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House Financial Services Committee Markup

House Financial Services Committee

Markup Part II

Tuesday, July 16, 2019

Bills Considered

Opening Statements

Chairwoman Maxine Waters (D-Calif.)

In her opening statement, Waters said the markup would consider eight bills, several with bipartisan support, that benefit consumers, investors and small businesses. Waters said that the markup would feature two bills on credit reporting and additional bills on capital markets and investor protection. Waters highlighted that one of these bills would provide the Securities and Exchange Commission (SEC) with a statute of limitations of 10 years for civil monetary penalties, and another would enhance the SEC’s ability to impose civil monetary penalties for violations of securities laws, saying she was “pleased” to move these bills forward for consideration by the committee.

Ranking Member Patrick McHenry (R-N.C.)

In his opening statement, McHenry noted bills with bipartisan support including H.R. 3702 and H.R. 3625, but said the remaining bills under consideration are a series of partisan bills that would raise the cost of doing business in America and “do nothing” to help consumers, grow the economy or create jobs. McHenry said these proposals would increase the cost of being a public company and hurt main street investors.

H.R. 3621, the “Student Borrower Credit Improvement Act”

Rep. Ayanna Pressley (D-Mass.) introduced her bill and her Amendment in the Nature of a Substitute, which would establish processes to allow private student loan borrowers to have derogatory marks removed from their credit profile once they have made nine of ten consecutive payments on their loan, mirroring the protections granted to delinquent or defaulted federal student loan borrowers. Reps. Alma Adams (D-N.C.) and Waters spoke in favor of the bill. Rep. Andy Barr (R-Ky.) spoke in opposition to the bill.

Amendment Offered by Rep. French Hill (R-Ark.)

Hill introduced his amendment, which would extend the provisions of the legislation to all student loans, not solely private student loans. McHenry spoke in support of the amendment. The amendment was not agreed to.

Amendment Offered by Rep. Lance Gooden (R-Texas)

Gooden introduced his amendment, which would require consumers who undergo credit rehabilitation under the underlying bill to attend financial literacy training to ensure they do not default again. Rep. Michael San Nicolas (D-Guam) spoke against the amendment, citing concerns about adequate access to approved financial counselors, particularly in small and rural communities. The amendment was not agreed to.

The amended measure was favorably reported to the House by a vote of 33-25.

H.R. 3623, the “Climate Risk Disclosure Act of 2019”

Rep. Sean Casten (D-Ill.) introduced his bill and his Amendment in the Nature of a Substitute, which would require public companies to disclose more information about their exposure to climate-related risks. Casten said that climate change is a risk to the global financial system, and explained that the bill presents a “market-based solution” to understand the impact of a changing climate on companies and provide investors, lenders and insurers with better information. Reps. Bill Huizenga (R-Mich.), Hill and Barr spoke in opposition to the bill. Reps. Madeleine Dean (D-Pa.), Nydia Velázquez (D-N.Y.), San Nicolas and Waters spoke in support of the bill.

Amendment Offered by Rep. Huizenga

Huizenga introduced his amendment, which would subject the added disclosures of the underlying legislation to the same investor testing required in H.R. 1815, the SEC Disclosure Effectiveness Testing Act to test the “usefulness” of the disclosure. Casten spoke in opposition to the amendment, saying it is “fundamentally different” from H.R. 1815 and “not material to the bill.” The amendment was not agreed to.

Amendment Offered by Rep. Bryan Steil (R-Wis.)

Steil introduced his amendment, which states that public companies should not be required to disclose information that is not of material importance to the average investor and that the SEC cannot deem information to be presumptively material, saying it “right sizes this one-size-fits-all bill.” Casten spoke against the amendment. Huizenga and McHenry spoke in favor of it. The amendment was not agreed to.

The amended measure was favorably reported to the House by a vote of 34-25.

H.R. 3624, the “Outsourcing Accountability Act of 2019”

Rep. Cindy Axne (D-Iowa) introduced her bill and her Amendment in the Nature of a Substitute, which would require public companies to include in their annual report how many employees they have by state and country. Huizenga spoke in opposition to the bill, saying it would add another reporting requirement to an “already vast” list of information public companies must disclose. Rep. Trey Hollingsworth (R-Ind.) also spoke against the bill. Rep. Katie Porter (D-Calif.) spoke in support of the bill, saying it would cause companies to “think twice” before laying off American workers in order to outsource to other countries. Casten and San Nicolas also spoke in support of the bill.

The amended measure was favorably reported to the House by a vote of 33-25.

H.R. 3625, the “PCAOB Whistleblower Protection Act of 2019”

Rep. Sylvia Garcia (D-Texas) introduced her bill and her Amendment in the Nature of a Substitute, which would establish a whistleblower program at the Public Company Accounting Oversight Board (PCAOB) based on the program established at the SEC under Dodd-Frank. Under the bill whistleblowers would be protected from retaliation from their employer, as well as be eligible for monetary rewards if their information leads to disciplinary action. Huizenga spoke in opposition to the bill, saying it would create a redundant whistleblower process.

The amended measure was favorably reported to the House by a voice vote.

H.R. 3629, the “Clarity in Credit Score Formation Act of 2019”

Rep. Stephen Lynch (D-Mass.) introduced his bill and his Amendment in the Nature of a Substitute, which would direct the Consumer Financial Protection Bureau (CFPB) to set standards for validating the accuracy and predictive value of credit scoring models, as well as require a study on the impact of using non-traditional data on consumer credit and the use of alternative data in credit scoring models. McHenry spoke against the bill, saying that the CFPB already has the authority to conduct oversight of credit scoring. Rep. Blaine Luetkemeyer (R-Mo.) also spoke in opposition to the bill. Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Waters spoke in favor of the bill.

Amendment Offered by Rep. McHenry

McHenry introduced his amendment, which would ensure credit reporting agencies are “thoroughly and appropriately supervised,” as well as prevent credit reporting agencies from using Social Security numbers for purposes of verification. He further explained that the amendment would also mandate removal of all paid non-elective medical debt from credit reports. Reps. Anthony Gonzalez (R-Ohio) and Luetkemeyer spoke in support of the amendment. Lynch and Waters spoke in opposition to the amendment. The amendment was ruled not germane.

Amendment Offered by Rep. Barr

Barr introduced his amendment, which would preserve the provision requiring the CFPB to conduct a study on the impact of non-traditional data as it relates to credit reporting, but strikes provisions that would direct the CFPB to set credit reporting standards. Reps. Bill Huizenga (R-Mich.), John Rose (R-Tenn.) and Luetkemeyer spoke in favor of the amendment. Reps. San Nicolas, Sylvia Garcia (D-Texas), Juan Vargas (D-Calif.), Gregory Meeks (D-N.Y.), Lynch and Waters spoke against the amendment. The amendment was not agreed to.

The amended measure was favorably reported to the House by a vote of 33-25.

H.R. 3641, the “Stronger Enforcement of Civil Penalties Act of 2019”

Rep. Katie Porter (D-Calif.) introduced her bill and her Amendment in the Nature of a Substitute, which would “significantly increase” the penalty amount in each of the existing three tiers of securities law violations and add a fourth tier for “particularly egregious rule breaking.” She explained that in addition to raising the per-violation caps for third-tier violations to $1 million per offense for individuals and $10 million per offense for entities, the bill would also give the SEC additional options to obtain greater penalties based on the financial harm the violations inflict on investors. Huizenga spoke in opposition to the bill, saying it should be coupled with “necessary reforms” to the SEC. Rep. Carolyn Maloney (D-N.Y.) spoke in favor of the bill.

Amendment Offered by Rep. Warren Davidson (R-Ohio)

Davidson introduced his amendment, which would “more appropriately balance the protections for the accused and punishments for wrongdoers.” Davidson explained that the amendment would require the SEC to incorporate economic analysis in its deliberation on enforcement matters to ensure shareholder interests are recognized and protected. Huizenga spoke in support of the amendment. Porter spoke against the amendment, saying it would make it harder for the SEC to “quickly and efficiently” resolve enforcement actions and remove bad actors from the marketplace. Casten also spoke in opposition to the amendment. The amendment was ruled not germane.

The amended measure was favorably reported to the House by a vote of 33-25.

H.R. 3701, “To establish a statute of limitations for certain actions of the Securities and Exchange Commission, and for other purposes.”

Rep. Vicente Gonzalez (D-Texas) introduced his bill and his Amendment in the Nature of a Substitute, which would allow the SEC to bring an action or proceeding for a civil monetary penalty up to ten years after the date the violation occurred. Maloney spoke in support of the bill, saying it is “long overdue.” She said the bill would give the SEC the tools it needs to “crack down” on securities fraud and protect investors.

Huizenga spoke against the bill, saying statutes of limitations are intended to be procedural protections that strike the proper balance between deterring and punishing securities fraud, adding that they help protect the shareholders ultimately responsible for paying the penalties for violations that they did not commit. Huizenga said having an extended and “potentially indefinite” statute of limitations would “erode those very protections.” Huizenga also highlighted that there is current statute that already subjects any federal agency enforcement seeking a “civil fine, penalty, and/or forfeiture” to a five year statute of limitations, so the bill would create a discrepancy between the SEC and other agencies “for no reason.” Steil also spoke against the bill, calling it “misguided.”

The amended measure was favorably reported to the House by a vote of 33-25.

H.R. 3702, the “Reforming Disaster Recovery Act”

Rep. Al Green (D-Texas) introduced his bill and his Amendment in the Nature of a Substitute, which would authorize the Secretary of Housing and Urban Development to provide disaster assistance to states under a community development block grant disaster recovery program. Reps. Ann Wagner (R-Mo.), Jesús Garcia (D-Ill.), Velázquez, Axne, Adams, Hill, Waters, Meeks and Barr spoke in favor of the bill.

The amended measure was favorably reported to the House by a vote of 58-0.

For more information on this markup, please click here.

For a summary of Part I of this markup, please click here.