Equifax, Wells and CFPB: Banking's momentous week on Capitol Hill

Published
  • September 29 2017, 4:21pm EDT
The week of Oct. 2 is shaping up to be a significant one on Capitol Hill, as lawmakers are scheduled to grill the top executives of Equifax and Wells Fargo, hear from the regulator of Fannie Mae and Freddie Mac and, potentially, take a run at overturning a rule banning mandatory arbitration clauses.

If that weren't enough, there is growing speculation that the Consumer Financial Protection Bureau is set to release its final rule on payday lending. That may be the subject of its own congressional challenge.

Following is a schedule of what to expect:

Banking's momentous week on Capitol Hill

The week of Oct. 2 is shaping up to be a significant one on Capitol Hill, as lawmakers are scheduled to grill the top executives of Equifax and Wells Fargo, hear from the regulator of Fannie Mae and Freddie Mac and, potentially, take a run at overturning a rule banning mandatory arbitration clauses.

If that weren't enough, there is growing speculation that the Consumer Financial Protection Bureau is set to release its final rule on payday lending. That may be the subject of its own congressional challenge.

Following is a schedule of what to expect:

Equifax on the hot seat

The former top executive at Equifax is facing four different hearings during the week, a grueling marathon that is likely to make him pleased he's now retired. It begins Tuesday when former CEO Richard Smith, who resigned Sept. 26, will testify before the House Energy and Commerce Committee. A day later, he appears before the Senate Banking Committee in the morning and before a Senate Judiciary subcommittee in the afternoon. On Thursday, Oct. 5, he is scheduled to appear before the House Financial Services Committee.

Equifax has already taken steps to dampen congressional ire. It announced on Thursday that it would give consumers the ability to lock and unlock their credit for free. That was the essence of a bill put forward by Senate Democrats, and is likely to put pressure on the other credit bureaus to follow suit.

Lawmakers may also seek to find out why such data breaches keep happening. Equifax was one of the largest, compromising the records of 143 million consumers, but it was by no means the largest.

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Wells: One year later

Also on Tuesday, Wells Fargo CEO Tim Sloan will appear before the Senate Banking Committee to testify on the aftermath of the bank's phony-accounts scandal. Lawmakers are likely to grill Sloan on the estimated number of potential victims, which was recently increased to 3.5 million. They are also likely to probe other scandals, including allegations that Wells sold auto insurance to consumers who didn't need or want it.

Sloan will be looking to escape the shadow of former CEO John Stumpf, whose performance last year in front of the panel was so poor that it was likely a key factor in his subsequent retirement. Stumpf visibly annoyed lawmakers from both parties by saying he was unaware of many details and attempting to shift the blame to former low-level employees.

Housing finance reform

If those hearings weren't enough, there is a third consequential one scheduled for Tuesday. Federal Housing Finance Agency Director Mel Watt is scheduled to testify before the House Financial Services Committee.

His visit comes as Congress is gearing up to tackle housing finance reform and figure out what to do with Fannie Mae and Freddie Mac, which have been in conservatorship for eight years and will be devoid of capital come 2018.

Watt is the point person on the conservatorship and will play a central role in those discussions. In testimony Tuesday, Watt is likely to make another plea to panel chairman Jeb Hensarling, R-Tex., to address the unsustainable situation, while Hensarling may preview his own plan to reform the housing finance system.

Will Congress overturn the CFPB arbitration rule?

Senate Republicans are optimistic that they can pass an industry-supported resolution to repeal a Consumer Financial Protection Bureau rule banning arbitration agreements. Congress can overturn the rule with a simple majority vote using the Congressional Review Act, but with a small advantage in the Senate, it’s unclear if they have the votes. Congress has to pass the measure by early November, so the clock is ticking.

A vote on the measure appeared likely to happen last week, but it was pulled because key Republican senators were not in town. A vote could occur as early as this week.

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Payday lending rule?

The Consumer Financial Protection Bureau is expected to release a rule reining in payday lenders as early as this week. The rule has already circulated among other regulators for review and is expected to focus on small-dollar loans with terms 45 days or less.

CFPB Director Richard Cordray is widely expected to leave soon after the payday rule is finalized so he can run for governor of Ohio. Republicans are likely to challenge any final rule, arguing that Cordray's possible poliitical motivations played a role in its design and implementation. The payday lenders, meanwhile, are expected to mount a legal challenge to the rule.

Powell has his say

Additionally on Tuesday, Federal Reserve Gov. Jerome Powell, who heads up banking supervision at the central bank, is scheduled to speak at an event hosted by Reuters on regulation.

This may be one of Powell's last opportunities to speak as the central bank's top representative on bank matters. Randal Quarles, nominated to be vice chairman for banking supervision, is expected to be approved by the full Senate soon.

Powell was recently interviewed by President Trump as a potential candidate for Fed chair, according to media outlets. That could mean any comments he makes carry extra importance should he later get the nod.