International Issues Take Center Stage; CFPB Soon Expected to Release Rulemaking on Short-Term, Small Dollar Loans as SEC Sets Timeline for Fiduciary Rule
House and Senate Remain Focused on International Issues
This week, the House Financial Services Task Force to Investigate Terrorism Financing will hold a hearing titled “Stopping Terror Finance: A Coordinated Government Effort” to specifically focus on: 1) how the Treasury Department works with relevant agency and law enforcement officials as part of a coordinated U.S. government effort to combat all forms of illicit finance; and 2) federal efforts to combat the financing of terrorism. Following the conclusion of its hearings on the matter, the Task Force this fall is expected to release a report and recommendations to “examine what, if any, changes are needed to upgrade and improve [the U.S.’s] ability to starve terrorists of the money they need to carry out their attacks.”
Meanwhile, the Senate Banking Committee is set to hold two hearings this week focusing on the role and impact of sanctions under the Iran nuclear deal framework. The witnesses include officials from the State Department and Treasury Department.
Lawmakers Set to Move on Puerto Rico
Last week, following weeks of delay, the House Natural Resources Committee released an updated draft of legislation to address the fiscal crisis in Puerto Rico. Though there appears to be an agreement between Republican leadership and the White House on the framework for the bill, there still appears to be opposition by some over accusations that the legislation is effectively a “bailout” of the Commonwealth. With the updated draft in hand, this week the House Natural Resources Committee will hold a markup of the bill, which is expected to be taken up by the full House shortly thereafter. While exactly how the bill will be handled in the Senate appears uncertain at present, given that timing is of the essence (July 1 is the Commonwealth’s next large bond payment), lawmakers will need to work through any remaining obstacles expeditiously in order to a meet this critical deadline.
Senate Banking Committee Able to Move Nominations
After the Senate Banking Committee last month unsuccessfully sought to advance several pending financial services-relate nominees, last week, the Committee was able to put together sufficient support to a block of five nominees: Lisa Fairfax and Hester Peirce to be Securities and Exchange Commission (SEC) Commissioners; Amias Gerety to be Assistant Treasury Secretary; Jay Lerner to be Inspector General of the Federal Deposit Insurance Corporation; and Rhett Jeppson to be Director of the United States Mint. Some of these nominations – the two nominees SEC Commissioner, in particular – may face a tough confirmation road ahead in the Senate, as leadership may seek to move these nominations through unanimous consent, and several Senators have already indicated their opposition to confirmation.
Beyond these nominees, there still appears to be no progress in the Senate Banking Committee in terms of holding a nomination hearing on nominees to the Federal Reserve and Export-Import Bank.
This Week’s Hearings:
Tuesday, May 24: The House Financial Services Task Force to Investigate Terrorism Financing will hold a hearing titled “Stopping Terror Finance: A Coordinated Government Effort.”
Tuesday, May 24: The Senate Banking, Housing and Urban Affairs Committee will hold a hearing titled “Understanding the Role of Sanctions Under the Iran Deal.”
Tuesday and Wednesday, May 24-25: The House Natural Resources Committee will hold a markup of H.R. 5278, Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA).
Wednesday, May 25: The Senate Banking, Housing and Urban Affairs Committee will hold a hearing titled “Understanding the Role of Sanctions Under the Iran Deal: Administration Perspectives.”
CFPB Prepares to Propose Rule on Short-Term, Small Dollar Credit Products
Last Wednesday, May 18, the Consumer Financial Protection Bureau (CFPB) released a report titled “Single-Payment Vehicle Title Lending,” which examines consumer usage and default patterns for single-payment vehicle title loans. This report, which follows previous reports by the Bureau on payday lending, sets the stage for the Bureau to release its long-awaited rulemaking on payday, vehicle title, and other similar loans. In conjunction with release of this report, the CFPB announced that it plans to hold a public hearing in Kansas City, Missouri, on June 2 to discuss short-term, small-dollar lending, which will feature remarks from CFPB Director Richard Cordray, as well as testimony from consumer groups, industry representatives, and the public. It is widely expected that the Bureau will use this opportunity to formally propose its short-term, small dollar credit rulemaking. If the CFPB’s proposal reflects the approach the Bureau took in its outline of the rulemaking released last year, lenders would generally be required to either verify a borrower’s ability to repay, or comply with restrictions on how often a short-term loan can be rolled over during a certain time period.
SEC Prepared to Move Forward with Fiduciary Rule
Following heavy criticism for failing to take the lead and ceding initial work on the Fiduciary Rule to the Department of Labor, the Securities and Exchange Commission (SEC) has indicated that it plans to issue in April 2017 a rule that requires both investment advisers and brokers to meet a fiduciary standard for advice to retail customers. Currently, advisers are already required to act in their clients’ best interests, while brokers adhere to a less stringent suitability standard.
From a legislative perspective, although unclear when it may be put on the Senate calendar, Senator Johnny Isakson (R-GA) indicated the Senate likely will vote on a resolution to disapprove the Department of Labor’s Fiduciary Rule. Senator Isakson believes that after the Senate vote, the resolution may be sent back to the House in an attempt to garner the necessary two-thirds majority support required for it to overcome a promised veto by President Barack Obama. For its part, the Department of Labor has indicated that it will “be responsive as problems emerge” and consider adjustments to the rule if problems arise during implementation.
Treasury Department’s Federal Advisory Committee on Insurance to Meet
On Thursday, May 26, the Treasury Department will hold a meeting of its Federal Advisory Committee on Insurance to discuss: 1) affordability in the National Flood Insurance Program; 2)the globalization of the insurance marketplace; 3) insights of behavioral economists for the insurance industry; and 4) updates from its subcommittees.