STATE GOVERNMENT RELATIONS
New Albany Regional Meeting
One regional meeting remains in New Albany, rescheduled for Oct. 17. Join us to facilitate grassroots communication between the bankers we serve and the legislators who serve our state. The meeting will include an hour-long update on the IBA, including legislative information and advocacy opportunities. Following the update, local legislators from the Indiana General Assembly will join bankers for lunch. The meeting will begin at 11:00 a.m. local time.
New Albany – October 17
The Exchange Pub
118 W Main Street
New Albany, IN 47150
FEDERAL GOVERNMENT RELATIONS
Trade Groups Sue CFPB for Exceeding its Statutory Authority
Seven trade groups have sued the Consumer Financial Protection Bureau and Director Rohit Chopra for exceeding the agency’s legal authority in a March update to the UDAAP exam manual, in which the bureau expanded the statutory definition of “unfairness” to encompass discrimination. In their lawsuit the plaintiffs make clear they support the fair enforcement of the nation’s nondiscrimination laws, but indicated they “cannot stand by while a federal agency exceeds its statutory authority, creates regulatory uncertainty and imposes costly burdens on the business community.”
The plaintiffs had previously urged CFPB to rescind the update, saying that the bureau’s unfair, deceptive and abusive acts or practices, or UDAAP, authority cannot be used to extend the fair lending laws beyond the bounds set by Congress. The lawsuit, filed in U.S. District Court for Eastern Texas, said the bureau violated the Administrative Procedure Act in three ways.
First, the agency exceeded its statutory authority as outlined in the Dodd-Frank Act. Second, the updated manual is “arbitrary” and “capricious” because the bureau did not grapple with Congress’s decision to narrowly define the Federal Trade Commission's unfairness authority, from which CFPB modeled its authority to enforce anti-discrimination principles. Third, the update violates the APA’s procedural requirements because it constituted a legislative rule that failed to go through notice and comment. The suit also challenged the CFPB by calling into question the bureau's funding structure.
FinCEN Issues Beneficial Ownership Rule, the First of Three CTA Mandates
The Financial Crimes Enforcement Network Thursday issued a final rule establishing a beneficial ownership information reporting requirement. The rule is part of the industry-backed Corporate Transparency Act, which was contained within the Anti-Money Laundering Act enacted by Congress last year. It will require most corporations, limited liability companies and other entities created in or registered to do business in the U.S. to report information to FinCEN about their beneficial owners –those who ultimately own or control the company.
The rule is intended to protect national security and strengthen the integrity and transparency of the financial system by stopping criminal actors from using anonymous shell companies to hide illicit proceeds. Effective Jan. 1, 2024, reporting companies created or registered before that date will have one year (until Jan. 1, 2025) to file their initial reports, while reporting companies created or registered after Jan. 1, 2024, will have 30 days after creation or registration to file their initial reports. Once the initial report has been filed, existing and new reporting companies will have to file updates within 30 days of a change in their beneficial ownership information.
The reporting rule is one of three rules planned as part of implementing the CTA. FinCEN will engage in additional rulemakings to establish rules for who may access beneficial ownership information, for what purposes and what safeguards will be required to ensure that the information is secured and protected, and to revise FinCEN’s customer due diligence rule.
Fed Announces Pilot Climate Exercise for Large Banks
The Federal Reserve Thursday indicated that six of the nation's largest banks will participate in a pilot climate scenario analysis exercise designed to enhance the ability of supervisors and firms to measure and manage climate-related financial risks. The exercise will begin in early 2023 and conclude near the end of the year.
Over the course of the exercise, participating banks will analyze the effects of different climate scenarios on specific portfolios and business strategies, according to the Fed. The climate analysis will be separate from bank stress tests, which are designed to assess whether large banks have enough capital to continue lending to households and businesses during a severe recession. Instead, the exercise is exploratory in nature and does not have capital consequences.
The banks in the pilot are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo. Fed Vice Chairman Michael Barr said during a Sept. 7 speech that the exercises would only apply to large banks. “We are quite a way from even being able to offer even good advice to community banks on the issue of climate change," he said. The Fed plans to provide additional details at a later date on how the exercise will be conducted and the scenarios to be used.
Bank, Credit Union Groups Unite Against Welch-Gooden Bill
Eight bank and credit union trade groups signed on to a joint letter opposing a House bill seeking to create new credit card routing mandates that would affect banks that issue credit. The proposed legislation (H. 8874), introduced by Reps. Peter Welch (D-Vt.) and Lance Gooden (R-Texas), would require covered credit card issuers to add a second network to their customers’ cards, but banks would only be allowed to choose from certain options set by the Federal Reserve. In their letter, the groups said the legislation circumvents the free market to award private-sector contracts to a small number of payment networks in order to pad the profits of the largest e-commerce and multinational retailers.
“Far from increasing competition in the credit card marketplace, this legislation will hurt consumers and benefit big box retailers by reducing the number of credit card issuers competing for consumers’ business, removing a consumer’s choice of preferred card network, wringing out the competitive differences among card products, limiting popular credit card rewards programs and putting the nation’s private-sector payments system under the micromanagement of the Federal Reserve Board,” the groups indicated.
The Welch-Gooden bill is similar to industry-opposed legislation introduced by Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.). Similar to the proposal in the Senate, the groups noted the House bill duplicates the mistakes of the 2010 Durbin Amendment on debit cards, which led to a drop in the availability of low-cost banking services and free checking accounts for consumers.