H. Rept. 115-668 - BUSINESS OF INSURANCE REGULATORY REFORM ACT OF 2017115th Congress (2017-2018)
Committee Report
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115th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 115-668
======================================================================
BUSINESS OF INSURANCE REGULATORY REFORM ACT OF 2017
_______
May 10, 2018.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hensarling, from the Committee on Financial Services, submitted the
following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 3746]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3746) to amend the Consumer Financial Protection
Act of 2010 to clarify the authority of the Bureau of Consumer
Financial Protection with respect to persons regulated by a
State insurance regulator, and for other purposes, having
considered the same, report favorably thereon without amendment
and recommend that the bill do pass.
Purpose and Summary
Introduced by Representative Sean Duffy on September 12,
2017, H.R. 3746, the ``Business of Insurance Regulatory Reform
Act of 2017'' amends the Consumer Financial Protection Act of
2010, which is Title X of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, to revise the authority of the Bureau
of Consumer Financial Protection (Bureau) over activities
regulated by a state insurance regulator. The Bureau may not
enforce the provisions of Title X of the Dodd-Frank Act against
any person regulated by a state insurance regulator who offers
a consumer financial product or service, to the extent that
person is engaged in the business of insurance. If a person
engaged in the business of insurance is regulated by a state
insurance regulator but otherwise subject to Title X of the
Dodd-Frank Act, the Bureau must construe its authority
narrowly.
Background and Need for Legislation
Title X of the Dodd-Frank Act authorizes the Bureau to
regulate consumer financial products and services, such as
extending credit, loan servicing, debt collection, deposit
taking, providing payment instruments, check cashing, consumer
reporting, etc. However, Section 1027 of the Dodd-Frank
excludes several enumerated products and services from the
Bureau's jurisdiction, including the business of insurance as
conducted by any entity regulated by a state insurance
regulator.\1\
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\1\Dodd-Frank Act Sec. 1027(f).
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The Dodd-Frank Act defines the ``business of insurance'' as
practices that include:
the writing of insurance or the reinsuring of risks
by an insurer, including all acts necessary to such
writing or reinsuring and the activities relating to
the writing of insurance or the reinsuring of risks
conducted by persons who act as, or are, officers,
directors, agents, or employees of insurers or who are
other persons authorized to act on behalf of such
persons.\2\
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\2\12 U.S.C. Sec. 5481(3).
In addition, the Bureau is prohibited from regulating the
business of insurance by the existence of the McCarran Ferguson
Act,\3\ which exempts the business of insurance from federal
regulation.
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\3\15 U.S.C. Sec. Sec. 1011-1015.
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Despite this explicit prohibition, the Bureau, under the
leadership of its former Director, demonstrated an interest in
insurance products and has pushed the boundaries of its own
authority by regulating products that would otherwise fall
under the purview of state insurance regulators. In 2013, the
Bureau issued an enforcement action against a bank and its
service provider for allegedly deceptive sales of ``add-on''
GAP insurance products by the bank's service provider.\4\
According to the consent order, the Bureau found Unfair
Deceptive and Abusive Acts or Practices violations for:
---------------------------------------------------------------------------
\4\https://www.consumerfinance.gov/policy-compliance/enforcement/
actions/dealers-financial-services-llc/.
``(a) deceptively marketing the prices of an add-on
vehicle service contract and an add-on GAP insurance
product, and (b) deceptively marketing the scope of the
coverage of a vehicle service contract.\5\
---------------------------------------------------------------------------
\5\http://files.consumerfinance.gov/f/201306_cfpb_consent-order-
004.pdf.
Despite the Dodd-Frank Act specific restrictions on the
Bureau's authority over the sale of optional insurance
products, which are not required in order for a consumer to
obtain a financial product or service, by a bank or service
provider.
As a federal regulatory agency, the law limits the Bureau's
regulatory authorities, and therefore, because every state has
a state insurance regulator to govern the sale of insurance,
and the Dodd-Frank Act only discusses the business of insurance
in order to exempt it from the Bureau's purview, it is clear
that Congressional intent was to prohibit the Bureau's
regulation of the business of insurance, but explicitly sought
to exclude the Bureau from doing so. H.R. 3746 would clarify
that state insurance regulators hold primary jurisdiction to
enforce consumer protection standards related to the business
of insurance.
Hearings
The Committee on Financial Services' Subcommittee on
Financial Institutions and Consumer Credit held a hearing
examining matters relating to H.R. 3746 on December 7, 2017.
Committee Consideration
The Committee on Financial Services met in open session on
January 17 and 18, 2018, and ordered H.R. 3746 to be reported
favorably by a recorded vote of 37 yeas to 18 nays (Record vote
no. FC-141), a quorum being present.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto. The
sole recorded vote was on a motion by Chairman Hensarling to
report the bill favorably to the House without amendment. The
motion was agreed to by a recorded vote of 37 yeas to 18 nays
(Record vote no. FC-141), a quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee states that H.R. 3746
will clarify that state insurance regulators hold primary
jurisdiction to enforce consumer protection standards related
to the business of insurance.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 10, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3746, the Business
of Insurance Regulatory Reform Act of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Keith Hall,
Director.
Enclosure.
H.R. 3746--Business of Insurance Regulatory Reform Act of 2017
Under current law, the Consumer Financial Protection Bureau
(CFPB) enforces federal consumer financial protection laws
except when enforcement would involve entities' that are
subject to state insurance regulation. That prohibition does
not apply, however, for those entities' transactions involving
consumer financial products or services or to the extent that
an entity is subject to consumer financial protection laws.
H.R. 3746 would clarify that the CFPB cannot enforce
consumer financial protection laws on entities to the extent
that they are engaged in the business of insurance, whether or
not those entities offer products or services that are subject
to consumer financial protection laws. Other lines of business
for those entities would continue to be subject to CFPB
enforcement.
Using information from the CFPB, CBO estimates that
enacting H.R. 3746 would have no significant effect on the
agency's costs or operations because the bill would primarily
codify current agency enforcement practices.
CBO estimates that implementing H.R. 3746 could reduce
civil penalties collected by the CFPB (which are recorded in
the budget as revenues) and the subsequent direct spending of
those penalties by slightly limiting the scope of enforcement
cases the agency may pursue. Therefore, pay-as-you-go
procedures apply. However, CBO estimates that those effects
would not be significant over the 2018-2028 period.
CBO estimates that enacting H.R. 3746 would not increase
net direct spending or significantly increase on-budget
deficits in any of the four consecutive 10-year periods
beginning in 2029.
H.R. 3746 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Stephen Rabent.
The estimate was approved by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
Federal Mandates Statement
This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of H. Res. 5, (115th Congress),
the following statement is made concerning directed
rulemakings: The Committee estimates that the bill requires no
directed rulemakings within the meaning of such section.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 3746 as the ``Business of Insurance
Regulatory Reform Act of 2017.''
Section 2. Clarification to the authority of the Bureau with respect to
persons regulated by a state insurance regulator
This section amends Section 1027(f) of the Consumer
Financial Protection Act of 2010 to clarify the definition of
the ``business of insurance.'' Specifically, this bill creates
an explicit exception related to Bureau of Consumer Financial
Protection authority to regulate insurance. In doing so, the
bill limits the Bureau's jurisdiction over insurance, to the
extent a person is engaged in the business of insurance, and
state insurance regulators regulate the insurance activities.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
CONSUMER FINANCIAL PROTECTION ACT OF 2010
* * * * * * *
TITLE X--BUREAU OF CONSUMER FINANCIAL PROTECTION
* * * * * * *
Subtitle B--General Powers of the Bureau
* * * * * * *
SEC. 1027. LIMITATIONS ON AUTHORITIES OF THE BUREAU; PRESERVATION OF
AUTHORITIES.
(a) Exclusion for Merchants, Retailers, and Other Sellers of
Nonfinancial Goods or Services.--
(1) Sale or brokerage of nonfinancial good or
service.--The Bureau may not exercise any rulemaking,
supervisory, enforcement or other authority under this
title with respect to a person who is a merchant,
retailer, or seller of any nonfinancial good or service
and is engaged in the sale or brokerage of such
nonfinancial good or service, except to the extent that
such person is engaged in offering or providing any
consumer financial product or service, or is otherwise
subject to any enumerated consumer law or any law for
which authorities are transferred under subtitle F or
H.
(2) Offering or provision of certain consumer
financial products or services in connection with the
sale or brokerage of nonfinancial good or service.--
(A) In general.--Except as provided in
subparagraph (B), and subject to subparagraph
(C), the Bureau may not exercise any
rulemaking, supervisory, enforcement, or other
authority under this title with respect to a
merchant, retailer, or seller of nonfinancial
goods or services, but only to the extent that
such person--
(i) extends credit directly to a
consumer, in a case in which the good
or service being provided is not itself
a consumer financial product or service
(other than credit described in this
subparagraph), exclusively for the
purpose of enabling that consumer to
purchase such nonfinancial good or
service directly from the merchant,
retailer, or seller;
(ii) directly, or through an
agreement with another person, collects
debt arising from credit extended as
described in clause (i); or
(iii) sells or conveys debt described
in clause (i) that is delinquent or
otherwise in default.
(B) Applicability.--Subparagraph (A) does not
apply to any credit transaction or collection
of debt, other than as described in
subparagraph (C)(i), arising from a transaction
described in subparagraph (A)--
(i) in which the merchant, retailer,
or seller of nonfinancial goods or
services assigns, sells or otherwise
conveys to another person such debt
owed by the consumer (except for a sale
of debt that is delinquent or otherwise
in default, as described in
subparagraph (A)(iii));
(ii) in which the credit extended
significantly exceeds the market value
of the nonfinancial good or service
provided, or the Bureau otherwise finds
that the sale of the nonfinancial good
or service is done as a subterfuge, so
as to evade or circumvent the
provisions of this title; or
(iii) in which the merchant,
retailer, or seller of nonfinancial
goods or services regularly extends
credit and the credit is subject to a
finance charge.
(C) Limitations.--
(i) In general.--Notwithstanding
subparagraph (B), subparagraph (A)
shall apply with respect to a merchant,
retailer, or seller of nonfinancial
goods or services that is not engaged
significantly in offering or providing
consumer financial products or
services.
(ii) Exception.--Subparagraph (A) and
clause (i) of this subparagraph do not
apply to any merchant, retailer, or
seller of nonfinancial goods or
services--
(I) if such merchant,
retailer, or seller of
nonfinancial goods or services
is engaged in a transaction
described in subparagraph
(B)(i) or (B)(ii); or
(II) to the extent that such
merchant, retailer, or seller
is subject to any enumerated
consumer law or any law for
which authorities are
transferred under subtitle F or
H, but the Bureau may exercise
such authority only with
respect to that law.
(D) Rules.--
(i) Authority of other agencies.--No
provision of this title shall be
construed as modifying, limiting, or
superseding the supervisory or
enforcement authority of the Federal
Trade Commission or any other agency
(other than the Bureau) with respect to
credit extended, or the collection of
debt arising from such extension,
directly by a merchant or retailer to a
consumer exclusively for the purpose of
enabling that consumer to purchase
nonfinancial goods or services directly
from the merchant or retailer.
(ii) Small businesses.--A merchant,
retailer, or seller of nonfinancial
goods or services that would otherwise
be subject to the authority of the
Bureau solely by virtue of the
application of subparagraph (B)(iii)
shall be deemed not to be engaged
significantly in offering or providing
consumer financial products or services
under subparagraph (C)(i), if such
person--
(I) only extends credit for
the sale of nonfinancial goods
or services, as described in
subparagraph (A)(i);
(II) retains such credit on
its own accounts (except to
sell or convey such debt that
is delinquent or otherwise in
default); and
(III) meets the relevant
industry size threshold to be a
small business concern, based
on annual receipts, pursuant to
section 3 of the Small Business
Act (15 U.S.C. 632) and the
implementing rules thereunder.
(iii) Initial year.--A merchant,
retailer, or seller of nonfinancial
goods or services shall be deemed to
meet the relevant industry size
threshold described in clause (ii)(III)
during the first year of operations of
that business concern if, during that
year, the receipts of that business
concern reasonably are expected to meet
that size threshold.
(iv) Other standards for small
business.--With respect to a merchant,
retailer, or seller of nonfinancial
goods or services that is a classified
on a basis other than annual receipts
for the purposes of section 3 of the
Small Business Act (15 U.S.C. 632) and
the implementing rules thereunder, such
merchant, retailer, or seller shall be
deemed to meet the relevant industry
size threshold described in clause
(ii)(III) if such merchant, retailer,
or seller meets the relevant industry
size threshold to be a small business
concern based on the number of
employees, or other such applicable
measure, established under that Act.
(E) Exception from state enforcement.--To the
extent that the Bureau may not exercise
authority under this subsection with respect to
a merchant, retailer, or seller of nonfinancial
goods or services, no action by a State
attorney general or State regulator with
respect to a claim made under this title may be
brought under subsection 1042(a), with respect
to an activity described in any of clauses (i)
through (iii) of subparagraph (A) by such
merchant, retailer, or seller of nonfinancial
goods or services.
(b) Exclusion for Real Estate Brokerage Activities.--
(1) Real estate brokerage activities excluded.--
Without limiting subsection (a), and except as
permitted in paragraph (2), the Bureau may not exercise
any rulemaking, supervisory, enforcement, or other
authority under this title with respect to a person
that is licensed or registered as a real estate broker
or real estate agent, in accordance with State law, to
the extent that such person--
(A) acts as a real estate agent or broker for
a buyer, seller, lessor, or lessee of real
property;
(B) brings together parties interested in the
sale, purchase, lease, rental, or exchange of
real property;
(C) negotiates, on behalf of any party, any
portion of a contract relating to the sale,
purchase, lease, rental, or exchange of real
property (other than in connection with the
provision of financing with respect to any such
transaction); or
(D) offers to engage in any activity, or act
in any capacity, described in subparagraph (A),
(B), or (C).
(2) Description of activities.--The Bureau may
exercise rulemaking, supervisory, enforcement, or other
authority under this title with respect to a person
described in paragraph (1) when such person is--
(A) engaged in an activity of offering or
providing any consumer financial product or
service, except that the Bureau may exercise
such authority only with respect to that
activity; or
(B) otherwise subject to any enumerated
consumer law or any law for which authorities
are transferred under subtitle F or H, but the
Bureau may exercise such authority only with
respect to that law.
(c) Exclusion for Manufactured Home Retailers and Modular
Home Retailers.--
(1) In general.--The Director may not exercise any
rulemaking, supervisory, enforcement, or other
authority over a person to the extent that--
(A) such person is not described in paragraph
(2); and
(B) such person--
(i) acts as an agent or broker for a
buyer or seller of a manufactured home
or a modular home;
(ii) facilitates the purchase by a
consumer of a manufactured home or
modular home, by negotiating the
purchase price or terms of the sales
contract (other than providing
financing with respect to such
transaction); or
(iii) offers to engage in any
activity described in clause (i) or
(ii).
(2) Description of activities.--A person is described
in this paragraph to the extent that such person is
engaged in the offering or provision of any consumer
financial product or service or is otherwise subject to
any enumerated consumer law or any law for which
authorities are transferred under subtitle F or H.
(3) Definitions.--For purposes of this subsection,
the following definitions shall apply:
(A) Manufactured home.--The term
``manufactured home'' has the same meaning as
in section 603 of the National Manufactured
Housing Construction and Safety Standards Act
of 1974 (42 U.S.C. 5402).
(B) Modular home.--The term ``modular home''
means a house built in a factory in 2 or more
modules that meet the State or local building
codes where the house will be located, and
where such modules are transported to the
building site, installed on foundations, and
completed.
(d) Exclusion for Accountants and Tax Preparers.--
(1) In general.--Except as permitted in paragraph
(2), the Bureau may not exercise any rulemaking,
supervisory, enforcement, or other authority over--
(A) any person that is a certified public
accountant, permitted to practice as a
certified public accounting firm, or certified
or licensed for such purpose by a State, or any
individual who is employed by or holds an
ownership interest with respect to a person
described in this subparagraph, when such
person is performing or offering to perform--
(i) customary and usual accounting
activities, including the provision of
accounting, tax, advisory, or other
services that are subject to the
regulatory authority of a State board
of accountancy or a Federal authority;
or
(ii) other services that are
incidental to such customary and usual
accounting activities, to the extent
that such incidental services are not
offered or provided--
(I) by the person separate
and apart from such customary
and usual accounting
activities; or
(II) to consumers who are not
receiving such customary and
usual accounting activities; or
(B) any person, other than a person described
in subparagraph (A) that performs income tax
preparation activities for consumers.
(2) Description of activities.--
(A) In general.--Paragraph (1) shall not
apply to any person described in paragraph
(1)(A) or (1)(B) to the extent that such person
is engaged in any activity which is not a
customary and usual accounting activity
described in paragraph (1)(A) or incidental
thereto but which is the offering or provision
of any consumer financial product or service,
except to the extent that a person described in
paragraph (1)(A) is engaged in an activity
which is a customary and usual accounting
activity described in paragraph (1)(A), or
incidental thereto.
(B) Not a customary and usual accounting
activity.--For purposes of this subsection,
extending or brokering credit is not a
customary and usual accounting activity, or
incidental thereto.
(C) Rule of construction.--For purposes of
subparagraphs (A) and (B), a person described
in paragraph (1)(A) shall not be deemed to be
extending credit, if such person is only
extending credit directly to a consumer,
exclusively for the purpose of enabling such
consumer to purchase services described in
clause (i) or (ii) of paragraph (1)(A) directly
from such person, and such credit is--
(i) not subject to a finance charge;
and
(ii) not payable by written agreement
in more than 4 installments.
(D) Other limitations.--Paragraph (1) does
not apply to any person described in paragraph
(1)(A) or (1)(B) that is otherwise subject to
any enumerated consumer law or any law for
which authorities are transferred under
subtitle F or H.
(e) Exclusion for Practice of Law.--
(1) In general.--Except as provided under paragraph
(2), the Bureau may not exercise any supervisory or
enforcement authority with respect to an activity
engaged in by an attorney as part of the practice of
law under the laws of a State in which the attorney is
licensed to practice law.
(2) Rule of construction.--Paragraph (1) shall not be
construed so as to limit the exercise by the Bureau of
any supervisory, enforcement, or other authority
regarding the offering or provision of a consumer
financial product or service described in any
subparagraph of section 1002(5)--
(A) that is not offered or provided as part
of, or incidental to, the practice of law,
occurring exclusively within the scope of the
attorney-client relationship; or
(B) that is otherwise offered or provided by
the attorney in question with respect to any
consumer who is not receiving legal advice or
services from the attorney in connection with
such financial product or service.
(3) Existing authority.--Paragraph (1) shall not be
construed so as to limit the authority of the Bureau
with respect to any attorney, to the extent that such
attorney is otherwise subject to any of the enumerated
consumer laws or the authorities transferred under
subtitle F or H.
(f) Exclusion for Persons Regulated by a State Insurance
Regulator.--
(1) In general.--No provision of this title shall be
construed as altering, amending, or affecting the
authority of any State insurance regulator to adopt
rules, initiate enforcement proceedings, or take any
other action with respect to a person regulated by a
State insurance regulator. Except as provided in
paragraph (2), the Bureau shall have no authority to
exercise any power to enforce this title with respect
to a person regulated by a State insurance regulator.
(2) [Description of activities.--] [Paragraph (1)]
Exceptions._
(A) Authority._Paragraph (1) does not apply to any person
described in such paragraph to the extent that such person is
engaged in the offering or provision of any consumer financial
product or service or is otherwise subject to any enumerated
consumer law or any law for which authorities are transferred
under subtitle F or H.
(B) Limitation.--With respect to a person
regulated by a State insurance regulator--
(i) and if such person is offering or
providing a consumer financial product
or service, the Bureau may not enforce
this title with respect to such person
to the extent such person is engaged in
the business of insurance; or
(ii) and if such person is subject to
any enumerated consumer law or any law
for which authorities are transferred
under subtitle F or H, the authority of
the Bureau to enforce such law with
respect to such person shall be
narrowly construed to the extent such
person is engaged in the business of
insurance.
(3) State insurance authority under gramm-leach-
bliley.--Notwithstanding paragraph (2), the Bureau
shall not exercise any authorities that are granted a
State insurance authority under section 505(a)(6) of
the Gramm-Leach-Bliley Act with respect to a person
regulated by a State insurance authority.
(4) Rule of construction.--The enforcement of this
title shall be broadly construed in favor of the
authority of a State insurance regulator with respect
to a person regulated by a State insurance regulator.
(g) Exclusion for Employee Benefit and Compensation Plans and
Certain Other Arrangements Under the Internal Revenue Code of
1986.--
(1) Preservation of authority of other agencies.--No
provision of this title shall be construed as altering,
amending, or affecting the authority of the Secretary
of the Treasury, the Secretary of Labor, or the
Commissioner of Internal Revenue to adopt regulations,
initiate enforcement proceedings, or take any actions
with respect to any specified plan or arrangement.
(2) Activities not constituting the offering or
provision of any consumer financial product or
service.--For purposes of this title, a person shall
not be treated as having engaged in the offering or
provision of any consumer financial product or service
solely because such person is--
(A) a specified plan or arrangement;
(B) engaged in the activity of establishing
or maintaining, for the benefit of employees of
such person (or for members of an employee
organization), any specified plan or
arrangement; or
(C) engaged in the activity of establishing
or maintaining a qualified tuition program
under section 529(b)(1) of the Internal Revenue
Code of 1986 offered by a State or other
prepaid tuition program offered by a State.
(3) Limitation on bureau authority.--
(A) In general.--Except as provided under
subparagraphs (B) and (C), the Bureau may not
exercise any rulemaking or enforcement
authority with respect to products or services
that relate to any specified plan or
arrangement.
(B) Bureau action pursuant to agency
request.--
(i) Agency request.--The Secretary
and the Secretary of Labor may jointly
issue a written request to the Bureau
regarding implementation of appropriate
consumer protection standards under
this title with respect to the
provision of services relating to any
specified plan or arrangement.
(ii) Agency response.--In response to
a request by the Bureau, the Secretary
and the Secretary of Labor shall
jointly issue a written response, not
later than 90 days after receipt of
such request, to grant or deny the
request of the Bureau regarding
implementation of appropriate consumer
protection standards under this title
with respect to the provision of
services relating to any specified plan
or arrangement.
(iii) Scope of bureau action.--
Subject to a request or response
pursuant to clause (i) or clause (ii)
by the agencies made under this
subparagraph, the Bureau may exercise
rulemaking authority, and may act to
enforce a rule prescribed pursuant to
such request or response, in accordance
with the provisions of this title. A
request or response made by the
Secretary and the Secretary of Labor
under this subparagraph shall describe
the basis for, and scope of,
appropriate consumer protection
standards to be implemented under this
title with respect to the provision of
services relating to any specified plan
or arrangement.
(C) Description of products or services.--To
the extent that a person engaged in providing
products or services relating to any specified
plan or arrangement is subject to any
enumerated consumer law or any law for which
authorities are transferred under subtitle F or
H, subparagraph (A) shall not apply with
respect to that law.
(4) Specified plan or arrangement.--For purposes of
this subsection, the term ``specified plan or
arrangement'' means any plan, account, or arrangement
described in section 220, 223, 401(a), 403(a), 403(b),
408, 408A, 529, 529A, or 530 of the Internal Revenue
Code of 1986, or any employee benefit or compensation
plan or arrangement, including a plan that is subject
to title I of the Employee Retirement Income Security
Act of 1974, or any prepaid tuition program offered by
a State.
(h) Persons Regulated by a State Securities Commission.--
(1) In general.--No provision of this title shall be
construed as altering, amending, or affecting the
authority of any securities commission (or any agency
or office performing like functions) of any State to
adopt rules, initiate enforcement proceedings, or take
any other action with respect to a person regulated by
any securities commission (or any agency or office
performing like functions) of any State. Except as
permitted in paragraph (2) and subsection (f), the
Bureau shall have no authority to exercise any power to
enforce this title with respect to a person regulated
by any securities commission (or any agency or office
performing like functions) of any State, but only to
the extent that the person acts in such regulated
capacity.
(2) Description of activities.--Paragraph (1) shall
not apply to any person to the extent such person is
engaged in the offering or provision of any consumer
financial product or service, or is otherwise subject
to any enumerated consumer law or any law for which
authorities are transferred under subtitle F or H.
(i) Exclusion for Persons Regulated by the Commission.--
(1) In general.--No provision of this title may be
construed as altering, amending, or affecting the
authority of the Commission to adopt rules, initiate
enforcement proceedings, or take any other action with
respect to a person regulated by the Commission. The
Bureau shall have no authority to exercise any power to
enforce this title with respect to a person regulated
by the Commission.
(2) Consultation and coordination.--Notwithstanding
paragraph (1), the Commission shall consult and
coordinate, where feasible, with the Bureau with
respect to any rule (including any advance notice of
proposed rulemaking) regarding an investment product or
service that is the same type of product as, or that
competes directly with, a consumer financial product or
service that is subject to the jurisdiction of the
Bureau under this title or under any other law. In
carrying out this paragraph, the agencies shall
negotiate an agreement to establish procedures for such
coordination, including procedures for providing
advance notice to the Bureau when the Commission is
initiating a rulemaking.
(j) Exclusion for Persons Regulated by the Commodity Futures
Trading Commission.--
(1) In general.--No provision of this title shall be
construed as altering, amending, or affecting the
authority of the Commodity Futures Trading Commission
to adopt rules, initiate enforcement proceedings, or
take any other action with respect to a person
regulated by the Commodity Futures Trading Commission.
The Bureau shall have no authority to exercise any
power to enforce this title with respect to a person
regulated by the Commodity Futures Trading Commission.
(2) Consultation and coordination.--Notwithstanding
paragraph (1), the Commodity Futures Trading Commission
shall consult and coordinate with the Bureau with
respect to any rule (including any advance notice of
proposed rulemaking) regarding a product or service
that is the same type of product as, or that competes
directly with, a consumer financial product or service
that is subject to the jurisdiction of the Bureau under
this title or under any other law.
(k) Exclusion for Persons Regulated by the Farm Credit
Administration.--
(1) In general.--No provision of this title shall be
construed as altering, amending, or affecting the
authority of the Farm Credit Administration to adopt
rules, initiate enforcement proceedings, or take any
other action with respect to a person regulated by the
Farm Credit Administration. The Bureau shall have no
authority to exercise any power to enforce this title
with respect to a person regulated by the Farm Credit
Administration.
(2) Definition.--For purposes of this subsection, the
term ``person regulated by the Farm Credit
Administration'' means any Farm Credit System
institution that is chartered and subject to the
provisions of the Farm Credit Act of 1971 (12 U.S.C.
2001 et seq.).
(l) Exclusion for Activities Relating to Charitable
Contributions.--
(1) In general.--The Director and the Bureau may not
exercise any rulemaking, supervisory, enforcement, or
other authority, including authority to order
penalties, over any activities related to the
solicitation or making of voluntary contributions to a
tax-exempt organization as recognized by the Internal
Revenue Service, by any agent, volunteer, or
representative of such organizations to the extent the
organization, agent, volunteer, or representative
thereof is soliciting or providing advice, information,
education, or instruction to any donor or potential
donor relating to a contribution to the organization.
(2) Limitation.--The exclusion in paragraph (1) does
not apply to other activities not described in
paragraph (1) that are the offering or provision of any
consumer financial product or service, or are otherwise
subject to any enumerated consumer law or any law for
which authorities are transferred under subtitle F or
H.
(m) Insurance.--The Bureau may not define as a financial
product or service, by regulation or otherwise, engaging in the
business of insurance.
(n) Limited Authority of the Bureau.--Notwithstanding
subsections (a) through (h) and (l), a person subject to or
described in one or more of such provisions--
(1) may be a service provider; and
(2) may be subject to requests from, or requirements
imposed by, the Bureau regarding information in order
to carry out the responsibilities and functions of the
Bureau and in accordance with section 1022, 1052, or
1053.
(o) No Authority To Impose Usury Limit.--No provision of this
title shall be construed as conferring authority on the Bureau
to establish a usury limit applicable to an extension of credit
offered or made by a covered person to a consumer, unless
explicitly authorized by law.
(p) Attorney General.--No provision of this title, including
section 1024(c)(1), shall affect the authorities of the
Attorney General under otherwise applicable provisions of law.
(q) Secretary of the Treasury.--No provision of this title
shall affect the authorities of the Secretary, including with
respect to prescribing rules, initiating enforcement
proceedings, or taking other actions with respect to a person
that performs income tax preparation activities for consumers.
(r) Deposit Insurance and Share Insurance.--Nothing in this
title shall affect the authority of the Corporation under the
Federal Deposit Insurance Act or the National Credit Union
Administration Board under the Federal Credit Union Act as to
matters related to deposit insurance and share insurance,
respectively.
(s) Fair Housing Act.--No provision of this title shall be
construed as affecting any authority arising under the Fair
Housing Act.
* * * * * * *
MINORITY VIEWS
Democrats support the state-based system of insurance
regulation in the U.S., and believe that the Consumer Financial
Protection Bureau's (Consumer Bureau) powers with respect to
insurance are clearly and appropriately limited.\1\ Generally
speaking, the Consumer Bureau does not have supervisory or
enforcement authority over insurance. However, there are very
narrow exceptions to this general exemption to ensure that
there are no loopholes in our oversight or our ability to
protect consumers. Nevertheless, H.R. 3746 would roll back the
Consumer Bureau's already limited supervisory and enforcement
authority over insurance, effectively creating opportunities
for regulatory arbitrage and risking consumer harm.
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\1\12 U.S.C. Sec. 5517(f)(1) states that ``no provision of this
title shall be construed as altering, amending, or affecting the
authority of any State insurance regulator to adopt rules, initiate
enforcement proceedings, or take any other action with respect to a
person regulated by a State insurance regulator.''
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The Consumer Bureau has supervisory and enforcement
authority over insurance companies or persons engaged in the
business of insurance to the extent that they are engaged in
the offering or provision of any consumer financial product or
service,\2\ or acting as a ``service provider''\3\ that
provides a material service to a bank in connection with the
offering of a financial product or service.\4\ This ensures
that an insurance company cannot unfairly evade scrutiny when a
financial institution, or service provider thereof, would be
subject to Consumer Bureau scrutiny for engaging in the same
activity. For example, Wells Fargo's negligent administration
of its force-placed auto insurance program relied on its
partnership with National General, an insurance provider.\5\
Wells Fargo and National General were responsible for pushing
hundreds of thousands of customers into delinquency or causing
them to have their car wrongly repossessed. Under current law,
the Consumer Bureau is authorized to take action against
insurance companies like National General that act as bank
service providers, but under H.R. 3746, this authority would be
eliminated.
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\2\12 U.S.C. Sec. 5517(f)(2).
\3\A ``service provider'' is defined as any entity that provides a
material service to a bank or nonbank subject to the supervision of the
Consumer Bureau in connection with the provision of a financial product
or service. 12 U.S.C. Sec. Sec. 5481(6) and (26).
\4\12 U.S.C. Sec. 5517(f)(2).
\5\https://www.nytimes.com/2017/07/27/business/wells-fargo-
unwanted-auto-insurance.html.
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The Dodd-Frank Act also grants the Consumer Bureau
supervisory and enforcement authority over insurance companies
to the extent that they are ``subject to any enumerated
consumer law . . .''\6\ For example, insurance companies are
subject to the Real Estate Settlement Procedures Act (RESPA),
which prohibits any person from giving or receiving a fee or
kickback as part of a real estate settlement. The Consumer
Bureau has brought multiple civil actions against insurance
companies for violating this provision of RESPA, particularly
in the aftermath of the financial crisis. Under H.R. 3746, the
Consumer Bureau would no longer be able to bring such actions.
Insurance companies are also subject to the Truth in Lending
Act (TILA), the Equal Credit Opportunity Act (ECOA), and the
Fair Credit Reporting Act (FCRA), but under H.R. 3746,
insurance companies that violate these important consumer laws
would be able to evade Consumer Bureau scrutiny. Even though
state insurance regulators have authority over insurance
companies, they cannot bring actions under these federal laws,
and it is not clear that any other federal agency would have
authority to do so.
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\6\12 U.S.C Sec. Sec. 5514(e), 5515(d), and Sec. 5516(e); 12 U.S.C.
5517(n).
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In sum, H.R. 3746 would substantially scale back the
Consumer Bureau's already limited authority over insurance,
ultimately leaving consumers at higher risk of fraudulent and
abusive practices. For these reasons, we oppose H.R. 3746.
Maxine Waters.
Michael E. Capuano.
Carolyn B. Maloney.
Keith Ellison.
Al Green.
Stephen F. Lynch.
[all]