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Senate beefs up consumer protections in Dodd-Frank revision bill

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Senate beefs up consumer protections in Dodd-Frank revision bill

The Senate bipartisan bill revising large swaths of the post-crisis Dodd-Frank regulatory framework just underwent a fresh round of changes that added provisions concerning consumer protections and a clarification of how foreign banks would be regulated by the Federal Reserve.

Sen. Mike Crapo, the Idaho Republican heading legislative movement on the bill, released a substitute amendment adding at least three consumer protection provisions for student borrowers, victims of identity fraud and service members dealing with foreclosure.

The bill also clarifies that the proposal to raise the regulatory threshold for enhanced prudential supervision from $50 billion to $250 billion would not affect the Federal Reserve's protocol for applying extra scrutiny on foreign banks operating in the U.S. New text says that foreign banking organizations with more than $100 billion are still legally tied to existing Fed regulation, adding that the Fed still has the authority to require the formation of an intermediate holding company.

Other new provisions clarify rules concerning venture capital fundraising, mandate a government report on foreclosures in Puerto Rico and clarify the definition of High Volatility Commercial Real Estate loans for the purposes of capital treatment.

The changes may be aimed at reorienting the optics of the bill to woo more Democrats, who generally support more consumer protections. The original draft's protections on credit freezes and veterans' credit scores remain unchanged. Rules concerning the supplementary leverage ratio for custody banks also appear unchanged.

Crapo said he is still working with the House of Representatives in minting a Senate bill that the House can ultimately pass without needing to go to conference. The House had been in talks with the Senate to make changes to the bill in the hopes of adding some of the many House-approved bills pitched by the chamber's Financial Services Committee. The committee's chair, Texas Republican Jeb Hensarling, had been leading the negotiations for his chamber and told Bloomberg TV March 7 that "we expect those [House bills] to be reflected in the final bill that ends up on the president's desk."

Some of those provisions aspire to make small tweaks not included in the Senate bill, such as expanding the Economic Growth and Regulatory Paperwork Reduction Act to include the Consumer Financial Protection Bureau and the National Credit Union Administration. Other provisions appear to align perfectly with what is already included in the bill, such as a shorter regulatory filing for banks with less than $5 billion in total consolidated assets. But some provisions run counter to what is already in the Senate package; a House bill aspiring to require regulators to apply a methods-based approach to capital standards defies the Senate bill's insistence that regulators continue to apply capital standards as they currently do, with the exception of healthily leveraged community banks.

Crapo told reporters March 7 that since introducing the substitute amendment, he had "not had a chance to talk to [the House] about the final deal."

Timing of the bill's passage remains uncertain, but lawmakers acknowledged the possibility of debate extending into the week of March 12.

Senate Majority Whip John Cornyn, R-Texas, said the morning of March 7 that debate could extend into next week, "if necessary." The Senate voted 67 to 32 to kick off debate on the legislative package.

Before adjourning the Senate on March 7, Crapo announced that debate on individual amendments would begin the morning of March 8, meaning that Senate leadership reached an agreement on how many amendments would be welcome on the chamber floor.

As of 5 p.m. ET on March 7, there were 93 amendments filed with the Senate, only a fraction of which will see floor time. A majority of the amendments were filed by Democrats that have been in strong opposition to the bill. Twelve amendments were proposed by Senators currently co-signed as sponsors, signaling efforts to make changes supported by the bill's proponents. Ten amendments were filed by the four Democratic senators that are not cosponsors but voted to advance the bill to debate: Maggie Hassan and Jeanne Shaheen of New Hampshire, Bill Nelson of Florida and Debbie Stabenow of Michigan. The amendments could be a bargaining chip for their ultimate support of the bill.