Financial Choice Act Clears House Committee

The House Financial Services Committee today voted to advance the Financial Choice Act, 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. American Bankers Association President and CEO Rob Nichols saluted the committee for its “very important step toward reforming the Dodd-Frank Act and providing much-needed regulatory relief,” adding that “we look forward to working with lawmakers from both parties as this important process moves forward.”

The Choice Act, which passed on a party-line vote, 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 repeal of the Durbin Amendment, which capped prices on debit interchange, as well as the Volcker Rule.

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.

“The thousands of pages of new regulations facing banks have become a tremendous driver of decisions to sell or merge,” remarked Nichols. “Given the cost of complying with all the new rules, some community banks are having to choose between meeting those regulatory requirements and meeting the financial needs of their individual and business customers.”