AGs Blast Financial CHOICE Act, Urge Congress To Reject Proposed Bill

Image courtesy of Adam Fagen

With legislation to roll back consumer protections and gut the Dodd-Frank Wall Street Reform and Consumer Protection Act expected to be discussed by the House as early as this week, several states are urging lawmakers to reject the legislation.

A coalition of 20 Attorneys General sent a letter [PDF] to House leaders to resist the legislation introduced in April by bank-backed Texas Rep. Jeb Hensarling in an attempt to scale back consumer protections, revamp the Consumer Financial Protection Bureau, and allow banks to take more risks.

The state AGs argue that the legislation — which is a revision of the previous Financial CHOICE Act introduced by Hensarling last year — would effectively cripple the CFPB by limiting or eliminating its enforcement and rulemaking authority.

“As the chief consumer protection officers in each of our respective States, we write to call your particular attention to those portions of the Act that would effectively eviscerate the role of the [CFPB], the only independent federal agency exclusively focused on consumer financial protection,” the letter states. “The undersigned Attorneys General support the work of the CFPB and oppose any effort to curtail its authority.”

As previously reported, the 598-page proposed bill [PDF] 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

“A rollback of these significant post-financial crisis rules and regulations would substantially harm consumers and the public in general,” the Attorneys General conclude.

The letter was signed by the Attorneys General from New York, California, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Mississippi, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington.

The AGs aren’t the first group to speak out against the Financial CHOICE Act. Just yesterday, U.S. PIRG released a report highlighting how the Act would harm servicemembers.

“The CFPB is an invaluable tool for servicemembers, veterans and their families,” the report states. “It not only provides restitution for servicemembers who have been wronged, the CFPB is also helping to create a fairer, more functional financial system.”

Back in May, when the legislation moved out of committee, our colleagues at Consumers Union said the bill’s approval puts individuals 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.”

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.

On the other side of the issue, several banking and lending associations have come out in support of the bill.

The Independent Community Bankers of America backed the legislation shortly after it was introduced, noting that community banks strongly support “much-needed relief from regulatory burdens that impede their ability to best serve their customers and communities.”

Likewise, the American Bankers Association argued that the Financial CHOICE Act will be a step toward better serving consumers.

“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.”

ACA International — an organization representing credit and collection companies — did not put out a statement or position on the bill. We’ve reached out to the organization for comment.