A House Financial Services subcommittee met last week and heard testimony from technology and banking experts on industry competition and reducing regulatory burdens, and reviewed a draft financial data privacy bill.
02/15/2023 3:10 P.M.
4 minute read
The House Financial Services Subcommittee on Financial Institutions and Monetary Policy met recently during a busy week on Capitol Hill to discuss issues surrounding banking in the 21st century, the balance between government overregulation and consumer protection as well as updated legislation on privacy and consumer data.
The hearing also examined areas where banking regulations can be updated to align with existing and emerging technologies; the consumer data privacy and breach notification frameworks; barriers to entry for de novo banks and impacts on competition in community banking; and increasing lack of transparency and accountability in bank regulation and supervision.
“Congress should be encouraging an economic and regulatory environment that allows community financial institutions to thrive, let alone survive,” said Subcommittee Chair U.S. Rep. Andy Barr, R-Ky., in his opening remarks.
Barr has introduced a bill, the Promoting Access to Capital in Underbanked Communities Act (PDF), that “seeks to increase de novo bank formations through a reduction in burdensome initial capital requirements and restrictions,” he said.
A bulk of the hearing and discussion with the witness panel, however, focused on technology issues and government regulations.
As part of those discussions, a draft of a financial data privacy bill from U.S. Rep. Patrick McHenry, R-N.C., chair of the House Financial Services Committee, is under review.
McHenry’s legislation expands the scope of the Gramm-Leach-Bliley Act (GLBA) to include new data rules and is one of his priorities as chair of the House Financial Services Committee, ACA International previously reported.
The bill would expand federal data privacy legislation with the goal to provide consistent consumer protection and guidance for regulated entities.
“The financial services industry is already highly regulated with regard to consumer financial information disclosed under the GLBA,” Barr said in his opening statement. “However, the ways in which consumer data is collected and disclosed has changed dramatically in the past [20] years, due primarily to the proliferation of new technologies that consumers interact with on a daily basis. It is time for Congress to update the protections in GLBA to bring our regulations into better alignment with existing and emerging technologies.”
The GLBA amendment discussion draft is likely slated for a markup by the House Financial Services Committee this spring.
Regulatory Issues
Overall issues on government regulations and their impact on consumer protection and small businesses were also discussed during the hearing, with Barr asking the witness panel about the best enforcement strategy for the financial industry.
GOP committee members homed in on the impact of overregulation for small businesses while Democrats also discussed the important role of the Consumer Financial Protection Bureau and its authority.
Witness responses to the discussion included the following:
- Brian Knight, senior research fellow, director of innovation and governance, Mercatus Center at George Mason University, said regulations need to be issued based on efficiency and non-invasive regulations should be a priority.
- Renita Marcellin, advocacy and legislative director, Americans for Financial Reform, spoke against the CFPB being subject to congressional appropriations—which has been discussed in the courts and in legislation—because it would impact its ability to conduct its primary functions.
- Jim Reuter, CEO, FirstBank, on behalf of the American Bankers Association, said a bipartisan oversight committee for the CFPB would streamline oversight of the bureau.
- Knight said Congress should have the overall oversight authority.
Coming Up on Capitol Hill and in the Courts
Oversight of the CFPB is expected to ramp up in the House of Representatives come the 118th Congress and McHenry’s move to chair of the House Financial Services Committee, ACA previously reported.
If legal challenges to the CFPB’s funding structure are reviewed by the U.S. Supreme Court as requested by the bureau, it’s possible the court could send the issue back to Congress to determine how to bring the CFPB under the congressional appropriations process.
A decision from the Supreme Court on whether it will review the petition is expected this month.
CFPB policymaking outside of the rulemaking process, medical debt credit reporting changes and data security are also expected to continue to be prominent issues at the federal level.
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