Republicans on the House Financial Services Committee have sent letters to financial regulators asking them to rescind a variety of measures the regulators issued during the Biden Administration.
“These letters highlight the rules and guidance issued under the previous Administration that reduce competition and innovation and must be rescinded or significantly modified,” the GOP members said in a joint letter to the regulators. “These rules and guidance [each] lacked [a] proper cost-benefit analysis, would have significant negative economic consequences, and frequently ran afoul of statutorily-mandated procedures intended to ensure well-formulated rulemaking.”
Republicans sent a joint letter to the Federal Reserve Board, FDIC, and Office of the Comptroller of the Currency all regulators, as well as individual letters to each of these regulators and to the CFPB.
In the joint letter to Federal Reserve Chairman Jerome Powell, Acting FDIC Director Travis Hill and Acting Comptroller of the Currency Rodney Hood, the Financial Services Committee GOP members ask the regulators to rescind a joint final rule implementing changes to the Community Reinvestment Act.
That final rule was issued in October 2023. “The rule’s high compliance costs, especially around new data collection requirements, complexity, and incentive structure might lead banks to reduce their lending to low and moderate-income individuals and communities,” the Republican members wrote.
They said that the final rule is too complex and goes well beyond the banking agencies’ statutory authority. In addition, financial institutions were not given enough time to comply with the rule, the GOP members wrote. See our prior posts on this and on related developments here and here, and our podcast here.
The GOP members also asserted that the banking regulators must provide more guidance to financial institutions and third-party vendors regarding risk management. In June 2023, the federal banking regulators issued guidance on managing the risks associated with third-party vendors. See our prior posts here, here, and here.
“The emphasis on banks’ sound management of potential risks arising from their third-party relationships throughout the relationship life cycle, while logically valid, was not accompanied with clear and objective expressions by the Federal banking agencies as to what third-party risk management practices would be consistent with the agencies’ expectations,” the Republicans wrote. They called on the agencies to revise existing guidance or issue new guidance to provide greater clarity to financial institutions and their third-party vendors.
In a separate letter to the Fed, the Republican members asked the agency to withdraw its Notice of Proposed Rulemaking that would lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction and that would establish a process for updating the maximum amount every two years. See our prior posts here, here, here and here, and our podcast here.
“Since the proposal would update the maximum interchange fee based on average costs for all financial institutions with over $10 billion in assets, it would likely place smaller debit card issuers at a significant competitive disadvantage since they do not have the efficiencies of scale that larger issuers possess,” the Republicans said. The proposal also likely would result in banks raising other fees to make up for lost revenue from debit interchange fees, the Republicans asserted.
“Lastly, the FRB failed to adequately consider fraud costs, which disincentivize banks from investing in fraud prevention given they can no longer cover these costs through debit interchange fees” the Republicans contended. “We believe this proposal should be withdrawn.”
In a letter to the FDIC, the Republicans said that in October 2023, the agency updated its supervisory guidance on Non-Sufficient Funds (NSF) fees that arise from the re-presentment of the same unpaid transaction. See our prior posts here, here, here, here, here and here .
The guidance said that most customer agreements are “deceptive” in their language “regarding NSF fees and recommended the elimination of such fees or that institutions should decline to charge more than one fee for the same transaction,” the GOP members said.
The guidance likely violated the Administrative Procedure Act by issuing a legislative rule, including new obligations, without the proper notice-and-comment process, they added. “Specifically, the guidance defines unfair or deceptive acts and practices, of which the primary authority to do so was granted to the CFPB and the FTC,” according to the Republicans.
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