Financial Choice Act Could Stop Government From Having Power Over Payday And Title Loan Lenders

The Financial CHOICE Act of 2017 (H.R. 10 of the 115th Congress) was introduced into the U.S. House of Representatives on April 27, 2017. Proposed legislation as described by this bill would amend the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law by then-president Barack Obama in July 21, 2010. These amendments would have several effects, including the effect of stripping the power to regulate title loan and payday lenders from the federal government. H.R. 10 was sponsored by Jeb Hensarling (R-5th District Texas). 

Currently, payday lenders and title loan lenders are designated as “non-bank financial institutions” and are subject to the authority of the Financial Security Oversight Council. H.R. 10 would remove such oversight, which in turn would exempt such institutions from additional regulations to which banks are not subject. 

Some further details of this proposed piece of government/business legislation are as follows:

• It would repeal the limits on fees that retailers are allowed to charge for debit card processing, as outlined in the current Durbin Amendment. Since the Durbin Amendment went into effect in 2013, fees for consumers have increased by an average of 4%. 
• It would repeal the so-called Volcker Rule for certain speculative investments that banks make. The Volcker Rule limits the relationship that banks are allowed to have with hedge funds and equity funds and attempts to address some of the speculative investment types that contributed to the financial crisis of 2008.
• It would establish new rules for financial institution bankruptcy and take the authority for winding down bankrupt financial institutions away from the Federal Deposit Insurance Corporation (FDIC). 
• It would exempt banks from certain regulations if they maintain a certain assets-to-capital ratio. 

Other provisions of H.R. 10 would amend the Consumer Financial Protection Act of 2010, which is itself an amendment to the National Bank Act. The 2010 act created the Consumer Financial Protection Agency. Its main purpose is to protect consumers from so-called predatory lenders; a secondary purpose is to clarify discrepancies between state and federal legislation regarding consumer financial protection. 

The proposed amendments to the Consumer Financial Protection Act of 2010 would:

• Allow additional Congressional oversight for the Consumer Financial Protection Bureau
• Change the Consumer Financial Protection Bureau into a law enforcement agency
• Eliminate the Consumer Financial Protection Bureau’s supervisory authority over financial institutions
• Expand judicial review of the Consumer Financial Protection Bureau
• Limit the authority of the Consumer Financial Protection Bureau to take punitive actions against institutions that abuse consumer rights
• Subject the Consumer Financial Protection Bureau to Congressional appropriations for its funding

In addition to these proposed amendments to existing financial protection laws for consumers, H.R. 10 also proposes modifying the enforcement authority of the Securities and Exchange Commission, closes the Office of Financial Research within the Department of the Treasury, and revises certain other provisions related to capital formation, civil penalties for violating securities laws, community financial institutions, and insurance regulation. 

The next stage for H.R. 10 is to go to the Senate, which will vote on the equivalent Senate version of the proposed law.