CFPB announces intent to examine nonbank financial companies as Chopra faces grilling
The Honorable Rohit Chopra, Director of the Consumer Financial Protection Bureau, was busy this week. On Monday, the CFPB announced that it would invoke “a largely unused” provision of the Dodd-Frank Act to examine nonbanks that the Bureau “has reasonable cause to determine pose risks to consumers.” The CFPB has been using its authority to supervise nonbank lenders, large companies that provide a range of consumer financial services, and fintechs, but the Bureau is seeking comment on a procedural rule for determining whether a company’s risk profile warrants the Bureau’s supervisory attention.
On Tuesday and Wednesday, Chopra appeared at oversight hearings before the Senate Banking Committee and the House Financial Services Committee, where Democrats generally praised his initiative and Republicans accused him of illegal overreach and of staging a coup against FDIC Chairman Jelena McWilliams last year. Chopra defended his actions as a member of the FDIC Board of Directors, and said that his goals were to find ways to create more competition among financial services providers; take strong action against repeat offenders that violate agency and court orders; and work to restore relationship banking, especially in rural and underserved areas.
House FinTech Task Force looks at rules for digital wallets, mobile payments
The House Financial Services Task Force on Financial Technology heard testimony yesterday from legal experts, consumer advocates, and industry representatives about how federal consumer laws should apply to the use of digital wallet applications and mobile payment services such as PayPal, Zelle, and Venmo. Yesterday’s hearing sought feedback on the Task Force’s draft of the Protecting Consumers from Payment Scams Act, which would amend the Electronic Funds Transfer Act to extend protections to consumers who are defrauded into making digital payments to scammers. Task Force Chairman Stephen Lynch (D-MA) has introduced legislation asking Treasury to design and pilot an electronic dollar, or “e-cash;” Lynch said this e-cash should work in parallel with other public-sector digital dollar initiatives, such as any central bank digital currency issued by the Federal Reserve.
FinCEN needs resources to implement beneficial ownership, anti-corruption requirements
Himamauli Das, Acting Director of the Financial Crimes Enforcement Network (FinCEN), made his first appearance before the House Financial Services Committee yesterday to talk about the agency’s efforts to implement the Anti-Money Laundering Act of 2020 (AML Act), which included the Corporate Transparency Act (CTA) to require reporting and collection of beneficial ownership information. Das said limited resources were presenting “significant challenges” to this work. FinCEN’s focus has expanded in recent years to fight illicit finance, ransomware attacks, and sanctions evasion as well as countering terrorism financing. Das emphasized the importance of international and public-private partnerships in sanctions enforcement, particularly since Russia’s invasion of Ukraine. FinCEN published its first Notice of Proposed Rulemaking on beneficial ownership last December, and is still weighing the more than 240 comments it received on this first set of reporting requirements. Timing on a final rule “is not clear yet,” Das said, but the agency is moving forward with a second proposal on access to the beneficial ownership database, and on design of the database itself, the Beneficial Ownership Secure System (BOSS). Data security, obviously, is the agency’s top priority for BOSS. But for all of these efforts, FinCEN has an employee count of only about 300, and they have “significant staffing requests that remain unfunded.” The President’s budget proposal for FY 2023 represents a 30% increase over current funding levels.
House, Senate agree to conference on America COMPETES Act
This week the Senate agreed to a conference with the House on HR 4521, the America COMPETES Act. Speaker of the House Nancy Pelosi appointed conferees on April 7, and the Senate voted yesterday to authorize the appointment of Senate conferees. The bill would provide financial and infrastructure support for domestic technology manufacturing. It has strong bipartisan support in the House, with 100 co-sponsors joining Rep. Eddie Bernice Johnson (D-TX). Its Senate version, co-sponsored by Senate Majority Leader Chuck Schumer (D-NY) and Rep. Todd Young (R-IN), was called the United States Innovation and Competition Act, or USICA.
Bipartisan House members introduce bill to clarify authority over digital commodities
Reps. Glenn Thompson (R-PA), Ro Khanna (D-CA), Darren Soto (D-FL), and Tom Emmer (R-MN) introduced the Digital Commodity Exchange Act of 2022 this week as HR 7614. The bill would make the Commodity Futures Trading Commission (CFTC) explicitly responsible for registering and regulating digital commodity exchanges, which would give these venues an alternative to state-by-state licensure as money transmitters. The bill would create clear jurisdictional lines between the CFTC and the Securities and Exchange Commission, and provide a new regulatory regime for certain asset-backed stablecoins.
Fed seeks applications for Community Advisory Council
The Federal Reserve Board is accepting applications for membership on its Community Advisory Council (CAC) until June 10. The CAC is a diverse group of experts and stakeholders who meet twice a year with the Federal Reserve Board to advise them on the economic conditions and financial needs of consumers, especially those living in low- to moderate-income communities. The CAC has at least 15 members at any time, serving staggered three-year terms. Read more about the application process here.
Confirmations, Nominations, Departures
The Senate voted 52-43 to confirm the nomination of Lael Brainard as Vice Chairman of the Federal Reserve Board. They postponed consideration of the other three nominees after several Senators and Vice President Kamala Harris tested positive for COVID-19.
Rep. Patrick McHenry (R-NC), currently ranking member of the House Committee on Financial Services, said in an interview this week that he will seek the committee chairmanship if Republicans win a majority in this year’s elections.
The Week Ahead
The House is in a District Work Period again next week, but the Senate is in session.
May 3 at 10:00 am Senate Committee on Commerce, Science, and Transportation holds a hearing on the Department of Transportation’s budget priorities, with testimony from Secretary of Transportation Pete Buttigieg.
May 4 at 10:00 am Senate Committee on the Judiciary holds a hearing on “Excessive Swipe Fees and Barriers to Competition in the Credit and Debit Card Systems.”
May 4 at 2:30 pm Senate Banking Subcommittee on Financial Institutions and Consumer Protection holds a hearing on “Examining Overdraft Fees and their Effects on Working Families.”
May 5 at 10:00 am Senate Committee on Banking, Housing, and Urban Affairs holds a hearing on “Examining Student Loan Servicers and their Impact on Workers.”
May 6 at 9:00 am The SEC’s Division of Economic and Risk Analysis (DERA) co-hosts the Ninth Annual Conference on Financial Market Regulation with the Lehigh University Center for Financial Services, the University of Maryland’s Center for Financial Policy, and the CFA Institution. The day-long program is virtual, and registration is open to the public.
May 6 at 9:15 am The Federal Reserve Bank of New York and the Columbia University Center for Environmental Economics and Policy holds a day-long, in-person conference on environmental economics and policy. The conference, which is open to the public, will explore the unequal effects of climate change on different communities, the unintended consequences of force-placed flood insurance, and the effects of climate change on economic stability and resource distribution. Ben Harris, Assistant Secretary of the Treasury for Economic Policy, will deliver the keynote address.
May 6 at 10:00 am The Securities and Exchange Commission’s Small Business Capital Formation Advisory Committee holds a public meeting online. The meeting will stream at www.sec.gov.