House Financial Services Committee Issues Report on Business of Insurance Regulatory Reform Act
Excerpts of the report follow:
Purpose and Summary
Introduced by Representative
Background and Need for Legislation
Title X of the Dodd-Frank Act authorizes the Bureau to regulate consumer financial products and services, such as extending credit, loan servicing, debt collection, deposit taking, providing payment instruments, check cashing, consumer reporting, etc. However, Section 1027 of the Dodd-Frank excludes several enumerated products and services from the Bureau's jurisdiction, including the business of insurance as conducted by any entity regulated by a state insurance regulator.1
1Dodd-Frank Act Sec. 1027(f).
The Dodd-Frank Act defines the "business of insurance'' as practices that include:
the writing of insurance or the reinsuring of risks by an insurer, including all acts necessary to such writing or reinsuring and the activities relating to the writing of insurance or the reinsuring of risks conducted by persons who act as, or are, officers, directors, agents, or employees of insurers or who are other persons authorized to act on behalf of such persons.2
212 U.S.C. Sec. 5481(3).
In addition, the Bureau is prohibited from regulating the business of insurance by the existence of the McCarran Ferguson Act,3 which exempts the business of insurance from federal regulation.
315 U.S.C. Sec. Sec. 1011-1015.
Despite this explicit prohibition, the Bureau, under the leadership of its former Director, demonstrated an interest in insurance products and has pushed the boundaries of its own authority by regulating products that would otherwise fall under the purview of state insurance regulators. In 2013, the Bureau issued an enforcement action against a bank and its service provider for allegedly deceptive sales of "add-on'' GAP insurance products by the bank's service provider.4 According to the consent order, the Bureau found Unfair Deceptive and Abusive Acts or Practices violations for:
4https://www.consumerfinance.gov/policy-compliance/enforcement/ actions/dealers-financial-services-llc/.
"(a) deceptively marketing the prices of an add-on vehicle service contract and an add-on GAP insurance product, and (b) deceptively marketing the scope of the coverage of a vehicle service contract.5
5http://files.consumerfinance.gov/f/201306_cfpb_consent-order- 004.pdf.
Despite the Dodd-Frank Act specific restrictions on the Bureau's authority over the sale of optional insurance products, which are not required in order for a consumer to obtain a financial product or service, by a bank or service provider.
As a federal regulatory agency, the law limits the Bureau's regulatory authorities, and therefore, because every state has a state insurance regulator to govern the sale of insurance, and the Dodd-Frank Act only discusses the business of insurance in order to exempt it from the Bureau's purview, it is clear that Congressional intent was to prohibit the Bureau's regulation of the business of insurance, but explicitly sought to exclude the Bureau from doing so. H.R. 3746 would clarify that state insurance regulators hold primary jurisdiction to enforce consumer protection standards related to the business of insurance.
Hearings
Committee Consideration
Committee Votes
Clause 3(b) of rule XIII of the Rules of the
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
In compliance with clause 3(c)(2) of rule XIII of the Rules of the
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
U.S.
Hon.
Chairman,
Dear Mr. Chairman: The
If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contact is
Sincerely,
Director.
Enclosure.
H.R. 3746--Business of Insurance Regulatory Reform Act of 2017
Under current law, the
H.R. 3746 would clarify that the
Using information from the
CBO estimates that implementing H.R. 3746 could reduce civil penalties collected by the
CBO estimates that enacting H.R. 3746 would not increase net direct spending or significantly increase on-budget deficits in any of the four consecutive 10-year periods beginning in 2029.
H.R. 3746 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is
Federal Mandates Statement
This information is provided in accordance with section 423 of the Unfunded Mandates Reform Act of 1995.
The Committee has determined that the bill does not contain Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental mandate on State, local, or tribal governments.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to the terms and conditions of employment or access to public services or accommodations within the meaning of the section 102(b)(3) of the Congressional Accountability Act.
Earmark Identification
With respect to clause 9 of rule XXI of the Rules of the
Duplication of Federal Programs
In compliance with clause 3(c)(5) of rule XIII of the Rules of the
Disclosure of Directed Rulemaking
Pursuant to section 3(i) of
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section cites H.R. 3746 as the "Business of Insurance Regulatory Reform Act of 2017.''
Section 2. Clarification to the authority of the Bureau with respect to persons regulated by a state insurance regulator
This section amends Section 1027(f) of the Consumer Financial Protection Act of 2010 to clarify the definition of the "business of insurance.'' Specifically, this bill creates an explicit exception related to
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of the
CONSUMER FINANCIAL PROTECTION ACT OF 2010
MINORITY VIEWS
112 U.S.C. Sec. 5517(f)(1) states that "no provision of this title shall be construed as altering, amending, or affecting the authority of any State insurance regulator to adopt rules, initiate enforcement proceedings, or take any other action with respect to a person regulated by a State insurance regulator.''
212 U.S.C. Sec. 5517(f)(2).
3A "service provider'' is defined as any entity that provides a material service to a bank or nonbank subject to the supervision of the
412 U.S.C. Sec. 5517(f)(2).
5https://www.nytimes.com/2017/07/27/business/wells-fargo- unwanted-auto-insurance.html.
The Dodd-Frank Act also grants the
612 U.S.C Sec. Sec. 5514(e), 5515(d), and Sec. 5516(e); 12 U.S.C. 5517(n).
In sum, H.R. 3746 would substantially scale back the
The full text of the report is found at: https://www.congress.gov/congressional-report/115th-congress/house-report/668/1?r=1
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