House Passes Financial CHOICE Act, But Unclear if Senate Will Consider It

By James. E. Hyland, Esq.
The Pennsylvania Avenue Group
TLTA Federal Legislative Counsel
June 21, 2017

On June 8, 2017, the full U.S. House of Representatives passed HR 10, the Financial CHOICE Act, by a vote of 233-186. No Democrat voted for it, and only one Republican voted against it. The Financial CHOICE Act is Chairman Hensarling’s (R-TX) blueprint to repeal and replace many parts of Dodd-Frank.

The bill would maintain the CFPB, but the bureau would be drastically modified. The focus would be on enforcing consumer statutes, not on creating new policy. It would remain headed by one person, but would be subject to Congressional appropriations, making it more accountable to the public. The bill also establishes an Office of Economic Analyses to review rules and regulations before they are promulgated to determine if they are necessary for consumer protection. The bill requires that all major financial regulations – such as those likely to result in an annual economic impact of more than $100 million or a major increase in prices for consumers or costs for businesses – receive affirmative Congressional approval before becoming effective. It removes authority from the CFPB to determine if a practice is “unfair or deceptive.” Given our industry’s concerns with regulatory interpretations that may be inconsistent with past practices, the bill contains a provision that would remove deference to agency interpretations in court actions, known as the Chevron doctrine.

The bill would also make it easier for community financial institutions to make mortgage loans. The provision would create a legal safe harbor from ability-to-repay requirements for mortgage loans that are kept on a depository institution’s balance sheet. In addition, the legislation includes the Mortgage Choice Act, as it did last year. This would have an impact on the title industry. Currently, title insurance costs do not count against the 3 percent cap on points and fees for a mortgage, unless the title company is affiliated with the lender. This legislation clarifies that lender-affiliated title company premiums would also not count toward the 3 percent cap. An effort was made to remove this provision from the bill related to affiliated companies by Rep. Keith Ellison (R-MN), but his amendment was not made in order by the House Rules Committee, which sets the parameters of debate for any bill going to the House floor.

Most observers in Washington do not believe the U.S. Senate would take up the bill. Instead, Senate Committee on Banking, Housing and Urban Affairs Chairman Mike Crapo (R-ID) has suggested that financial reform could be accomplished in smaller legislative pieces moving through the Senate. Sen.
Crapo also believes most proposals would have to be bipartisan, since the Senate requires 60 votes to break a filibuster. Currently, there are 52 Republicans, and not all of them would support a complete rollback of Dodd-Frank.

The Senate Committee on Banking, Housing and Urban Affairs is starting the process of determining what reforms are needed. On June 8, the day the House considered the CHOICE Act, the Senate held a hearing with community banks and credit unions. Last week, it heard from regional banks. On June 22, it will hear from bank regulators. Meanwhile, the Treasury Department has released a report on regulatory relief, but it has limited reach over independent agencies like the CFPB, FDIC, FTC and SEC. Others believe true regulatory relief for small businesses and community institutions will come from within the financial agencies themselves, but the new administration’s appointees would need to be in place for that to happen. The process of Senate confirmation is starting, but it has been slow to begin.