House Bill Includes Grab Bag of Regulatory Provisions

A financial services budget bill passed in the House on Thursday contains some controversial regulatory provisions.

Here is a summary of what the measure proposes:

•For the first time since before the financial crisis, cut the budget of the Securities and Exchange Commission, to the tune of $50 million. That would represent a relatively modest decrease to a budget that has steadily grown to about $1.6 billion in the current year from about $900 million in 2007. SEC officials say the agency needs additional funding to meet a series of postcrisis mandates and to adequately police markets.

•Extend an existing provision that restricts the SEC from spending money on a rule requiring companies to disclose their political-spending activities. Democrats have long argued that mandating political-spending disclosures would provide greater transparency into the connection between corporations and politicians. Republican lawmakers say such requirements are misguided because companies’ political contributions generally don’t affect their financial performance—or aren’t “material.”

•Force the Consumer Financial Protection Bureau to have its budget approved by Congress, and create a five-member commission to lead the agency as opposed to a single director.

•Challenge a new rule on payday loans proposed by the CFPB last month and opposed vigorously by industry and some lawmakers. The bill requires the agency to submit a “detailed” report on the rule’s impact before funds from the budget can be used to issue and enforce the new rule during and after fiscal year 2017. Specifically, the CFPB is asked to analyze the impact of the new rule on consumers’ access to credit and identify products available to borrowers as alternatives to short-term, small-dollar loans to be affected by the rule, which include payday and auto-title loans, as well as some installment loans. The rule is currently going through a 90-day public comment period. It is likely to be completed early next year.

•Require the CFPB to do a similar cost-benefit study before regulating arbitration clauses in consumer contracts. The CFPB proposed regulation on that front in May.

•Prevent the CFPB from implementing or enforcing guidance related to indirect auto lending.

•Prevent the SEC from enforcing a requirement that companies disclose whether their products contain metals that are commonly called “conflict minerals” because the mining may be controlled by warlords or armed groups.

•Prevent the SEC from forcing firms to report the pay gap between their chief executive officer and median worker during the fiscal year that begins Oct. 1. This provision is symbolic and would have little practical effect, since requirements for public companies to disclose the “pay ratio” of CEO to worker pay don’t take effect until 2018.

•Require the Financial Stability Oversight Council to better explain its reasoning for designating financial firms as “systemically important financial institutions” subject to stricter oversight from the Federal Reserve, and require the Council to allow the firms to submit a plan to mitigate regulators’ concerns before the designation took effect. Another provision sponsored by Rep. Scott Garrett (R., N.J.) would prevent the oversight council from designating any firms.

•Prevent the SEC from proposing or implementing a rule mandating the use of universal proxy ballots during proxy contests.

•Add new provisions to the U.S. bankruptcy code to make it easier to handle the bankruptcy of a large financial institution.