HR 1909

112th CONGRESS
1st Session

H. R. 1909

To create a charter for Federal Financial Services and Credit Companies.

IN THE HOUSE OF REPRESENTATIVES

May 13, 2011

Mr. BACA (for himself, Mr. MEEKS, Mr. SIRES, and Mrs. SCHMIDT) introduced the following bill; which was referred to the Committee on Financial Services

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A BILL

To create a charter for Federal Financial Services and Credit Companies.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `FFSCC Charter Act of 2011'.

SEC. 2. FINDINGS; PURPOSE.

(a) Findings- The Congress finds the following:

(1) According to the Federal Deposit Insurance Corporation, more than 60 million low- and moderate-income consumers in America remain unbanked, underbanked, or underserved.

(2) The proportion of United States households that are unbanked varies considerably across racial and ethnic groups with certain racial and ethnic groups being more likely to be unbanked than the population as a whole. Minorities more likely to be unbanked include Blacks (21.7 percent of Black households), Hispanics (19.3 percent), and American Indian/Alaskans (15.6 percent). Racial groups less likely to be unbanked are Asians (3.5 percent) and Whites (3.3 percent).

(3) Certain racial and ethnic minorities are more likely to be underbanked than the population as a whole. Minorities more likely to be underbanked include Blacks (an estimated 31.6 percent), American Indian/Alaskans (28.9 percent), and Hispanics (24.0 percent). Asians and Whites are less likely to be underbanked (7.2 percent and 14.9 percent, respectively).

(4) Households with income under $30,000 account for at least 71 percent of unbanked households. As income increases, the share of households that are unbanked declines considerably. Nationally, nearly 20 percent of lower-income United States households--almost 7 million households earning below $30,000 per year--do not currently have a bank account. In contrast, only 4.2 percent of households with annual income between $30,000 and $50,000 and less than 1 percent of households with yearly income of $75,000 or higher are unbanked.

(5) Lack of access to affordable banking products and services deters the economic advancement of low- and moderate-income consumers and stunts the economic growth of communities in which they live.

(b) Purpose- The purpose of this Act is to establish a vibrant, safe, and commercially viable market for underbanked and unbanked individuals to gain access to financial services and products.

SEC. 3. FEDERAL FINANCIAL SERVICES AND CREDIT COMPANY.

(a) In General- The Comptroller of the Currency shall--

(1) under such regulations as the Comptroller of the Currency may prescribe, provide for the organization, incorporation, examination, operation, regulation, and chartering of companies to be known as Federal Financial Services and Credit Companies (hereinafter in this Act referred to as `FFSCCs'); and

(2) have the responsibility to ensure that credit alternatives are available to the underbanked.

(b) Eligibility- The Comptroller of the Currency may not issue an FFSCC charter to a company unless the company satisfies the following requirements, as reasonably determined by the Comptroller of the Currency:

(1) The company has a demonstrated history of experience in providing underbanked persons with a financial product from within the following services:

(A) Credit extended to consumers or, in an amount less than $10,000, to small businesses.

(B) The issuing of reloadable stored value cards to consumers or small businesses.

(C) Ancillary financial services extended to consumers or small businesses, including issuing money orders, sending and receiving wire transfers, check cashing services, bill payment services, and tax preparation services.

(D) Such other short-term consumer credit services as the Comptroller of the Currency determines appropriate.

(2)(A) No person who is a director, officer, partner, agent, sole proprietor, owner, or controlling person of the company--

(i) has been convicted of a felony within ten years of the charter application date; or

(ii) is associated with any person who has been convicted of a felony within ten years of the charter application date.

(B) For purposes of subparagraph (A)--

(i) the term `controlling person' means a person owning or controlling 10 percent or more of the total outstanding ownership of the company; and

(ii) with respect to two people, the term `associated with' means one person--

(I) is a partner, officer, or director (or any person occupying a similar status or performing similar functions) of the other person; or

(II) directly or indirectly controls, is controlled by, or is under common control with the other person.

(3) The company submits a business plan or operating plan that adequately addresses the appropriate statutory and policy considerations. Such plan shall--

(A) reflect sound financial principles and demonstrate realistic assessments of risk in light of economic and competitive conditions in the market for serving underbanked and unbanked populations;

(B) include information sufficient to permit the Comptroller of the Currency to evaluate the overall management ability of the company, especially the ability to provide financial services to the underbanked and unbanked population; and

(C) demonstrate that the company is aware of, and understands, Federal and State consumer credit laws and sound consumer credit operations and practices in the context of serving the needs of the underbanked and unbanked populations.

(4) The company has senior management officials who are familiar with applicable Federal and State consumer credit laws and regulations, and the credit needs of underbanked and unbanked consumers.

(5) The company has competent management, with ability and experience relevant to the types of services to be provided, especially the ability and experience to design and provide financial services to the underbanked and unbanked consumer population.

(c) Requirements Placed on FFSCCs-

(1) CREDIT DISCLOSURES-

(A) SHORT-TERM CREDIT- With respect to an extension of short-term credit by an FFSCC, the FFSCC shall provide the person to whom credit is being extended a clear and prominent statement in the loan agreement that states the true cost of the loan in terms of an actual finance charge per dollar of credit extended to such person instead of the annual percentage rate disclosure required under the Truth in Lending Act.

(B) LONG-TERM CREDIT- With respect to an extension of long-term credit by an FFSCC, the FFSCC shall provide the person to whom credit is being extended a disclosure of the finance charge to be paid by the person, expressed as an `annual percentage rate', using that term.

(2) ACCOUNT ACCESS- Each FFSCC shall provide continuous account access to the customers of the FFSCC, either through a toll-free telephone number, the Internet, or both.

(3) FINANCIAL LITERACY PROGRAMS- Each FFSCC shall implement a financial literacy program, which shall include--

(A) making financial literacy materials available to its customers; and

(B) assisting customers in building and improving their credit scores.

(4) FINANCIAL PRODUCTS OFFERED- Each FFSCC shall provide to underbanked persons at least three financial products from within the services listed under the subparagraphs of subsection (b)(1).

(5) ADDITIONAL REQUIREMENTS- Each FFSCC shall comply with the following:

(A) Have a primary mission of providing a comprehensive array of financial services to the underbanked, unbanked, and consumers with low credit scores.

(B) Serve as a vehicle for providing access to credit products predominately to unbanked or underbanked consumers.

(C) File articles of association, articles of incorporation, or other appropriate organizational documents with the Comptroller of the Currency.

(D) Submit to the Comptroller of the Currency for approval a business plan which, among other things, provides in reasonable detail evidence of the knowledge, understanding, and experience of the institution and senior management of the unique challenges that unbanked and underbanked individuals face with respect to access to financial credit.

(d) FFSCC Powers- Subject to such regulations as the Comptroller of the Currency may issue, in addition to general corporate powers, an FFSCC shall have the authority to provide any financial products authorized by the Comptroller of the Currency under section 4(2).

(e) Penalty- Whoever knowingly violates any provision of this section, or any regulation issued pursuant to this section, shall be fined not more than $20,000 for each day such violation continues or imprisoned for not more than 3 years, or both. The Comptroller of the Currency may authorize any State attorney general to enforce violations of this Act, or regulations issued pursuant to this Act.

(f) FFSCC Fee- All FFSCCs shall pay an annual fee to the Comptroller of the Currency in an amount that the Comptroller of the Currency determines is sufficient, in the aggregate, to offset the cost to the Comptroller of the Currency of carrying out the provisions of this section.

(g) Preemption of State Law- A law of a State or political subdivision thereof shall be preempted if the application of such law would have a discriminatory effect on a company because such company is chartered as an FFSCC.

(h) Model Forms- The Comptroller of the Currency shall draft approved, model product and disclosure forms that may be utilized by FFSCCs with any approved credit products or services offered by an FFSCC.

SEC. 4. RATES AND TERMS STUDY; DEVELOPMENT OF FINANCIAL PRODUCTS.

The Comptroller of the Currency shall--

(1) conduct a study on rates and terms used in the extension of credit; and

(2) develop a suite of financial products that FFSCCs may offer to underbanked persons, that will--

(A) contain transparent and full disclosure of all fees and terms related to such products; and

(B) be economically viable for FFSCCs to offer to consumers.

SEC. 5. DEFINITIONS.

For purposes of this Act:

(1) COMPANY DEFINED- For purposes of this subsection, the term `company' shall include--

(A) the entity applying for an FFSCC charter;

(B) any wholly owned subsidiary of such entity applying for an FFSCC charter; and

(C) any other entity that is part of an affiliated control group with such entity applying for an FFSCC charter.

(2) CONSUMER- The term `consumer' shall have the meaning given such term under section 103(h) of the Truth in Lending Act (15 U.S.C. 1602(h)).

(3) INSURED CREDIT UNION- The term `insured credit union' shall have the meaning given such term under section 101(7) of the Federal Credit Union Act.

(4) INSURED DEPOSITORY INSTITUTION- The term `insured depository institution' shall have the meaning given such term under section 3(c) of the Federal Deposit Insurance Act.

(5) LONG-TERM CREDIT- The term `long-term credit' means an extension of credit with an initial term of one year or more.

(6) SHORT-TERM CREDIT- The term `short-term credit' means an extension of credit with an initial term of less than one year.

(7) SMALL BUSINESS- The term `small business' means a company with no more than 500 employees.

(8) UNDERBANKED- The term `underbanked' means a natural person or a small business that--

(A) has a deposit account with an insured depository institution or an insured credit union; and

(B) has limited or no ability to access non-depository services from insured depository institutions or insured credit unions, as reasonably determined by the Comptroller of the Currency.

(9) UNDERBANKED PERSON- The term `underbanked person' means a natural person or a small business that is underbanked, unbanked, or has a low credit score.

(10) OTHER TERMS- The Comptroller of the Currency may issue regulations to define such other terms as the Comptroller of the Currency determines necessary to carry out this Act.

END