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Senators urge CFPB to increase transparency on “Remittance Rule”
On October 19, a group of five Democratic senators sent a letter to CFPB Director Rohit Chopra requesting that the Bureau strengthen its rule regarding remittances transfers. According to the letter, though remittance providers are required to display the exchange rate and fees associated with a transaction, as required by a May 2020 final rule (covered by InfoBytes here), some providers collect additional revenue by increasing exchange rates. The senators explained that because of various “loopholes in the rules, remittance providers may technically comply with the CFPB’s remittance rule requirements while providing insufficient price transparency to allow consumers to make informed comparisons and choose the lowest-cost provider.” The senators requested that the Bureau “strengthen the remittance rule to ensure greater transparency” so that remittance providers are not able to “advertise ‘no-fee remittances’ while simultaneously inflating exchange rates without limit or without providing accurate third-party costs.” Additionally, the senators stressed that the Bureau “should require remittance providers to display mid-market exchange rates, while only collecting revenue through added costs, including fixed third-party fees, openly displayed as ‘total cost,’ as recommended by the Remittance Community Task Force.” The senators also recommended that the Bureau “rescind the permanent exemption for non-covered third-party fees and encourage the adoption of new technology that would provide transparent, pre-transfer cost information.”
Senator urges SEC to issue crypto rulemaking
On October 13, Senator John Hickenlooper (D-CO) sent a letter to SEC Chair Gary Gensler urging him to issue regulations on digital asset securities. According to the letter, Hickenlooper urged the agency to publish regulations through a notice-and-comment process, stating that “existing laws and regulations were not designed to deal with how digital assets are being used in the market.” Hickenlooper noted that the SEC has repeatedly mentioned that existing securities regulations do not ‘cleanly apply’ to digital securities and said that retail investors may not always receive proper disclosures for comprehending the risks tied to digital assets. Hickenlooper also commented that “there are some products and investments, such as Initial Coin Offerings (ICOs), where the SEC is well positioned to offer regulatory guidance since ICOs operate similarly to a traditional financial product.” He specifically urged the SEC to, among other things, clarify what types of digital assets are securities, address how digital securities should be issued and listed, determine what disclosures are necessary for investors to be properly informed, and establish a registration regime for digital asset security trading platforms.
Senators express support for ILC in letter to FDIC
On September 15, five Republican Senators and four Democrats sent a letter to FDIC acting Chairman Martin Gruenberg expressing their support for the industrial loan company (ILC) charter. The Senators also expressed their opposition to regulatory actions that could “target the ILC charter in a manner not consistent with the laws Congress has passed.” The Senators noted that “the safety and soundness of the ILC charter has been broadly successful when historically compared to the rest of the banking industry,” and further explained that the ILC charter will allow “new and expanded opportunities in the regulated banking sector.” The Senators stated that they support more competition in financial services and encourage regulators “to ensure that new competition is kept under the confines of the regulated banking system, which ultimately protects consumers and our constituents.”
Republican senators and states oppose gun-store MCC
On September 20, twenty-four state attorneys general sent a letter to the CEOs of three credit card companies opposing the International Organization for Standardization’s (ISO) recommendation to create a merchant category code (MCC) for gun stores to use when processing credit and debit card transactions. According to the AGs, the MCC “will not protect public safety,” and tracking gun purchase information “can only result in its misuse, either unintentional or deliberate.” The AGs also expressed their concern “that financial institutions that place their desired public policy outcomes ahead of the well-being of their investors do so in derogation of their fiduciary obligations.”
The same week, in a separate letter, twelve Republican U.S. Senators sent a letter to the CEOs also requesting the reversal of their decision to comply with the ISO standard to create a separate MCC for the sale of firearms in the U.S. According to the letter, the CEOs “are choosing the side of gun control advocates over the privacy and Second Amendment rights of millions of law abiding Americans,” and consider the decision to comply with the MCC “the first step towards backdoor gun control on law abiding Americans.” The Senators asked the CEOs to respond to a series of ISO-related questions.
As previously covered by InfoBytes, on September 2, the California and New York AGs sent a letter to the CEOs asking for the establishment of a unique MCC for gun store purchases, writing that a specially-designated MCC would help companies flag suspicious activity. The letter followed recent requests sent by several congressional Democrats to the same companies urging them to establish an MCC code for guns.
Democrats want PLUS loans in relief plan
On September 12, eight Senate Democrats sent a letter to President Biden, urging him to extend student-loan debt relief to roughly 3.6 million borrowers under the Parent Loan for Undergraduate Student (PLUS) loan program. Biden’s debt relief plan instructed the Department of Education (DOE) to, among other things: (i) provide up to $20,000 in debt cancellation to Pell Grant recipients with loans held by the DOE; (ii) provide up to $10,000 in debt cancellation to non-Pell Grant recipients for borrowers making less than $125,000 a year or less than $250,000 for married couples; and (iii) propose a new income-driven repayment (IDR) plan and cap monthly payments for undergraduate loans at 5 percent of a borrower’s discretionary income. Additionally, for IDR plans, Biden’s August announcement instructed the DOE to propose a rule to, among other things, reduce the amount that borrowers have to pay each month for undergraduate loans from 10 percent to 5 percent. The Senators expressed their concern that Biden’s recent actions do not appropriately cover Parent PLUS borrowers and urged his administration and the DOE to “to incorporate Parent PLUS borrowers in any administrative improvements to federal student loan programs, including the Public Service Loan Forgiveness and Income-Driven Repayment programs, extensions or creation of waivers, and in the implementation of executive actions to provide student debt relief.”
Republicans take issue with CFPB agenda
On September 12, several Republican senators sent a letter to CFPB Director Rohit Chopra expressing concerns that the Bureau is again pursuing “a radical and highly-politicized agenda unbounded by statutory limits.” In particular, the letter took issue with recent Bureau reports on the use of overdraft fees (covered by InfoBytes here and here), calling the agency’s actions a “relentless smear campaign” against banks. “Charging fees that customers chose to pay should not be disturbing or illegal, and yet, the CFPB appears to have developed a particular disdain for banks charging their customers for services, pejoratively calling overdraft protection ‘junk fees,’” the letter stated. Additionally, the letter claimed that the Bureau is changing its rules in order to publish previously confidential information about financial institutions to make it easier to threaten them with reputational harm (covered by InfoBytes here), without affording the financial institution the similar ability to, for example, disclose the existence of a CFPB examination. Among other things, the new procedural rule establishes a disclosure mechanism intended to increase transparency of the Bureau’s risk-determination process that will exempt final decisions and orders by the CFPB director from being considered confidential supervisory information, allowing the Bureau to publish the decisions on their website. According to the senators, the rule requires nonbanks to keep confidential information relating to a decision issued by the Bureau, including facts that could question the decision or raise procedural concerns. “The one-sided nature of the CFPB’s rule change gives the agency the ability to publicly tarnish an institution’s name without affording the firm the power to defend itself,” the letter said. The letter also decries a recent change to the agency’s rules of adjudication to make it more difficult for companies to defend themselves against novel enforcement theories by bypassing an administrative law judge and permitting the director to rule directly on the validity of the legal basis for the enforcement action.
Senate Democrats urge CFPB for guidance on P2P apps
On September 1, five Senate Democrats sent a letter to CFPB Director Rohit Chopra urging the Bureau to issue guidance to provide better tools to protect older Americans and their families from the increased prevalence of P2P fraud. The letter discussed that, according to the FTC, P2P apps are used by scammers because “the ease with which consumers may make payments to individuals they have never met on P2P platforms facilitates quick purchasing decisions.” The FTC also found that older adults are increasingly using payment apps or services, noting that P2P-related complaints received by the FTC tripled from 2019 to 2020, and older adults reported $10 million in losses associated with complaints related to payment apps and services in 2020 alone. The letter concluded that the CFPB should “move forward with the guidance under consideration, keeping in mind the disproportionate effect that frauds and scams have on communities of color and people with Limited English Proficiency.”
Democrats ask OCC to rescind crypto guidance
On August 10, four U.S. Democratic Senators sent a letter to acting Comptroller of the Currency Michael Hsu urging the OCC to rescind November 2021 guidance permitting national banks to engage in certain cryptocurrency activities. According to the letter, the Senators “are concerned that the OCC’s actions on crypto may have exposed the banking system to unnecessary risk, and ask that [Hsu] withdraw existing interpretive letters that have permitted banks to engage in certain crypto-related activities.” The letter noted that the OCC unilaterally released interpretive letters related to cryptocurrencies in July 2020 (Interpretive Letter 1170), October 2020 (Interpretive Letter 1172), and January 2021 (Interpretive Letter 1174). In the letters, the Senators noted, the OCC determined that banks were permitted to engage in certain crypto-related activities, which include, among other things: (i) “providing cryptocurrency custody service for customers”; (ii) “holding deposits that serve as reserves for certain stablecoins”; and (iii) “operating independent node verification networks [] and stablecoins for payment activities.” The Senators argued that the letters “granted banks unfettered opportunity to engage in certain crypto activities and remain problematic” after the OCC issued another interpretive letter (Interpretive Letter 1179) under Hsu attempting to limit the risks posed by the policies set forth in the earlier letters. The Senators asked Hsu to provide information so that they can “better understand banks’ exposure to the crypto market” by August 24. The Senators also urged Hsu to work with the Fed and FDIC on replacing his agency’s existing crypto guidance with a more “comprehensive approach.”
Senate Republicans urge FHFA to “abandon” equitable finance plans
On July 19, twelve Republican Senators wrote a letter to FHFA Director Sandra Thompson expressing their “many significant concerns” about “race-based housing subsidies” in the recently released Equitable Housing Finance Plans for Fannie Mae and Freddie Mac (GSEs). As previously covered by InfoBytes, in June, the GSEs released their Equitable Housing Finance Plans for 2022-2024 (available here and here), affirming their commitment to addressing racial and ethnic disparities in homeownership and wealth. The plans were developed following FHFA’s September 2021 request for public input, which invited comments to help the GSEs prepare their first plans and to aid FHFA in overseeing the plans (covered by InfoBytes here). In the letter, the Senators argued that the plans “raise significant legal concerns,” adding that “no law authorizes FHFA to use a GSE’s assets to pursue affirmative action in housing.” The Senators also wrote that the Biden administration “is conscripting the GSEs as instrumentalities of its progressive racial equity agenda to achieve outcomes it cannot achieve legislatively or even legally.” The Senators urged Thompson to “abandon” the plans and, “in anticipation of litigation challenging the legality” of them, requested that the GSEs “retain all correspondence with FHFA and other records relating to these plans.”
Dem senators urge CFPB to expand Regulation E fraud protections for P2P payment service users
On July 20, six Senate Democrats sent a letter to CFPB Director Rohit Chopra urging the Bureau to hold banks that own instant digital payment networks accountable for facilitating fraudulent payments. In the letter, the senators noted that “consumers are often on the hook because existing rules do not reflect new technological developments.” The Senators further noted that the Electronic Fund Transfer Act (EFTA) and Regulation E protect consumers “if they are tricked into handing over account information to a fraudster who then initiates a transfer.” However, the letter further explained, that consumers are not protected “if they are tricked into opening an application to transfer funds directly to the fraudster.” The senators believe consumers should be protected in both instances. In particular, the Senators suggested that the CFPB could issue guidance providing that a “fraudulently induced” transfer counts as an “unauthorized” transaction under the EFTA, which could “end up shifting liability from consumers to financial institutions.” The letter suggested, among other things, that the Bureau expand the definition of what counts as a payment “error” under the EFTA, to “clarify that, in certain circumstances, a payment is an 'error' when a consumer is defrauded into initiating a transfer to a scammer.” The letter further argued that expanding financial institutions’ potential liability for covering their customers’ losses to fraud would create “powerful incentives” for them to prevent scams on their payment platforms. The letter concludes with the senators urging the Bureau “to similarly protect banks’ customers against transfers with ‘fraudulent intent’ involving other consumers on payment services that banks themselves own, operate, and control.”