What (else) banks want from Washington

Financial firms are going on offense in Washington, pressing a policy agenda that would have been unimaginable just a few months ago. Some proposals, like reforming the Consumer Financial Protection Bureau, have been floated before while others began to gain traction after Republicans swept the November elections. Here's a look at some of the industry's requests.

Reform the CFPB

Banks are hoping that Congress will restructure the CFPB as a five-member commission instead of an agency led by a single director, and subject its budget to the congressional appropriations process. Both proposals face a steep climb in the Senate, where Democrats have continued to fiercely oppose any changes to the CFPB. Additionally, GOP leaders have called on President Trump to fire CFPB Director Richard Cordray, a move many bankers support but which would likely touch off another legal battle over the president's authority.

Bring back deposit advance loans

The deposit advance has been dead for a few years, but now the Consumer Bankers Association is angling to revive it.

The product — known to critics as a bank payday loan –is a high-cost, short-term form of consumer credit. Prior to its demise, it was only offered by a handful of banks, including Wells Fargo, Fifth Third Bancorp, Regions Financial and U.S. Bancorp. The deposit advance disappeared after the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency issued 2013 guidance that effectively banned it.

But following the recent change in administrations, the CBA is urging Congress and the bank regulators to reconsider the issue. The trade group sees a path forward once new leadership is installed at the banking agencies. Comptroller Thomas Curry's term ends in April, while FDIC Chairman Martin Gruenberg finishes his term in November.

Scale back the government's role in student lending

Banks that make private student loans are licking their chops over the possibility that the Republican-led Congress will curb the government's role in financing higher education. Since the election, there has been speculation in Washington about the potential for cuts to government programs that allow graduate students to borrow for tuition.

Such cuts would result in a bigger market for private student lenders including SLM Corp., Wells Fargo, PNC Financial Services Group, Citizens Financial Group and Discover Financial Services. At an industry conference Tuesday, Discover Chief Financial Officer Mark Graf expressed optimism about the policy landscape with respect to student loans. "I think we as a team are hopeful that as time progresses here, the federal government will, for lack of a better term, cede more of that opportunity back into the private space," he said.

Repeal the price cap on swipe fees

The federal government's cap on debit card swipe fees has long been a bugaboo of the banking industry. The GOP's control of Congress and the White House boosted the sector's hopes for a full repeal or — perhaps more realistically — changes that would exempt more banks from current caps. But the swipe fee rules enjoy strong support from the retail industry, and bankers are aware that they face a tough fight. "We're under no illusion that this is a slam dunk to get done," James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association, said in a recent interview.

Repeal the CFPB's prepaid card rules

The CFPB released its long-awaited rules for prepaid cards on Oct. 5. The rules would improve fraud protection and better inform consumers about prices. They also include provisions that have been widely expected to result in the elimination of overdraft fees on prepaid cards.

The latter requirements would have a big impact on Total System Services, which issues prepaid cards through its NetSpend division. The Columbus, Ga.-based firm estimated last fall that it would lose $20 million to $25 million in revenue this year, plus an additional $40 million to $50 million next year, if the rules take effect on Oct. 1 as planned. But NetSpend may still get a reprieve, since the prepaid card rule has yet to take effect, and Congress has a window of opportunity to overturn it. Sen. David Perdue, R-Ga., is seeking to use a law called the Congressional Review Act to stop implementation of the prepaid card rules.

Repeal and replace Obamacare

Health care costs are a huge concern for many small businesses, and bankers say that repealing the Affordable Care Act and replacing it with something less costly would allow small firms to more easily expand, hire and, of course, borrow.

Repealing the law could also be a boon to banks that offer health savings accounts. It's widely believed that the replacement offered by the Trump administration would result in higher out-of-pocket costs for insured Americans, and that could mean many millions more people enrolling in health savings accounts offered through Webster Bank, UMB Bank and others in the HSA business. "While no action has been taken, it's possible that eligibility for HSAs could expand by multiples of previous expectations … and contribution limits could potentially double," Webster Chairman and CEO James Smith said last month.

Prevent consumer-style protections for small-business borrowers

Amid widespread complaints about abuses in the online small-business loan industry, the Treasury Department last year floated the idea of applying borrower protection rules to business loans under $100,000.

The idea did not catch on immediately, but it figured to remain on Treasury's agenda if Hillary Clinton won the presidential election. Following Trump's victory, online small-business lenders now see an opportunity to stave off new regulation.

"Small-business loans differ from consumer loans, so regulations should treat them differently," a trade group called the Coalition for Responsible Business Finance, whose members include Fundation and a unit of Enova International, wrote in a Feb. 8 letter to Trump.