Posted July 15, 2014Advocacy Activity
On July 8, 2014, NACHA briefed 20 Senate Banking, Housing and Urban Affairs Committee staffers on the attributes of the ACH Network and NACHA’s role governing the Network. Bill Sullivan, senior director and group manager of NACHA's Government & Industry Relations, and Cindy Jenkins, senior director and group manager of ACH Network Risk Management at NACHA, provided information on consumer protections afforded by the NACHA Operating Rules and risk mitigation resources available to financial institutions to better assess new originators/customers that utilize the ACH Network. The briefing was part of a series that is arranged by senior staff of committee Chairman Tim Johnson (D-SD), and Ranking Member Mike Crapo (R-ID), in order for legislative staff to hear from financial services community representatives on the legality and operational effects surrounding the Department of Justice’s “Operation Choke Point.” The ACH Network is caught in the cross-fire between regulators and financial institutions, explained Sullivan. “No regulatory expectation or NACHA Rule requires a financial institution to know the legality of each underlying transaction. The expectation is to know the nature of the business of the Originator and the risk it represents.” Jenkins delivered a message of appropriate “due diligence when onboarding a new ACH Originator or when evaluating existing relationships.” The briefing was an excellent opportunity to educate and showcase the Network to Senate staffers. Through outreach such as Congressional staff briefings, NACHA leverages its expertise to serve as an educator and valued resource on topics important to the ACH Network.
Tomorrow, July 16, 2014, Federal Reserve Chairman Janet Yellen will testify before the House Financial Services Committee about shutting down stimulus policies and in the wake of H.R. 5018, the Federal Reserve Accountability and Transparency (FRAT) Act, which would give the Fed less flexibility in making monetary policy.
Today, July 15, 2014, Federal Reserve Chairman Janet Yellen will deliver the semi-annual Monetary Policy Report to Congress before the Senate Banking Committee. The Fed chief by law testifies twice a year to deliver the U.S. central bank's latest report on monetary policy.
Consumer Financial Protection Bureau
On July 14, 2014, the CFPB announced collaboration with federal bank regulators to raise financial institutions’ awareness about cybersecurity awareness. As part of their increased focus on cybersecurity, the Federal Financial Institutions Examination Council (FFIEC) launched a web page that combines available resources from the federal regulators on cybersecurity. In addition to heightening institutions’ awareness of cybersecurity risks, the web page is intended to create a repository of prior FFIEC cybersecurity documents and guidance. The web page was established in conjunction with the CFPB, the Fed, the FDIC, the NCUA and the OCC.
Operation Choke Point
On July 8, 2014, Rep. Darrell Issa (R-CA) spoke at the Cato Institute on the Justice Department investigation of banks and payment processors, and expressed concern of a chilling effect from the initiative. Issa, who leads the House Oversight and Government Reform Committee, has long said that “while the professed goal of the investigation is to fight mass-market consumer fraud by foreclosing fraudsters' access to payment systems, evidence exists that the real reason behind Operation Choke Point is to target industries deemed “high-risk” or otherwise objectionable by the administration — including payday lenders and gun dealers.” Attorney General Eric Holder has defended the initiative, saying “the goal is to protect consumers from fraud — while assuring that DOJ has no interest in discouraging lawful conduct.” In June, Rep. Blaine Luetkemeyer’s (R-MO) bill, H.R. 4986, passed in the House effectively stripping the operation's funding from a law enforcement appropriations bill. Supporters praised Luetkemeyer’s legislation proclaiming it would “ensure that existing laws are interpreted as intended, overzealous and inappropriate use of regulatory and enforcement tools is curbed, and financial institutions have the security and ability to return to the business of offering products and services to a variety of industries including ammunition sales, fireworks sales and pharmaceutical sales.” Opponents will continue fighting the initiative, but the likelihood of passing legislation to address the issue this year within the Senate remains uncertain.
On July 8, 2014, the U.S. Senate Intelligence Committee approved a bill on Tuesday to encourage companies to exchange information with the government on hacking attempts and cybersecurity threats. The bill authorizes companies and individuals to monitor their own and consenting customers’ networks for hacking and voluntarily shares cyber threat data, stripped of personally identifiable information, with the government and each other for cybersecurity purposes. The legislation would increase the amount of information the government shares with private firms, and directs the Department of Homeland Security to set up and manage a data sharing portal. Privacy advocates expressed concern that expanded information sharing would enable the government to vacuum up personal information of Americans without warrants; however, despite the opposition the committee voted 12-3 to advance the measure. The bill still faces hurdles before becoming law, since it must be approved by the full Senate and reconciled with similar legislation that passed the House of Representatives in April. The House bill received a veto threat from the White House over concerns that the bill did not require private entities to take reasonable steps to remove irrelevant personal information before sharing it.
On July 10, 2014, the Subcommittee on Commerce, Manufacturing and Trade of the House Energy and Commerce Committee passed Rep. Lee Terry’s (R-NB) draft patent bill (H.R. 4450 - Targeting Rogue and Opaque Letters Act or “TROL Act”) and voted to advance it to the full Committee for consideration. The bill addresses patent demand letters and authorizes the Federal Trade Commission to levy fines on fraudulent practices. If the bill advances to the House floor before the members head into August recess, it faces obstacles in the Senate, where Majority Leader Harry Reid (R-NV) has refused to take up the Senate Judiciary’s comprehensive bill and the Commerce Committee has yet to consider a demand letter bill introduced in February by Sen. Claire McCaskill (D-MO).
Midterm Election Results & Analysis
Depending on the November outcome, leadership of the Senate Banking Committee will fall to either Democratic Sen. Sherrod Brown (D-OH) or Sen. Richard Shelby (R-AL). The banking gavel is guaranteed to change hands in January because the current chairman, Sen. Tim Johnson (D-SD), is retiring at the end of his term. Senate Republicans are slightly favored to win the majority, and Shelby has made clear he wants to lead the Banking panel if they succeed. If Democrats manage to hold the Senate, Sen. Chuck Schumer (D-NY) and Jack Reed (D-RI) would be in line to take over for Johnson, but neither is expected to take the job — meaning Brown, a more liberal member, would take the reins. Financial chiefs have expressed that "both outcomes would be tough for the financial industry to swallow."
Politics & Controversy
Last week, a revised estimate from the Federal Reserve's Inspector General put the cost of renovating the CFPB's headquarters at $215 million, which nearly doubles the Bureau's projections. The public attention shift overshadows the Bureau's substantive regulatory efforts, which now Republican lawmakers say require additional "regulatory oversight." The matter is expected to remain a central topic of hearing fodder during future appearances by CFPB Director Richard Cordray.
Week of July 14-18
Two House committees scheduled hearings this week on Operation Choke Point. Today, July 15, the House Financial Services Committee holds a hearing entitled, “The Department of Justice’s ‘Operation Choke Point.’” Witnesses scheduled to appear are:
- Stuart F. Delery, Assistant Attorney General, Department of Justice
- Scott G. Alvarez, General Counsel, Federal Reserve Board
- Richard J. Osterman, Acting General Counsel, Federal Deposit Insurance Corporation
- Daniel P. Stipano, Deputy Chief Counsel, Office of the Comptroller of the Currency
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