Financial Services Innovation Act of 2024
This bill addresses the regulation of financial products and services. Specifically, the bill allows persons intending to offer a financial innovation to petition specified financial regulatory agencies regarding existing areas of regulation. A petitioner may request a modification or waiver of an agency regulation. The bill sets forth requirements regarding the petition process, a safe harbor for petitioners from enforcement, and enforceable compliance agreements. Agencies must biannually publish a list of financial regulatory areas the agency would consider modifying or waiving through the petition process.
The bill also establishes Financial Services Innovation Offices at these agencies to assist petitioners. These offices must also generally support the development of financial innovations and coordinate with other offices to share data.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7440 Introduced in House (IH)]
<DOC>
118th CONGRESS
2d Session
H. R. 7440
To promote innovation in financial services, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 23, 2024
Mr. McHenry introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To promote innovation in financial services, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Financial Services
Innovation Act of 2024''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Agency identification of regulatory areas.
Sec. 4. Establishment or designation of FSIO at agencies.
Sec. 5. FSIO Liaison Committee and chair.
Sec. 6. Petition to agency.
Sec. 7. Agency determination of petition.
Sec. 8. Enforceable compliance agreement.
Sec. 9. Report to Congress.
SEC. 2. DEFINITIONS.
In this Act, the following definitions shall apply:
(1) Agency regulation.--The term ``agency regulation''
means--
(A) a rule (as defined in section 551 of title 5,
United States Code) issued by an agency;
(B) guidance issued by an agency; or
(C) a published proposed or interim rule, policy
statement, directive, adjudication, or interpretation
of an agency.
(2) Agency.--The term ``agency'' means each of the Board of
Governors of the Federal Reserve System, the Bureau of Consumer
Financial Protection, the Department of Housing and Urban
Development, the Department of the Treasury, the Federal
Deposit Insurance Corporation, the Federal Housing Finance
Agency, the National Credit Union Administration Board, the
Office of the Comptroller of the Currency, and the Securities
and Exchange Commission.
(3) Covered person.--The term ``covered person'' means a
person that offers or intends to offer a financial innovation
by submitting a petition to a Financial Services Innovation
Office at one or more agencies.
(4) Enforceable compliance agreement.--The term
``enforceable compliance agreement'' means an agreement
described under section 8.
(5) Financial innovation.--The term ``financial
innovation'' means a financial product or service (as defined
in section 1002 of the Consumer Financial Protection Act of
2010 (12 U.S.C. 5481))--
(A) the delivery of which is enabled by technology;
and
(B) that is or may be subject to an agency
regulation or Federal statute.
(6) Financial services innovation office; fsio.--The term
``Financial Services Innovative Office'' or ``FSIO'' means an
office established in an agency pursuant to section 4.
SEC. 3. AGENCY IDENTIFICATION OF REGULATORY AREAS.
Not later than 60 days after the date of the enactment of this Act,
and biannually thereafter, each agency shall publish in the Federal
Register a nonexclusive list that identifies 3 or more areas of
existing agency regulation--
(1) that apply or may apply to a financial innovation; and
(2) that the agency would consider modifying or waiving if
the agency were to receive a petition under section 6 relating
to that regulation.
SEC. 4. ESTABLISHMENT OR DESIGNATION OF FSIO AT AGENCIES.
(a) In General.--Each agency shall establish or designate an office
within the agency to be known as the ``Financial Services Innovation
Office'' of the ``FSIO''. Each such Financial Services Innovation
Office shall to promote financial innovations and to assist a covered
person with an approved petition under section 7.
(b) Administration.--Each agency shall designate an individual to
serve as the head of the agency's FSIO.
(c) Duties.--
(1) General duties.--Each agency, acting through the
agency's FSIO, shall--
(A) support the development of financial
innovations;
(B) coordinate with FSIOs at other agencies to
share information and data about financial innovations;
(C) upon request, coordinate with relevant State
regulatory entities to provide information to the
public with respect to financial innovations and agency
regulations related to such financial innovations; and
(D) establish procedures to reduce the regulatory
burden of offering a financial innovation to the public
and enable greater access to financial innovations.
(2) Duties for petitions.--With respect to a covered person
with an approved petition under section 7, each FSIO shall--
(A) work with the covered person to address issues
of how existing regulatory frameworks apply to the
financial innovation that is the subject of the
petition;
(B) assist the covered person in complying with the
requirements of Federal regulators of the financial
innovation; and
(C) assist the covered person in responding to any
challenges to a modification or a waiver granted under
subsection (d).
(d) Waiver Authority.--An agency, acting through the agency's FSIO,
may modify or waive the application of an agency regulation of the
agency or the Federal statute under which the agency has rulemaking
authority if--
(1) a petition of the covered person has been approved
under section 7; and
(2) the agency determines that compliance with such agency
regulation or Federal statute would impede the ability of a
covered person to offer the financial innovation that is the
subject of the petition.
(e) Termination of Other Programs; Transfer of Authority.--
(1) In general.--Not later than 90 days after the
establishment or designation of a FSIO at an agency, the agency
shall modify any offices or programs at the agency that promote
financial innovations or assist covered persons in offering
financial innovations, and merge or transfer the operations of
such offices or programs into the FSIO.
(2) Legal actions or proceedings.--On the date that is 90
days after the establishment or designation of a FSIO at an
agency, any legal action or proceeding commenced by or against
any other offices or programs at the agency that promote
financial innovations or assist covered persons in offering
financial innovations, including no-action letters and staff
advisory opinions, shall be transferred to the FSIO of that
agency.
(f) Report.--Not later than 6 months after the date of the
enactment of this Act, and annually thereafter, each agency shall
present testimony to Congress and submit a report to Congress and to
the Financial Stability Oversight Council on the activities of the FSIO
of such agency, including a description of the petitions considered,
the rationale for acceptance or rejection of petitions, and the efforts
of the FSIO to encourage financial innovations.
(g) Elimination of FSIO.--If an agency has not received a petition
described in section 6 within 5 years of the date of the establishment
of the FSIO of such agency, the agency shall eliminate the FSIO. Such
agency shall continue to comply with the requirements of any multiparty
agreement entered into pursuant to section 8(c) on or before the date
of such elimination.
SEC. 5. FSIO LIAISON COMMITTEE AND CHAIR.
(a) Establishment.--Not later than 60 days after the date of the
enactment of this Act, the agencies shall establish a committee to be
known as the ``FSIO Liaison Committee''.
(b) Members.--The FSIO Liaison Committee shall be composed of the
head of each FSIO described under section 4 and a State banking
supervisor selected by the Conference of State Bank Supervisors (or a
successor organization).
(c) Duties.--The FSIO Liaison Committee shall--
(1) consult on the administration, coordination, and
oversight the FSIO of each agency;
(2) facilitate the cooperation of each FSIO to ensure that
agencies share information and data on petitions submitted
under section 6;
(3) monitor proposals for agency regulation and
developments related to financial innovations;
(4) encourage the application of uniform principles and
standards at each FSIO; and
(5) facilitate collaboration with relevant State regulatory
entities to provide information to the public with respect to
financial innovations and agency regulations related to such
financial innovations.
(d) Meetings.--The FSIO Liaison Committee shall meet at least twice
a year.
(e) Chair.--
(1) Establishment.--The first Chair of the FSIO Liaison
Committee shall be elected by the members. The Chair shall
serve for a term of 2 years and thereafter the chairmanship
shall rotate among the members of the committee.
(2) Powers of the chair.--The Chair is authorized to carry
out the internal administration of the FSIO Liaison Committee,
including the appointment and supervision of employees and the
distribution of tasks among members, employees, and
administrative units.
(f) Testimony.--Not later than 6 months after the date of the
enactment of this Act, the Chair of the FSIO Liaison Committee shall
present testimony to Congress on the activities of the FSIO Liaison
Committee.
(g) Funding.--
(1) Compensation of members.--Each member of the FSIO
Liaison Committee shall serve without additional compensation
but shall be entitled to reasonable expenses incurred in
carrying out official duties as such a member.
(2) General expenses.--The costs and expenses of the FSIO
Liaison Committee, including the salaries of employees, shall
be split equally between, and paid by, each agency other than
an agency that has eliminated the agency's FSIO pursuant to
section 4(g).
SEC. 6. PETITION TO AGENCY.
(a) In General.--A covered person may submit a petition to an
agency, through the agency's FSIO, in such form and in such manner as
the agency's FSIO may require, to request to enter into an enforceable
compliance agreement containing a modification or waiver of an agency
regulation of the agency or the Federal statute under which the agency
has rulemaking authority with respect to--
(1) the covered person; or
(2) a financial innovation the covered person offers or
intends to offer.
(b) Contents.--In a petition submitted under this section, the
covered person shall--
(1) submit an alternative compliance strategy that proposes
a method to comply with the agency regulation or Federal
statutory requirement; and
(2) demonstrate that under the alternative compliance
strategy, the financial innovation--
(A) would serve the public interest;
(B) improves consumer access to a financial product
or service;
(C) would not present systemic risk to the United
States financial system; and
(D) would promote consumer protection.
(c) Multiparty Petitions.--One or more covered persons that offer
or intend to offer similar financial innovations may jointly submit a
petition under this section.
(d) Safe Harbor.--
(1) In general.--During the period after a covered person
submits a petition under this section and before the agency
receiving the petition makes a determination on the petition
pursuant to section 7, an agency may not take an enforcement
action against a covered person relating to the financial
innovation that was the subject of the petition.
(2) Injunctive relief.--If an agency determines that a
financial innovation described under paragraph (1) presents an
immediate danger to consumers or presents systemic risk to the
United States financial system, the agency may apply to a court
of competent jurisdiction for an injunction to prohibit a
covered person from offering such financial innovation during
the period described in paragraph (1).
(3) Preservation of anti-fraud authority.--This subsection
shall not apply to the authority of an agency to take an
enforcement action against a covered person with respect to
fraud relating to the financial innovation that was the subject
of the petition.
(e) Notice and Comment.--
(1) In general.--Not later than 30 days after receiving a
petition, the agency that receives the petition shall publish
the petition in the Federal Register and provide a 60-day
period for public notice and comment.
(2) Exception for notice and comment period.--The agency
that receives the petition may waive the notice and comment
period described in paragraph (1) if such agency determines
that the covered person submitting the petition is similarly
situated to another covered person that has been granted
approval of a petition pursuant to section 7.
(3) Confidentiality.--The agency shall maintain the
confidentiality of any nonpublicly available data or
information in any petition submitted under this section. The
agency shall give reasonable consideration to maintaining the
confidentiality of data or information identified by the
covered person in the petition submitting under this section as
nonpublicly available data or information.
SEC. 7. AGENCY DETERMINATION OF PETITION.
(a) In General.--Not later than 30 days after the end of the
comment period described under section 6 (or if the comment period was
waived, not later than 60 days after receipt of a petition under
section 6), the head of the agency receiving the petition shall
complete a review of the petition and notify the covered person, in
writing, of the agency's determination of the petition.
(b) Approval.--If the covered person submitting the petition shows
that it is more likely than not that the covered person meets the
requirements for establishing an alternative compliance strategy, the
agency shall--
(1) approve the petition; and
(2) enter into an enforceable compliance agreement with the
covered person in accordance with the requirements of section
8.
(c) Disapproval.--
(1) Explanation.--If the agency disapproves a petition, the
agency head shall provide the covered person with a written
notice explaining the reason for such disapproval, including--
(A) evidence that the covered person did not
satisfy the requirements for establishing an
alternative compliance strategy;
(B) an identification of any agency regulations or
Federal statutes applicable to the covered person with
respect to the financial innovation that were omitted
from the petition; and
(C) a description of--
(i) any beneficial effects, including an
identification of persons likely to benefit,
from rejecting the petition;
(ii) any potential costs, including an
identification of persons likely to bear the
costs, of rejecting the petition; and
(iii) the baseline used by the agency to
measure the likely economic consequences of
rejecting the petition.
(2) Resubmittal.--Receipt of a notice of disapproval of a
petition under this subsection shall not preclude a covered
person from revising and resubmitting such petition to the
agency under section 6.
(d) Moratorium.--If an agency disapproves a petition submitted in
good faith under this section, the agency shall provide the covered
person a reasonable amount of time before the agency takes an
enforcement action against the covered person relating to the financial
innovation that was the subject of the petition.
(e) Judicial Review.--A covered person may seek judicial review of
an agency's determination on a petition in accordance with subchapter
II of chapter 5 of title 5, United States Code, and chapter 7 of such
title (commonly known as the ``Administrative Procedure Act'').
SEC. 8. ENFORCEABLE COMPLIANCE AGREEMENT.
(a) In General.--If an agency approves a petition under section 7,
the covered person shall enter into an enforceable compliance agreement
with the agency, which shall include--
(1) the terms under which the approved financial innovation
may be developed or offered to the public; and
(2) any requirements of the covered person and any agency
with respect to the financial innovation.
(b) Requirements.--Each agency, by rule, shall establish
requirements relating to enforceable compliance agreements that
include--
(1) procedures for modifying the terms of the agreement;
(2) consequences for failure to comply with the terms of
the agreement;
(3) a compliance examination process that--
(A) solicits feedback from other agencies on the
agreement; and
(B) occurs not less frequently than annually;
(4) a termination date for the agreement that is at least 1
year after the date on which the agreement is entered into;
(5) procedures for extending the termination date;
(6) procedures for judicial review of another agency's or
State's challenge to the agreement in accordance with
subchapter II of chapter 5 of title 5, United States Code, and
chapter 7 of such title (commonly known as the ``Administrative
Procedure Act''); and
(7) procedures for maintaining the confidentiality of any
information disclosed to the agency during the process of
drafting and entering into agreement.
(c) Multiparty Agreements.--With respect to a financial innovation
that is the subject of an enforceable compliance agreement entered into
under this section, an agency that did not enter into such enforceable
compliance agreement may join as a party to the enforceable compliance
agreement entered into pursuant to this section.
(d) Limitation on Enforcement Actions.--
(1) In general.--If a covered person and an agency enter
into an enforceable compliance agreement--
(A) another agency that is not party to the
multiparty agreement described in subsection (c) may
not commence an enforcement action against the covered
person with respect to the financial innovation that is
the subject of the enforceable compliance agreement;
and
(B) a State may not commence an enforcement action
against the covered person with respect to the
financial innovation that is the subject of the
enforceable compliance agreement, if the covered person
provides the State with--
(i) the enforcement compliance agreement;
and
(ii) a statement of policies and procedures
the covered person has in place to comply with
State laws that are applicable to the financial
innovation.
(2) State exception for consumer harm.--Notwithstanding
paragraph (1)(B), a State may commence an enforcement action
against a covered person with respect to a financial innovation
that is the subject of an enforceable compliance agreement if,
in an action brought by the State in a court of competent
jurisdiction, the court determines that the agency's action was
arbitrary and capricious and the financial innovation has
substantially harmed consumers within such State.
(e) Arbitration.--A covered person may elect to arbitrate any
action initiated by another person relating to a financial innovation
that is the subject of the enforceable compliance agreement.
SEC. 9. REPORT TO CONGRESS.
Not later than 1 year after the date of the enactment of this Act,
and annually thereafter, the Financial Stability Oversight Council
shall submit to Congress a report on the aggregate impact of
enforceable compliance agreements entered into under this Act, which
shall include--
(1) the number and characteristics of the agreements;
(2) the most innovative and least burdensome tools that the
agency's FSIO has implemented to allow a financial innovation
that is the subject of an enforceable compliance agreement to
be offered;
(3) strategies implemented to coordinate and facilitate
cooperation among FSIOs;
(4) the existing Federal and State laws, regulations, or
practices (including guidance materials, examinations, and
enforcement proceedings and settlements) that the Financial
Stability Oversight Council identifies as the most burdensome
to innovation that adversely affect competition in the
financial services industry, or that restrict improvements for
consumers of financial products or services; and
(5) an identification of the overlap or fragmentation of
agency regulations of financial products or services and
recommendations for reducing, consolidating, or eliminating
such overlap or fragmentation.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Committee Consideration and Mark-up Session Held
Ordered to be Reported in the Nature of a Substitute (Amended) by the Yeas and Nays: 28 - 22.
Reported (Amended) by the Committee on Financial Services. H. Rept. 118-792.
Reported (Amended) by the Committee on Financial Services. H. Rept. 118-792.
Placed on the Union Calendar, Calendar No. 654.
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