Bankruptcy Reform
S 220, HR 333
A 32-member House-Senate conference committee is set to meet in early September to begin ironing out differences between bankruptcy overhaul bills each chamber passed independently in March. Staff-level negotiations are being held during the August congressional recess.
The 19-member House negotiating team, named July 31, is led by Judiciary Committee Chairman James Sensenbrenner Jr., R-Wis., Rep. Henry Hyde, R-Ill., and Rep. George Gekas, R-Pa. The 13 Senate conferees were announced July 17, and include Judiciary Committee Chairman Patrick Leahy, D-Vt., and Sen. Joseph Biden, D-Del.
The Senate approved its bankruptcy reform bill March 15 by a vote of 83 to 15. A similar bill had cleared the House on March 1 by a vote of 306 to 108. Among other provisions, the House and Senate bills would establish a "means test" to determine whether people should be allowed to file for protection under Chapter 7 of the federal Bankruptcy Code, which discharges filers from credit card and other unsecured debts. It would make more debtors file under Chapter 13, which requires them to pay off most or all of their debts.
The conference will have to resolve two main differences between the bills: whether to supersede state "homestead" laws, which a handful of states including Texas have, that let wealthy debtors thwart creditors by buying expensive homes that cannot be seized; and whether to prohibit people convicted of violent crimes from filing for bankruptcy to avoid paying court-ordered fines.
The White House said in an Aug. 6 letter to the Senate conferees that the administration "strongly opposes" the homestead provisions in the Senate version of the bankruptcy bill, and "strongly urges" the conference to adopt the House version, which effectively preserves states' existing exemption laws.
Deposit Insurance
S 128, S 227, HR 1899, HR 746, HR 1293, HR 135
House lawmakers are expected to introduce deposit insurance reform legislation soon after the chamber reconvenes on Sept. 5.
Regulators and industry officials testified in July and August at hearings held by House and Senate subcommittees, and more are planned. Incoming Federal Deposit Insurance Corp. Chairman Donald Powell is expected to testify at a House Financial Services financial institutions subcommittee hearing soon. Meanwhile, the Senate Banking financial institutions subcommittee plans to call former FDIC chairmen to testify in September or October.
Several bills have already been introduced.
House lawmakers introduced legislation May 17 that would raise the deposit insurance coverage limit for in-state municipal deposits. Under the bill, introduced by Reps. Paul Gillmor, R-Ohio; Doug Bereuter, R-Neb.; Rep. Bob Ney, R-Ohio; and Rep. Stephanie Tubbs Jones, D-Ohio, the coverage limit would equal an institution's "total equity capital."
This is similar to a bill Sen. Robert Torricelli, D-N.J., introduced on Jan. 31 that would give municipal deposits 100% federal insurance coverage. In-state public deposits are currently insured for up to $200,000, and out-of-state municipal deposits are guaranteed up to $100,000.
Rep. Ney has a separate bill, introduced March 29, that was the starting point for discussion. His bill would merge the bank and thrift insurance funds, let the FDIC charge fast-growing institutions a special fee, and give regulators more flexibility when the fund's ratio of reserves to insured deposits falls below the statutory minimum of 1.25%.
On April 3, Rep. John J. LaFalce of New York, the committee's top Democrat, introduced a narrower version of the Ney measure. The LaFalce bill would only merge the bank and thrift funds.
Rep. Joel Hefley, R-Colo., introduced legislation Feb. 27 to increase federal deposit insurance coverage to about $200,000 per account. Sen. Tim Johnson, D-S.D., introduced the same language in the Senate in January. The Johnson and Hefley measures would index the coverage limit to 1980 price levels, when the deposit coverage limit was last raised, to $100,000 from $40,000. Afterward, the limit would be adjusted every three years to the consumer price index to keep up with inflation.
Predatory Lending
HR 1051-1061
Senate Banking Committee Chairman Paul Sarbanes held a series of hearings in July on ways to rein in predatory lenders. The hearings also laid the groundwork for comprehensive legislation he is expected to introduce as early as September.
A draft summary of the Sarbanes bill calls for expanding the number of loans subject to protections under the Home Ownership Equity and Protection Act, which uses rates and fees to define high-cost loans and trigger additional reporting requirements. Specifically, the draft suggests restricting a creditor from financing any portion of the points, fees, or other charges topping 3% of a HOEPA loan total; prohibiting prepayment penalties after the first two years of the loan; and limiting the prepayment penalty during the first two years to 3% of the loan's total. It also proposes outlawing up-front payment or financing of credit insurance on a single-premium basis for HOEPA loans; prohibiting balloon payments for such loans; and limiting mandatory arbitration clauses in the loans to make it easier for borrowers to sue lenders.
The Sarbanes measure is expected to be similar to a package of 10 bills Rep. John J. LaFalce of New York, the ranking Democrat on the House Financial Services Committee, introduced in March to create what he calls a "financial services consumer bill of rights."
Investment Advice
HR 2269
A bill that would let financial services firms give investment advice to users of their retirement savings plans cleared a House education and work-force subcommittee by a voice vote on Aug. 2. It is expected to be voted on by the full committee in September.
The Retirement Security Advice Act, sponsored by panel Chairman John Boehner, R-Ohio, and endorsed by the financial services industry, would let companies advise workers covered by 401(k) or other retirement savings plans on how to invest their money. Under current law, plan providers may offer financial advice but can be sued by employees whose investments sour. The Boehner bill would shield firms from liability.
Money Laundering
S 1371, S 398, HR 1114
A bipartisan group of senators introduced money-laundering legislation Aug. 3 that would restrict U.S. banks' dealings with foreign banks and customers.
The Money Laundering Abatement Act would bar U.S. banks from opening correspondent accounts for foreign institutions with no offices or branches, or "shell banks." It would require banks to perform enhanced due diligence before opening a private account of $1 million or more for a foreign national or for an institution chartered by countries considered to have weak anti-laundering enforcement. The bill would also give federal law enforcement authorities the power to subpoena the records of a foreign bank that has a U.S. correspondent account. If a foreign bank were to refuse to provide the subpoenaed records, the U.S. bank would be required to close the foreign institution's account.
The sponsors include Sen. Carl Levin, D-Mich., and Sen. Sarbanes. The bill is similar to measures Sen. John Kerry, D-Mass., introduced on Feb. 27, and House Financial Services ranking Democrat John LaFalce of New York introduced April 2.
Credit Scoring
S 1242, HR 1176
Sens. Charles Schumer, D-N.Y., and Wayne Allard, R-Colo., on July 25 reintroduced legislation that would require mortgage lenders and credit reporting agencies to provide customers with their credit scores and a summary of what the grades mean.
The Consumer Credit Score Disclosure Act, which stalled last year, would prohibit credit reporting agencies from banning mortgage lenders from disclosing credit scores. It would also require lenders to tell consumers how their scores are calculated and what credit behavior could raise them.
In the House, Rep. Harold Ford Jr., D-Tenn., introduced a similar bill April 10 that would require lenders to disclose the scores on a consumer's request, as well as provide free annual credit reports.
S Corporations
S 1201, S 936, HR 1263
Sen. Orrin Hatch, R-Utah, on July 19 introduced legislation that would expand the number of banks eligible to become S corporations and let members of one family be treated as a single shareholder. S corporations pay no corporate taxes, passing their profits directly to shareholders whose dividend income is taxed. Currently only businesses with fewer than 75 shareholders are eligible. The Hatch bill would increase the allowable number of shareholders to 150.
The bill, co-sponsored by Sen. John Breaux, D-La., is similar to one introduced May 23 by Sens. Wayne Allard, R-Colo.; Craig Thomas, R-Wyo.; and Tim Johnson, D-S.D. A companion bill was introduced in the House March 29 by Rep. Scott McInnis, R-Colo.
Privacy
S 1055, S 30, S 324, S 526, S 1014, HR 2036, HR 2720
Reps. Edward J. Markey, D-Mass., and Joe Barton, R-Tex., on Aug. 2 reintroduced legislation that would amend the Gramm-Leach-Bliley Act by requiring that financial institutions get customers' explicit permission - an "opt in" - before divulging their personal information to other companies. The opt-in requirement would apply to affiliates as well as third parties.
The bill also would prohibit financial institutions from denying services to customers who block information-sharing. Additionally, consumers would be able to inspect the personal information collected by their financial service providers and correct any inaccuracies. Among other changes to regulatory oversight, state attorneys general would be granted enforcement authority.
Separately, Commerce consumer protection subcommittee Chairman Cliff Stearns, R-Fla., is preparing to introduce a bill as early as September that likely would further limit the uses of financial and medical information, but preempt state and local privacy laws and possibly restrict class-action lawsuits.
Financial Fraud
HR 1408
The House is expected in early September to vote on a bill that would facilitate information-sharing among federal and state regulators on industry professionals who have been convicted of fraud or been the subjects of enforcement action by regulators.
The Financial Services Anti-fraud Network Act, sponsored by Rep. Mike Rogers, R-Mich., cleared the House Financial Services Committee by voice vote in June. It would create a computer network to track industry professionals convicted of fraud and make the information available to state and federal officials.
Law enforcement and financial regulators would have six months to develop a data-sharing policy and two years to put it in effect.
