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Capitol Hill Weighs In On Equifax
This week Capitol Hill weighed in heavily on the Equifax breach which reportedly affected more than 143 million customers. There were several letters from  Members of Congress on both sides of the aisle in the House and Senate.
The Senate Commerce Committee sent a letter to Equifax CEO Richard Smith inquiring of the scope and response to the breach. Democrats from the House Energy and Commerce Committee also sent a letter expressing concern and inquiring of the company's response. The leadership of the Senate Finance Committee sent Mr. Smith a letter highlighting the potential impact on federal services requiring personally identifiable information.
Meanwhile, Senator Mark Warner (D-VA) sent a letter to the Federal Trade Commission regarding its probe of the breach. Additionally, twenty Democrat Senators weighed in on their dislike of the initial use of arbitration on the free credit monitoring and identity theft service offered by Equifax's third party provider TrustedID. Another group of Senators sent a letter to the heads of the Securities and Exchange Commission, the Department of Justice, and the Federal Trade Commission calling for an investigation of reports that senior Equifax executives sold Equifax securities within days of the breach.
Congressional hearings are also expected on the breach. The first scheduled hearing will occur at the House Energy and Commerce Committee on Oct. 3rd and feature testimony from Mr. Smith.
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Deputy Attorney General Rod Rosenstein signaled that the Department of Justice is reviewing a policy announced under the Obama administration that sought to  increase prosecutions of individuals in corporate wrongdoing cases.
"It's under review and I anticipate that there may be some change to the policy on corporate prosecutions," said Rosenstein at a think tank event in Washington. "I don't have any announcement about that today, but I do anticipate that we may in the near future make an announcement about what changes we're going to make to corporate fraud principles."
Under the so-called Yates Memorandum, issued by former Deputy AG Sally Quillian Yates in 2015, federal prosecutors received new guidelines for the prosecution of individuals in cases of corporate wrongdoing and the standards that must be met by corporations in order to receive cooperation credit from the Department of Justice. Corporations must provide all non-privileged information about individual wrongdoing to the government in order to receive cooperation credit.
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In a
report
issued Sept. 13, the Government Accountability Office focused its attention on financial technology. The GAO defined four key sectors: marketplace  lenders, mobile payments, digital wealth management platforms, and distributed ledger technology. The GAO then described the varied approaches to regulating these sectors, both at the federal and state levels.
As for state regulation, the GAO noted: "State licensing laws and oversight mechanisms, including consumer protection, vary by state...Officials from the Conference of State Bank Supervisors we spoke with noted that the states are working on developing tools that can facilitate compliance with state-by-state licensing mechanisms, such as the Nationwide Mortgage Licensing and Registry System (NMLS). NMLS is intended to enable firms to complete one record to apply for state licensing that fulfills the requirements of each state, for states that participate in the system."
Indeed, last week CSBS announced that it had begun development on a
next generation NMLS
, which will allow state regulators to streamline the multi-state licensing process, integrate data into a new examination technology platform, and enhance a consumer information portal. The next generation NMLS is a core part of
CSBS' ™ Vision 2020
, in which state regulators are moving towards a more integrated licensing and supervisory system for fintechs and other non-banks.
Also of note: "Some marketplace lenders that originate loans directly to consumers or businesses (e.g., a direct marketplace lender) are generally required to obtain licenses and register in each state in which they provide lending services. According to officials from CSBS, state regulators then have the ability to supervise these lenders, ensuring that the lender is complying with state and federal lending laws."
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Stanley Fischer, vice chairman of the Federal Reserve Board of Governors, surprised many by stating that he will resign soon, well before his term was set to expire.  Fischer's departure will reduce the Board to just three -- Chair Janet Yellen and Governors Jay Powell and Lael Brainard - with now four vacancies to fill. Meanwhile, an interim comptroller leads the OCC. The FDIC chairman's term is set to expire this November. And the CFPB director's term runs only through mid-2018. The process to nominate and confirm these appointments typically takes a long time.
The Senate Banking Committee approved the nomination of Randal Quarles to the Federal Reserve Board of Governors and, importantly to state regulators and state-chartered banks, vice chairman for supervision. The committee also approved the nomination of Joseph Otting as Comptroller of the Currency. These nominations will now go to the full Senate for its consideration.
John Ryan, CSBS chief executive officer, commented: "State regulators believe it is critical for federal regulatory positions to be filled promptly. Only with a fully-functioning regulatory apparatus at the federal level can the dual banking system be properly regulated and supervised. In particular, we call on the President to nominate and Congress to confirm, as quickly as possible, to the Federal Reserve Board of Governors a qualified individual with community banking or supervisory experience, as required by law."
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Wednesday, November 8, 2017
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Thursday, September 28, 2017
Wednesday, October 4, 2017
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