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Proposed Legislation May End CFPB Regulation of Insurance — Here's What You Need to Know

by Precise Leads

May 1, 2018

Bipartisan bills aim to keep insurance regulations solely in the hands of the states — not federal agencies.

Although the original Dodd-Frank Act prohibited the Consumer Financial Protection Bureau (CFPB) it created from overseeing insurance, bipartisan bills introduced in the House of Representatives and the Senate could make that barrier even stronger. In April, Senators Tim Scott (R-SC), Mike Rounds (R-SD), Tammy Baldwin (D-WI.), and Joe Manchin (D-WV) all backed legislation that would ensure that the power to regulate insurance falls to the states, not the CFPB.

The Senate proposal mirrors a bill forwarded by the House late last year that also aims to restrain CFPB oversight of insurance. That measure received bipartisan support as well, with Representatives Sean Duffy (R-WI), Ann Wagner (R-MO), Gwen Moore (D-WI) and Rep. Ed Perlmutter (D-CO) all sponsoring the legislation.

“Congress never intended for the CFPB to be an insurance regulator,” Sen. Scott said in a statement. “This bill ensures that our 150-year old system of state-based insurance regulation stays in place while keeping costs down for policyholders.”

A Check on CFPB Overreach

Supporters of the proposed bills argue that both are needed to stop what they see as the CFPB’s unnecessary overreach into insurance regulation. In a statement, Nat Wienecke, SVP, Federal Government Relations at the Property Casualty Insurers Association of America, said that while Dodd-Frank exempted insurance from CFPB supervision, the bureau “has overstepped its boundaries in some instances.”

President of the MIT Federal Credit Union Brian Ducharme echoed these concerns when speaking on behalf of the National Association of Federally Insured Credit Unions. During a House committee hearing on the bill, he said that the CFPB’s “jurisdiction creep” placed new burdens on credit unions.

The American Council of Life Insurers (ACLI) endorsed the proposed legislation as well, viewing it as way to prevent duplicate laws governing insurance. The organization added that the “state-based system of insurance regulation has a long history of effective consumer protection.”

Joining the chorus of advocates was the National Association of Insurance Commissioners (NAIC), which said in a statement that tasking two agencies with overseeing the industry “added undue costs” that increased consumer prices.

At the House hearing, critics pointed out that dual oversight is needed when insurance products are sold in tandem with loans, as was the case when Wells Fargo employees fraudulently sold the bank’s customers unwanted auto insurance. “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,” Marcus Stanley, Policy Director with the Americans for Financial Reform, said.

What It Means for Agents

Both the House proposal and the recently introduced Senate CFPB-focused bill are part of a wider Congressional effort to revise the Dodd-Frank Act. In March, the Senate passed a bill that would lift restrictions on smaller lenders and raise the dollar amount of assets a financial company must hold to be considered a Systemically Important Financial Institution (SIFI, or “too big to fail”) from $50 billion to $250 billion. The Senate bill was then sent to the House, where it appears stalled for now as members of both chambers debate a final version.

While Dodd-Frank reform will affect insurers and financial companies, the bills that block the CFPB from seeping into insurance regulations could impact agents the most. If enacted, the bills will put the authority to oversee insurance agents solely in the hands of state regulators and not a federal agency. That’s good news for agents, who wouldn’t have the extra burden of having to follow two sets of laws. Of course, agents must always adhere to the applicable laws in their state whatever the fate of the House and Senate bills.

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