[Congressional Record Volume 164, Number 29 (Wednesday, February 14, 2018)]
[House]
[Pages H1147-H1155]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PROTECTING CONSUMERS' ACCESS TO CREDIT ACT OF 2017
Mr. HENSARLING. Mr. Speaker, pursuant to House Resolution 736, I call
up the bill (H.R. 3299) to amend the Revised Statutes, the Home Owners'
Loan Act, the Federal Credit Union Act, and the Federal Deposit
Insurance Act to require the rate of interest on certain loans remain
unchanged after transfer of the loan, and for other purposes, and
[[Page H1148]]
ask for its immediate consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore (Mr. Brat). Pursuant to House Resolution 736,
the bill is considered read.
The text of the bill is as follows:
H.R. 3299
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protecting Consumers'
Access to Credit Act of 2017''.
SEC. 2. FINDINGS.
Congress finds that--
(1) the contractual doctrine of valid when made which, as
applied to lending agreements, provides that a loan that is
valid at inception cannot become usurious upon subsequent
sale or transfer to another person;
(2) this important and longstanding principle derives
from the common law and its application has been a
cornerstone of United States banking law for nearly 200
years, as provided in the case Nichols v. Fearson, 32 U.S. (7
Pet.) 103, 106 (1833), where the Supreme Court famously
declared: ``Yet the rule of law is everywhere acknowledged,
that a contract free from usury in its inception, shall not
be invalidated by any subsequent usurious transactions upon
it.'';
(3) in 2016, the Solicitor General, in consultation with
all Federal banking regulators, filed an amicus brief in the
case of Midland Funding, LLC v. Madden, 136 S. Ct. 2505
(2016) (mem.), denying cert. to 786 F.3d 246 (2d Cir. 2015),
that described the United States Court of Appeals for the
Second Circuit in that case ``incorrect'' with an ``analysis
reflect[ing] a misunderstanding'' of section 85 of the
National Bank Act and Supreme Court precedent, because it
contradicted the contractual doctrine of valid when made;
(4) the valid-when-made doctrine, by bringing certainty
to the legal treatment of all valid loans that are
transferred, greatly enhances liquidity in the credit markets
by widening the potential pool of loan buyers and reducing
the cost of credit to borrowers at the time of origination;
(5) a joint academic study from professors at Stanford,
Fordham, and Columbia universities concluded that the Madden
v. Midland decision has already disproportionately affected
low- and moderate-income individuals in the United States
with lower FICO scores; and
(6) if the valid-when-made doctrine is not reaffirmed
soon by Congress, the lack of access to safe and affordable
financial services will force households in the United States
with the fewest resources to seek financial products that are
nontransparent, fail to inform consumers about the terms of
credit available, and do not comply with State and Federal
laws (including regulations).
SEC. 3. RATE OF INTEREST AFTER TRANSFER OF LOAN.
(a) Amendment to the Revised Statutes.--Section 5197 of
the Revised Statutes (12 U.S.C. 85) is amended by adding at
the end the following: ``A loan that is valid when made as to
its maximum rate of interest in accordance with this section
shall remain valid with respect to such rate regardless of
whether the loan is subsequently sold, assigned, or otherwise
transferred to a third party, and may be enforced by such
third party notwithstanding any State law to the contrary.''.
(b) Amendment to the Home Owners' Loan Act.--Section 4(g)
of the Home Owners' Loan Act (12 U.S.C. 1463(g)) is amended
by adding at the end the following:
``(3) A loan that is valid when made as to its maximum
rate of interest in accordance with this subsection shall
remain valid with respect to such rate regardless of whether
the loan is subsequently sold, assigned, or otherwise
transferred to a third party, and may be enforced by such
third party notwithstanding any State law to the contrary.''.
(c) Amendment to the Federal Credit Union Act.--Section
205(g) of the Federal Credit Union Act (12 U.S.C. 1785(g)) is
amended by adding at the end the following:
``(3) A loan that is valid when made as to its maximum
rate of interest in accordance with this subsection shall
remain valid with respect to such rate regardless of whether
the loan is subsequently sold, assigned, or otherwise
transferred to a third party, and may be enforced by such
third party notwithstanding any State law to the contrary.''.
(d) Amendment to the Federal Deposit Insurance Act.--
Section 27 of the Federal Deposit Insurance Act (12 U.S.C.
1831d) is amended by adding at the end the following:
``(c) A loan that is valid when made as to its maximum
rate of interest in accordance with this section shall remain
valid with respect to such rate regardless of whether the
loan is subsequently sold, assigned, or otherwise transferred
to a third party, and may be enforced by such third party
notwithstanding any State law to the contrary.''.
SEC. 4. RULE OF CONSTRUCTION.
Nothing in this Act may be construed as limiting the
authority or jurisdiction of the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System, the Bureau
of Consumer Financial Protection, or the National Credit
Union Administration.
The SPEAKER pro tempore. The gentleman from Texas (Mr. Hensarling)
and the gentlewoman from California (Ms. Maxine Waters) each will
control 30 minutes.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. HENSARLING. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days to revise and extend their remarks and to
submit extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. HENSARLING. Mr. Speaker, I yield myself such time as I may
consume.
I rise today in strong support of H.R. 3299, the Protecting
Consumers' Access to Credit Act of 2017, a most important goal of this
Chamber. H.R. 3299 is an important bill that is cosponsored by a
bipartisan group of Members of the House and was approved by the House
Financial Services Committee with a very strong bipartisan vote of 42-
17.
I would like to start out by thanking my colleague, the gentleman
from North Carolina (Mr. McHenry), the vice chairman of the committee,
for introducing this legislation and leading our congressional efforts
to help create a regulatory framework which will encourage the growth
of financial technology and expand much-needed access to credit for
American small businesses and consumers.
H.R. 3299 is a legislative response to the 2015 Second Circuit Court
of Appeals decision in Madden v. Midland Funding, which clearly appears
to have not not considered the valid-when-made legal doctrine, which is
a nearly 200-year-old principle of usury law in our Republic. Again,
Mr. Speaker, 200 years of settled common law upended in one court case.
In the decision, the court held that, while the National Bank Act
allowed a federally chartered bank to charge interest under the laws of
its home State on loans it makes nationwide, nonbanks that bought those
loans could not continue to collect that interest because nonbanks are
generally subject to the limits of the borrower's State.
The Second Circuit decision has caused considerable uncertainty and
risk for many types of bank lending programs, including bank model
marketplace lending where national banks originate loans and then
transfer them to nonbank third parties.
Being able to offer consistent terms nationwide is vital to scaling
the marketplace lending business, which, in turn, allows lenders to
access cheaper investment capital and then pass the savings on to the
borrowers who may be looking to buy their first home, start a business,
send a kid to college.
H.R. 3299, again, is a commonsense bill that simply codifies the 200-
year-old valid-when-made legal doctrine, which would preserve the
lawful interest rate on a loan originated by a bank even if the loan is
sold, assigned, or transferred to a nonbank third party.
This fundamental concept is the backbone of how fintech companies
partner with banks. Without it, consumers are faced with higher costs
and less availability of credit, particularly those consumers with less
access to traditional lending sources.
Mr. Speaker, don't take my word for it. According to a recent
Columbia/Stanford University study, borrowers with credit scores under
625 have seen their credit cut in half, cut in half thanks to this
decision. Again, Mr. Speaker, borrowers with less than stellar credit
scores have seen their credit cut in half in the territory comprising
the Second Circuit. We simply cannot allow this to happen.
Now, Mr. Speaker, thanks to President Trump and Congress passing the
Tax Cuts and Jobs Act, we are beginning to see this economy start to
take off. We are finally seeing wages begin to grow after 8 years of
failed economic policy, but so much work remains to be done for working
American families.
We have heard, on our Financial Services Committee, Mr. Speaker, from
so many of these families who are trying to make ends meet, and it is
just vital that they be able to access credit.
Americans like Alan from New Hampshire, who recently had trouble
finding credit through traditional
[[Page H1149]]
banks and credit unions due to the regulatory load. As he explained:
``But for my local dealer's efforts on my behalf, there is no doubt I
would not be driving my current car. And this was a desperate
situation, as I am the sole income earner for my family. My wife is
ill, and we have two young children in school. After my old vehicle
broke down, I needed to find reliable replacement transportation so I
could get to work and continue to provide for my family.''
Mr. Speaker, we should not let the Second Circuit prevent Alan from
getting that car loan he desperately needs in order to get to work as
the sole provider for his family.
A small-business owner from Utah named Maxine applied for a loan for
her 37-year-old established business so she could update and purchase
equipment to support a contract that would have led to the creation of
50 additional jobs. She explained: ``Three banks informed us that our
rating, according to new bank regulations imposed by Dodd-Frank,
disqualified us from loan consideration.''
Fifty jobs, poof, gone, Mr. Speaker.
So is not Dodd-Frank bad enough? Now we are going to add this Second
Circuit opinion to deny credit, which, for lower credit score
individuals, has cut credit opportunity in half?
I don't think so. I don't think so. It is not up for the unelected to
make such decisions.
We cannot continue to allow, Mr. Speaker, Washington red tape and the
Second Circuit to cut off credit opportunities for hardworking
Americans. As the bill says: ``We must preserve and protect consumers'
access to credit.''
I urge every Member to support this very important bipartisan bill.
Mr. Speaker, I reserve the balance of my time.
{time} 1415
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I rise today in opposition to H.R. 3299, or the so-
called Protecting Consumers' Access to Credit Act of 2017. There is a
good reason over 200 civil rights, consumer, faith-based, housing,
labor, and veterans advocacy organizations oppose this bill. The type
of credit that this bill helps consumers access is the kind that makes
it easier for vulnerable consumers to sink into insurmountable debt
like payday and other high-cost loans.
H.R. 3299 expands the ability of nonbanks to preempt State-level
consumer protections by stating that the interest rate on any loan
originated by a national bank that is subsequently transferred to a
third party, no matter how quickly after it is originated, is
enforceable, which incentivizes riskier and predatory lending. H.R.
3299 advances a dangerous precedent by allowing third parties that
purchase loans from national banks to collect on interest rates that
would otherwise be illegal because they exceed State caps.
Now, this bill is an attempt to overturn a court decision related to
the legal concept of ``valid when made'' from the Second Circuit Court
of Appeals in Madden v. Midland Funding, LLC. In that case, the court
held that, when loans are transferred from banks to nonbank third
parties, they must maintain the same terms, rates, and conditions as
required by the State where the originating bank is chartered.
Despite claims by proponents of the bill, legal experts have
explained in testimony that ``the valid-when-made doctrine is a modern
invention, not a cornerstone of U.S. banking law.''
The Madden decision is only the rule of law in the States under the
Second Circuit, which are Connecticut, New York, and Vermont. Some
industry advocates, particularly marketplace lender fintechs, have
argued the ruling and confusion about valid when made caused such great
market ambiguity that it has resulted in reduced lending to needy
borrowers in those States, but those claims have not been
substantiated.
The only purported evidence we have on the effect of the Madden rule
is a single, unpublished study that cannot even be peer-reviewed
because it relies on private data from a single, unidentified
marketplace lender, and the authors of that study have not endorsed
this bill. In addition, 20 State attorneys general, including the
attorneys general for all three States under the Second Circuit, oppose
this legislative change.
But do you know what? Predatory lenders are worried about the Madden
case for a different reason.
Elevate, an online payday lender, is afraid that they won't be able
to continue making predatory loans if the Madden decision stays in
place. In their public filings with the SEC, Elevate said:
To the extent that the holdings in Madden were broadened to
cover circumstances applicable to Elevate's business or if
other litigation on related theories were brought against us
and were successful, we could become subject to State usury
limits and State licensing laws in addition to the State
consumer protection laws to which we are already subject. In
a greater number of States, loans in such States could be
deemed void and unenforceable, and we would be subject to
substantial penalties in connection with such loans.
Mr. Speaker, I do not doubt the sincerity of the good actors that may
be trying to navigate a difficulty the Madden ruling potentially
caused, but this is not just about those businesses, because H.R. 3299
would go much further to allow other third parties, including payday
lenders, to evade or outright disregard State-level laws and collect
debt from borrowers at unreasonably high rates of interest if they
purchase loans from a national bank. These arrangements are called
rent-a-bank or rent-a-charter agreements, and they allow payday lenders
to use banks as a front for predatory behavior and the evasion of State
interest rate caps.
Payday loans drain wealth from low-income consumers, particularly
those in communities of color, and payday loans trap their borrowers
into a cycle of debt that it takes years to climb out of with high
interest rates that are often in excess of 300 percent.
So let's be clear. Instead of simply overturning the Madden decision,
H.R. 3299 would go far beyond that and codify an expanded preemption
power without any proof that it will benefit consumers. In fact, all we
do know is that the bill will make it easier for bad actors to evade
safeguards that States have put in place to protect borrowers.
We cannot advance a bill that will allow nonbanks like payday lenders
to ignore State interest rate caps and make high-rate loans. While
Congress has preempted some State laws for national banks, it did not
authorize national banks to extend the privilege to whatever entities
they so choose.
I urge my colleagues to oppose this bill.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 5 minutes to the gentleman from
North Carolina (Mr. McHenry), vice chairman of the committee and
sponsor of the legislation.
Mr. McHENRY. Mr. Speaker, I want to thank the chairman for his
kindness in working with me and my team on bringing this bill to the
floor today, and I want to thank his staff as well.
What we have today is the Protecting Consumers' Access to Credit Act,
a bipartisan piece of legislation that we have both Republicans and the
Democrats in the Senate in support of as well as Democrats and
Republicans here in the House of Representatives supportive of.
The issue we are dealing with is one of the biggest challenges facing
our country, which is the decline of lending to consumers and small
businesses in small towns and rural communities like the ones I
represent in western North Carolina. It is the same issue facing so
many in urban settings as well. This touches all of America.
But the story in rural America is bleak. Community banks are closing
at a rapid pace, and small businesses are struggling to find loans.
Many Americans don't have the savings to cover a common $1,000
emergency like a car repair. That is not just a rural issue; that
touches all American communities.
The good news is, after the financial crisis, innovative companies
and banks partnered together to find new ways to help hardworking
Americans and small-business owners. They call it fintech.
These innovative companies partner with banks to help small
businesses get a loan. They help young people get out of student debt.
They help everyday Americans find the financing they need to lead
better lives.
[[Page H1150]]
Now, this should be something heralded by both parties. It shouldn't
be a partisan issue. It shouldn't be left or right, conservative or
liberal. It is a good thing that is happening with innovation and
different modes of lending and borrowing in this country.
And while this era of financial innovation is brand-new, the actual
structure supporting fintech is based on one of the oldest bedrock
principles in American law. The fundamental concept is called valid
when made.
Valid when made, or what the Supreme Court referred to in 1833 as
``the cardinal rule'' of American interest rate laws, provides the
legal foundation for how fintech companies partner with banks.
I don't have to share with the ranking member or other Members of our
Chamber that banks are heavily regulated; and if they even partner with
another firm, that, too, is a regulated thing. Yet all that changed
when the Supreme Court declined to hear the case of Madden v. Midland
Funding.
In Madden, activist judges on a Federal appeals court broke with a
longstanding legal precedent of valid when made and, instead, held that
the 1864 National Bank Act did not have a preemptive effect on loans
created under this fintech bank partnership.
Now the legal framework has been around almost for 200 years, and the
particular law that we are dealing with has been around for 150 years,
roughly speaking. This decision, though, has created uncertainty for
fintech companies, financial institutions, and credit markets
generally.
According to a study from Columbia University and Stanford
University, Madden significantly reduced credit availability in that
affected region, and this matters for all Americans because of the
effect it is having.
What we saw is loan volumes declined and the average FICO score for
borrowers to get a loan increased. That means that, if you are on the
margins of society, it got harder and more expensive for you to get
lending. So it is a bad case. Simply put, this should not be happening,
and if we are serious about financial inclusion for all Americans, we
need this bill today. A bipartisan bill, we need it.
And if we are serious about modernizing our financial system, we need
this bill passed into law. And if we are serious about helping everyday
Americans, not just the fortunate few with unblemished credit, we need
to pass this bill.
I am pleased this legislation enjoys support from my colleagues on
both sides of the aisle. I want to thank Representative Meeks,
Democrat, of New York; Senator Mark Warner, Democrat, of Virginia; and
Senator Pat Toomey, Republican, of Pennsylvania, who worked hard on
this bipartisan, bicameral legislation. It is important. It is needed.
It will have a positive impact on people's lives.
All arguments that have been made against this bill on the floor
don't actually focus on what is important and necessary about this
legislation. They are straw men that don't have anything to do with the
contents of this very simple, bipartisan piece of legislation.
Mr. Speaker, I ask my colleagues to vote for this.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield 2 minutes to
the gentleman from California (Mr. Khanna), vice chair of the
Congressional Progressive Caucus.
Mr. KHANNA. Mr. Speaker, I rise in opposition to this bill,
Protecting Consumers' Access to Credit Act.
I represent Silicon Valley, and I am not opposed to fintech. Let's be
very clear: If there is technology that is going to make it easier for
people to get access to capital, who is opposed to that?
But this has nothing to do with fintech. This has to do with basic
State laws. The question is not: Are we going to go to the future? The
question is: Are we going to go back to ``The Merchant of Venice'' when
usury laws were allowed? That really is what the issue is.
What this bill does, just to be very clear, is it says: If you want
to use fintech, if you want to use technology, now there is no law
against being charged 380 percent interest.
Mr. McHENRY. Will the gentleman yield?
Mr. KHANNA. I yield to the gentleman from North Carolina.
Mr. McHENRY. Mr. Speaker, is the gentleman asserting there is no law
or Federal regulation against federally chartered banks giving loans to
people?
Mr. Speaker, that is not simply the case.
Mr. KHANNA. Mr. Speaker, let me take back my comment.
Mr. Speaker, I understand the Second Circuit decision. The Second
Circuit decision basically said that, if you are a bank and if you are
a fintech company and you are in a rural part of the country--and I
totally agree with the gentleman; we need more capital to rural
America; we need more tech there. I admire Steve Case's work, the
``Rise of the Rest.''
But what the Second Circuit said is you can't partner with a national
bank and preempt State law. So if North Carolina has a law saying you
can't charge 400 percent interest, if there is a bank in New York or a
bank in California that wants to charge 400 percent interest just
because they have some magical fintech, they can't charge people 400
percent interest in North Carolina or Arkansas.
I am all for giving more capital at affordable rates and using
technology to help rural America.
We have done a terrible job of that. I concede that point. But this
is not the way to do that.
{time} 1430
The SPEAKER pro tempore. The time of the gentleman has expired.
Ms. MAXINE WATERS of California. I yield an additional 1 minute to
the gentleman from California.
Mr. KHANNA. This is going to hurt ordinary folks who can't make
paycheck to paycheck, and they are going to have to pay these
exorbitant interest rates.
Now, if the majority comes up with a bill that says we want to expand
the SBA, we want to expand figuring out how to get venture capital into
rural America, we want to expand the earned income tax credit so that
people have more money in their pocket so that they can make a living
and meet their daily expenses, I agree.
If they say, look, all the capital, 85 percent of the capital is in
my district in Massachusetts and New York, and we have got to get the
capital into other States, I agree.
But to say that just to use the word ``fintech'' and to say okay,
because there is something that is going to allow the diffusion of
capital, that that means that you should get rid of the State laws
capping usury, that is really going back to the Victorian era. I mean,
we had that debate. I was reading Shylock; that was what that was all
about. They were charging four times as much, and I just don't think
that that is what people want.
Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds just to say to
the gentleman who says this is a majority bill, I would also point out
it is supported by Congressman Meeks, Democrat from New York;
Congressman Clay, Democrat from Missouri; Congressman Scott, Democrat
from Georgia; Congressman Cleaver, Democrat from Missouri;
Congresswoman Moore, Democrat from Wisconsin; Congressman Perlmutter,
Democrat from Colorado; Congresswoman Sinema, Democrat from Arizona,
and the list goes on.
Mr. Speaker, I yield 4 minutes to the gentleman from Pennsylvania
(Mr. Rothfus), the vice chairman of our Subcommittee on Financial
Institutions and Consumer Credit.
Mr. ROTHFUS. Mr. Speaker, just listening to some of this debate, it
seems like some folks just want to find a way to vote ``no'' on this
bill when there are many reasons to vote ``yes.''
I am pleased to rise today in support of Vice Chairman McHenry's
bill, H.R. 3299, the Protecting Consumers' Access to Credit Act of
2017. I also want to commend him for his hard work on this very
important issue.
Under the valid-when-made doctrine, the interest rate on a loan that
complies with Federal law when it is made will remain valid, regardless
of whether that loan is transferred to a third party. This is an
important principle, and it is essential to maintaining a vibrant
secondary market and fostering continued growth in the online lending
industry.
The Second Circuit's decision in Madden v. Midland, which challenged
the valid-when-made doctrine, introduced significant uncertainty and
risk,
[[Page H1151]]
threatening both the secondary market and fintech lending partnerships.
This ultimately hurts consumers.
At the Financial Services Committee, we have extensively discussed
the difficulty that many Americans face in getting credit. Madden v.
Midland will only intensify that challenge for families and Main Street
businesses as it jeopardizes the ability of banks to sell loans into
the secondary market.
If banks find it difficult to sell debt to nonbanks, a common and
healthy practice, they will be forced to become more restrictive in
offering credit, and they may do so at a higher cost. Because of this,
fewer consumers will be able to access the funds they need to build,
invest, and innovate.
Throughout the course of the slow and uneven postcrisis economic
recovery, we settled into a two-speed economy. The biggest and richest
and best-connected firms have done just fine. They have a relatively
easy time accessing funds. Small businesses, however, have been
struggling to keep up. In fact, many haven't even gotten off the
ground.
Researchers found that our economy is currently missing 650,000 small
businesses; that is 650,000 fewer businesses that can innovate, create
jobs, and invest in our communities. And those 650,000 businesses would
have represented 6\1/2\ million jobs, 6\1/2\ million taxpayers, 6\1/2\
million people contributing to help Social Security and Medicare and
helping to pay for our veterans' care.
Anyone who travels this country talking to small-business owners
knows that access to credit is a major cause. By codifying valid when
made, this bill will help to address one of the most pressing threats
to our economic recovery and the resurgence of American small business.
As the OCC's former Acting Comptroller Keith Noreika noted, this
``proposal supports economic opportunity.''
H.R. 3299 will help to keep credit flowing through to those who need
it, while ensuring that consumers are protected. This is a commonsense
fix that provides the market with the clarity needed to support
continued economic growth. I urge my colleagues to support the
Protecting Consumers' Access to Credit Act of 2017.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Both of the gentlemen, Mr. McHenry and Mr. Rothfus, who are advancing
this legislation come from States that don't support it.
Mr. McHenry, North Carolina has banned payday lending. Mr. Rothfus,
Pennsylvania has banned payday lending. And here you have a bill that
would allow payday lenders to buy up debt from national banks and,
basically, charge consumers whatever they would like to charge them.
They would get around the ban of your own States. Do you really want to
do this?
Mr. Speaker, I reserve the balance of my time.
The SPEAKER pro tempore. Members are reminded to direct their remarks
to the Chair.
Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from
North Carolina (Mr. Pittenger), the vice chairman of the Terrorism and
Illicit Finance Subcommittee.
Mr. PITTENGER. Mr. Speaker, I thank the chairman for his leadership,
and I thank Congressman McHenry, also.
Mr. Speaker, I rise today to just, regretfully, say that this ruling,
Madden v. Midland, is just another layer of Big Brother, a misguided
ruling by some people of good intentions and goodwill, but the net
effect is fewer choices for the American people.
Mr. Speaker, I think we have seen what has happened as a result of
Dodd-Frank. We saw what happened to the American economy. We saw what
happened to the American consumers.
Mr. Speaker, regrettably, it is the low-income, minority people who
have suffered the most in the last decade as a result of the misguided
regulations that were put upon the American people. Big Brother really
doesn't have the answers.
What we do have is the opportunity to provide choices for the
American people, and that is what H.R. 3299 is all about.
Mr. Speaker, in North Carolina, we have lost 50 percent of our banks
because of this misguided regulatory overmanagement by the Federal
Government. There is less access to capital and credit for small
business. There is less access to capital for that individual who has a
real need. Maybe they want to start something, or maybe they have an
emergency in their family.
This is what this bill is all about, and we need to be behind it. We
need to support it. We need to understand that the American people know
how to make good choices. We need to trust the American people and not
trust Big Brother and the Big Government.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
I would like to remind Mr. Pittenger that his State, North Carolina,
again, along with Mr. McHenry, attorneys general have opposed this
bill. They do not like this bill, and I just want to remind them that
they don't have the support of their States in doing so.
Mr. Speaker, I yield 2 minutes to the gentlewoman from New York (Mrs.
Carolyn B. Maloney), the ranking member of the Capital Markets,
Securities, and Investments Subcommittee on the Financial Services
Committee.
Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I thank the ranking
member for yielding and for her extraordinary efforts to protect
consumers by opposing this bill.
Mr. Speaker, I rise in very strong opposition to H.R. 3299. I don't
think that we should be doing anything to take away States' authority
to enforce their own usury laws, which make it illegal for lenders to
charge outrageously high interest rates on their residents.
This is a core consumer protection issue, and if we allow lenders
that aren't subject to the strict Federal regulations for banks to
circumvent State regulations too, then we are just throwing consumers
to the wolves, removing protections.
I know that some people have claimed that this bill would promote
innovation by allowing financial technology companies to better serve
lower income customers; but let's be clear. The only loans that would
be allowed by this bill that aren't already allowed are loans that
violate State usury laws that are put in place in States to protect
their consumers. Why in the world would we want to do that to people?
I am sorry, but there is nothing innovative about usury, and there is
nothing innovative about gouging low-income consumers with outrageous
interest rates. This is a terrible, terrible bill.
So this bill is not about innovation. It is about taking away
protections for consumers from predatory loans. Why in the world would
we want to do that to people?
I urge my colleagues, I urge them to protect consumers and to oppose
this bill.
Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from
Colorado (Mr. Tipton), vice chairman of the Subcommittee on Oversight
and Investigations.
Mr. TIPTON. Mr. Speaker, it is interesting being able to listen to
this debate. The common ground is we want to be able to have consumers
have access to capital, and we also want responsible lending. We now
need to reset this debate to the reality that is being faced on the
ground.
In an already challenging loan environment for many banks nationwide,
the Madden v. Midland decision has further limited the ability of
national banks to be able to issue credit. Because of the court's
decision not to apply the valid-when-made doctrine to its decision,
which would have preserved lawful interest rates originated by a bank
for nonbanks and third parties, access to credit and risk mitigation
tools have been placed into jeopardy.
The legal uncertainty resulting from the Madden decision has led to a
reduction in responsible and affordable lending, and has limited
consumers' access to better and cheaper choices.
Fortunately, the vice chairman's legislation, the Protecting
Consumers' Access to Credit Act of 2017, would reassert the valid-when-
made principle, to ensure that a loan that is valid at its inception
cannot become invalid or unenforceable upon a subsequent transfer to
another person or party.
This legislation promotes healthy financial markets and would help
improve the often-limiting loan environment facing banks nationwide.
This
[[Page H1152]]
measure is important for our families and small businesses, for whom
access to credit is critical to success.
Further, this legislation ensures that innovative marketplace lending
remains intact while simultaneously providing safe consumer
protections.
I would like to thank Mr. McHenry for supporting and developing this
bipartisan legislation to be able to help preserve access to credit for
those who need it most, and I encourage my colleagues to support the
measure here today.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, you have heard those of us who are opposed to this
legislation repeat over and over again that this is all about predatory
lending; that this bill would open the gates wide to the kind of abuses
that we have been fighting so hard against.
Mrs. MALONEY asked the questions: Why do you want to do this to your
constituents? Why do you want to do this to the very consumers that we
are supposed to be protecting?
I have raised a question to those who come from States where the
attorneys general oppose this legislation. The gentlemen from North
Carolina and Pennsylvania, who are here in support of this bill, they
are ignoring the fact that their State attorneys general are saying
that this bill is a bad bill.
Of course, if H.R. 3299 was really about expanding access to
underserved populations, as the proponents claim, then they may be
surprised to learn that the Nation's leading civil and consumer groups
are all opposed to this legislation because it will harm consumers, not
help them.
{time} 1445
According to a news article from last November, there is a reason the
NAACP, the Southern Poverty Law Center, the National Consumer Law
Center, the Consumer Federation of America, and dozens of churches,
women's groups, and antipoverty organizations from around the country
have denounced the bill.
In September, those groups wrote a joint letter to Congress warning
that H.R. 3299 ``wipes away the strongest available tool against
predatory lending practices'' and ``will open the floodgates to a wide
range of predatory actors to make loans at 300 percent annual interest
or higher.''
The article goes on to say: ``But you don't have to take the NAACP's
word for it, just take a look at the companies who are lobbying in
favor of H.R. 3299.''
Well, they aren't many, as it is a complicated and obscure issue. But
one of them, according to a Federal lobbying disclosure form, is a firm
called CNU Online Holdings, LLC. Most customers of CNU Online Holdings
don't even realize they use it. They are more familiar with CNU's
parent company, payday lending giant Enova Financial; or its flagship
brand, CashNetUSA.
The bottom line is that this bill is not helping our consumers, but,
rather, lining the pockets of predatory lenders who are looking for any
way around State interest rate caps and consumer protections.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield 2 minutes to the gentleman from
Minnesota (Mr. Emmer), a hardworking member of the Financial Services
Committee.
Mr. EMMER. Mr. Speaker, I thank the chairman for yielding me time.
Mr. Speaker, I rise today to support another bill which builds on the
good work of the House Financial Services Committee.
The Protecting Consumers' Access to Credit Act takes an important
step to provide certainty through our financial system and to support
consumers.
A 2015 court decision that we have heard other speakers talk about
today, Madden v. Midland, is making it difficult for online lenders to
offer businesses the funds they need to grow and succeed.
In Madden, the court held that, while the National Bank Act allows a
federally chartered bank to charge interest under the laws of its home
State on loans it makes nationwide, nonbanks that acquire these loans
may not be able to maintain the same rate of interest since nonbanks
are subject to limits of the borrower's State.
At a time when lenders are eager to help consumers and businesses
gain access to capital, Congress needs to step in to check this
misguided ruling.
When a federally chartered bank originates the interest on a loan,
that interest rate should remain consistent.
Representative McHenry's legislation provides that fix by codifying
the legal doctrine of valid when made.
Further, it helps community banks and credit unions access secondary
markets they need to generate liquidity while also enabling new and
emerging financial technology innovators to find easier ways for
consumers and businesses to access credit and capital.
Mr. Speaker, I appreciate the hard work of my colleague, our chief
deputy whip, on this important legislation. I encourage all of the
Members of this body to support the Protecting Consumers' Access to
Credit Act.
We must fix the misguided Madden ruling and take another step forward
in supporting consumers, financial innovation, and our lenders that
serve as the backbone of Main Street America.
Ms. MAXINE WATERS of California. Mr. Speaker, this is odd. Here, we
have another Member of Congress, whose State attorney general opposes
the bill, and who has banned payday lending.
So, here, Mr. Emmer is joining with Mr. McHenry and Mr. Pittenger,
whose State opposes the bill, North Carolina. Again, the two of them
are in opposition to their own State's attorney general. And now we
have Mr. Rothfus from Pennsylvania and all of these speakers on the
opposite side of the aisle who are coming here to support a bill that
will open up the opportunity for payday lenders to basically rent a
bank and put these payday loans out there at exorbitant amounts.
Mr. Speaker, again, this is rather odd to see so many Members
representing, supposedly, their constituents who come from States where
payday lending has been banned and their attorneys general oppose this
legislation.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield myself 2 minutes.
Mr. Speaker, number one, just for the Record, it is Mr. Rothfus from
Pennsylvania and Mr. Pittenger from North Carolina. Since we serve with
these colleagues, it would be nice to learn their names.
Mr. Speaker, what the ranking member is proposing is to take away
credit opportunities for those who need it the most.
The greatest credit program is a competitive marketplace. And,
unfortunately, the policy that she is advocating, this Second Circuit
court case, has cut credit opportunities in half. That means people are
paying more. In many respects, this is a more usurious result than what
the ranking member is otherwise claiming will happen without the Second
Circuit decision.
Again, I alluded to it in my opening statement, but we have the
definitive academic study. We don't have to guess at this, Mr. Speaker.
They studied those with lower credit scores in the Second Circuit.
And what did they find out?
I will quote from the study. The results presented in figure 3
indicate that the FICO increase was caused by a decline--a decline--in
lending to lower quality borrowers.
Thank you, Second Circuit.
The pattern is most obvious for the lowest quality borrowers, those
with FICO scores below 625. The growth rate for these borrowers in
Connecticut and New York was a negative 52 percent.
Mr. Speaker, that means they had their credit opportunities cut in
half. So exactly what the ranking member says that she wants to do to
help these people, she is hurting these people; taking away their
opportunities to buy a home or taking away their opportunities to buy a
car when they may be the sole breadwinner for their family; taking away
opportunities, perhaps, to send somebody to college.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. HENSARLING. Mr. Speaker, I yield myself an additional 30 seconds.
And then this so-called radical bill of the gentleman from North
Carolina, I would note it is a Democrat bill in the Senate. The exact
companion bill is carried by a Democrat Senator, Senator Warner from
Virginia. It is a Democrat bill. It is bipartisan. It is supported by
at least nine Members of the ranking member's party that sit
[[Page H1153]]
with her in our hearings. Clearly, they heard something she didn't
hear.
Again, Mr. Speaker, it is important to note that what the Second
Circuit has done is change settled law that has been settled law for
over 200 years; that will completely not only cut credit opportunities
in the Second Circuit, but cut credit opportunities all over America.
We cannot allow that to happen.
Mr. Speaker, I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I think my friend on the opposite side of the aisle, the
chairman, is right. I must make sure that I am correct in the way that
I identify my colleagues, who they are and what States they come from.
So I would like to repeat: Mr. McHenry is from North Carolina. Mr.
Pittenger is from North Carolina. The attorney general from that State
opposes this bill, and this State has banned payday lending.
Also let me just mention that Mr. Rothfus from Pennsylvania is
another one who is opposed by his attorney general. His attorney
general is opposed to this bill, is opposed to his representation, and
Pennsylvania has banned payday lending.
Of course, we were joined by Mr. Emmer, who is from Minnesota.
Minnesota is in the same position as North Carolina and Pennsylvania.
The attorney general of Minnesota opposes this bill, and Minnesota bans
payday lending.
So let's be clear. We want to make sure that everybody understands
who these Members are who are coming here in opposition to their
attorneys general, in opposition to their State. These are
Representatives from States that oppose this bill. These are
Representatives from States who have banned payday lending.
So I want to be sure that I agree with my chairman. We should let
everyone know who they are. We should pronounce their names correctly.
We should be sure that all of their constituents understand who their
Representatives are and what they are doing here today on this bill
that will help to explode predatory lending.
This is the rent-a-bank bill that would allow payday lenders to buy
up debt from national banks and be able to charge whatever they would
like, 300 percent and more, to the unsuspecting consumers.
So I thank the chairman for helping me to make that clear.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds just to say:
Apparently, Mr. Meeks is abusing these consumers, as is Mr. Clay, as is
Mr. Scott, as is Mr. Cleaver, as is Ms. Moore, as is Mr. Perlmutter, as
is Ms. Sinema, as is Mr. Heck, and as is Mr. Gottheimer, all Democrats
on the House Financial Services Committee that actually support this
legislation.
Mr. Speaker, I yield 2 minutes to the gentleman from Michigan (Mr.
Trott), a member of the Financial Services Committee.
Mr. TROTT. Mr. Speaker, I rise in support of H.R. 3299, the
Protecting Consumers' Access to Credit Act.
I thank my good friend from North Carolina (Mr. McHenry) for his
leadership on this bipartisan, commonsense bill.
This is a commonsense piece of legislation that is sponsored by two
Republicans, two Democrats. It passed out of our committee with a vote
of 42-17. It is the kind of bipartisan solution that the American
people expect from their elected officials.
Yet, opponents of this bill want people to believe that it will hurt
consumers. We heard similar rhetoric on the recent tax bill passed in
Congress. In fact, we still hear it, even though millions of Americans
are getting bonuses, taking new and better jobs, and seeing their
savings account grow.
Now, let's be clear. This bill will allow banks and credit unions to
sell certain loans to investors, thus diversifying their risk and
freeing up capital that can be used to issue more loans in local
communities. Imagine that.
Why is this commonsense legislation necessary?
A recent case out of the Second Circuit ruled that certain loans
would be valid when held on the books of a bank, but would be invalid
the minute they are sold to investors.
I fail to see how a loan becomes more dangerous, usurious, or
otherwise problematic because the owner of the loan has changed. This
is like saying a house's roof becomes leaky the minute you sell it to
your neighbor. This is the sort of logic that can only thrive in
Washington.
What happens when banks and credit unions can no longer sell loans on
the public market?
They issue fewer loans. Fewer young parents can get a mortgage for
their new home. Fewer single mothers can get a loan for a new car.
Fewer students can get a critical loan to pay for their first year of
college. Fewer businesses can get loans to bring innovative ideas to
the market to create jobs.
This bill is not rent-a-bank. It will not result in usurious interest
rates.
I recently was at a restaurant and I struck up a conversation with
the waitress. She can't get a mortgage. She can't buy a home, even
though she and her husband have good credit. That is the kind of
problem we are trying to address.
Mr. Speaker, I would ask the opponents of this bill to put aside
politics and to join me in supporting legislation that will help young
families, new businesses, and students. This bill will make credit
accessible, and I urge all Members to vote for it.
{time} 1500
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, Chairman Hensarling has named the Members on my side of
the aisle, the Democrats who support this bill. None of them are on the
floor at this time. None of them came here to defend the position that
they took. Some of them are reconsidering the vote that they took, and
so I don't want him to try and wrap this bill around the fact that
there were some Democrats who supported it.
This is a Republican bill. This is a bill by the opposite side of the
aisle that supports payday lending and the ability for payday lenders
to continue to exploit their consumers in a new and different way. They
simply allow them to buy up this debt from the national banks to be
able to basically overcome usury laws.
So while he would like everyone to believe there is all of this great
Democratic support and he keeps saying over and over again how
bipartisan this bill is, none of them are on the floor at this time.
None of them came here to defend their position. None of them have
said, ``I know that I am absolutely correct.'' As a matter of fact,
some of them are raising questions about whether or not they should
have voted for the bill, understanding it in one particular way, and
some now understanding what it really does.
So I thank the gentleman for his position, and I thank him for being
a strong advocate for his position. I thank him for at least stepping
up to the plate to say, in essence, he believes that he is doing the
right thing, despite the fact that he has got Members on that side of
the aisle who are going against their own States' attorneys general.
But let us not believe that this is some great Democratic bill. It is
not.
Mr. Speaker, I reserve the balance of my time.
Mr. HENSARLING. Mr. Speaker, I yield myself 10 seconds just to say--
with the exception of the gentlewoman from New York (Mrs. Carolyn B.
Maloney)--I don't see any of the committee Democrats on the floor, even
those who are supporting the ranking member's position.
I am now pleased to yield 2 minutes to the gentleman from North
Carolina (Mr. Budd), a hardworking member of the Financial Services
Committee.
Mr. BUDD. Mr. Speaker, I thank the chairman and my friend and
colleague from North Carolina, the deputy whip, for his leadership on
this very important issue.
Mr. Speaker, I rise today in strong support of this bipartisan
legislation, the Protecting Consumers' Access to Credit Act of 2017.
Mr. Speaker, we are on the verge of something special in the
financial services space with financial technology
[[Page H1154]]
opening the industry up to amazing innovation. However, as many of us
gathered here today know, the Second Circuit's decision in the Madden
v. Midland Funding case has put this innovation and movement in
jeopardy. It has done so by undermining a long-held principle which has
left fintech lenders and the secondary credit market with issues that
need to be addressed.
Luckily, Mr. McHenry's legislation provides a much-needed fix to the
Second Circuit's decision by codifying the valid-when-made legal
doctrine. This common law principle has been around and accepted in the
financial services space for some time now. This bill will ensure that
innovative lending practices remain intact, allowing creative and
innovative sources of capital to reach the consumer and small
businesses. This is important because it will help to preserve the
relationship between banks and fintech firms.
I am thankful this legislation is coming up for a vote today because
it is greatly needed and, if enacted, will help our economy continue to
grow. This body must continue to serve as an advocate for innovation in
the credit and financial technology space because, ultimately, it will
benefit community development, job creation, and, most importantly, the
consumer.
Mr. Speaker, I urge adoption of this bipartisan and commonsense piece
of legislation.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself the
balance of my time.
There was a reference to Senator Warner, and he said that the Madden
fix bill must address the payday lender loophole. I alluded to some of
this kind of thinking about those who may have supported the bill
without really giving a lot of thought to this loophole, but I just
want you to know that even the author of the bill, Senator Warner, is
saying that the Madden fix bill must address payday lender loopholes.
Mr. Speaker, H.R. 3299 is ultimately a bill that would make it easier
for bad actors to get around interest rate caps that States have put
into place to protect borrowers from predator payday pit traps. Let's
be clear: the availability of affordable credit is very important in
every community, and we should work together in ways to make sure that
underserved communities have fair access to credit and banking
services.
But measures like H.R. 3299 do not productively advance that goal. In
fact, the bill would do the opposite. It would open the door for
nonbanks to ignore States' strong protections and make loans with high
interest rates. The bill would usher in a wave of harmful, high-cost
payday loans in States where such loans were previously disallowed.
Let's not forget that last month Mick Mulvaney, who President Trump
illegally appointed to serve as Acting Director of the Consumer
Financial Protection Bureau, directed the Consumer Bureau to reconsider
its sensible and much-needed rule on payday vehicle title and certain
high-cost installment loans. That rule, put in place under the
leadership of Richard Cordray, would require payday lenders to ensure
that consumers can actually afford to pay off their loans.
Essentially, Donald Trump and Mick Mulvaney are helping out payday
lenders by undermining the Consumer Bureau's rule as well as rolling
back and undermining many of the other critical protections put in
place by Democrats in the Dodd-Frank Wall Street Reform and Consumer
Protection Act.
On top of his pull to reconsider the payday rule, Mulvaney has also
drawn a Consumer Bureau lawsuit against a group of payday lenders who
allegedly failed to disclose the true cost of loans which had interest
rates as high as 950 percent a year.
Mr. Speaker, Congress should be standing up for and enhancing
protections for consumers, not legislating to make it easier for
hardworking Americans to be drawn into payday debt traps.
H.R. 3299 is widely opposed by over 200 consumer and civil rights
groups, including the Leadership Conference on Civil and Human Rights,
the NAACP, the National Consumer Law Center, the Southern Poverty Law
Center, and many others.
And so I think it is clear what we are advocating on this side of the
aisle. We are simply saying that we should not create this loophole,
that we should understand the struggle that many of us have been in to
try and keep payday lenders from going into the most vulnerable
neighborhoods, targeting the most vulnerable people, taking advantage
of folks who have no place to turn and who need a few dollars until
payday, taking advantage of them and trapping them into these loans and
creating all of this debt for them.
This would just go a long way to continue that kind of madness, and
so I would urge Members to vote ``no'' on the bill.
Mr. Speaker, I yield back the balance of my time.
Mr. HENSARLING. Mr. Speaker, I am pleased to yield 2 minutes to the
gentleman from Indiana (Mr. Hollingsworth), another hardworking member
of the Financial Services Committee.
Mr. HOLLINGSWORTH. Mr. Speaker, there are many days when we stand in
this Chamber and I specifically talk about the regulations, the
regulations that are holding back our economy from growing, holding
back consumers from getting the products that they want--we talked
about them in very sweeping, hyperbolic terms--but this is not one of
those days. This is a day where, in this bill, we are simply codifying
what has been the law of the land for over five decades, what is
currently the law of the land in 47 out of 50 States.
So not only has this historically been the case, what we are arguing
for here, but it is also the case in 47 out of 50 States. And I don't
think those three States, the consumers or the citizens of those
States, should be disadvantaged by not being able to access affordable
capital to be able to grow better futures. That is what I hear back
home is they want the opportunity to get loans, to get credit, to get
more chances for them to build better financial futures.
And, frankly, this bill does that. It solves the problem of
uncertainty, and capital flees uncertainty. This makes clear what has
been the law of the land. It doesn't change State usury laws. It
doesn't impact payday. It merely restates that which we have operated
under for decades before this Second Circuit decision and says the law
in 47 States should be the law in 50 States.
Valid when made is an important aspect of our financial markets and
ensuring that we can turn over capital more frequently, thus, get more
capital out to more individuals. And, frankly, that is what we are here
fighting for: making sure everybody gets the opportunity to participate
in a better economy by building a financial future. H.R. 3299 goes a
long way in solving that problem by a very simple, very narrow fix in
ensuring those three States get to participate in the benefit of a
vibrant secondary market just like the 47 other States outside of the
Second Circuit.
Mr. Speaker, I rise in support of the legislation and encourage all
Members here to support this legislation.
Mr. HENSARLING. Mr. Speaker, may I inquire how much time I have
remaining.
The SPEAKER pro tempore. The gentleman from Texas has 1\1/2\ minutes
remaining.
Mr. HENSARLING. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, the ranking member has lamented that she has heard from
few Democrats on this matter, so let me take the liberty of quoting
from Congressman Greg Meeks, a Democrat from New York, the lead
Democratic cosponsor of the bill, who said, during markup:
This bill would facilitate such affordable lending to those
who need it the most.
He goes on to say:
H.R. 3299 is a community bank bill. Fintech firms have
partnered with small community banks and provided these
institutions with technological expertise needed to contend
with larger competitors. In fact, I'm aware that there are
fintech firms engaging with Black-owned banks who have
benefited tremendously from new technologies.
Congressman Meeks goes on to say:
H.R. 3299 is also a small-business bill. According to the
Urban Institute, 34 percent of my constituents in Jamaica,
Queens, who have bank accounts rely on alternative financial
service providers, including rent-to-own agreements and
refund anticipation loans because they have unmet lending
needs. Madden does little to help these underbanked
individuals. Instead, it shuts the door to more affordable
bank loans facilitated through partnership models.
[[Page H1155]]
Madam Speaker, I could go on, but what we are trying to do here is
assure that what just happened in the Second Circuit, where credit
opportunities are cut in half, doesn't happen nationwide. The
hardworking men and women of America deserve better, and so we must
support H.R. 3299.
Madam Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Ms. Cheney). All time for debate has
expired.
Pursuant to House Resolution 736, the previous question is ordered on
the bill.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. HENSARLING. Madam Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further
proceedings on this question will be postponed.
____________________