FEDERAL GOVERNMENT RELATIONS
SEC Pauses Enforcement of Climate Disclosure Rule
The Securities and Exchange Commission last week issued a stay on enforcement of its climate disclosure final rule while federal courts consider several challenges to the regulation brought by businesses and business groups. The rule, which was approved by the SEC in March, would require companies to disclose material climate-related risks, activities to mitigate or adapt to such risks, and information about the board’s and management’s oversight of risks. Several entities have since sued the SEC challenging its authority to promulgate its rule.
In an April 4 order, the SEC said it is using its discretion under the Administrative Procedure Act to stay the rule pending judicial review. The SEC added that the order does not mean it believes the rule violates the law, and that it will continue to vigorously defend the rule in court.
“Among other things, given the procedural complexities accompanying the consolidation and litigation of a large number of petitions for review of the final rules, a commission stay will facilitate the orderly judicial resolution of those challenges and allow the court of appeals to focus on deciding the merits,” the SEC said. “Further, a stay avoids potential regulatory uncertainty if registrants were to become subject to the final rules’ requirements during the pendency of the challenges to their validity.”
Proposed Bill Would Block Large Ransomware Payments by Financial Institutions
A proposed House bill would require financial institutions to notify the Treasury Department before making a ransomware payment, as well as prohibit payments of more than $100,000 without prior approval of law enforcement. The Ransomware and Financial Stability Act seeks to establish “commonsense guiderails” for financial institutions when responding to ransomware attacks, according to House Financial Services Committee Chairman Patrick McHenry, R-N.C., and Rep. Brittany Pettersen, D-Colo., the bill’s sponsors.
The bill focuses on financial market utilities, large securities exchanges and certain technology service providers essential for banks’ core processing services, according to a summary of the legislation. Financial institutions making a ransomware payment of more than $100,000 must first acquire a ransomware payment authorization from law enforcement, or the president could waive the requirement if the payment is determined to be in the national interest. The bill also would exempt from public disclosure most information or documents reported to law enforcement from financial institutions regarding a ransomware incident, although there are exceptions, such as requests for information by certain members of Congress.
FDIC Spells Out Agency Strategy for GSIB Resolution
The Federal Deposit Insurance Corp. released a new report Wednesday that explains in detail how it will manage the resolution of a global systemically important bank (GSIB), should the situation arise. In a speech announcing the report, FDIC Chairman Martin Gruenberg said that a U.S.-based GSIB failure “will be extraordinarily challenging under any circumstances” for the financial system, which is why the agency needed to document ahead of time how it would handle such a situation.
“Needless to say, we have yet to execute an orderly resolution of a U.S. GSIB,” he said. “And look, until we do so successfully, there will be questions as to whether it can be done.”
The report – ”Overview of Resolution Under Title II of the Dodd-Frank Act” – explains when and how the FDIC will consider whether a Title II resolution is necessary for a particular financial institution, as well as the operational steps it will take to facilitate a resolution. The paper stresses that the FDIC will hold management responsible for the failure, allocate losses to shareholders and creditors, and return assets and viable operations to private sector control as soon as possible. It also states that consistent with statutory obligations, all losses would be borne by the private sector, primarily the GSIB’s former shareholders and unsecured creditors, and not taxpayers.
Gruenberg said the paper was “particularly timely” given the decision by Swiss authorities last year not to place Credit Suisse into a resolution process following its failure, instead supporting a merger with another bank potentially backed by public funding. “Effectively shareholders of the firm were protected as were the TLAC bondholders, and that has consequences in terms of market expectations that are problematic,” he said in a Q&A after the speech.
ABA, ICBA Associations Urge Congress to Overturn CFPB Credit Card Late Fees Rule
The American Bankers Association, Independent Community Bankers of America and three other bank and credit union associations Wednesday expressed support for two resolutions to overturn the Consumer Financial Protection Bureau’s final rule on credit card late fees. Senate Joint Resolution 70 and House Joint Resolution 122 would overturn the rule if passed by both houses of Congress and signed by the president. In letters to Senate and House lawmakers, the associations said the rule to reduce the safe harbor amount for credit card late fees will create long-term harm for the minority of consumers the CFPB purports to help.
“The CFPB's final rule would, by definition, make it easier for consumers to miss their credit card payments,” the associations said. “As more consumers pay late, there is a higher chance they will become delinquent. Ultimately, consumers experiencing delinquency will have this information reported to credit bureaus, leading to higher credit card balances carried month-to-month and lower credit scores, which can lead to far worse outcomes for consumers such as difficulty obtaining credit, or higher financing costs for housing, cars, and other necessary purchases.”
Senators Introduce Resolution to Overturn CFPB Credit Card Late Fee Rule
Senate Banking Committee Ranking Member Tim Scott, R-S.C., and 12 Republican senators on Monday introduced a Senate joint resolution to overturn the Consumer Financial Protection Bureau rule to lower the safe harbor amount for credit card late fees. The Congressional Review Act resolution would overturn the CFPB rule if passed by both houses of Congress and signed by the president.
In a statement, Scott said the CFPB rule will decrease the availability of credit card products for those who need it most, raise rates for many borrowers and increase the likelihood of late payments across the board. “Lawful and contractually agreed upon payment incentives promote financial discipline and responsibility, and this rule shows that the CFPB is more focused on scoring political talking points than policies that protect consumers,” he said.
Six business groups in March joined a lawsuit seeking to overturn the rule, arguing the CFPB exceeded its statutory authority and offered deficient analysis and reasoning for the rule to achieve a pre-ordained outcome.