House Subcommittee Examines Bills to Promote Access to Banking Services

September 27, 2016

On Tuesday, September 27, 2016, the House Financial Services Financial Institutions and Consumer Credit Subcommittee held a hearing to explore seven bills aimed at improving consumer access to banking services.  Subcommittee Chairman Randy Neugebauer (R-TX) shared in his opening statement, “Today’s hearing is important to consider legislation that can have a tremendous impact on consumer credit and product access and education.  I am pleased our Committee members on both sides of the aisle have taken thoughtful approaches to tackle issues that affect the daily lives of the American consumer.”  Ranking Member Lacy Clay (D-MO) utilized his opening time to highlight the need to aid the un-banked, under-banked, and credit invisible.

 

Rep. Ed Royce (R-CA) introduced two of the bills considered by the Committee.  First, the Credit Score Competition Act of 2015 would allow Fannie Mae and Freddie Mac to consider multiple credit scoring models, as opposed to one single model, when evaluating mortgage purchasing decisions.  His second bill, the Facilitating Access to Credit Act of 2015, would promote access to credit education services by updating the law to reflect the differences between credit education and credit repair activities.  A third credit reporting related bill, the Credit Access and Inclusion Act of 2015, was offered by Rep. Keith Ellison (D-MN).  The legislation seeks to help consumers build credit histories by allowing the U.S. Department of Housing and Urban Development as well as utility and telecom companies to report on-time payment data to credit reporting agencies. 

 

In addition, Reps. Gwen Moore (D-WI) and Tom Emmer (R-MN) discussed their legislation to help smaller institutions holding reciprocal deposits by excluding such deposits from the definition of “brokered deposits,” which are subject to higher FDIC deposit insurance assessments.  Specifically, the exclusion would apply for institutions having composite scores of “good” or “outstanding,” or those not holding reciprocal deposits exceeding the lesser of $10 billion or 20 percent of total liabilities.  Rep. Roger Williams’ (R-TX) Retail Checking Protection Account would provide relief to community banks by exempting retail deposits from the definition of brokered deposits if such retail deposit accounts are opened by and held in the name of the retail customer.  Finally, Rep. Scott Tipton’s (R-CO) Protect Prepaid Accounts Act of 2016 would allow prepaid funds to be considered core deposits, thereby decreasing costs associated with deposit insurance and compliance.

 

The hearing also featured testimony from Dr. Michael Turner, President and Chief Executive Officer of the Policy and Economic Research Council; Mr. Ron Paul, CEO of Eagle Bank; and Dr. Norbert Michel of the Heritage Foundation.  While the testimony from Dr. Turner and Mr. Paul was generally supportive of the legislation discussed, Dr. Michel’s testimony was critical of expanding FDIC insurance on brokered deposits and reciprocal deposits, claiming doing so would promote moral hazard and increase taxpayer risk.