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December 2, 2021

November Hill Update

OCC Nominee Confirmation hearing

President Biden’s nominee to be Comptroller of the Currency, the top banking supervisor in the country, had a rough reception before the Senate Banking Committee, which included outrageous red-baiting attacks from one Republican Senator.  That was not a surprise given the many baseless statements made after her nomination was announced on September 23rd and in light of the quick opposition by the Chamber of Commerce and other allies/front groups for Wall Street’s biggest banks.

The nominee, Saule Omarova, is a law professor from Cornell University, and a highly regarded expert on banking issues. But Louisiana Republican Senator John Kennedy wasn’t interested in any of that.  Instead, he questioned the Kazakhstan-born Omarova on her childhood membership in a communist youth organization and outrageously said “I don’t know if I should call you ‘professor’ or ‘comrade.'” Thankfully, Senator Kennedy was alone is such explicit attacks, but not in the many implicit, baseless attacks having nothing to do with her actual qualifications for the job.

This is doubly unfortunate.  First, it detracts from a serious substantive discussion of the important mission of the OCC in regulating thousands of the country’s banks, including the largest banks in the country.  Second, such irrelevant, personal, and venomous attacks will inevitably discourage good, high-quality people—Democrats and Republicans alike—from seeking or accepting senior government positions.  That is a grave disserve to and loss for the country.

The next step in the process is for the Senate Banking Committee to hold a vote on Omarova’s nomination, but a date for that has not yet been set.

CFPB Director Congressional hearing

The Director of the Consumer Financial Protection Bureau, Rohit Chopra, recently testified before the House Financial Services Committee in his first hearing as the country’s top regulator of financial products.  While he addressed many specific topics, the overall message was that the financial consumer cop—the CFPB—was back on the Wall Street beat fearlessly protecting hardworking Main Street Americans from financial predators and scams.

At his hearing, Chopra said he planned to deploy the resources of the CFPB against the “the largest firms that are engaged in nationwide harm,” because “[f]ocusing on larger participants in the market is one of the best ways we can accomplish our mission.”  He also testified about the progress the agency is making in evaluating the “ability-to-repay” rule for mortgages, a controversial initiative begun by the Trump administration.

CFPB Director Chopra was also asked by the Committee’s Chairwoman, Maxine Waters, if he would strengthen the agency’s rules cracking down on payday lenders; Chopra said he and his staff would continue to monitor the payday lending industry closely, but he did not commit to additional regulation.

SPAC mark up

On Tuesday, November 16, the House Financial Services Committee passed two bills that will create new protections for investors in special purpose acquisition companies. SPACs are shell companies that allow private companies to be listed on public stock exchanges without fulfilling the investor protection requirements—and regulatory oversight—of a traditional initial public offering (IPO). This alternative route to the public markets is growing in popularity, with many high-profile investors and celebrities lending their names to newly formed SPACs in exchange for lucrative fees.

However, while SPACs are very lucrative for their sponsors and other Wall Street insiders, the lack of investor protections and other regulatory guardrails are not working out so well for investors.  A screaming red flag confirming that is a “growing mountain of evidence” that SPACs have “significantly underperform[ed]” IPOs.  That’s why legislation approved by the Committee this week is so important: it eliminates what some have called a “loophole” that supposedly allows SPACs to make “forward-looking statements” about the company’s profitability and prospects without repercussions even if the statements are later proven false. The bill’s supporters say this change would begin to level the playing field for SPACs and companies going public via a traditional IPO.

The other bill approved by the Committee requires SPAC sponsors to disclose how much the deal’s key investors stand to make in fees if the deal goes through.  This is another way to protect retail investors who might see their shares in the company suffer due to excessive fee-taking by insiders.

While the fate of these bills is unclear, the next step in the process would be for a vote to be scheduled by the full House of Representatives

Our fact sheet lays out some of the key points that anyone should be thinking about when it comes to SPACs. Read it here

“Buy Now, Pay Later” (BNPL) hearing

In early November, the House Financial Services Task Force on Financial Technology held a hearing on the growing use of “buy now, pay later” (BNPL) payment plans for consumers. The hearing was entitled “Buy Now, Pay More Later? Investigating Risks and Benefits of BNPL and Other Emerging Fintech Cash Flow Products.”

During the hearing, Dr. Kristen Broady, a fellow at The Brookings Institution, said that BNPL programs had a role to pay to help under-banked communities avoid excessive overdraft fees that often plague low-income earners. Lauren Saunders of the National Consumer Law Center warned, however, that some financial technology products like BNPL “appear primarily to be designed to evade consumer protection laws,” a position that was supported by

Marisabel Torres of the California Policy Center for Responsible Lending, who said that BNPL loans may fall outside of existing consumer protection rules and put consumers at risk of abuse.

This is yet another reminder that so-called “innovations” in the financial industry must be carefully scrutinized to ensure that consumers are protected and that such “innovations” are not just another creative predatory mechanism to rip people off.

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