In a letter to the House Financial Services Committee, the American Bankers Association expressed support for H.R. 1121, the Responsible Consumer Financial Protection Regulations Act, introduced by Committee Chairman Spencer Bachus (R-AL) that would replace the Director of the Bureau of Consumer Financial Protection with a five person Commission. ABA believes that a Commission structure is appropriate to address the extremely broad authority of the Bureau’s Director to impose new rules. The Commission approach would broaden the perspective on any rulemaking and enforcement activity of the Bureau, and it would
provide needed balance and appropriate checks in the exercise of the Bureau’s authority. The Commission also would facilitate continuity of the organization and enhance predictability about rulemaking over time.
In an effort to improve the legislation, which is scheduled for mark up today, the banking group urged that the legislation require the Commission to include members with consumer finance business experience and direct safety and soundness regulatory expertise, which would add an important and necessary perspective as standards are set and enforcement activities are undertaken. This important addition also will help improve the accountability and address the separation between consumer protection and sound financial management.
The also urged that one of the five seats on the proposed Commission be filled with the recently created, statutorily mandated position of the Vice-Chairman for Supervision of the Federal Reserve Board, which would provide necessary and current safety and soundness experience that directly addresses a pivotal deficiency of the existing structure. The Vice-Chairman for Supervision is a unique official who has oversight responsibility both for large financial holding companies (which include the nation’s biggest banks and credit card issuers) and state-chartered community banks that are Federal Reserve members. This broad responsibility and expertise would be invaluable to achieving the missing accountability for safety and soundness of the current mandated structure.
The ABA also supports another bill scheduled for mark up, HR 1315, the Consumer Financial Protection Safety and Soundness Improvement Act, which would change the voting standard established in the Dodd-Frank Act for the Financial Stability Oversight Council (FSOC) from the two-thirds majority vote currently required to a simple majority vote. The FSOC is comprised of the nation’s top regulators, including the SEC and CFTC, covering the spectrum of the financial services industry, the group reasoned, and so it should be sufficient to set aside a Bureau rule if a simple majority of the nation’s top regulators believes the Bureau has acted in a manner that adversely impacts the safety and soundness of the banking or financial system. The very purpose of the FSOC was to avoid problems that could lead to risks that threaten the economy. To ignore the majority viewpoint of the regulators with this responsibility is completely counter to the mission of the Council.
Finally, concerned about the transfer of authority date established in the Dodd-Frank Act, the ABA supports legislation, H.R. 1667, the Bureau of Consumer Financial Protection Transfer Clarification Act, introduced by Financial Institutions Subcommittee Chairman Shelley Moore Capito (R-WV), which would delay the transfer of authority to the Bureau until a leadership structure has been put in place. Having the Bureau inherit certain regulatory powers but not others because there is no leadership structure in place is not good public administration, in the banking group's view.