BREAKING NEWS & ANALYSIS: Dodd Frank Water-down

After a grueling three-day markup of the bill, the House Financial Service Committee favorably reported the Financial CHOICE Act to the House Floor by a strict party line vote of 34-26. Democrats pulled out all of their dilatory practices including offering 19 amendments to this bill (all failed to be adopted) and having the committee read approximately 350 of 600 pages of this bill aloud. Click here to see the 593-page text of the Financial CHOICE Act 2.0.

The next step for this bill is to be debated and voted upon on the House Floor. It is unclear when and if this will happen. If the bill passes on the House Floor, it will go over to the Senate, where it will likely be a non-starter…but you never know.

The Financial CHOICE Act that made it out of Committee is an update to a version that the committee passed last year.  OLPI’s general take is that this bill is too aggressive and by not considering any of the Democrats amendments, the Republicans likely killed any bi-partisan support that is needed to truly move some of these efforts forward.  The particularly hot-button issues that would need bi-partisan support would be (1) killing the Durbin amendment that limits fees charged to retailers for debit card processing (the banks and credit card companies arguably have competing interests that need to be reconciled) and (2) moving the CFPB to the Congressional appropriations process.

Bill Analysis:

Combing through the Financial CHOICE Act 2.0, OLPI does not see any significant surprises compared to Financial Choice Act 1.0 and the signaling that Chairman Hensarling (R-TX) did around what was coming.

One particularly noticeable change is that this bill is a lot harsher on CFPB authority—it aggressively tries to defang the CFPB’s enforcement tools.

We provided a brief summary of some relevant provisions:

  • Section 312 requires regulatory analysis: forces regulators to do a LOT more analysis on how their proposed rule makings would affect the market
  • Section 331 Congressional review: Congress has to approve rule makings from financial regulators… this would be messy and not in line with traditional notice and comment requirements.
  • Section 352 FHFA: Makes the director removable by the president, thereby making it an executive agency.
  • Section 561: Small business loan data collection requirement: repeals CFPB’s authority to build the HMDA of small business data. The CFPB did not really have any teeth to do anything with this data in the first place, so this seems like a controversial amendment with no true benefit.
  • Section 571: Study regarding privacy of info collected under HMDA: requires Comptroller General to study HMDA data privacy issues, and meanwhile pause public disclosure of all data
  • Section 581: Rate of interest after transfer of loan: Fixes the language that marketplace lenders have had an issue with regarding interest rates when the loan is made. This would be a codification of the valid when made doctrine, so this would have been a huge win for marketplace lenders and the secondary markets.
  • Section 711: Renames the CFPB to the Consumer Law Enforcement Agency (CLEA)
  • Section 713: Puts CFPB, I mean CLEA, on appropriations
  • Section 721: Advisory opinions: This section requires CLEA to issue written and binding advisory opinions to the market. This would provide somewhat of a fix to the complaint against the CFPB or CLEA? That they do not provide enough guidance on their positions and rather focus on enforcement actions (and requiring companies to read consent orders that are not exactly factually on point).
  • Section 723: Agency pay fairness: This puts CLEA on the general schedule pay, which means everyone there gets paid less.
  • Section 724: Elimination of market monitoring functions: As a research institution, OLPI has concerns with removing an office that is often best positioned to understand business models like marketplace lending and peer-to-peer lending.
  • Section 725: Reforms to mandatory function units: Makes most of the CLEA positions optional. This means a potential republican leader can just empty out the agency and not be violating law.
  • Section 727: Elimination of supervisory authority: Seems to remove all of CFPB’s supervisory authority. 
  • Section 729: limitation of agency authority: removes CFPB discretionary rulemaking authority. Payday would be an example of discretionary rulemaking.
  • Section 731: Consumer right to financial privacy: it seems this section forces CLEA to get direct consent from any consumer whose personal info they collect. This would…. Cripple the agency? They couldn’t use basically any of the data they use today, per our understanding
  • Section 736: Removal of UDAAP authority: CFPB can’t do UDAAP enforcement actions anymore… This is the CFPB’s biggest stick and the basis for many of its consent orders, so this section alone would change the entire scope of the CFPB.


OLPI will keep you posted on the progression of this Bill.


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