House/Senate Conference Reach Consensus on Regulatory Reform Bill

June 25, 2010 — After more than two weeks of conference and a 20-hour debate on June 24, the House and Senate agreed on a financial regulatory reform bill. The next step for the legislation, renamed the Dodd-Frank Act, will be action by the full House and Senate.

The Dodd-Frank Act, named for the two chairmen of the House and Senate banking committees, is the result of more than two years of work on financial regulatory reform. The bill is expected to pass in both the House and Senate by the July 4 recess.

Below find summaries of certain provisions:

Deposit Insurance
The bill makes permanent bank and credit union deposit insurance to $250,000 for insured accounts of the National Credit Union Share Insurance Fund (NCUSIF) and Federal Deposit Insurance Corporation (FDIC). It also insures non-interest bearing transaction accounts at FDIC-insured institutions. A similar insurance structure will also be established for credit union share business accounts.

Interchange Fees
The Federal Reserve is directed to set a "reasonable" rate for interchange fees for debit cards. Government issuers are exempt, as well as financial institutions under $10 billion in assets. The financial services industry lobbied to have this provision removed from the bill, arguing that the rate may disadvantage smaller issuers. However, the provisions remain in the reconciled bill.

Consumer Protection
The reconciled bill includes the Senate language for a separate consumer protection agency. The new Consumer Financial Protection Bureau (CFPB) will be housed at the Federal Reserve Board. For financial institutions, including credit unions, with under $10 billion in assets consumer protection examination will remain with the prudential regulator.

The Dodd-Frank Act states that the Office of the Comptroller of the Currency can only preempt state law if they "prevent or significantly interfere with the business of banking." State attorneys generals' enforcement authority is also reinforced in the final bill; further, they will also be able to enforce some federal consumer protection rules from newly created CFPB.

Risk Retention
The conference base text included a provision requiring retention of not less than 5 percent of the credit risk for any asset that is transferred, sold or conveyed through the issuance of an asset-backed security, referred to as the "skin in the game" provision. During final deliberations on the bill, a compromise was reached on this provision establishing an exemption for lenders who package qualified mortgages into securities.

Financial Stability
A new Financial Stability Oversight Council will be charged with monitoring and addressing systemic risks, as well as identifying and imposing certain regulatory requirements for financial entities posing system-wide risk. The Chairman of the National Credit Union Administration is a voting member of this Council. Also, a state banking supervisor, state securities commissioner and state insurance commissioner are included in the Council as nonvoting members.

NASCUS will report on the progress of votes in the House and Senate as news develops.