[House Report 119-164]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 119-164
======================================================================
FINANCIAL INTEGRITY AND REGULATION MANAGEMENT
ACT
_______
June 20, 2025.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 2702]
The Committee on Financial Services, to whom was referred
the bill (H.R. 2702) to curtail the political weaponization of
Federal banking agencies by eliminating reputational risk as a
component of the supervision of depository institutions, having
considered the same, reports favorably thereon with an
amendment and recommends that the bill as amended do pass.
CONTENTS
Page
Purpose and Summary.............................................. 3
Background and Need for Legislation.............................. 3
Committee Consideration.......................................... 4
Related Hearings................................................. 4
Committee Votes.................................................. 5
Committee Oversight Findings..................................... 7
Performance Goals and Objectives................................. 7
Committee Cost Estimate.......................................... 7
New Budget Authority and CBO Cost Estimate....................... 7
Unfunded Mandates Statement...................................... 7
Earmark Statement................................................ 7
Federal Advisory Committee Act Statement......................... 8
Applicability to the Legislative Branch.......................... 8
Duplication of Federal Programs.................................. 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 9
Minority Views................................................... 10
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Financial Integrity and Regulation
Management Act'' or the ``FIRM Act''.
SEC. 2. FINDINGS.
Congress finds that--
(1) the primary objective of financial regulation and
supervision by the Federal banking agencies is to promote
safety and soundness of depository institutions;
(2) all federally legal businesses and law-abiding citizens
regardless of political ideology should have equal opportunity
to obtain financial services and should not face unlawful
discrimination in obtaining such services;
(3) financial service providers are private entities entitled
to provide services to whichever customers they so choose,
provided that those decisions do not violate the law;
(4) financial service providers should strive to ensure that
all business decisions are based on factors free from unlawful
prejudice or political influence;
(5) the use of reputational risk in supervisory frameworks
encourages Federal banking agencies to regulate depository
institutions based on the subjective view of negative publicity
and provides cover for the agencies to implement their own
political agenda unrelated to the safety and soundness of a
depository institution;
(6) Federal banking agencies have in fact used reputational
risk to limit access of federally legal businesses and law-
abiding citizens to financial services in 2018 when the Federal
Deposit Insurance Corporation acknowledged that the agency used
reputational risk reviews to limit access to financial services
by certain industries, commonly known as ``Operation Choke
Point''; and
(7) reputational risk does not appear in any statute and is
an unnecessary and improper use of supervisory authority that
does not contribute to the safety and soundness of the
financial system.
SEC. 3. DEFINITIONS.
In this Act:
(1) Depository institution.--The term ``depository
institution''--
(A) has the meaning given the term in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813); and
(B) includes an insured credit union, as such term is
defined in section 101 of the Federal Credit Union Act
(12 U.S.C. 1752).
(2) Federal banking agency.--The term ``Federal banking
agency''--
(A) has the meaning given the term in section 3 of
the Federal Deposit Insurance Act (12 U.S.C. 1813); and
(B) includes--
(i) the National Credit Union Administration;
and
(ii) the Bureau of Consumer Financial
Protection.
(3) Foreign terrorist organization.--The term ``foreign
terrorist organization'' means a foreign organization that is
designated by the Secretary of State in accordance with section
219 of the Immigration and Nationality Act (8 U.S.C. 1189).
(4) Reputational risk.--The term ``reputational risk'' means
the potential that negative publicity or negative public
opinion regarding a depository institution's business
practices, whether true or not, will cause a decline in
confidence in the institution or a decline in the customer
base, costly litigation, or revenue reductions or otherwise
adversely impact the depository institution. The previous
sentence does not apply to negative publicity or negative
public opinion regarding an institution's business practices
where such practices involve unlawful transactions in
connection with state sponsors of terrorism or foreign
terrorist organizations.
(5) State sponsors of terrorism.--The term ``state sponsors
of terrorism'' means a country, the government of which has
been determined by the Secretary of State to have repeatedly
provided support for acts of international terrorism, for
purposes of--
(A) section 1754(c)(1)(A)(i) of the Export Control
Reform Act of 2018 (50 U.S.C. 4813(c)(1)(A)(i));
(B) section 620A of the Foreign Assistance Act of
1961 (22 U.S.C. 2371);
(C) section 40(d) of the Arms Export Control Act (22
U.S.C. 2780(d)); or
(D) any other provision of law.
SEC. 4. REMOVAL OF REPUTATIONAL RISK AS A CONSIDERATION IN THE
SUPERVISION OF DEPOSITORY INSTITUTIONS.
Each Federal banking agency shall remove from any guidance, rule,
examination manual, or similar document established by the agency any
reference to reputational risk, or any term substantially similar,
regarding the supervision of depository institutions such that
reputational risk, or any term substantially similar, is no longer
taken into consideration by the Federal banking agency when examining
and supervising a depository institution.
SEC. 5. PROHIBITION.
No Federal banking agency may engage in any activity concerning or
related to the regulation, supervision, or examination of the
reputational risk, or any term substantially similar, or the management
thereof, of a depository institution, including--
(1) establishing any rule, regulation, requirement, standard,
or supervisory expectation concerning or related to the
reputational risk, or any term substantially similar, or the
management thereof, of a depository institution whether binding
or not;
(2) conducting any examination, assessment, data collection,
or other supervisory exercise concerning or related to
reputational risk, or any term substantially similar, or the
management thereof, of a depository institution;
(3) issuing any examination finding, supervisory criticism,
or other supervisory or examination communication concerning or
related to reputational risk, or any term substantially
similar, or the management thereof, of a depository
institution;
(4) making any supervisory ratings decision or determination
that is based, in whole or in part, on any matter concerning or
related to reputational risk, or any term substantially
similar, or the management thereof, of a depository
institution; and
(5) taking any formal or informal enforcement action that is
based, in whole or in part, on any matter concerning or related
to reputational risk, or any term substantially similar, or the
management thereof, of a depository institution.
SEC. 6. REPORTS.
Not later than 180 days after the date of enactment of this Act, each
Federal banking agency shall submit to the Committee on Banking,
Housing, and Urban Affairs of the Senate and the Committee on Financial
Services of the House of Representatives a report that--
(1) confirms implementation of this Act; and
(2) describes any changes made to internal policies as a
result of this Act.
PURPOSE AND SUMMARY
Introduced on April 8, 2025, by Representative Andy Barr
(KY-06), H.R. 2702, the Financial Integrity and Regulation
Management (FIRM) Act, prohibits the use of ``reputational
risk'' as a factor in the supervision of depository
institutions and, by eliminating this subjective and undefined
metric, the bill aims to prevent politicization of bank
supervision and ensure regulatory focus remains squarely on
material risks related to safety and soundness.
BACKGROUND AND NEED FOR LEGISLATION
The central purpose of financial regulation is to protect
the safety and soundness of depository institutions--not to
advance political or ideological agendas. Yet, federal
regulators have increasingly cited ``reputational risk,'' a
term with no statutory definition, to justify supervisory
actions against institutions engaged in lawful business
activities. This has raised concerns that the supervisory
process is being misused to deny financial access based on
perceived political unpopularity or social stigma.
The use of reputational risk as a supervisory tool was
notably employed under the Obama Administration's ``Operation
Choke Point,'' an initiative acknowledged by the FDIC in 2018
which discouraged financial institutions from serving entire
industries despite those industries' lawful status. This
approach undermines the principle of equal access to financial
services and allows regulators to exert pressure unrelated to
financial performance or regulatory compliance.
H.R. 2702 removes reputational risk from supervisory
considerations, reinforcing that regulatory discretion must be
grounded in objective, material financial risk, not ideological
concerns.
COMMITTEE CONSIDERATION
119TH CONGRESS
On April 8, 2025, Representative Barr introduced H.R. 2702,
the Financial Integrity and Regulation Management (FIRM) Act,
with Representatives Ritchie Torres (D-NY), Lisa McClain (R-
MI), Frank Lucas (R-OK), Barry Loudermilk (R-GA), John Rose (R-
TN), Ann Wagner (R-MO), Marlin Stutzman (R-IN), William Timmons
(R-SC), Scott Fitzgerald (R-WI), Tim Moore (R-NC), Mark Messmer
(R-IN), Andy Ogles (R-TN), Troy Downing (R-MT), Pete Sessions
(R-TX), Doug LaMalfa (R-CA), and Glenn Grothman (R-WI).
Representatives Roger Williams (R-TX), Derek Schmidt (R-KS),
and Andrew Garbarino (R-NY) were added subsequently as
cosponsors. The bill was referred solely to the Committee on
Financial Services. H.R. 2702 was attached to the April 29,
2025, hearing titled ``Regulatory Overreach: The Price Tag on
American Prosperity.''
In addition, Senator Tim Scott (R-SC) introduced S. 875, a
companion bill to H.R. 2702, with Senators Mike Crapo (R-ID),
Mike Rounds (R-SD), Thom Tillis (R-NC), John Kennedy (R-LA),
Bill Hagerty (R-TN), Cynthia Lummis (R-WY), Katie Britt (R-AL),
Pete Ricketts (R-NE), Kevin Cramer (R-ND), Bernie Moreno (R-
OH), David McCormick (R-PA) and Jim Banks (R-IN) as original
cosponsors. On March 13, 2025, the Senate Banking Committee met
in executive session to consider S. 875 and advanced the
measure without written report.
On May 21, 2025, the Committee on Financial Services met in
open session to consider, among others, H.R. 2702. The
Committee favorably reported H.R. 2702, as amended, to the
House of Representatives.
RELATED HEARINGS
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearing was used to
develop H.R. 2702:
The Subcommittee on Financial Institutions of the Financial
Services Committee held a hearing on April 29, 2025, entitled
``Regulatory Overreach: The Price Tag on American Prosperity.''
A discussion draft version of the bill was considered in this
hearing. The following witnesses testified: Ms. Sarah Christine
Flowers, Senior Vice President, Senior Associate General
Counsel, Bank Policy Institute; Mr. J. Michael Radcliffe,
Chairman and Chief Executive Officer, Community Financial
Services Bank (Benton, KY); Ms. Margaret E. Tahyar, Partner,
Head of Financial Institutions Group, Davis Polk & Wardwell
LLP; The Honorable Graham Steele, Academic Fellow, Rock Center
for Corporate Governance, Stanford Law School.
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
On May 21, 2025, the Committee ordered H.R. 2702, as
amended, to be reported favorably to the House by a recorded
vote of 33 yeas and 19 nays, a quorum being present. (Record
Vote No. FC-124).
The Committee considered the following amendments to H.R.
2702:
Representative Barr offered an amendment in
the nature of a substitute, which made minor edits and
technical changes. This amendment was adopted by a
voice vote.
Representative Brad Sherman (D-CA) offered
an amendment (No. 5), designated SHERMA_044. This
amendment clarifies that protections against
reputational risk do not apply to negative publicity or
public opinion related to an institution's involvement
in unlawful transactions with state sponsors of
terrorism or foreign terrorist organizations. This
amendment was agreed to by a voice vote.
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c) of rule XIII of the Rules of the
House of Representatives, the findings and recommendations of
the Committee, based on oversight activities under clause
2(b)(1) of rule X of the Rules of the House of Representatives,
are incorporated in the descriptive portions of this report.
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the goal H.R. 2702 is to prohibit the
use of ``reputational risk'' as a factor in the supervision of
depository institutions and, by eliminating this subjective and
undefined metric, the bill aims to prevent politicization of
bank supervision and ensure regulatory focus remains squarely
on material risks related to safety and soundness.
COMMITTEE COST ESTIMATE
Clause 3(d)(1) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison of the
costs that would be incurred in carrying out H.R. 2702. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee will adopt as its own
the cost estimate by the Director of the Congressional Budget
Office once it has been prepared.
NEW BUDGET AUTHORITY AND CBO COST ESTIMATE
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, a cost estimate was not made
available to the Committee in time for the filing of this
report. The Chairman of the Committee shall cause such estimate
to be printed in the Congressional Record upon its receipt by
the Committee.
UNFUNDED MANDATES STATEMENT
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Committee will adopt the estimate once
it has been prepared by the Director.
EARMARK STATEMENT
With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the resolution and states that the provisions
of the bill do not contain any congressional earmarks, limited
tax benefits, or limited tariff benefits within the meaning of
the rule.
FEDERAL ADVISORY COMMITTEE ACT STATEMENT
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
APPLICABILITY TO THE 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 section
102(b)(3) of the Congressional Accountability Act.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to clause 3(c)(5) of rule XIII of the Rules of the
House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Short title
Section 1 provides the short title is the ``Financial
Integrity and Regulation Management Act'' or the ``FIRM Act.''
Section 2. Findings; Purposes
Section 2 provides that Congress finds:
the primary objective of financial
regulation and supervision by the Federal banking
agencies is to promote safety and soundness of
depository institutions;
all federally legal businesses and law-
abiding citizens regardless of political ideology
should have equal opportunity to obtain financial
services and should not face unlawful discrimination in
obtaining such services;
financial service providers are private
entities entitled to provide services to whichever
customers they so choose, provided that those decisions
do not violate the law;
financial service providers should strive to
ensure that all business decisions are based on factors
free from unlawful prejudice or political influence;
the use of reputational risk in supervisory
frameworks encourages Federal banking agencies to
regulate depository institutions based on the
subjective view of negative publicity and provides
cover for the agencies to implement their own political
agenda unrelated to the safety and soundness of a
depository institution;
Federal banking agencies have in fact used
reputational risk to limit access of federally legal
businesses and law-abiding citizens to financial
services in 2018 when the Federal Deposit Insurance
Corporation acknowledged that the agency used
reputational risk reviews to limit access to financial
services by certain industries, commonly known as
``Operation Choke Point''; and
reputational risk does not appear in any
statute and is an unnecessary and improper use of
supervisory authority that does not contribute to the
safety and soundness of the financial system.
Section 3. Definitions
Section 3 defines depository institution, Federal banking
agency, and reputational risk.
Section 4. Removal of reputational risk as a consideration in the
supervision of depository institutions
Section 4 requires Federal banking agencies to remove from
any guidance, rule, examination manual, or similar document any
reference to reputational risk or a substantially similar term.
Section 5. Prohibition
Section 5 prohibits Federal banking agencies from engaging
in any activity related to reputational risk, including through
rulemaking, examinations, supervision determinations, or
enforcement.
Section 6. Reports
Section 6 requires each Federal banking agency to submit a
report to the Senate Committee on Banking, Housing, and Urban
Affairs and the House Committee on Financial Services
confirming implementation of the requirements in this bill and
describing all changes no later than 180 days after enactment.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
H.R. 2702 does not repeal or amend any section of a
statute. Therefore, the Office of Legislative Counsel did not
prepare the report required under clause 3(e) of rule XIII of
the House of Representatives.
MINORITY VIEWS
This sweeping bill, instead of focusing on debanking as the
House has done in years past with legislation to prevent
regulators from misusing reputational risk to discouraging
banks to close certain types of accounts, would completely
eliminate reputational risk as a component of the supervision
of depository institutions. This would, for the first time,
prevent regulators from considering certain types of risk, in
this case reputational risk, when promoting safety and
soundness of banks.
Banking is a business that relies on trust. Since the
1990s, bank regulators have recognized that a bank's
reputation, among many other kinds of risks they must manage,
can impact if not undermine its safety and soundness. The quick
erosion of customer trust due to reputational damage is one of
the most common causes of bank runs and insolvency. Two years
ago, concerns about Silicon Valley Bank (SVB) quickly spread
over social media, fueling the fastest bank run in U.S. history
when in one day, $42 billion in deposits were withdrawn. By the
next morning, customers had requested $100 billion more in
withdrawals, forcing regulators to close the bank.\1\ Signature
Bank also experienced a quick bank run the same weekend, which
also happened to occur a few days after another crypto-focused
bank, Silvergate Bank, announced they would voluntarily
liquidate and close their bank. In a post-mortem report, FDIC's
Inspector General found that Signature Bank faced reputational
risks for several years, known in the marketplace as a bank
focused on digital assets, and faced related pressures when
other crypto-related businesses failed, like FTX, along with
SVB's and Silvergate Bank's closure.\2\
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\1\Reuters, Speed of US bank failures to play starring role in Fed,
FDIC post-mortems (Apr. 27, 2023); Federal Reserve Bank of St. Louis,
Understanding the Speed and Size of Bank Runs in Historical Comparison
(May 26, 2023).
\2\FDIC OIG, Material Loss Review of Signature Bank of New York
(Oct. 2023). Also see Federal Reserve Bank of Chicago, Rushing to
Judgment and the Banking Crisis of 2023 (Mar. 2025); and American
Banker, Crypto and VC firms led to SVB's failure, researchers say (Mar.
10, 2025).
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Reputational risk has been cited by bank regulators and
researchers relating to money laundering and lax Bank Secrecy
Act compliance, for example, with respect to Riggs Bank in the
early 2000s. Riggs Bank's reputation took multiple hits after
they were investigated for several money laundering scandals,
including one relating to former Chilean dictator Augusto
Pinochet and unwittingly allowing the September 11th hijackers
to transfer money due to lax AML/BSA controls.\3\ The bank
nearly failed before PNC Bank acquired it. Furthermore,
reputational risk has been cited relating to large banks, like
Wells Fargo, that repeatedly broke the law and harmed millions
of consumers.\4\ Another example is Credit Suisse, who was
investigated for a number of issues, including an executive
spying scandal, a data leak of customer information, and
exposure to the default of the Archegos Capital Management fund
as well as the Greensill Capital fund. The bank nearly failed
before it was acquired by UBS.\5\
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\3\See OCC, Comptroller Hawke Directs Review of Agency's Handling
Of Bank Secrecy Act Compliance at Riggs Bank N.A. (Jun. 3, 2004); WSJ,
Riggs Bank Is Sued Over 9/11 Attacks (Sep. 13, 2004); DOJ, Riggs Bank
Enters Guilty Plea and Will Pay $16 Million Fine for Criminal Failure
to Report Numerous Suspicious Transactions (Jan. 27, 2005); and
\4\Brian Tayan (Stanford University), The Wells Fargo Cross-Selling
Scandal (Feb. 6, 2019).
\5\Vanguard, Risk oversight failure at Credit Suisse (May 2023).
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Critics argue reputational risk concerns may have
contributed to bank's closing accounts and otherwise debanking
certain industries, as was alleged during the Obama-era
``Operation Chokepoint,''\6\ though some argue those concerns
were overstated,\7\ similar to more recent accusations that the
Biden Administration engaged in an ``Operation Chokepoint 2.0''
that encouraged banks to debank crypto firms.\8\ However, this
sweeping proposal would, for the first time, direct Federal
regulators to completely ignore any kind of risk a bank must
manage, in this case reputational risk. This seems to be an
overreaction that may have unintended consequences. Trump's
regulators are already administratively taking this step, so
codifying these reforms into law are arguably premature until
there is time to see if completely ignoring reputational risks
poses safety and soundness risks for banks, as we've seen in
the examples noted above.
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\6\Politico, Justice Department to end Obama-era `Operation Choke
Point' (Aug. 17, 2017).
\7\For example, see Drury D. Stevenson, Operation Choke Point:
Myths and Reality (Dec. 2, 2022).
\8\See FSC hearing, Operation Choke Point 2.0: The Biden
Administration's Efforts to Put Crypto in the Crosshairs (Feb. 6,
2025); in particular, see Testimony from Shayna Olesiuk, Director of
Banking Policy, Better Markets.
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Moreover, there are more narrow policy solutions that have
enjoyed broad bipartisan support that could be pursued. For
example, in the aftermath of ``Operation Chokepoint,'' former
Rep. Blaine Luetkemeyer (R-MO) reached a compromise with
Ranking Member Waters to prohibit regulators from ordering or
discouraging banks from serving customers based on reputational
risk, and to otherwise provide a notice with a legal
justification in other situations where accounts are closed.\9\
The House overwhelmingly passed this compromise by a vote of
395-2, and this legislation was later added to the SAFE Banking
Act to grant cannabis-related businesses access to the banking
system, which repeatedly passed the House with broad bipartisan
support.\10\
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\9\HR 2706 (115th Cong.), the Financial Institution Customer
Protection Act.
\10\Cannabis Business Times, SAFE Banking Act: How We Got Here,
What's Next For SAFER (Sep. 25, 2023).
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Ranking Member Waters also introduced a bill to combat
payment scams last year that would also clarify that Electronic
Fund Transfer Act's (EFTA) error resolution duties apply to
institutions when they freeze or close an account in most
cases, ensuring consumers receive an explanation in such
situations.\11\ Former Senate Banking Committee Chairman
Sherrod Brown introduced a bill that would expand existing
anti-discrimination provisions that only apply to lending to
prevent any financial institution from discriminating on the
basis of race, color, religion, national origin, or sex
(including sexual orientation and gender identity) in providing
any financial product or service, including offering a checking
account.\12\
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\11\FSC, Ranking Member Waters, Senator Blumenthal, and Senator
Warren Introduce ``Protecting Consumers from Payment Scams Act'' (Aug.
2, 2024).
\12\S. 4619 (117th), the ``Fair Access to Financial Services Act.''
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The CFPB took steps under former Director Rohit Chopra to
combat debanking as well, including by proposing a rule that
would bar financial companies from fining, suing, or debanking
consumers based on their comments, reviews, or political or
religious views,\13\ but Acting Director Russell Vought
recently withdrew this proposed rule.\14\ The CFPB also issued
a larger participant rule to allow it to supervise big tech
payment platforms, in part to ensure the companies were not
unlawfully freezing or debanking customer accounts,\15\ but
Republicans rescinded that rule through a Congressional Review
Act resolution.\16\
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\13\CFPB, CFPB Proposes Rule to Ban Contract Clauses that Strip
Away Fundamental Freedoms (Jan. 13, 2025).
\14\Federal Register, Prohibited Terms and Conditions in Agreements
for Consumer Financial Products or Services (Regulation AA); Withdrawal
of Proposed Rule (May 15, 2025).
\15\CFPB, CFPB Finalizes Rule on Federal Oversight of Popular
Digital Payment Apps to Protect Personal Data, Reduce Fraud, and Stop
Illegal ``Debanking'' (Nov. 21, 2024).
\16\FSC, Waters Slams Republican ``Big Tech Payment Scams Act'' on
House Floor: ``We See This Bill for What It Is: A Thank-You Gift to
Elon Musk and the Other Big Tech Billionaires Who Came to Trump's
Rescue During the 2024 Election (Apr. 9, 2025).
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Former Treasury Assistant Secretary for Financial
Institutions, Graham Steele, testified before the Committee
earlier this year, outlining several concerns with this bill's
approach, as well as the HUMPS Act (previously named the CAMELS
Rating Modernization Act) that is described further below in
this memo. Mr. Steele testified, ``The FIRM Act curtails the
use of reputational risk in bank supervision and the CAMELS
Rating Modernization Act directs agencies to review and revise
the CAMELS rating system to use a ``transparent methodology
that is limited to . . . objective criteria'' limiting the role
played by factors such as an institution's management.
Reputational risk is just one factor in examination and
supervision and is very rarely the sole basis upon which an
agency would expect a bank to correct its behavior. It is most
commonly used in relation to consumer compliance and deterring
banks from engaging in predatory practices, compliance with
anti-money laundering requirements and preventing banks from
doing business with entities engaged in illicit activities, and
the risks of environmental damage as a result of agricultural
or oil & gas lending. A bank's managerial character and
capacity has long been a foundational basis for evaluating
whether a bank is worthy of receiving a charter or federal
deposit insurance. Sound management and reputational
considerations are fundamental part of the banking business.
These factors may not be precisely quantifiable in the way a
bank's capital ratio can be calculated, but we have seen time
and again that public perception and confidence and sound
management affect the stability of banks and the entire banking
system--from the failure of Riggs Bank in the 2000s, to the
Global Financial Crisis, to the failures of SVB, Signature
Bank, and Credit Suisse in 2023. The irony is that these bills
cannot make the underlying risks go away. Instead, they just
require banking agencies to ignore reality and
experience.''\17\
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\17\Testimony of The Honorable Graham Steele, former Treasury
Assistant Secretary for Financial Institutions before FSC hearing
entitled, ``Regulatory Overreach: The Price Tag on American
Prosperity'' (Apr. 29, 2025).
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During the debate, Republicans adopted an amendment offered
by Rep. Brad Sherman (D-CA) to exempt reputational risk
concerns related to terrorist financing, which improved the
bill. However, there are many other types of issues that this
bill could interfere banking regulators work to promote safety
and soundness with, including involving other forms of anti-
money laundering, banks that repeatedly violate Federal laws
and regulations to the detriment of millions of consumers,
climate-related risks, and more.
The Senate Banking Committee passed a similar bill earlier
this year on a party-line vote with Senate Democrats
unanimously opposing the bill. Moreover, a number of groups
opposed the bill, including Americans for Financial Reform
(AFR), California Consumer Protection Attorneys' Association,
Center for Responsible Lending (CRL), Chevedden Corporate
Governance, Consumer Action, Consumer Federation of America,
Consumer Reports, Florida for Good, Impact Fund, Interfaith
Center on Corporate Responsibility, Maine People's Alliance,
National Association of Consumer Advocates, National Community
Reinvestment Coalition (NCRC), National Consumer Law Center, on
behalf of its low-income clients (NCLC), National Consumers
League, Natural Investments Oregon Consumer League, Private
Equity Stakeholder Project, Public Citizen, Public Justice
Center, Rise Economy, South Carolina Appleseed Legal Justice
Center, The People's Justice Council, Transparency Task Force,
and Womxn From The Mountain.\18\
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\18\See AFR et al, Letter to Senate Banking Committee re FIRM Act
(Mar. 13, 2025).
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For these reasons, we oppose H.R. 2702.
Sincerely,
Maxine Waters,
Ranking Member.
Nydia M. Velazquez,
Stephen F. Lynch,
Al Green,
Emanuel Cleaver, II,
Bill Foster,
Joyce Beatty,
Juan Vargas,
Rashida Tlaib,
Sylvia R. Garcia,
Nikema Williams,
Members of Congress.
[all]