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Wednesday, April 26, 2017

Senators Cassidy and Gillibrand Release NFIP Extension Draft Legislation for Comment

Today, US Senators Bill Cassidy, MD (R-LA) and Kristen Gillibrand (D-NY) released draft legislation to reauthorize the National Flood Insurance Program (NFIP) for 10 years. The NFIP is currently set to expire on September 30, 2017.

This proposed legislation would reauthorize the NFIP over a 10-year term (2017-2027), which is needed to avoid short-term extensions and program lapses that create uncertainty in both the insurance and housing markets.

This legislation also takes to reform the program by addressing:
  • Affordability and accessibility

  • Solvency and sustainability

  • Private market access, accountability, and competition

  • Flood mapping and flood risk accuracy

  • Transparency and accountability
For a full summary of the bill, click here.

To review of the Draft legislation, click here.

Thursday, April 20, 2017

Hensarling's Choice Act Includes Key ABA Priorities

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) yesterday released the latest legislative text of his Financial Choice Act, a 600-page bill aimed at rolling back and reforming parts of the Dodd-Frank Act’s extensive supervisory regime, as well as providing regulatory relief for banks of all sizes. A similar version of the legislation cleared the committee in the previous Congress. The committee is scheduled to hold a hearing on the bill next week.

Title V of the Choice Act contains numerous provisions long sought by ABA as part of the Blueprint for Growth. These regulatory relief measures would provide a Qualified Mortgage safe harbor to mortgage loans held in portfolio, tailor supervision to banks’ risk profiles and business models, raise the small bank holding company policy statement asset threshold to $5 billion, create an independent exam appeals process, provide charter flexibility for thrifts, stop data collection on small business loans, clarify the QM rule’s points and fees test, expand the short-form Call Report, enhance mortgage relief for smaller banks and smaller mortgage originators and prevent future “Operation Choke Point” activities.

The bill further details plans to reform the Consumer Financial Protection Bureau, which would be renamed the Consumer Law Enforcement Agency and would be stripped of examination powers and “UDAAP” enforcement authority. The Choice Act would also repeal the Durbin Amendment, impose more stringent penalties for Wall Street in cases of fraud or deception and repeal sections of Dodd-Frank that limit capital formation, including the Volcker Rule. It would bring the new CLEA, FDIC, OCC, Federal Housing Finance Agency, National Credit Union Administration and supervisory functions of the Federal Reserve into the congressional appropriations process, mandate cost-benefit analyses of regulations and require congressional approval for “major rules.”

Additional regulatory relief would be available for banks maintaining a 10 percent non-risk weighted leverage ratio that elect into the alternative regime. Qualifying banks would be exempt from federal capital and liquidity requirements, blocks on capital distributions, systemic risk regulations and limitations on mergers and acquisitions provided any new entity also maintains the minimum leverage ratio.

Another key component of the Choice Act is ensuring no institution is “too big to fail” by replacing Dodd-Frank’s Orderly Liquidation Authority provision with a new Bankruptcy Code designed to accommodate the failure of a large, complex financial institution. Additionally, it significantly restricts the Federal Reserve’s ability to make discounted loans or bail out financial firms or creditors. ABA will analyze the full text of the Choice Act in coming days and provide further information to members.

View the full text of the bill.

Wednesday, April 19, 2017

ABA Shares Insurance-Related Concerns on Fiduciary Rule

ABA’s Bank Insurance Council on Monday wrote to the Department of Labor seeking clarifications and changes to its fiduciary rule affecting banks that sell insurance. Specifically, ABA urged DoL to revise the rule’s definition of “investment property” to exclude products regulated as insurance by state authorities.

ABA also asked DoL to clarify that the rule does not apply to minimum distributions once funds have been distributed and that periodic distributions from retirement plans into insurance policies entered into before the rule takes effect are exempt. The effective date of the fiduciary rule has been delayed to June 10.

The rule, which expanded the definition of “fiduciary” under the Employee Retirement Income Security Act and the Internal Revenue Code, was the target of a recent executive action by President Trump, who directed the secretary of labor to thoroughly review the rule’s effect on Americans’ ability to access financial services.

Read the letter.

For more information, contact ABA’s Sarah Ferman.

Wednesday, April 5, 2017

Fiduciary Rule Implementation Date Moved to June

The Department of Labor has unveiled a final rule postponing the applicability deadline of its “fiduciary rule” for 60 days. On Friday, DoL will publish in the Federal Register a rule extending the deadline from April 10 to June 9.

The rule, which expanded the definition of “fiduciary” under the Employee Retirement Income Security Act and the Internal Revenue Code, was the target of a recent executive action by President Trump, who directed the secretary of labor to thoroughly review the rule’s effect on Americans’ ability to access financial services. The delay will provide the DoL additional time to determine the rule’s full impact on consumers, and, if necessary, issue a new proposal for revising or rescinding the rule.

ABA strongly advocated for an even longer implementation period to allow banks of all sizes time to comply. ABA has also urged DoL to revisit the economic and legal analysis undergirding the rule, noting that it remains fundamentally flawed.

Read more.

Thursday, March 30, 2017

High Court Orders Closer Look at New York Credit Card Fee Law

By: McIntyre & Lemon, PLLC

Yesterday, the Supreme Court of the United States held that a New York law that
prohibits merchants from charging customers a credit card fee – also known as a “swipe
fee” – if they refer to the fee as a “surcharge,” may violate the First Amendment and has
ordered a lower court to take a second look at the law. The case is relevant to banks and
insurance agencies that permit their customers to charge insurance premiums on a credit

The case involves several New York State merchants that would like to charge
their customers swipe fees. The merchants would also like to call the swipe fees
“surcharges,” an amount that is added on to the regularly posted price.

Currently, the New York law prohibits merchants from adding swipe fees as a
surcharge. Instead, the law allows merchants to offer discounts if customers pay in cash.

The merchants argue that because the law prohibits surcharges but allows
discounts, the law does nothing more than ban the way the merchants can communicate
the swipe fees. Put another way, the merchants argue that the law does not regulate
whether they can charge credit card customers more than cash customers (to account for
the swipe fee). The law only prohibits the merchant from describing the difference in the
price as a “credit card surcharge.” They must instead call the difference a “cash

For example, assume a product costs $10.00 but it costs $10.30 to buy it with a
credit card. It is permissible to say that the product’s price is $10.30, but that there is a
30 cent discount if the customer pays by cash, but it is not permissible to say the
product’s price is $10.00 but there is a 30 cent surcharge if the customer pays with a
credit card.

The Supreme Court sought to answer two questions about the law: (1) does the
law regulate speech (as the merchants claim), which would implicate First Amendment
concerns; and (2) if the law does regulate speech, does it violate the First Amendment’s
Free Speech guarantee?

On the first question, the Supreme Court was convinced by the merchants’
arguments. The Court found that the New York law did not regulate what the merchants
could charge cash customers and credit card customers. Moreover, it did not prohibit
merchants from charging customers different amounts based on their payment methods.
But “[w]hat the law does regulate is how sellers may communicate their prices. A
merchant who wants to charge $10 for cash and $10.30 for credit may not convey that
price any way he pleases.”

Thus, the Court concluded, “[i]n regulating the communication of prices rather
than prices themselves, [the New York law] regulates speech.” This raises First
Amendment concerns.

On the second question, whether the law violates the First Amendment, the Court
punted. The Court noted that the lower court, the Second Circuit Court of Appeals, did
not address this second question. According to the Supreme Court, there may be valid
reasons for a state to enact this law. That would mean that the law does not violate the
First Amendment even though it raises First Amendment concerns. The Court wants the
Second Circuit to address this question first.

The Court has sent the case back to the Second Circuit and ordered the lower
court to consider whether this law, which regulates speech, violates the First Amendment.

This decision means that the case is still ongoing and has not decided whether
laws that prohibit credit card surcharges (but allow discounts) are unconstitutional.