What is the Financial CHOICE Act (HR 10)?

| June 7, 2017

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The so-called "Financial CHOICE Act," introduced in April 2017 by Rep. Jeb Hensarling (R-Texas), is a bill scheduled for a June 8 vote in the House of Representatives. Although the Act’s sponsors tout it as being focused on financial reform and Wall Street accountability, in reality it eliminates major consumer safeguards created in the wake of the disastrous financial crisis of 2008. The bill would weaken regulatory powers that pre-date the 2010 Dodd-Frank Act, and eliminate long-standing rights of shareholders to hold companies accountable for corporate misbehavior.

In essence, the Financial CHOICE Act would:

  1. Destroy the Consumer Financial Protection Bureau (CFPB) and obliterate consumer protections as we currently know them, including allowing banks to gouge consumers with debit card fees;
  2. Deregulate the banks and financial institutions whose greed brought on the 2008 financial crisis and resulting economic downturn;
  3. Eliminate opportunities for ordinary shareholders to formally engage with the companies in which they are invested.

House Republicans are hoping to sneak this bill through without Americans knowing. The Financial CHOICE Act allows for risky corporate behavior and practices that benefit Wall Street, and would take away power from regulators that should be able to protect us from corporate greed.

THE ACT WOULD DESTROY THE BUREAU CHARGED WITH PROTECTING CONSUMERS

The CFPB was created for a simple reason: we can’t trust Wall Street to put the interests of average American families over financial gain. Following the Great Recession, the largest economic downturn since the Great Depression, Congress created the CFPB to ensure that big banks wouldn’t be able to so easily wreck our economy again. The CFPB is charged with protecting American consumers from the greed and abuses of Wall Street.

Despite what its sponsors may say, the Financial CHOICE Act would destroy the CFPB, making it impossible for the CFPB to act forcefully against unlawful practices in consumer markets. As a result, it would make it easier for predatory lenders, big banks, and other financial companies to rip people off. The CFPB is working to stop tricks and traps that cost billions of dollars a year. The CHOICE Act takes away key tools the CFPB needs to fulfill its mission, including its authority to:

  • Supervise and bring enforcement actions against big banks;
  • Prevent unfair, deceptive, and abusive practices;
  • Enforce against lawbreaking by payday and car title lenders that charge sky-high interest rates;
  • Maintain a public database of consumer complaints about financial firms.

BUT WAIT, THE BILL SAYS IT WOULD HOLD WALL STREET ACCOUNTABLE

Unfortunately, the CHOICE Act would tie the hands of bank regulators and make it easier for banks to again take risks that endanger our economy. The bill would repeal the Volcker Rule, which prohibits banks from gambling with customer money; the fiduciary rule which requires retirement investment advisors to act in the best interest of clients; and repeal the Durbin Amendment which would allow big banks to rake in higher fees while doing nothing for community banks that are not covered by the provision. The legislation sharply limits the ability of regulators to ensure that banks are managed in a safe and sound manner, and have adequate funds available to absorb potential losses without turning to the taxpayer for a bailout. It would give Wall Street a slew of new tools to overturn rules and make it harder for regulators to enforce the rules that remain. In short, the bill is a gift to Wall Street wolves that seek to prey on honest citizens trying to make a living.

SHAREHOLDER RIGHTS

History has shown us that companies often make decisions in favor of profit over community health and safety: oil spills, slashing employee benefits, sourcing goods made with child or forced labor, and much more. But it doesn’t have to be this way. If you own stock in a company through an investment or retirement account, you have a right to engage with that company (and much of corporate good citizenship can be linked to shareholder engagement). The Financial CHOICE Act would require shareholders to own 1 percent of company stock in order to formally engage through the shareholder proposal process. For Fortune 100 companies, this means you would need to own an average of $1.2 billion in stock, with a range of $6 million to $7.7 billion. Without shareholders who care and are willing to do the hard work of engaging with companies, local and international communities would suffer under unchecked corporate greed.

TELL YOUR MOC YOU OPPOSE FINANCIAL DEREGULATION THAT BENEFITS CORPORATIONS AND PUTS YOUR MONEY AT RISK

Republican Representatives seem to think it’s acceptable to undermine the safeguards put in place that have stabilized our financial system and protected consumers effectively. We must act quickly to make Congress understand that it is NOT OKAY to charge us more for no reason, put our money at risk, and take away the rights we have as shareholders in a company.

Our MoCs must strongly oppose any plan that destroys the CFPB and steals our rights as shareholders. Specifically, they should oppose:

  1. The Financial CHOICE Act in its entirety
  2. Any bill that would dismantle the Consumer Financial Protection Bureau
  3. Any bill that reduces much-needed regulation on Wall Street and financial firms
  4. Any part of the bill that would undermine the right to file shareholder proposals.

SAMPLE TOWN HALL QUESTIONS:

  1. The Financial CHOICE Act would return Wall Street to the power it had before the financial crisis. Will you oppose any bill that dismantles the Consumer Financial Protection Bureau?
  2. I am an owner of stock in U.S. publicly-traded companies in my retirement account. Every year, I am allowed to weigh in on the behavior of the companies I own. The Financial CHOICE Act would eliminate the rights of small investors like me. Will you commit to me that you will oppose any change to the Shareholder Proposal Rule?
  3. I am responsible for investing my clients’ money in their best interest. As an ethical investment manager, the Financial CHOICE Act would take away my ability to engage with companies on my behalf of my clients, and their investments could suffer. Will you commit to me that you will oppose any change to the Shareholder Proposal Rule that would take away my ability as a trusted advisor to engage with the companies in my clients’ accounts?
  4. The 2008 financial crisis and the recent Wells Fargo disaster both came from Wall Street greed and lack of regulation. The Financial CHOICE Act would repeal laws like the Volcker Rule and the fiduciary rule which are put in place to protect my assets and our financial system. Will you commit to me that you will oppose deregulation of the financial system?