House Committee Holds Hearing on Choice Act

The House Financial Services Committee today held a hearing on the Financial Choice Act, Committee Chairman Jeb Hensarling’s (R-Texas) sweeping, 600-page bill aimed at reforming parts of the Dodd-Frank Act’s extensive supervisory regime and providing regulatory relief for banks. A markup of the bill is scheduled for next week.

The Choice Act includes a number of regulatory relief provisions long sought by ABA as part of its Blueprint for Growth, including a Qualified Mortgage safe harbor for mortgage loans held in portfolio, more tailored supervision based on an institution’s risk profile and business model, and a repeal of  the Volcker Rule and the Durbin Amendment, which capped prices on debit interchange.

The bill would also reform the Consumer Financial Protection Bureau, renaming it the Consumer Law Enforcement Agency and stripping it of examination powers and “UDAAP” enforcement authority and replace Dodd-Frank’s Orderly Liquidation Authority provision with a new Bankruptcy Code. In addition, it would also allow banks maintaining a 10 percent non-risk weighted leverage ratio to elect into an alternative regulatory regime that would, among other things, exempt qualifying institutions from federal capital and liquidity requirements, blocks on capital distributions, systemic risk regulations and limitations on mergers and acquisitions provided that any new entity also maintains the minimum leverage ratio.

Ahead of the hearing, ABA and several financial trade associations sent a letter to members of the committee urging the to support the repeal of the Durbin Amendment. The groups noted that the amendment has enhanced retailers’ revenues while limiting the range of financial products and services banks are able to offer their customers. “Big box retailers have amassed an $8 billion annual windfall from the Durbin Amendment,” they wrote. “Instead of passing on revenues to their customers in the form of lower prices at the checkout counter, Federal Reserve Board of Richmond data show that 99 percent of retailers raised prices or kept them level after Durbin went into effect. Academics have even described the Durbin Amendment as a wealth transfer from low-income families to retailers.”

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