Posted September 30, 2015
NACHA GR Back on the Hill
Wednesday afternoon, Sept. 16: Jaime Graham and Bill Sullivan met with several House Financial Services Committee staff with updates on recent NACHA Operating Rules implementation of the enforcement rule, the third-party sender RFC, the Federal Reserve Faster Payments Initiative, technology and innovation in the payments industry, and a status on Same Day ACH.
Thursday night, Sept. 17: NACHA was pleased to be a sponsor of the W.Net’s fall networking reception, featuring remarks from congressional staffers working on the Congressional Payments Technology Caucus. W.Net, the Women’s Network in Electronic Transactions, is a professional organization for women that seeks to offer opportunities for career growth through social networking. Jan Estep, CEO of NACHA, gave remarks on current NACHA initiatives, as well as insight into her activities as a member of the Steering Committee of the Fed’s Faster Payments Task Force. Many women working in the electronic payments industry from Washington D.C were in attendance.
Friday, Sept. 18: Jaime Graham and Bill Sullivan continued their meetings on Capitol Hill with the focus on staff on the Senate Banking Committee. The update in each meeting revolved around the effective date of the NACHA Operating Rules change on enforcement, the third-party sender RFC, the Federal Reserve Faster Payments Initiative and a status on Same Day ACH.
NACHA Visits AFP Treasury Advisory Group
On Wednesday, Sept. 16, Bill Sullivan and Samantha Carrier addressed the Association for Financial Professionals’ Treasury Advisory Group on several notable NACHA initiatives that would benefit treasury managers. Ms. Carrier walked the group through the upcoming Payments Innovation Alliance white paper, “Real Time in Real Life”. Mr. Sullivan addressed several topics including the status of Same Day ACH.
Possible Fed Funding for CFPB
Backers of H.R.1266 – Financial Product Safety Commission Act of 2015, introduced in March of this year by Rep. Randy Neugebauer (R-TX), are proposing to allocate close to $75 million of the Federal Reserve System’s $29 billion capital surplus fund to the Consumer Financial Protection Bureau as a one-time "pay-for." The bill, which aims to restructure the CFPB in order to increase transparency and accountability, has received some Democratic support – Reps. Kyrsten Sinema (D-AZ), David Scott (D-GA) and Brad Ashford (D-NE) have all signed on as co-sponsors – despite the party’s general opposition to structural changes for the Bureau established by the 2010 Dodd-Frank law. In an attempt to gain additional support from across the aisle prior to a potential committee markup, Rep. Neugebauer, who chairs the House Financial Institutions and Consumer Credit Subcommittee, hopes the proposed pay-for will help demonstrate that he does not intend to "do away with the CFPB."
Separately, the House is considering a proposal to raise revenue for financing infrastructure costs through a rate reduction on annual dividends paid to member banks mandated to hold stock in the Federal Reserve System. In a letter to the U.S. Comptroller General on Sept. 10, Rep. Jeb Hensarling (R-TX), Chairman of the House Financial Services Committee, requested that the U. S. Government Accountability Office study and report back on the implications of such a rate adjustment.
Fed Delays Raise in Interest Rates
On Sept. 17, 2015, The Federal Open Market Committee (FOMC), which sets the Federal Reserve’s monetary policy, announced that interest rates would stay at near-zero (0%–0.25%) where they have been set for the past seven years, citing uncertainty in global markets making it too risky to change rates at this time. The Fed has been indicating that a rate hike would likely be necessary this year to avoid inflation and other risk factors that led to the 2008 financial crisis. FOMC is scheduled to meet again in October and December, and it is expected that rates will not be increased until December or possibly as late as spring of 2016.
Jon Prior, Reporter for POLITICO Pro Financial Services summarized: "The delay is likely to please liberals who have been pushing for the Fed to hold off on increasing borrowing costs on the grounds that the recovery hasn't yet benefited low-wage workers and minorities," Across the aisle, "It will probably disappoint Republicans who have complained that the central bank has been propping up the economy for too long."
U.S. Regulators Must Face Payday Lenders' Lawsuit
On Sept. 25, 2015, U.S. District Judge Gladys Kessler in Washington, D.C. ruled that Community Financial Services Association of America Ltd., the primary trade group that represents payday lenders, may move forward with a lawsuit against the Federal Deposit Insurance Corp. (FDIC), the Federal Reserve and the Office of the Comptroller of Currency (OCC). The trade group filed a complaint last year which claims that the U.S. regulators unfairly targeted the group’s member businesses as part of the “Operation Choke Point” anti-fraud initiative, violating their due process rights and exerting "back-room pressure" to dissuade financial institutions from serving them.
Judge Kessler wrote, "Plaintiffs have sufficiently alleged that their liberty interests are implicated by defendants' alleged actions and that the alleged stigma has deprived them of their rights to bank accounts and their chosen line of business, so as to state a claim for violation of constitutional due process."
The parties are scheduled to meet back in court for a conference on Oct. 22.
CFPB Director Presents Semi-Annual Report to Congress
On Tuesday, Sept. 29, 2015, CFPB Director Richard Cordray appeared before the House Financial Services Committee to present the latest semi-annual report to Congress. He noted that this July marked five years since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and four years since the Consumer Bureau opened its doors. Cordray said consumer products were in a period of growth despite concerns over the creation of the Bureau by the 2010 Dodd-Frank financial overhaul.
As expected, Cordray defended the actions of the Bureau in several key areas, while fielding heavy criticism from Members of both parties. Cordray was criticized for a lack of accountability and transparency and a perception of regulatory paternalism. Key areas of interest included disparate impact in auto lending, pending regulations for payday lending, pre-dispute arbitration clauses in financial products, and marketing service agreements in mortgage lending. Chairman Hensarling (R-TX) criticized the CFPB’s interference in the marketplace, asserting that such activity has encouraged consolidation, raised prices, and given fewer choices to low- and moderate-income consumers. By contrast, Ranking Member Waters (D-CA) highlighted that the CFPB has returned more than $11 billion to over 25 million Americans and praised the CFPB for increasing lending to African American and Hispanic borrowers.
CISA Up for Floor Action in October
The Cybersecurity Information Sharing Act is on the Senate's short-term list of things to do, as indicated by the inclusion of cyber issues on the look ahead section of the Senate’s Whip Notice. Negotiators are still trying to chop down the number of amendments, possibly by adding some to a manager's amendment, but look for an agreement in the next couple of weeks.
Speaker John Boehner Retiring on Oct. 30
After 25 years in Congress, Speaker John Boehner (R-OH) will retire on Oct. 30. The scramble for successors has begun and could have significant impact on federal spending and debt ceiling negotiations. At the time of print:
Our take is that Majority Leader Kevin McCarthy (R-CA) is the most likely successor to Boehner. While he stopped short of a full endorsement, Boehner stated that McCarthy would make an excellent Speaker of the House. If McCarthy gets promoted, we expect that conservatives in the House will push for one of their own to fill the number two position of Majority Leader. House Financial Services Committee Chair Jeb Hensarling (R-TX) has publically bowed out of the race, as has Rep. Paul Ryan. Both Hensarling and Ryan have endorsed the candidacy of Budget Chairman Tom Price (R-GA). Chairman Price is facing Rep. Steve Scalise (R-LA), the House majority whip, while House Republican Conference Chairman Cathy McMorris Rodgers (R-WA) has given up her bid for the second-ranking position in GOP leadership. The election has been scheduled for Oct. 8, 2015.
Our expectation is Boehner's announcement will clear the way for Congress to pass a short term Fiscal Year 2016 spending bill and keep the government open until Dec. 11. Boehner is free to seek Democratic support for FY2016 spending bills and potentially legislation increasing the debt ceiling. We expect conservatives to demand that any FY2016 spending bill not increase non-defense spending above the Budget Control Act (sequester) levels.
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