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U.S. House Committee Passes Bill Aimed at Replacing Dodd-Frank

Last week, the U.S. House Financial Services Committee passed the Financial CHOICE Act, which supporters describe as an alternative to the Dodd-Frank Act. It contains language aimed at repealing the CFPB’s guidance on dealer participation, among other things.

by Staff
September 15, 2016
4 min to read


WASHINGTON, D.C. — Last week, the House Financial Services Committee approved a bill described by supporters as an alternative to the Dodd-Frank Act. Critics, however, call the bill an “anthology of the committee’s efforts over the past six years” to defang the Consumer Financial Protection Bureau (CFPB) and deregulate the financial services industry.

House bill 5983, also known as the Financial CHOICE Act of 2016, was introduced on Sept. 9 by Rep. Jeb Hensarling (R-Texas), one of the CFPB’s harshest critics, and was passed by the committee he chairs on Sept. 13 by a 30-26 vote. The legislation contains language found in 73 other bills introduced during the 114th Congress, including two bills, S. 2663 and H.R. 1737, that aim to repeal the CFPB’s March 2013 guidance on dealer participation.

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“Simply put, the Dodd-Frank Act has hurt the economy, hurt consumers, codified bank bailouts, and made our financial system less stable,” said Hensarling during a recent hearing on his proposed legislation. “It’s time for a new paradigm in banking and capital markets. It’s time to offer all Americans opportunities to raise their standards of living and achieve financial independence. In a phrase, we need economic growth for all and bank bailouts for none.

“There’s a better way forward, and it’s called the Financial CHOICE Act,” he added. “It’s an acronym for creating hope and opportunity for investors, consumers and entrepreneurs.”

According to a press release posted on the House Financial Committee’s website, the legislation would end taxpayer-funded bailouts for large financial institutions; relieves banks that elect to be strongly capitalized from regulations; imposes tougher penalties on those who commit financial fraud; and demands greater accountability from Washington Regulators.

And aside from the CFPB’s guidance and dealer markups, the bill would repeal the Durbin Amendment, which called on the Federal Reserve to limit fees charged to retailers for debit card processing when it was passed as part of the Dodd-Frank Act in 2010. It would also repeal the “living will” requirement under Dodd-Frank, which mandates that bank holding companies with assets of $50 million or more to submit plans to the Federal Reserve and the Federal Deposit Insurance Corp. that describe their strategy in the event of “material financial distress or failure of the company.”

The legislation, which the financial services committee passed five days after the CFPB announced that Wells Fargo will pay more than $100 million in fines for setting up millions of fraudulent consumer accounts, would also repeal Dodd-Frank’s Volcker Rule, which restricts banks from making risky investments.

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The bill, which now goes to the House of Representatives, also includes provisions that would make the CFPB’s budget subject to Congressional appropriations, replace its single director with a five-person, bi-partisan commission, and repeal the CFPB’s “abusive” standard and authority to regulate arbitration clauses.

“This is all part of a massive deregulatory agenda not to make America great, but to put the needs of special interest above those of working Americans and leave taxpayers footing the bill,” said Rep. Maxine Waters (D-Calif.) during the same hearing. “The legislation we will consider today, the wrong CHOICE Act, is the centerpiece of this deregulatory agenda and is the culmination of six years of Republican efforts to gut financial reform. It recycles every bad idea this committee has ever generated, adds a few more bad ideas on top, and creates an omnibus of special interest giveaways that invites the next financial crisis.”

On Wednesday, the National Automobile Dealers Association published a news brief on the House committee’s passage of Hensarling’s bill. In the Editor’s note, the association said, “Although the CHOICE Act is not expected to be enacted this session, the legislation demonstrates House Financial Services Committee Chairman Jeb Hensarling’s commitment to ensuring the CFPB’s flawed indirect auto finance policy is addressed.

“Senate Banking, Housing and Urban Affairs Committee Chairman Richard Shelby (R-Ala.) continues to pursue passage of the NADA-backed S. 2663,” the note added. “The NADA is urging dealers to contact their Democratic Senators to support S. 2663.”

Aside from repealing the CFPB dealer participation guidance, S. 2663, along with H.R. 1737, would add a few more steps to the bureau’s guidance-writing activities. Specifically, the legislation calls for a public comment period, coordination with regulatory calls for a public comment period, coordination with regulatory agencies that possess authority over dealers, and a study of the impact of the guidance on small businesses and consumers.

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For more on the Financial CHOICE Act, click here.

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