118 HR 7440 IH: Financial Services Innovation Act of 2024
U.S. House of Representatives
2024-02-23
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I
118th CONGRESS
2d Session
H. R. 7440
IN THE HOUSE OF REPRESENTATIVES
February 23, 2024
Mr. McHenry introduced the following bill; which was referred to the Committee on Financial Services
A BILL
To promote innovation in financial services, and for other purposes.
1.

Short title; table of contents
(a)

Short title
This Act may be cited as the “Financial Services Innovation Act of 2024”.
(b)

Table of contents
The table of contents for this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Agency identification of regulatory areas.
Sec. 4. Establishment or designation of FSIO at agencies.
Sec. 5. FSIO Liaison Committee and chair.
Sec. 6. Petition to agency.
Sec. 7. Agency determination of petition.
Sec. 8. Enforceable compliance agreement.
Sec. 9. Report to Congress.
2.

Definitions
In this Act, the following definitions shall apply:
(1)

Agency regulation
The term agency regulation means—
(A)
a rule (as defined in section 551 of title 5, United States Code) issued by an agency;
(B)
guidance issued by an agency; or
(C)
a published proposed or interim rule, policy statement, directive, adjudication, or interpretation of an agency.
(2)

Agency
The term agency means each of the Board of Governors of the Federal Reserve System, the Bureau of Consumer Financial Protection, the Department of Housing and Urban Development, the Department of the Treasury, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration Board, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission.
(3)

Covered person
The term covered person means a person that offers or intends to offer a financial innovation by submitting a petition to a Financial Services Innovation Office at one or more agencies.
(4)

Enforceable compliance agreement
The term enforceable compliance agreement means an agreement described under section 8.
(5)

Financial innovation
The term financial innovation means a financial product or service (as defined in section 1002 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5481))—
(A)
the delivery of which is enabled by technology; and
(B)
that is or may be subject to an agency regulation or Federal statute.
(6)

Financial Services Innovation Office; FSIO
The term Financial Services Innovative Office or FSIO means an office established in an agency pursuant to section 4.
3.

Agency identification of regulatory areas
Not later than 60 days after the date of the enactment of this Act, and biannually thereafter, each agency shall publish in the Federal Register a nonexclusive list that identifies 3 or more areas of existing agency regulation—
(1)
that apply or may apply to a financial innovation; and
(2)
that the agency would consider modifying or waiving if the agency were to receive a petition under section 6 relating to that regulation.
4.

Establishment or designation of FSIO at agencies
(a)

In general
Each agency shall establish or designate an office within the agency to be known as the “Financial Services Innovation Office” of the “FSIO”. Each such Financial Services Innovation Office shall to promote financial innovations and to assist a covered person with an approved petition under section 7.
(b)

Administration
Each agency shall designate an individual to serve as the head of the agency’s FSIO.
(c)

Duties
(1)

General duties
Each agency, acting through the agency’s FSIO, shall—
(A)
support the development of financial innovations;
(B)
coordinate with FSIOs at other agencies to share information and data about financial innovations;
(C)
upon request, coordinate with relevant State regulatory entities to provide information to the public with respect to financial innovations and agency regulations related to such financial innovations; and
(D)
establish procedures to reduce the regulatory burden of offering a financial innovation to the public and enable greater access to financial innovations.
(2)

Duties for petitions
With respect to a covered person with an approved petition under section 7, each FSIO shall—
(A)
work with the covered person to address issues of how existing regulatory frameworks apply to the financial innovation that is the subject of the petition;
(B)
assist the covered person in complying with the requirements of Federal regulators of the financial innovation; and
(C)
assist the covered person in responding to any challenges to a modification or a waiver granted under subsection (d).
(d)

Waiver authority
An agency, acting through the agency’s FSIO, may modify or waive the application of an agency regulation of the agency or the Federal statute under which the agency has rulemaking authority if—
(1)
a petition of the covered person has been approved under section 7; and
(2)
the agency determines that compliance with such agency regulation or Federal statute would impede the ability of a covered person to offer the financial innovation that is the subject of the petition.
(e)

Termination of other programs; transfer of authority
(1)

In general
Not later than 90 days after the establishment or designation of a FSIO at an agency, the agency shall modify any offices or programs at the agency that promote financial innovations or assist covered persons in offering financial innovations, and merge or transfer the operations of such offices or programs into the FSIO.
(2)

Legal actions or proceedings
On the date that is 90 days after the establishment or designation of a FSIO at an agency, any legal action or proceeding commenced by or against any other offices or programs at the agency that promote financial innovations or assist covered persons in offering financial innovations, including no-action letters and staff advisory opinions, shall be transferred to the FSIO of that agency.
(f)

Report
Not later than 6 months after the date of the enactment of this Act, and annually thereafter, each agency shall present testimony to Congress and submit a report to Congress and to the Financial Stability Oversight Council on the activities of the FSIO of such agency, including a description of the petitions considered, the rationale for acceptance or rejection of petitions, and the efforts of the FSIO to encourage financial innovations.
(g)

Elimination of FSIO
If an agency has not received a petition described in section 6 within 5 years of the date of the establishment of the FSIO of such agency, the agency shall eliminate the FSIO. Such agency shall continue to comply with the requirements of any multiparty agreement entered into pursuant to section 8(c) on or before the date of such elimination.
5.

FSIO Liaison Committee and chair
(a)

Establishment
Not later than 60 days after the date of the enactment of this Act, the agencies shall establish a committee to be known as the “FSIO Liaison Committee”.
(b)

Members
The FSIO Liaison Committee shall be composed of the head of each FSIO described under section 4 and a State banking supervisor selected by the Conference of State Bank Supervisors (or a successor organization).
(c)

Duties
The FSIO Liaison Committee shall—
(1)
consult on the administration, coordination, and oversight the FSIO of each agency;
(2)
facilitate the cooperation of each FSIO to ensure that agencies share information and data on petitions submitted under section 6;
(3)
monitor proposals for agency regulation and developments related to financial innovations;
(4)
encourage the application of uniform principles and standards at each FSIO; and
(5)
facilitate collaboration with relevant State regulatory entities to provide information to the public with respect to financial innovations and agency regulations related to such financial innovations.
(d)

Meetings
The FSIO Liaison Committee shall meet at least twice a year.
(e)

Chair
(1)

Establishment
The first Chair of the FSIO Liaison Committee shall be elected by the members. The Chair shall serve for a term of 2 years and thereafter the chairmanship shall rotate among the members of the committee.
(2)

Powers of the Chair
The Chair is authorized to carry out the internal administration of the FSIO Liaison Committee, including the appointment and supervision of employees and the distribution of tasks among members, employees, and administrative units.
(f)

Testimony
Not later than 6 months after the date of the enactment of this Act, the Chair of the FSIO Liaison Committee shall present testimony to Congress on the activities of the FSIO Liaison Committee.
(g)

Funding
(1)

Compensation of members
Each member of the FSIO Liaison Committee shall serve without additional compensation but shall be entitled to reasonable expenses incurred in carrying out official duties as such a member.
(2)

General expenses
The costs and expenses of the FSIO Liaison Committee, including the salaries of employees, shall be split equally between, and paid by, each agency other than an agency that has eliminated the agency’s FSIO pursuant to section 4(g).
6.

Petition to agency
(a)

In general
A covered person may submit a petition to an agency, through the agency’s FSIO, in such form and in such manner as the agency’s FSIO may require, to request to enter into an enforceable compliance agreement containing a modification or waiver of an agency regulation of the agency or the Federal statute under which the agency has rulemaking authority with respect to—
(1)
the covered person; or
(2)
a financial innovation the covered person offers or intends to offer.
(b)

Contents
In a petition submitted under this section, the covered person shall—
(1)
submit an alternative compliance strategy that proposes a method to comply with the agency regulation or Federal statutory requirement; and
(2)
demonstrate that under the alternative compliance strategy, the financial innovation—
(A)
would serve the public interest;
(B)
improves consumer access to a financial product or service;
(C)
would not present systemic risk to the United States financial system; and
(D)
would promote consumer protection.
(c)

Multiparty petitions
One or more covered persons that offer or intend to offer similar financial innovations may jointly submit a petition under this section.
(d)

Safe harbor
(1)

In general
During the period after a covered person submits a petition under this section and before the agency receiving the petition makes a determination on the petition pursuant to section 7, an agency may not take an enforcement action against a covered person relating to the financial innovation that was the subject of the petition.
(2)

Injunctive relief
If an agency determines that a financial innovation described under paragraph (1) presents an immediate danger to consumers or presents systemic risk to the United States financial system, the agency may apply to a court of competent jurisdiction for an injunction to prohibit a covered person from offering such financial innovation during the period described in paragraph (1).
(3)

Preservation of anti-fraud authority
This subsection shall not apply to the authority of an agency to take an enforcement action against a covered person with respect to fraud relating to the financial innovation that was the subject of the petition.
(e)

Notice and comment
(1)

In general
Not later than 30 days after receiving a petition, the agency that receives the petition shall publish the petition in the Federal Register and provide a 60-day period for public notice and comment.
(2)

Exception for notice and comment period
The agency that receives the petition may waive the notice and comment period described in paragraph (1) if such agency determines that the covered person submitting the petition is similarly situated to another covered person that has been granted approval of a petition pursuant to section 7.
(3)

Confidentiality
The agency shall maintain the confidentiality of any nonpublicly available data or information in any petition submitted under this section. The agency shall give reasonable consideration to maintaining the confidentiality of data or information identified by the covered person in the petition submitting under this section as nonpublicly available data or information.
7.

Agency determination of petition
(a)

In general
Not later than 30 days after the end of the comment period described under section 6 (or if the comment period was waived, not later than 60 days after receipt of a petition under section 6), the head of the agency receiving the petition shall complete a review of the petition and notify the covered person, in writing, of the agency’s determination of the petition.
(b)

Approval
If the covered person submitting the petition shows that it is more likely than not that the covered person meets the requirements for establishing an alternative compliance strategy, the agency shall—
(1)
approve the petition; and
(2)
enter into an enforceable compliance agreement with the covered person in accordance with the requirements of section 8.
(c)

Disapproval
(1)

Explanation
If the agency disapproves a petition, the agency head shall provide the covered person with a written notice explaining the reason for such disapproval, including—
(A)
evidence that the covered person did not satisfy the requirements for establishing an alternative compliance strategy;
(B)
an identification of any agency regulations or Federal statutes applicable to the covered person with respect to the financial innovation that were omitted from the petition; and
(C)
a description of—
(i)
any beneficial effects, including an identification of persons likely to benefit, from rejecting the petition;
(ii)
any potential costs, including an identification of persons likely to bear the costs, of rejecting the petition; and
(iii)
the baseline used by the agency to measure the likely economic consequences of rejecting the petition.
(2)

Resubmittal
Receipt of a notice of disapproval of a petition under this subsection shall not preclude a covered person from revising and resubmitting such petition to the agency under section 6.
(d)

Moratorium
If an agency disapproves a petition submitted in good faith under this section, the agency shall provide the covered person a reasonable amount of time before the agency takes an enforcement action against the covered person relating to the financial innovation that was the subject of the petition.
(e)

Judicial review
A covered person may seek judicial review of an agency’s determination on a petition in accordance with subchapter II of chapter 5 of title 5, United States Code, and chapter 7 of such title (commonly known as the “Administrative Procedure Act”).
8.

Enforceable compliance agreement
(a)

In general
If an agency approves a petition under section 7, the covered person shall enter into an enforceable compliance agreement with the agency, which shall include—
(1)
the terms under which the approved financial innovation may be developed or offered to the public; and
(2)
any requirements of the covered person and any agency with respect to the financial innovation.
(b)

Requirements
Each agency, by rule, shall establish requirements relating to enforceable compliance agreements that include—
(1)
procedures for modifying the terms of the agreement;
(2)
consequences for failure to comply with the terms of the agreement;
(3)
a compliance examination process that—
(A)
solicits feedback from other agencies on the agreement; and
(B)
occurs not less frequently than annually;
(4)
a termination date for the agreement that is at least 1 year after the date on which the agreement is entered into;
(5)
procedures for extending the termination date;
(6)
procedures for judicial review of another agency’s or State’s challenge to the agreement in accordance with subchapter II of chapter 5 of title 5, United States Code, and chapter 7 of such title (commonly known as the “Administrative Procedure Act”); and
(7)
procedures for maintaining the confidentiality of any information disclosed to the agency during the process of drafting and entering into agreement.
(c)

Multiparty agreements
With respect to a financial innovation that is the subject of an enforceable compliance agreement entered into under this section, an agency that did not enter into such enforceable compliance agreement may join as a party to the enforceable compliance agreement entered into pursuant to this section.
(d)

Limitation on enforcement actions
(1)

In general
If a covered person and an agency enter into an enforceable compliance agreement—
(A)
another agency that is not party to the multiparty agreement described in subsection (c) may not commence an enforcement action against the covered person with respect to the financial innovation that is the subject of the enforceable compliance agreement; and
(B)
a State may not commence an enforcement action against the covered person with respect to the financial innovation that is the subject of the enforceable compliance agreement, if the covered person provides the State with—
(i)
the enforcement compliance agreement; and
(ii)
a statement of policies and procedures the covered person has in place to comply with State laws that are applicable to the financial innovation.
(2)

State exception for consumer harm
Notwithstanding paragraph (1)(B), a State may commence an enforcement action against a covered person with respect to a financial innovation that is the subject of an enforceable compliance agreement if, in an action brought by the State in a court of competent jurisdiction, the court determines that the agency’s action was arbitrary and capricious and the financial innovation has substantially harmed consumers within such State.
(e)

Arbitration
A covered person may elect to arbitrate any action initiated by another person relating to a financial innovation that is the subject of the enforceable compliance agreement.
9.

Report to Congress
Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the Financial Stability Oversight Council shall submit to Congress a report on the aggregate impact of enforceable compliance agreements entered into under this Act, which shall include—
(1)
the number and characteristics of the agreements;
(2)
the most innovative and least burdensome tools that the agency’s FSIO has implemented to allow a financial innovation that is the subject of an enforceable compliance agreement to be offered;
(3)
strategies implemented to coordinate and facilitate cooperation among FSIOs;
(4)
the existing Federal and State laws, regulations, or practices (including guidance materials, examinations, and enforcement proceedings and settlements) that the Financial Stability Oversight Council identifies as the most burdensome to innovation that adversely affect competition in the financial services industry, or that restrict improvements for consumers of financial products or services; and
(5)
an identification of the overlap or fragmentation of agency regulations of financial products or services and recommendations for reducing, consolidating, or eliminating such overlap or fragmentation.