The House Financial Service Committee approved the Financial CHOICE Act 2.0 today, signaling the first concrete move to roll back consumer protections and gut the Dodd-Frank Wall Street Reform and Consumer Protection Act.
According to The Hill, today’s 34-26 party-line vote came after nearly 24 hours of debate and markups of the bill, which included several amendments that would have preserved some of the provisions under the Dodd-Frank Act.
The 589-page legislation [PDF], which has received significant opposition from advocates, retailers, and others, is a revision of the previous Financial CHOICE Act introduced by Hensarling last year.
As it stands, the Financial CHOICE 2.0 Act would, among other things:
• Require the Consumer Financial Protection Bureau to get congressional approval before taking enforcement action against financial institutions
• Restrict the Bureau’s ability to write rules regulating financial companies
• Revoke the agency’s authority to restrict arbitration
• Revoke the CFPB’s authority to conduct education campaigns
• Prevent the Bureau from making public the complaints it collects from consumers in its Consumer Complaint Database
• Revamp the agency’s structure by allowing the CFPB director to be fired at will by the President
• Require the agency’s budget to be subject to the annual congressional appropriations process
• Prevent the CFPB from having oversight over the payday lending industry
• Rename the CFPB to the Consumer Law Enforcement Agency
• Require banks to undergo stress tests every other year, with banks agreeing to increase their capital never having to undergo stress tests
• Revoke the so-called qualitative test that evaluates a bank’s plan for managing capital and risk
• Remove requirements under the Durbin Amendment [PDF] that guided how much credit card networks could charge retailers for processing debit card transactions
The bill’s approval by the House Financial Service Committee was met with strong opposition by consumer advocates, the retail industry, and other lawmakers.
Our colleagues at Consumers Union say the bill’s approval puts consumers at risk while protecting the financial interests of big banks and shady lenders.
“Congress created the CFPB to ensure consumers get a fair deal and to protect them from predatory practices that can undermine their financial security,” Pamela Banks, senior policy counsel for Consumers Union, said in a statement. “This bill strips the CFPB of most of its power and would leave consumers vulnerable to fraud, hidden fees and costly gotchas by banks and unscrupulous financial firms.”
Several groups, including the National Consumer Law Center, Americans for Financial Reform, and Public Citizen, lambasted the bill’s provision restricting the CFPB and Security and Exchange Commission’s authority to restrict forced arbitration.
“Contrary to its title, H.R. 10 would deprive consumers and investors of any choice of their day in court when resolving serious disputes with powerful financial institutions and force them into a rigged system,” Amanda Werner, arbitration campaign manager with Americans for Financial Reform and Public Citizen, said in a statement.
Werner noted that forced arbitration clauses “only serve to kill consumer class action lawsuits and cover up widespread fraud and abuse.”
The Center For American Progress said in a statement that the Financial CHOICE Act is only the right choice for Wall Street bankers.
“It shows a blatant disregard for the painful lessons learned during the 2007–2008 financial crisis,” Marc Jarsulic, Vice President for Economic Policy at the Center for American Progress, said in a statement. “The so-called CHOICE Act removes protections against taxpayer-funded bailouts, erodes consumer protections, and undercuts necessary tools to hold Wall Street accountable.”
Even the retail industry, which had urged Congress to not roll back financial reforms involving debit card transactions, called out the Committee for moving forward with the legislation.
The Retail Industry Leaders Association — which counts a number of major retailers, such as Apple, Best Buy, Gap, Target, Walmart, and others, as members — said in a statement that it would keep fighting the Financial CHOICE Act’s provisions related to swipe fees. RILA and other industry groups believe that by revoking the swipe fee reforms, retailers would pass on the new, more expensive processing costs to consumers.
“While we believe in financial reforms that make sense for America’s community banks and local credit unions, the repeal of hard-fought debit swipe fee reform included in the CHOICE Act gives big banks and card networks a green light to raise costs on every business in America that accepts debit cards,” Austen Jensen, Vice President of Government Affairs and Financial Services for RILA, said in a statement.
On the other side of the debate, the American Bankers Association called today’s vote an important step.
“We commend Chairman Hensarling and members of the Committee for their tireless efforts to help our nation’s banking industry serve their customers and communities,” Rob Nichols, ABA president and CEO, said in a statement, calling the Financial CHOICE Act “needed regulatory relief.”