Bank-Backed Congressman Introducing Law To Gut Consumer Financial Protections

Image courtesy of Adam Fagen

Less than a week after President Trump signed a mostly symbolic executive order directing federal regulators to revise the rules established by the 2010 financial reforms, one lawmaker (whose campaign just happens to have been heavily financed by big banks) is planning to introduce legislation to scale back consumer protections and allow banks to take more risks.

Bloomberg reports that Texas Rep. Jeb Hensarling, chairman of the House Financial Services Committee, plans to revise the Financial Choice Act bill he introduced last year to include provisions that would eliminate Wall Street financial stress tests and turn the head of the CFPB into an appointed position.

The Feb. 6 memo, obtained by Bloomberg, would overhaul the annual stress tests the Federal Reserve uses to determine if banks have enough capital to sustain a financial crisis.

Under the soon-to-be proposed legislation, banks would be subject to the stress tests every other year and banks that agree to dramatically increase their capital would not have to undergo the stress test at all.

Additionally, Bloomberg notes that the changes would eliminate the so-called qualitative test that evaluates a bank’s plan for managing capital and risk.

With respect to the CFPB, the revised Financial Choice Act would largely transform the Bureau into a law enforcement agency, as it would only be able to pass rules that have been mandated by Congress.

According to the memo, the bill would also eliminate the CFPB’s authority to supervise financial firms and would remove the agency’s database of consumer complaints, Bloomberg reports.

Hensarling’s revisions and original legislation targeting the CFPB aren’t entirely a surprise, as he — and the Financial Services Committee he leads — has strong ties to Wall Street and big banks, Allied Progress reports.

For example, Allied Progress notes, more than a dozen current and former House Financial Services Committee staffers either work in the financial industry before joining the committee or have left the committee to work in the industry.

The report also found that Hensarling has personally accepted at least $7.38 million from companies regulated by the CFPB.

According to the Center for Responsive Politics, the top 20 contributors to Hensarling’s committee and PAC from 2015 to 2016 includes a number of major banks.

In the top four alone, JPMorgan Chase contributed $25,200, Bank of America provided $25,000, Goldman Sachs contributed $22,700, and the American Bankers Association contributed $22,000.

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.