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Life Health > Life Insurance

State Insurance Regulators May Get to Outrank CFPB

By Allison Bell

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Some House members are fighting to give state insurance commissioners the final say when commissioners and the federal Consumer Financial Protection Bureau (CFPB) get into fights over jurisdiction.

Rep. Sean Duffy, R-Wis., has introduced H.R. 3746, the Business of Insurance Regulatory Reform Act of 2017 bill.

Provisions in the Dodd-Frank Act, the act that created the CFPB, already limit the CFPB’s ability to regulate insurance. The act blocks the agency from regulating the business of insurance, except in some cases in which providing insurance coverage is closely related to providing credit.

H.R. 3746 would further restrict the CFPB’s ability to get involved with insurance.

The bill would limit the CFPB’s ability to regulate any person overseen by a state insurance regulator.

If a federal law did give the CFPB some say over a person under the eye of a state insurance regulator, then the CFPB would have to construe its ability to apply the law to a person regulated by a state insurance regulator narrowly, according to the bill text.

If the CFPB and a state insurance regulator had different ideas about how to apply Dodd-Frank rules to a person regulated by the insurance regulator, the authority to enforce the rules “shall be broadly construed in favor of the authority of a state insurance regulator,” according to the bill text. 

(Related: Republican Questions Constitutionality of Insurance Regulatory System)

Duff has one Republican cosponsor and two Democratic cosponsors: Rep. Ann Wagner, R-Mo.; Rep. Gwen Moore, D-Wis.; and Rep. Ed Perlmutter, D-Colo.

A House Financial Services Committee subcommittee considered the bill at a hearing last week.

The committee has posted a collection of documents related to the hearing here.

(Photo: Thinkstock)

(Photo: Thinkstock)

One of the witnesses who testified in favor of H.R. 3746 was Anthony Cimino, a senior vice president at the Financial Services Roundtable.

Another witness who testified in support of the bill was Brian Ducharme, president of the MIT Federal Credit Union, who appeared on behalf of the National Association of Federally Insured Credit Unions. 

Ducharme said credit unions such as the MIT credit union support H.R. 3746.

“Unfortunately, we have seen jurisdiction creep from the [CFPB] into this realm,” he said, according to a written version of his remarks.

That jurisdiction creep could create new burdens for institutions like the MIT credit union, Ducharme said.

Marcus Stanley, a witness appeared on behalf of Americans for Financial Reform, said his group proposes the new CFPB limits that would be imposed by H.R. 3746.

Many insurance products, such as insurance products sold with loans, cross jurisdictional boundaries, Stanley said.

“Limits on CFPB authority would be particularly severe in cases where lenders owned insurance companies, or insurance companies engaged directly in credit-related activities, ranging from lending to reporting information to credit bureaus,” Stanley said.

The H.R. 3746 limits would, for example, have damaged the CFPB’s ability to investigate moves by Wells Fargo employees to sell unnecessary insurance to credit customers, Stanley said.

The American Council of Life Insurers says it strongly supports H.R. 3746.

The ACLI, which is joining with the Financial Services Roundtable effort to back the bill, says in a statement that letting the CFPB expand the federal government’s role in regulating insurance products could result in CFPB regulations conflicting with state insurance regulators’ directives.

—Read Birnbaum: TILA Should Apply to Credit Insurance on ThinkAdvisor.


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