Financial CHOICE Act advances to House

Financial CHOICE Act committee voteOn Thursday, the House Financial Services Committee approved the Financial CHOICE Act. The 34-26 party-line vote will send Texas Representative and Committee Chairman Jeb Hensarling’s bill to the full house for consideration.

The legislation, which has received tremendous opposition from consumer advocates and Democratic lawmakers, proposes to roll back many of the expansive financial regulations passed during the Obama Administration in response to the 2008 financial crisis.

Thursday’s vote came after nearly 24 hours of contentious debate and markups of the bill that stretched across three days. During the three days of committee debate, Democrats fought unsuccessfully to stop its passage. They offered numerous amendments aimed at restoring the key parts of Dodd-Frank that Republicans sought to eliminate. All of those amendments were rejected.

Hensarling’s bill would significantly undo burdensome requirements that the Dodd-Frank Act placed on the financial industry.

Among other things, the Financial CHOICE Act would allow banks to opt out of Dodd-Frank if they hold enough cash, and it would limit federal stress tests of major banks to every two years. The bill would also remove the power through which the federal government can label a bank “too big to fail,” and instead force the failing firm to go through bankruptcy proceeding instead of allowing regulators to liquidate the firm outside of bankruptcy.

The Financial CHOICE Act also proposes to overhaul the day-to-day functions and authority of the CFPB. Perhaps most significantly, the CFPB would lose its authority to supervise firms and pursue certain violation that are “unfair, deceptive, or abusive acts or practices,” known as UDAAPs.

The Bureau would be renamed as the Consumer Law Enforcement Agency and could only enforce pre-existing consumer financial protection laws. The bill would also require the CFPB to obtain Congressional approval before initiating such enforcement actions. Additionally, the Bureau’s director would be removable at-will by the president, and its budget would be controlled by Congress through the traditional appropriations process.

The CHOICE Act now heads to the House floor, where it likely will be approved in the coming weeks. Observers suggest that while the bill could clear the House along party lines, it faces uncertain prospects in the Senate where Republicans will need some level of Democratic support to get the bill through that chamber. In all, the bill is widely considered a long-shot to move through the Senate.

Tags: CFPB, Financial CHOICE Act

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