H. Rept. 113-346 - 113th Congress (2013-2014)

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House Report 113-346 - CONSUMER FINANCIAL PROTECTION SAFETY AND SOUNDNESS IMPROVEMENT ACT OF 2013

[House Report 113-346]
[From the U.S. Government Publishing Office]


113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-346

======================================================================



 
 CONSUMER FINANCIAL PROTECTION SAFETY AND SOUNDNESS IMPROVEMENT ACT OF 
                                  2013

                                _______
                                

February 6, 2014.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

       Mr. Hensarling, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3193]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3193) to amend the Consumer Financial Protection 
Act of 2010 to strengthen the review authority of the Financial 
Stability Oversight Council of regulations issued by the Bureau 
of Consumer Financial Protection, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                          Purpose and Summary

    H.R. 3193, the Consumer Financial Protection Safety and 
Soundness Improvement Act of 2013, amends the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (the ``Dodd-Frank 
Act'') to improve the Financial Stability Oversight Council's 
(FSOC) review of regulations of the Consumer Financial 
Protection Bureau (CFPB) that may undermine the safety and 
soundness of U.S. financial institutions.

                  Background and Need for Legislation

    Under section 1023 of the Dodd-Frank Act, CFPB regulations 
may not be set aside unless two-thirds of the FSOC's voting 
membership votes to do so and the FSOC determines that the 
regulation ``puts the safety and soundness of the United States 
banking system or the stability of the financial system at 
risk.''\1\ The supermajority threshold and the requirement that 
the regulation have a pervasive negative effect on the entire 
banking system are too stringent, especially when the 
regulations in question have been crafted by a Federal agency 
that lacks checks and balances in numerous other respects, and 
when one of the members voting on whether to set aside a CFPB 
regulation is the CFPB Director himself.
---------------------------------------------------------------------------
    \1\The FSOC is an inter-agency body created by the Title I of the 
Dodd-Frank Act that is charged with identifying risks to the financial 
stability of the United States, promoting market discipline, and 
responding to emerging threats to the U.S. financial system. It is 
chaired by the Secretary of the Treasury, and consists of ten voting 
members, including the CFPB Director.
---------------------------------------------------------------------------
    H.R. 3193 changes the vote required to set aside a CFPB 
regulation from two-thirds of the FSOC voting membership to a 
simple majority, excluding the Director of the CFPB. It 
modifies the standard for the FSOC's review to permit a CFPB 
regulation be set aside if it is ``inconsistent with the safe 
and sound operations of U.S. financial institutions.''
    The legislation amends the time limits for the FSOC to 
review and vote on CFPB regulations, by striking section 1023 
of the Dodd-Frank Act, which requires that the FSOC vote within 
the later of the following: (1) 45 days following the date of 
filing the petition challenging the CFPB regulation, unless a 
stay is issued; or (2) the expiration of a stay issued by the 
FSOC.
    Finally, the bill amends section 1022 of the Dodd-Frank Act 
to specify that in prescribing a rule, the CFPB must consider 
``the impact of such rule on the financial safety and soundness 
of an insured depository institution.''

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Financial Institutions and Consumer Credit held a hearing on 
H.R. 3193 on October 29, 2013.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 20, 2013, and ordered H.R. 3193 to be reported 
favorably to the House without amendment by a recorded vote of 
32 yeas to 25 nays (recorded vote no. FC-43), a quorum being 
present.

                            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.
    1. A motion by Chairman Hensarling to report the bill (H.R. 
3193) without amendment to the House with a favorable 
recommendation was agreed to by a record vote of 32 yeas to 25 
nays (recorded vote no. FC-43).

Record vote no. FC-43

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
           Representative               Yea      Nay     Present        Representative        Yea      Nay                                          Present
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Mr. Hensarling......................       X   .......  .........  Ms. Waters.............  .......       X   ..................................................................................
Mr. Bachus..........................       X   .......  .........  Mrs. Maloney (NY)......  .......       X   ..................................................................................
Mr. King (NY).......................       X   .......  .........  Ms. Velazquez..........  .......       X   ..................................................................................
Mr. Royce...........................       X   .......  .........  Mr. Watt...............  .......       X   ..................................................................................
Mr. Lucas...........................       X   .......  .........  Mr. Sherman............  .......       X   ..................................................................................
Mr. Gary G. Miller (CA).............       X   .......  .........  Mr. Meeks..............  .......       X   ..................................................................................
Mrs. Capito.........................       X   .......  .........  Mr. Capuano............  .......       X   ..................................................................................
Mr. Garrett.........................       X   .......  .........  Mr. Hinojosa...........  .......       X   ..................................................................................
Mr. Neugebauer......................       X   .......  .........  Mr. Clay...............  .......  .......  ..................................................................................
Mr. McHenry.........................       X   .......  .........  Mrs. McCarthy (NY).....  .......  .......  ..................................................................................
Mr. Campbell........................  .......  .......  .........  Mr. Lynch..............  .......       X   ..................................................................................
Mrs. Bachmann.......................       X   .......  .........  Mr. David Scott (GA)...  .......       X   ..................................................................................
Mr. McCarthy (CA)...................       X   .......  .........  Mr. Al Green (TX)......  .......       X   ..................................................................................
Mr. Pearce..........................       X   .......  .........  Mr. Cleaver............  .......       X   ..................................................................................
Mr. Posey...........................       X   .......  .........  Ms. Moore..............  .......       X   ..................................................................................
Mr. Fitzpatrick.....................       X   .......  .........  Mr. Ellison............  .......       X   ..................................................................................
Mr. Westmoreland....................       X   .......  .........  Mr. Perlmutter.........  .......  .......  ..................................................................................
Mr. Luetkemeyer.....................       X   .......  .........  Mr. Himes..............  .......       X   ..................................................................................
Mr. Huizenga (MI)...................       X   .......  .........  Mr. Peters (MI)........  .......       X   ..................................................................................
Mr. Duffy...........................       X   .......  .........  Mr. Carney.............  .......       X   ..................................................................................
Mr. Hurt............................       X   .......  .........  Ms. Sewell (AL)........  .......       X   ..................................................................................
Mr. Grimm...........................       X   .......  .........  Mr. Foster.............  .......       X   ..................................................................................
Mr. Stivers.........................       X   .......  .........  Mr. Kildee.............  .......       X   ..................................................................................
Mr. Fincher.........................       X   .......  .........  Mr. Murphy (FL)........  .......       X   ..................................................................................
Mr. Stutzman........................       X   .......  .........  Mr. Delaney............  .......       X   ..................................................................................
Mr. Mulvaney........................       X   .......  .........  Ms. Sinema.............  .......       X   ..................................................................................
Mr. Hultgren........................       X   .......  .........  Mrs. Beatty............  .......       X   ..................................................................................
Mr. Ross............................       X   .......  .........  Mr. Heck (WA)..........  .......       X   ..................................................................................
Mr. Pittenger.......................       X
Mrs. Wagner.........................       X
Mr. Barr............................       X
Mr. Cotton..........................       X
Mr. Rothfus.........................       X
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

                      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 states that H.R. 3193, 
among other things, modifies the standard under which the FSOC 
may set aside a CFPB regulation.

   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 of 1974.

                        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 Estimates

    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:
                                                  February 5, 2014.
Hon. Jeb Hensarling,
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. 3193, the Consumer 
Financial Protection Safety and Soundness Improvement Act of 
2013.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.
    Enclosure.

H.R. 3193--Consumer Financial Protection Safety and Soundness 
        Improvement Act of 2013

    Summary: H.R. 3193 would amend the statute that authorizes 
the Financial Stability Oversight Council (FSOC) to delay 
implementation or set aside final regulations developed by the 
Consumer Financial Protection Bureau (CFPB). The bill also 
would require the CFPB, when developing a new rule, to consider 
the impact of the rule on the financial soundness of an insured 
depository institution.
    CBO estimates that enacting H.R. 3193 would increase direct 
spending by $5 million over the 2014-2024 period; therefore, 
pay-as-you-go procedures apply. CBO estimates that enacting 
H.R. 3193 would not have a significant effect on revenues and 
implementing the bill would not affect discretionary costs.
    H.R. 3193 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated cost to the federal government: The CFPB is 
permanently authorized to spend amounts transferred from the 
Federal Reserve; because that activity is not subject to 
appropriation, CFPB expenditures are recorded in the budget as 
direct spending.
    CBO assumes that the bill will be enacted near the middle 
of fiscal year 2014 and that spending will follow historical 
patterns for the CFPB. H.R. 3193 would broaden the scope of 
items the CFPB must consider when prescribing new rules under 
consumer financial laws. Currently, the CFPB must consider both 
the potential costs to consumers and the effect on certain 
entities and consumers in rural areas. H.R. 3193 would direct 
the CFPB to consider the impact of a potential new rule on the 
financial safety or soundness of an insured depository 
institution as well.
    Based on information from the CFPB, CBO estimates that the 
cost to enact H.R. 3193 would total $5 million over the 2014-
2024 period for additional staff costs associated with the new 
rulemaking requirement. We expect that the cost in any given 
year would not be significant.
    The bill also would change the conditions under which the 
FSOC would stay the effective date or set aside a regulation 
developed by the CFPB. Based on information from the Treasury, 
CBO estimates that enacting those provisions of H.R. 3193 would 
not have a significant effect on direct spending or revenues.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

       CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 3193, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON NOVEMBER 21, 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2014   2015   2016   2017   2018   2019   2020   2021   2022   2023   2024  2014-2019  2014-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
Statutory Pay-As-You-Go Impact.......................      0      0      0      0      0      0      0      0      0      0      0         3         5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Components may not sum to totals because of rounding.

    Intergovernmental and private-sector impact: H.R. 3193 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal Costs: Susan Willie; Impact 
on State, Local, and Tribal Governments: Melissa Merrell; 
Impact on the Private Sector: Paige Piper/Bach.
    Estimate approved by: Theresa Gullo, 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.

                  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. 3193 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(j) of H. Res. 5, 113th Cong. (2013), 
the Committee states that no provision of H.R. 3193 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(k) of H. Res. 5, 113th Cong. (2013), 
the Committee states that H.R. 3193 does not direct any 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 3193 as the ``Consumer Financial 
Protection Safety and Soundness Improvement Act of 2013.''

Section 2. Council voting procedure

    This section changes the required 2/3 vote of the FSOC to 
set aside a CFPB regulation to a majority, excluding the 
Director of the CFPB.

Section 3. Review authority of the council

    This section requires the FSOC to review a CFPB regulation 
if the regulation is ``inconsistent with the safe and sound 
operations of United States financial institutions.'' Under 
current law, FSOC review is permissive (not required) and the 
standard is whether the CFPB regulation puts the ``safety and 
soundness of the United States banking system of the stability 
of the financial system of the United States at risk.''

Section 4. Safety and soundness check

    This section requires the Director of the CFPB, when 
proposing a rule under federal consumer financial laws, to 
consider the rule's impact on the financial safety or soundness 
of an insured depository institution.

         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):

               CONSUMER FINANCIAL PROTECTION ACT OF 2010

TITLE X--BUREAU OF CONSUMER FINANCIAL PROTECTION

           *       *       *       *       *       *       *


Subtitle B--General Powers of the Bureau

           *       *       *       *       *       *       *


SEC. 1022. RULEMAKING AUTHORITY.

  (a) * * *
  (b) Rulemaking, Orders, and Guidance.--
          (1) * * *
          (2) Standards for rulemaking.--In prescribing a rule 
        under the Federal consumer financial laws--
                  (A) the Bureau shall consider--
                          (i) the potential benefits and costs 
                        to consumers and covered persons, 
                        including the potential reduction of 
                        access by consumers to consumer 
                        financial products or services 
                        resulting from such rule; [and]
                          (ii) the impact of proposed rules on 
                        covered persons, as described in 
                        section 1026, and the impact on 
                        consumers in rural areas; and
                          (iii) the impact of such rule on the 
                        financial safety or soundness of an 
                        insured depository institution;

           *       *       *       *       *       *       *


SEC. 1023. REVIEW OF BUREAU REGULATIONS.

  (a) Review of Bureau Regulations.--On the petition of a 
member agency of the Council, the Council [may] shall set aside 
a final regulation prescribed by the Bureau, or any provision 
thereof, if the Council decides, in accordance with subsection 
(c), that the [regulation or provision would put the safety and 
soundness of the United States banking system or the stability 
of the financial system of the United States at risk] 
regulation which is the subject of the petition is inconsistent 
with the safe and sound operations of United States financial 
institutions.

           *       *       *       *       *       *       *

  (c) Stays and Set Asides.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Vote.--
                  (A) In general.--The decision to issue a stay 
                of, or set aside, any regulation under this 
                section shall be made only with the affirmative 
                vote in accordance with subparagraph (B) of 
                [\2/3\] a majority of the members of the 
                Council then serving, excluding the Director of 
                the Bureau.
                  (B) Authorization to vote.--A member of the 
                Council may vote to stay the effectiveness of, 
                or set aside, a final regulation prescribed by 
                the Bureau only if the agency or department 
                represented by that member has--
                          (i) * * *
                          (ii) made an official determination, 
                        at a public meeting where applicable, 
                        that the regulation which is the 
                        subject of the petition [would put the 
                        safety and soundness of the United 
                        States banking system or the stability 
                        of the financial system of the United 
                        States at risk] is inconsistent with 
                        the safe and sound operations of United 
                        States financial institutions.
          (4) Decisions to set aside.--
                  (A) * * *
                  [(B) Timely action required.--The Council may 
                not issue a decision to set aside a regulation, 
                or provision thereof, which is the subject of a 
                petition under this section after the 
                expiration of the later of--
                          [(i) 45 days following the date of 
                        filing of the petition, unless a stay 
                        is issued under paragraph (1); or
                          [(ii) the expiration of a stay issued 
                        by the Council under this section.]
                  [(C)] (B) Separate authority.--The issuance 
                of a stay under this section does not affect 
                the authority of the Council to set aside a 
                regulation.
          [(5) Dismissal due to inaction.--A petition under 
        this section shall be deemed dismissed if the Council 
        has not issued a decision to set aside a regulation, or 
        provision thereof, within the period for timely action 
        under paragraph (4)(B).]
          [(6)] (5) Publication of decision.--Any decision 
        under this subsection to issue a stay of, or set aside, 
        a regulation or provision thereof shall be published by 
        the Council in the Federal Register as soon as 
        practicable after the decision is made, with an 
        explanation of the reasons for the decision.
          [(7)] (6) Rulemaking procedures inapplicable.--The 
        notice and comment procedures under section 553 of 
        title 5, United States Code, shall not apply to any 
        decision under this section of the Council to issue a 
        stay of, or set aside, a regulation.
          [(8)] (7) Judicial review of decisions by the 
        council.--A decision by the Council to set aside a 
        regulation prescribed by the Bureau, or provision 
        thereof, shall be subject to review under chapter 7 of 
        title 5, United States Code.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    The Consumer Financial Protection Bureau (CFPB or Bureau) 
is the only bank regulator whose rules can be overturned by a 
vote of its fellow regulators on the Financial Stability 
Oversight Council (FSOC); an extraordinary limit on the CFPB's 
powers. The CFPB is also constrained by rulemaking requirements 
that do not exist at the other independent financial 
regulators. H.R. 3193 lowers the bar for overturning CFPB rules 
in two ways--decreasing the number of votes required by the 
FSOC and increasing the number of reasons a rule can be 
overturned.
    Currently, 2/3 of the regulators on the Financial Stability 
Oversight Council must agree to overturn a CFPB rule. This bill 
lowers that threshold to a simple majority. The FSOC, which is 
composed of many of the same regulators who neglected to 
appropriately consider consumer protections in the run up to 
the 2008 Financial Crisis, would only need 5 votes, rather than 
the current 7, to overturn a CFPB rulemaking.
    The bill also lowers the threshold the FSOC needs to 
consider overturning a CFPB rulemaking, by establishing a broad 
and vague standard that a rulemaking shall be reviewed if it is 
merely ``inconsistent with the safe and sound operations of 
United States financial institutions.'' By lowering the 
standard for overturning a rule the bill implies that consumer 
protection is somehow incompatible with the safe and sound 
operation of the financial system. However, it is readily 
apparent from the 2008 Financial Crisis that an increased focus 
on consumer protection would have benefitted the safety and 
soundness of the financial system, and that short-term 
profitability of complex financial products was not a reliable 
indicator of a financial institution's health. Prudential 
regulators cannot be empowered to undermine consumer protection 
regulations to preserve business models that rely on unfair, 
deceptive, or abusive acts and practices. It is in fact crucial 
to the safety and soundness of the financial system to have a 
strong and independent consumer financial product regulator.
    The Dodd-Frank Wall Street Reform and Consumer Protection 
Act contains numerous provisions to enhance the safety and 
soundness of the financial system, including the creation of 
the Consumer Financial Protection Bureau. Opponents of the 
Dodd-Frank Act have steadfastly opposed all efforts to increase 
financial stability. It is clear that the purpose of H.R. 3193 
is neither to increase regulatory certainty nor financial 
stability, but to impede the CFPB in its mission of protecting 
American consumers.

                                   Maxine Waters.
                                   Stephen F. Lynch.
                                   Ruben Hinojosa.
                                   Keith Ellison.
                                   David Scott.
                                   Michael E. Capuano.
                                   Carolyn B. Maloney.
                                   Kyrsten Sinema.
                                   Gary C. Peters.
                                   Bill Foster.
                                   Joyce Beatty.
                                   Al Green.
                                   Daniel Kildee.
                                   Denny Heck.
                                   James A. Himes.
                                   John Carney.
                                   Gregory W. Meeks.
                                   Gwen Moore.
                                   Terri Sewell.
                                   Wm. Lacy Clay.
                                   Patrick Murphy.
                                   Ed Perlmutter.
                                   Emanuel Cleaver.
                                   Brad Sherman.