Redding: House committee passes ‘Financial CHOICE’

Legislation, which would replace the current Federal Insurance Office, faces test in Senate. Where does ASA stand?

The U.S. House of Representatives’ Committee on Financial Services has passed the Financial CHOICE Act of 2017. This bill, approved along party lines 34-26, replaces the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that attempted to address the financial crisis that began in 2008.

Included in the repeal of Dodd-Frank is language that replaces the Federal Insurance Office with the Office of Independent Insurance Advocate.

“The Financial CHOICE Act ends bailouts so Washington can never again pick taxpayers’ pockets and hand the money over to big banks,” said Chairman Jeb Hensarling, R-Texas. “With the Financial CHOICE Act, the era of big-bank bailouts and ‘too big to fail’ will be over. There will be bankruptcy for failed banks, not bailouts. And banks that qualify for much-needed regulatory relief will be so well capitalized that they pose no threat to taxpayers or the economy.

“Our plan replaces Dodd-Frank’s growth-strangling regulations on small banks and credit unions with reforms that expand access to capital, so small businesses on Main Street can grow and create jobs,” Vice Chairman Patrick McHenry, R-N.C. said. “Since President Obama signed it into law, Dodd-Frank has made it more expensive for American families to save and borrow, while also creating a regulatory climate that has hurt small business growth nationwide. Today’s vote on the Financial CHOICE Act is an important step in our work to undo the damage done over the last seven years.”

However, ranking member Maxine Waters, D-Calif., stated in her opening comments at the bill markup, “In the final analysis, the Wrong Choice Act is a deeply misguided measure that would bring harm to consumers, investors and our whole economy. The bill is rotten to the core, and simply carries water for Trump and his buddies on Wall Street. The bill is also dead on arrival in the Senate and has no chance of becoming law. And so, I’d urge my colleagues on the other side of the aisle to vote to protect their constituents rather than walking the plank with the chairman on this senseless, harmful dead-end bill.”

It’s important to note that the Automotive Service Association (ASA) was very involved in the origins of the Federal Insurance Office (FIO). ASA worked with members of Congress to include the current FIO language in the original law. What started out as a much more aggressive federal regulatory structure for the insurance industry eventually was diluted to include the following:

“The Dodd-Frank Wall Street Reform and Consumer Protection Act established Treasury’s Federal Insurance Office (FIO) and vested FIO with the authority to monitor all aspects of the insurance sector, monitor the extent to which traditionally underserved communities and consumers have access to affordable non-health insurance products and to represent the United States on prudential aspects of international insurance matters, including at the International Association of Insurance Supervisors. In addition, FIO serves as an advisory member of the Financial Stability Oversight Council, assists the Secretary with administration of the Terrorism Risk Insurance Program and advises the Secretary on important national and international insurance matters.”

The Dodd-Frank Act left the state regulatory infrastructure in place for property and casualty insurers. In addition to tardiness with deadlines on required federal reports and timidity with regard to reaching into the state regulatory world, the FIO stacked a federal advisory committee with insurers, a few consumer groups, etc., ignoring small businesses, which are heavily impacted by the insurance industry. These federal advisory committees do contribute to agendas, provide industry information to agencies and assist with the policymaking process.
Despite Congress asking that the collision industry be represented on the FIO federal advisory committee, the Obama administration refused.

The new Financial CHOICE Act envisions the following process for any federal government role in insurance regulation:

  • Abolishes the Federal Insurance Office and establishes the Office of the Independent Insurance Advocate to act as an independent advocate on behalf of U.S. policyholders on prudential aspects of insurance matters
  • Grants the Office of the Independent Insurance Advocate the authority to coordinate federal efforts on prudential aspects of international insurance matters, consult with states regarding insurance matters of national importance, assist the Treasury Secretary in administering the Terrorism Reinsurance Program and observe all aspects of the insurance industry and identify issues that could contribute to systemic crises in the insurance industry or the U.S. financial system
  • Provides that the Independent Insurance Advocate is a voting member of the FSOC

Several consumer groups have been outspoken in their support of the FIO. In addition, Greg Gelzinis at the Center for American Progress stated, “Over the past six years, the Federal Insurance Office has developed into a reliable source of information for policymakers, consumers and the greater public. It is troubling that the NAIC may push for Congress to eliminate the FIO.

“If anything, policymakers should consider expanding the office and elevating the head of the office to the status of a Senate-confirmed appointment. That would enhance the FIO’s capacity and standing among domestic and international regulators. Debating the merits of the state-federal balance in insurance regulation is for another day, but the value of having insurance expertise in the federal government is clear. It is important to highlight the significance of these lesser-known elements of Dodd-Frank, so they are not quietly rolled back in the shadows.”

The bill, as passed by the Committee, dilutes federal powers over the insurance industry. Collision repairers have seen little FIO activity that impacts their businesses since the passage of Dodd-Frank, but the FIO did provide a framework for further federal involvement. Currently, the Federal Trade Commission and the U.S. Department of Justice fall back on the McCarran-Ferguson Act, other than for health-care insurance, and the role of states in insurance regulation and, generally, avoid those issues most important to the insurer-repairer-consumer relationship.

What’s next? The Financial CHOICE Act still must be considered on the House floor. If the Committee vote is any indicator, it should pass the House with a vote along party lines. The U.S. Senate could be more problematic for the act’s supporters. The bill will require Democratic support to pass the Senate, even if it receives all 52 republican votes.

The House may take up the bill this summer but the Senate could take its time with numerous administration nominees-in-waiting and more time for the Banking, Housing and Urban Affairs Committee consideration.

To learn more about the repeal of Dodd-Frank and contact your congressman or senator in opposition to eliminating the Federal Insurance Office, please go to