H. Rept. 110-234 - 110th Congress (2007-2008)

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House Report 110-234 - FDIC ENFORCEMENT ENHANCEMENT ACT

[House Report 110-234]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-234

======================================================================
 
                    FDIC ENFORCEMENT ENHANCEMENT ACT

                                _______
                                

 July 16, 2007.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Frank of Massachusetts, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 2547]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2547) to amend the Federal Deposit Insurance Act 
to prevent misrepresentation about deposit insurance coverage, 
and for other purposes, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for Legislation..............................     2
Hearings.........................................................     2
Committee Consideration..........................................     2
Committee Votes..................................................     2
Committee Oversight Findings.....................................     2
Performance Goals and Objectives.................................     2
New Budget Authority, Entitlement Authority, and Tax Expenditures     3
Committee Cost Estimate..........................................     3
Congressional Budget Office Estimate.............................     3
Federal Mandates Statement.......................................     4
Advisory Committee Statement.....................................     4
Constitutional Authority Statement...............................     4
Applicability to Legislative Branch..............................     4
Earmark Identification...........................................     4
Section-by-Section Analysis of the Legislation...................     4
Changes in Existing Law Made by the Bill, as Reported............     5

                          Purpose and Summary

    H.R. 2547, the FDIC Enforcement Enhancement Act, gives the 
Federal Deposit Insurance Corporation (FDIC) authority to enter 
cease and desist orders against any person or entity that 
misuses FDIC's name, logo, abbreviation, or other indicators to 
falsely represent the nature of the product offered or the FDIC 
insurance coverage available. The bill allows the FDIC to 
impose civil monetary liabilities of up to $1 million per day 
on any person engaged in such conduct. Additionally, the bill 
clarifies FDIC authority in seeking injunctive relief against 
such person in Federal, State and foreign courts.

                  Background and Need for Legislation

    The FDIC has encountered multiple schemes to defraud 
depositors by actors that fraudulently purport connections to 
the FDIC. While the FDIC has the authority to directly address 
any misconduct occurring in state-chartered insured depository 
institutions--where FDIC is the primary Federal regulator--many 
of these schemes are perpetrated by persons or entities outside 
of the deposit insurance system. H.R. 2547 enhances the ability 
of the FDIC to fight these financial scams by authorizing the 
FDIC to take action against any person or entity that is 
fraudulently purporting to be connected to the FDIC.

                                Hearings

    No hearings were held on H.R. 2547 in the 110th Congress.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
June 26, 2007, and ordered H.R. 2547, FDIC Enforcement 
Enhancement Act, reported by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken in conjunction with the consideration 
of this legislation. A motion by Mr. Frank to report the bill 
to the House with a favorable recommendation was agreed to by a 
voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 2547 enhances the ability of the FDIC to fight 
financial scams by authorizing the FDIC to take action against 
any person or entity that is fraudulently purporting to be 
connected to the FDIC.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                     July 12, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2547, the FDIC 
Enforcement Enhancement Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 2547--FDIC Enforcement Enhancement Act

    H.R. 2547 would authorize the Federal Deposit Insurance 
Corporation (FDIC) to take civil action against any person who 
falsely asserts or suggests that any funds or assets are 
insured or guaranteed by the agency. Under current law, 
financial institutions are subject to FDIC sanctions for such 
false advertising or misrepresentation, and other persons are 
subject to criminal penalties for the misuse of agency names or 
titles, which are enforced by the Attorney General of the 
United States. H.R. 2547 would expand enforcement by making all 
such practices a violation of deposit insurance laws and 
allowing the FDIC to issue cessation orders and impose civil 
penalties of up to $1 million for each day the violation 
occurs.
    Based on information from the FDIC, CBO estimates that 
implementing this bill would have no significant effect on the 
agency's costs, which are funded directly by deposit insurance 
premiums. Any civil penalties collected as a result of this 
legislation would increase revenues, but CBO estimates that any 
such annual collections would be negligible. Thus, we estimate 
that enacting this bill would have no significant effect on 
direct spending or revenues.
    H.R. 2547 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Kathleen Gramp. 
This estimate was approved by Peter H. Fontaine, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 2547 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section establishes the short title of the bill, the 
``FDIC Enforcement Enhancement Act''.

Section 2. Enforcement against misrepresentations regarding FDIC 
        deposit insurance coverage

    This section prohibits false advertising and misuse of FDIC 
names as well as misrepresentations of insured status. It 
expands the jurisdiction of the FDIC to cover all persons or 
entities that misrepresent FDIC coverage. It empowers the FDIC 
to enter cease and desist orders against such persons or 
entities and to assign civil money penalties of up to $1 
million a day for each day the violation occurs or continues.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

FEDERAL DEPOSIT INSURANCE ACT

           *       *       *       *       *       *       *


  Sec. 8. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

          (4) False advertising or misuse of names to indicate 
        insured status.--
                  (A) Temporary order.--
                          (i) In general.--If a notice of 
                        charges served under subsection (b)(1) 
                        of this section specifies on the basis 
                        of particular facts that any person is 
                        engaged in conduct described in section 
                        18(a)(4), the Corporation may issue a 
                        temporary order requiring--
                                  (I) the immediate cessation 
                                of any activity or practice 
                                described, which gave rise to 
                                the notice of charges; and
                                  (II) affirmative action to 
                                prevent any further, or to 
                                remedy any existing, violation.
                          (ii) Effect of order.--Any temporary 
                        order issued under this subparagraph 
                        shall take effect upon service.
                  (B) Effective period of temporary order.--A 
                temporary order issued under subparagraph (A) 
                shall remain effective and enforceable, pending 
                the completion of an administrative proceeding 
                pursuant to subsection (b)(1) in connection 
                with the notice of charges--
                          (i) until such time as the 
                        Corporation shall dismiss the charges 
                        specified in such notice; or
                          (ii) if a cease-and-desist order is 
                        issued against such person, until the 
                        effective date of such order.
                  (C) Civil money penalties.--Violations of 
                section 18(a)(4) shall be subject to civil 
                money penalties as set forth in subsection (i) 
                in an amount not to exceed $1,000,000 for each 
                day during which the violation occurs or 
                continues.

           *       *       *       *       *       *       *

  Sec. 18. (a) [Insurance Logo.--] Representations of Deposit 
Insurance._
  (1) * * *

           *       *       *       *       *       *       *

  (3) Penalties.--For each day that an insured depository 
institution continues to violate this subsection or any 
regulation issued under this subsection, it shall be subject to 
a penalty of not more than $100, which the Corporation may 
recover for its use.
          (4) False advertising, misuse of fdic names, and 
        misrepresentation to indicate insured status.--
                  (A) Prohibition on false advertising and 
                misuse of fdic names.--No person may--
                          (i) use the terms ``Federal 
                        Deposit'', ``Federal Deposit 
                        Insurance'', ``Federal Deposit 
                        Insurance Corporation'', any 
                        combination of such terms, or the 
                        abbreviation ``FDIC'' as part of the 
                        business name or firm name of any 
                        person, including any corporation, 
                        partnership, business trust, 
                        association, or other business entity; 
                        or
                          (ii) use such terms or any other sign 
                        or symbol as part of an advertisement, 
                        solicitation, or other document,
                to represent, suggest or imply that any deposit 
                liability, obligation, certificate or share is 
                insured or guaranteed by the Federal Deposit 
                Insurance Corporation, if such deposit 
                liability, obligation, certificate, or share is 
                not insured or guaranteed by the Corporation.
                  (B) Prohibition on misrepresentations of 
                insured status.--No person may knowingly 
                misrepresent--
                          (i) that any deposit liability, 
                        obligation, certificate, or share is 
                        federally insured, if such deposit 
                        liability, obligation, certificate, or 
                        share is not insured by the 
                        Corporation; or
                          (ii) the extent to which or the 
                        manner in which any deposit liability, 
                        obligation, certificate, or share is 
                        insured by the Federal Deposit 
                        Insurance Corporation, if such deposit 
                        liability, obligation, certificate, or 
                        share is not insured by the Corporation 
                        to the extent or in the manner 
                        represented.
                  (C) Authority of fdic.--The Corporation shall 
                have--
                          (i) jurisdiction over any person that 
                        violates this paragraph, or aids or 
                        abets the violation of this paragraph; 
                        and
                          (ii) for purposes of enforcing the 
                        requirements of this paragraph with 
                        regard to any person--
                                  (I) the authority of the 
                                Corporation under section 10(c) 
                                to conduct investigations; and
                                  (II) the enforcement 
                                authority of the Corporation 
                                under subsections (b), (c), (d) 
                                and (i) of section 8,
                as if such person were a state nonmember 
                insured bank.
                  (D) Other actions preserved.--No provision of 
                this paragraph shall be construed as barring 
                any action otherwise available, under the laws 
                of the United States or any State, to any 
                Federal or State law enforcement agency or 
                individual.

           *       *       *       *       *       *       *