Panel adopts Stivers amendment adding insurers to cannabis banking bill's safe harbor

The House Financial Services Committee on Thursday, March 28, reported five bills to the House floor, including HR 1595, the Secure and Fair Enforcement Banking Act (SAFE Banking Act), which would allow state-authorized cannabis businesses and their service providers to access banking services and products. The other bills included measures on consumer testing of broker disclosures; restoring authority and certain offices at the CFPB; foreign government corruption; and funding to end homelessness. Amendments and other materials from the markup, which took place over the course of three days, are available at the committee's page here. The committee's memo describing the five bills is also attached to this Alert.

HR 1595, SAFE Banking Act

The committee approved HR 1595, sponsored by Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH) and Warren Davidson (R-OH), by a vote of 45-15, after approving a substitute amendment from the sponsors by voice vote. The bill would prohibit federal banking regulators from "engaging in certain actions against financial institutions serving state-authorized cannabis businesses," according to the staff markup memo, by providing a safe harbor for financial institutions to serve "well-regulated cannabis-related businesses." The substitute amendment added protections for ancillary businesses; specified how businesses on tribal land could qualify; required the Federal Financial Institution Examination Council (FFIEC) to develop guidance and exam procedures to help financial institutions lawfully serve cannabis-related businesses; clarified protections for service providers, electronic payments and armored cars; and required reports to Congress on access to financial services and barriers to entry for minority- and women-owned cannabis-related businesses.

Amendments to HR 1595. During Wednesday's markup session, the committee approved:

• By voice vote, an amendment offered by Rep. Stivers to include insurers in the bill's safe harbor provisions (a letter from several insurance trade associations (attached to this Alert) supported the amendment)
• By voice vote, an amendment by Katie Porter (D-CA) stipulating that federal banking regulators may not take "adverse or corrective supervisory actions" on loans made to legitimate cannabis-related businesses, including financial institutions applying for de novo banking charters
• By voice vote, an amendment by Scott Tipton (R-CO) requiring that the GAO's comptroller general conduct a study within two years of enactment on the effectiveness of reports on suspicious transactions filed

During Friday's roll calls, the committee also:

• Rejected, by a vote of 27-33, an amendment by Andy Barr (R-KY) that would have required the Treasury Secretary to issue a report to Congress certifying that the bill does not leave financial institutions more susceptible to illicit financial activities or inhibit their ability to comply with the existing laws
• Rejected, by a vote of 18-42, another amendment by Rep. Barr that would have defined hemp and hemp-related business and replaced the bill's references to cannabis and cannabis-related businesses with "hemp and hemp-related businesses"
• Rejected, by a vote of 27-33, an amendment by John W. Rose (R-TN) that would have required each financial institution to file a report asserting the responsibility of the CEO and others to establish and maintain internal control for extending financial services to cannabis-related legitimate businesses.
• Rejected, by a vote of 26-34, an amendment by Sean Duffy (R-WI) inserting a section stating that a depository institution may not provide financial services to a cannabis-related business located within 1,000 feet of a school, youth center, park, child care facility, public housing facility, civic center or drug-free zone.
• Rejected, by a vote of 25-35, an amendment by Bill Huizenga (R-MI) that would have required that the bill take effect only after federal banking regulators issue a report to Congress stating the final implementing rules have been issued.

Other bills

The committee also approved, by a vote of 34-26, HR 1500, the Consumers First Act, sponsored by Chairman Waters, which would reverse "anti-consumer actions taken by Mick Mulvaney" when he served as acting director of the Consumer Financial Protection Bureau (CFPB) from November 2017 through December 2018, according to the staff markup memo. A substitute amendment by Chairman Waters, approved by voice vote, would: restore the supervisory and enforcement powers of the Office of Fair Lending and Equal Opportunity; reestablish a dedicated student loan office; require adequate agency staffing, including for supervision and enforcement; direct the agency to immediately resume Military Lending Act examinations; and limit the number of political appointees the CFPB may hire. The substitute also would mandate that the CFPB consumer complaint database remain publicly accessible; reinstate the Consumer Advisory Board with certain protections to ensure the board is diverse and represents consumers' views; encourage greater cooperation with other government agencies; and direct the CFPB to resume publishing how much consumers have saved from the CARD Act. All changes would have to be implemented within 30 days.

The committee rejected a number of Republican amendments to HR 1500, including: one by Rep. Stivers to establish an Inspector General at the CFPB appointed by the Bureau's director; one by Bryan Steil (R-WI) requiring the GAO to perform a study of the effectiveness of the CFPB, the prevalence of discriminatory practices in lending, and other issues; and one by Rep. Barr that would have required the Bureau to be subject to the regular appropriations process.

The committee approved, by a vote of 33-26, HR 1815, the SEC Disclosure Effectiveness Testing Act, sponsored by Sean Casten (D-IL), which would build on the SEC's investor-testing efforts by requiring the agency to conduct usability testing of new disclosures that are primarily used by retail investors to help them make investment decisions. The SEC would have to conduct the testing and reviews before finalizing its proposed Regulation Best Interest and the Form CRS relationship disclosure document for brokers. A substitute amendment by Rep. Casten, approved by voice vote, would also require the SEC to review and test the usability of its existing disclosures for retail investors, such as mutual fund disclosures, and would provide the SEC's Investor Advocate with the authority to conduct investor testing and allow such testing to meet the bill's requirements. In a letter sent to the committee on March 25 opposing HR 1815, former Republican SEC commissioners Paul Atkins and Daniel Gallagher and former chairman Harvey Pitt said, "There is simply no evidence that investor outreach is lacking, and particularly not as it pertains to Regulation [Best Interest]." They said the bill "would unnecessarily hamstring the SEC and ultimately would have the unintended effect of harming investors."

The committee also approved, by a vote of 32-26, HR 1856, the Ending Homelessness Act, sponsored by Chairman Waters, which would appropriate $13.27 billion in mandatory funding over five years for several Department of Housing and Urban Development (HUD) programs and initiatives "in order to functionally end homelessness in America," according to the staff markup memo. A substitute amendment by Chairman Waters, adopted by the committee by a vote of 33-26, would provide, among other provisions: $5 billion over five years for McKinney-Vento Homeless Assistance grants; $2.5 billion over five years for new special purpose Section 8 Housing Choice Vouchers (HCV) for people who are homeless or are at risk of it; and $5.25 billion over five years for the National Housing Trust Fund (HTF) targeted for homeless people, which would be in addition to funds the program receives through Fannie Mae and Freddie Mac. A press release from the committee on HR 1856 is posted here.

The committee rejected several Republican amendments to HR 1856. Among others, these would have: restricted how many of the bill's grants could go to organizations in the largest U. cities; required 35% of grants to go to rural areas; expanded eligible grantees to include faith-based groups; and struck its language on direct appropriations.

Finally, the committee approved, by voice vote, HR 389, the Kleptocracy Asset Recovery Rewards Act, sponsored by Stephen Lynch (D-MA) and Ted Budd (R-NC), which would establish a program within the Treasury Department to provide monetary incentives to people furnishing information leading to the restraining, seizure, forfeiture or repatriation of stolen assets linked to foreign government corruption. A substitute amendment offered by the sponsors, approved by voice vote, also provides for the administration of the program, including reward payment and eligibility.

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ATTACHMENT

Full committee markup

Insurers' letter