, excluding the
Director of the CFPB.
Section 3. Review authority of the council
This section requires the FSOC to review a CFPB regulation
if the regulation is ``inconsistent with the safe and sound
operations of United States financial institutions.'' Under
current law, FSOC review is permissive (not required) and the
standard is whether the CFPB regulation puts the ``safety and
soundness of the United States banking system of the stability
of the financial system of the United States at risk.''
Section 4. Safety and soundness check
This section requires the Director of the CFPB, when
proposing a rule under federal consumer financial laws, to
consider the rule's impact on the financial safety or soundness
of an insured depository institution.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
CONSUMER FINANCIAL PROTECTION ACT OF 2010
TITLE X--BUREAU OF CONSUMER FINANCIAL PROTECTION
* * * * * * *
Subtitle B--General Powers of the Bureau
* * * * * * *
SEC. 1022. RULEMAKING AUTHORITY.
(a) * * *
(b) Rulemaking, Orders, and Guidance.--
(1) * * *
(2) Standards for rulemaking.--In prescribing a rule
under the Federal consumer financial laws--
(A) the Bureau shall consider--
(i) the potential benefits and costs
to consumers and covered persons,
including the potential reduction of
access by consumers to consumer
financial products or services
resulting from such rule; [and]
(ii) the impact of proposed rules on
covered persons, as described in
section 1026, and the impact on
consumers in rural areas; and
(iii) the impact of such rule on the
financial safety or soundness of an
insured depository institution;
* * * * * * *
SEC. 1023. REVIEW OF BUREAU REGULATIONS.
(a) Review of Bureau Regulations.--On the petition of a
member agency of the Council, the Council [may] shall set aside
a final regulation prescribed by the Bureau, or any provision
thereof, if the Council decides, in accordance with subsection
(c), that the [regulation or provision would put the safety and
soundness of the United States banking system or the stability
of the financial system of the United States at risk]
regulation which is the subject of the petition is inconsistent
with the safe and sound operations of United States financial
institutions.
* * * * * * *
(c) Stays and Set Asides.--
(1) * * *
* * * * * * *
(3) Vote.--
(A) In general.--The decision to issue a stay
of, or set aside, any regulation under this
section shall be made only with the affirmative
vote in accordance with subparagraph (B) of
[\2/3\] a majority of the members of the
Council then serving, excluding the Director of
the Bureau.
(B) Authorization to vote.--A member of the
Council may vote to stay the effectiveness of,
or set aside, a final regulation prescribed by
the Bureau only if the agency or department
represented by that member has--
(i) * * *
(ii) made an official determination,
at a public meeting where applicable,
that the regulation which is the
subject of the petition [would put the
safety and soundness of the United
States banking system or the stability
of the financial system of the United
States at risk] is inconsistent with
the safe and sound operations of United
States financial institutions.
(4) Decisions to set aside.--
(A) * * *
[(B) Timely action required.--The Council may
not issue a decision to set aside a regulation,
or provision thereof, which is the subject of a
petition under this section after the
expiration of the later of--
[(i) 45 days following the date of
filing of the petition, unless a stay
is issued under paragraph (1); or
[(ii) the expiration of a stay issued
by the Council under this section.]
[(C)] (B) Separate authority.--The issuance
of a stay under this section does not affect
the authority of the Council to set aside a
regulation.
[(5) Dismissal due to inaction.--A petition under
this section shall be deemed dismissed if the Council
has not issued a decision to set aside a regulation, or
provision thereof, within the period for timely action
under paragraph (4)(B).]
[(6)] (5) Publication of decision.--Any decision
under this subsection to issue a stay of, or set aside,
a regulation or provision thereof shall be published by
the Council in the Federal Register as soon as
practicable after the decision is made, with an
explanation of the reasons for the decision.
[(7)] (6) Rulemaking procedures inapplicable.--The
notice and comment procedures under section 553 of
title 5, United States Code, shall not apply to any
decision under this section of the Council to issue a
stay of, or set aside, a regulation.
[(8)] (7) Judicial review of decisions by the
council.--A decision by the Council to set aside a
regulation prescribed by the Bureau, or provision
thereof, shall be subject to review under chapter 7 of
title 5, United States Code.
* * * * * * *
MINORITY VIEWS
The Consumer Financial Protection Bureau (CFPB or Bureau)
is the only bank regulator whose rules can be overturned by a
vote of its fellow regulators on the Financial Stability
Oversight Council (FSOC); an extraordinary limit on the CFPB's
powers. The CFPB is also constrained by rulemaking requirements
that do not exist at the other independent financial
regulators. H.R. 3193 lowers the bar for overturning CFPB rules
in two ways--decreasing the number of votes required by the
FSOC and increasing the number of reasons a rule can be
overturned.
Currently, 2/3 of the regulators on the Financial Stability
Oversight Council must agree to overturn a CFPB rule. This bill
lowers that threshold to a simple majority. The FSOC, which is
composed of many of the same regulators who neglected to
appropriately consider consumer protections in the run up to
the 2008 Financial Crisis, would only need 5 votes, rather than
the current 7, to overturn a CFPB rulemaking.
The bill also lowers the threshold the FSOC needs to
consider overturning a CFPB rulemaking, by establishing a broad
and vague standard that a rulemaking shall be reviewed if it is
merely ``inconsistent with the safe and sound operations of
United States financial institutions.'' By lowering the
standard for overturning a rule the bill implies that consumer
protection is somehow incompatible with the safe and sound
operation of the financial system. However, it is readily
apparent from the 2008 Financial Crisis that an increased focus
on consumer protection would have benefitted the safety and
soundness of the financial system, and that short-term
profitability of complex financial products was not a reliable
indicator of a financial institution's health. Prudential
regulators cannot be empowered to undermine consumer protection
regulations to preserve business models that rely on unfair,
deceptive, or abusive acts and practices. It is in fact crucial
to the safety and soundness of the financial system to have a
strong and independent consumer financial product regulator.
The Dodd-Frank Wall Street Reform and Consumer Protection
Act contains numerous provisions to enhance the safety and
soundness of the financial system, including the creation of
the Consumer Financial Protection Bureau. Opponents of the
Dodd-Frank Act have steadfastly opposed all efforts to increase
financial stability. It is clear that the purpose of H.R. 3193
is neither to increase regulatory certainty nor financial
stability, but to impede the CFPB in its mission of protecting
American consumers.
Maxine Waters.
Stephen F. Lynch.
Ruben Hinojosa.
Keith Ellison.
David Scott.
Michael E. Capuano.
Carolyn B. Maloney.
Kyrsten Sinema.
Gary C. Peters.
Bill Foster.
Joyce Beatty.
Al Green.
Daniel Kildee.
Denny Heck.
James A. Himes.
John Carney.
Gregory W. Meeks.
Gwen Moore.
Terri Sewell.
Wm. Lacy Clay.
Patrick Murphy.
Ed Perlmutter.
Emanuel Cleaver.
Brad Sherman.