The House of Representatives Financial Services Committee marked up and passed 12 bills out of committee for full House consideration. Chairman Jeb Hensarling (R-Texas) stated that the committee “took action today to provide critical reforms to the Federal Reserve.” According to Hensarling, “these bills help move us another step closer towards achieving our goals as a committee this Congress.”
H.R. 6743. Representative Blaine Luetkemeyer (R-Mo) issued a statement about one of the bills, the Leutkemeyer-sponsored H.R. 6743, the Consumer Information Notification Requirement Act, which was passed by a vote of 32-20. The bill would require any data security safeguards related to any entity providing insurance to be enforced by the state insurance authorities in the state in which the entity is “domiciled,” or in the case of an insurance agent, agency, or brokerage, by the authority in the state where the agent, agency, or brokerage has its “principal place of business.” Any notification requirements would also be enforced by the state insurance authority of any state in which customers of the insurance entity are affected by a data security breach. According to Leutkemeyer, “Nearly every week we discover new data breaches exposing the personal information of American consumers and today was our opportunity to take action to protect them. At some point there will be another major breach, and without a comprehensive solution our constituents will pay the price for our inaction.”
H.R. 6743 would also institute a statutory requirement that all financial institutions notify consumers in the event of a breach involving their personal information. Representative Randy Hultgren (R-Ill), a member of the Financial Services Committee, stated that “After last year’s data security breach at Equifax, it was clear that reform and a national standard are crucial to protect consumers.” Hultgren pointed out that the legislation would provide a national standard for financial institutions around data security and breach notification on behalf of consumers. It also establishes steps that covered entities need to take to notify regulators, law enforcement and victims after any breach exposing records of 5,000 or more consumers.
H.R. 6158. The Brokered Deposit Affiliate-Subsidiary Moderation Act of 2018 (H.R. 6158), introduced by Rep. Scott Tipton (R-Colo), was passed by a vote of 34-17. The bill would revise the definition of “deposit broker” under the Federal Deposit Insurance Act to exempt funds collected through an insured depository institution’s affiliate or subsidiaries of an insured depository institution. H.R. 5534, the Give Useful Information to Define Effective Compliance Act, introduced by Rep. Sean P. Duffy (R-Wis), was passed by a vote of 38-14. The bill would modify Title X of the Dodd-Frank Act so that the Consumer Financial Protection Bureau has clearly defined procedures on how to issue guidance, including guidance necessary to comply with the law, and provides a safe harbor for good faith reliance on guidance issued by the Bureau.
Additional bills. The committee also passed the following bills:
- H.R. 6751, the Banking Transparency for Sanctioned Persons Act of 2018, introduced by Rep. Mia Love (R-Utah), was passed by a vote of 48-0. The bill would require the Secretary of the Treasury to issue a semi-annual report to both the House Financial Services Committee and Senate Banking Committee regarding financial services provided to state sponsors of terrorism or certain sanctioned individuals.
- H.R. 6737, the Protect Affordable Mortgages for Veterans Act of 2018, introduced by Rep. Lee Zeldin (R-NY), was passed by a vote of 49-0. The bill would amend the National Housing Act to provide a technical fix so that recently executed mortgage loans refinanced by the U.S. Department of Veterans Affairs Home Loans remain eligible for pooling in the Ginnie Mae securities.
- H.R. 6729, the Empowering Financial Institutions to Fight Human Trafficking Act of 2018, introduced by Rep. Ann Wagner (R-Mo), passed by a vote of 44-5. The bill would instruct the Secretary of the Treasury to establish a mechanism for non-profit organizations to qualify for safe harbor when sharing specific information with financial institutions that facilitates their duties of customer due diligence and the reporting of suspicious activities relating to human trafficking.
- H.R. 4753, the Federal Reserve Supervision Testimony Clarification Act, introduced by Rep.Frank Lucas (R-Okla), passed by a vote of 49-0. The bill would modify the Federal Reserve Act to require the Vice Chairman of the Board of Governors to fulfill the statutory requirement for semi-annual testimony of the Federal Reserve if the Vice Chairman for Supervision position is vacant.
- H.R. 6745, the Access to Capital Creates Economic Strength and Supports Rural America Act, introduced by Rep. Sean P. Duffy (R-Wis), passed by a vote of 37-15. The bill would modify the Securities Exchange Act of 1934 to modify the shareholder threshold for registration defined under that Act. Additionally, the Securities and Exchange Commission would be required to submit a report to Congress regarding the impact of the bill three years after its enactment.
- H.R. 2128, the Due Process Restoration Act of 2017, introduced by Rep. Warren Davidson (R-Ohio), was passed by a vote of 31-20. The bill would allow respondents in SEC enforcement cases to remove their proceedings out of the SEC’s administrative in-house tribunal to a federal district court.
- H.R. 4758, the FOMC Policy Responsibility Act, introduced by Rep. Claudia Tenney (R-NY), was passed by a voice vote. The bill would modify the Federal Reserve Act to clarify that the Federal Open Market Committee is responsible for establishing interest rates on reserve balances.
- H.R. 6021, the Small Business Audit Correction Act of 2018, introduced by Rep. French Hill (R-Ark), was passed by a vote of 36-16. The bill would modify the Sarbanes-Oxley Act of 2002 so that small, privately owned non-custodial brokers and dealers in good standing are no longer required to hire a Public Company Accounting Oversight Board-registered audit firm in order to meet the annual reporting obligations outlined by Title I of that Act.
- H.R. 6741, the Federal Reserve Reform Act of 2018, introduced by Rep. Andy Barr (R-Ky), was passed by a vote of 30-21. The bill would require the FOMC to annually adopt a monetary policy strategy, as well as up to three reference rules that can increase policy transparency.
CBA stated that the comprehensive approach in H.R. 6743 “would better serve consumers by making it easier for financial institutions to adequately protect their customers from identity theft and account fraud.” With regard to H.R. 6158, CBA stated that the definition of deposit broker has not been updated since 1991 and since then the “vast technological innovation and new deposit account programs have entered the market changing the manner in which banks solicit deposits and interact with their customers.” Additionally, CBA stated that a “clear understanding of the rules of the road would help financial institutions meet statutory and regulatory intentions and ultimately better serve their customers” and that H.R.5534 “addresses these concerns by clearly defining guidance and requiring the BCFP to issue guidance necessary to carry out the law.”
American Bankers Association stated in a letter to the committee that its members “support reporting H.R. 6743 out of Committee so that Congress can take a step forward in enacting comprehensive data breach legislation.” H.R. 6743 would institute uniform consumer notification standards and would preempt state and local data protection and consumer notification standards.
State regulators oppose legislation. John W. Ryan, President and CEO of the Conference of State Bank Supervisors (CSBS), sent a letter to the Financial Services Committee leadership on behalf of the CSBS expressing CSBS opposition to both H.R. 6743 and H.R. 6741The letter expressed state regulators’ opposition to provisions in Section 7 of H.R. 6741 that “would impose a tax on state-chartered banks.” According to Ryan’s letter, Section 7 “calls on the Federal Reserve to assess new fees on state-chartered banks to cover the cost of the Federal Reserve’s bank supervision activities” without receiving any new supervisory benefit.
Ryan also notified the committee members that CSBS “firmly oppose H.R. 6743 for its attempt to preempt state data breach and privacy laws.” According to Ryan, H.R. 6743 undermines important sate consumer protections and “would preempt the authority of state regulators by preempting state laws that articulate when regulated entities are required to notify regulators and by preempting state authority to examine licensed nondepository financial institutions for compliance with data breach notification and other data security requirements.”
ConsumersUnion, the advocacy division of Consumer Reports, “strongly opposes” H.R. 6743, stating that the bill, if passed, “would further weaken existing protections for data held by financial institutions. This would leave consumers even more vulnerable to identity theft” According to a statement by the company, “the primary outcome of H.R. 6743 is to preempt useful, state-level data security and data breach notification protections—several of which were enacted in the wake of the Equifax data breach—and replace them with a lower standard of security.
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