Lame-duck session need not be lame for consumers

After an election, Congress occasionally holds a “lame-duck session” to tidy up outstanding legislative matters, such as completing budget appropriations or electing to address or defer a major issue.

Lawmakers should buck the trend of only doing “the minimum” in the upcoming lame-duck session, however, and take a few easy steps to bolster consumer protections.

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The legislature should prioritize four items in particular — all of which are achievable. In its final days, the 115th Congress can put a stop to overreach in certain regulatory agencies, settle a budding controversy in consumer credit and expand access to private investing beyond the wealthy.

The Senate can also finally confirm the president’s nominee to lead the Consumer Financial Protection Bureau (CFPB), which has been without a full-time director since last Thanksgiving. 

First up: Congress should pass legislation to end, once and for all, Operation Choke Point, the executive branch’s program of putting the squeeze on certain companies by “choking off” their access to banking services.

The ostensible purpose of Choke Point was to fight fraud and money laundering. However, senior federal agency officials under the Obama administration used Choke Point to strangle legal businesses, pressuring banks to terminate their banking relationships with companies engaged in so-called “high-risk activity.”

In addition to effectively obstructing lawful enterprises from accessing capital and banking services, Choke Point also denied them due process. Ultimately, government regulators rendered legitimate businesses essentially unbankable — without a mandate from Congress. 

The Department of Justice finally ended Choke Point in 2017, although recently unsealed court documents revealed just how systematic the program was.

The House of Representatives has already passed a bill, 395-2, which would ensure something like Operation Choke Point never happens again. To protect consumer access to legal goods and services, the Senate must pass its own version of the bill.

Second, Congress should protect consumer access to credit by codifying a lending standard known as “valid-when-made.” According to the valid-when-made principle, a state cannot deem loans originating from other jurisdictions as invalid or usurious if transferred to third parties in that state.

The certainty this standard affords gives banks the confidence to lend more readily, meaning consumers have improved access to credit.

Last year, however, a federal court ruled in favor of a borrower who argued that her loan from a national bank, which a New York lender purchased after she defaulted, was usurious under New York state law.

By increasing the future risk of litigation for lenders, the appellate court’s decision in Madden v. Midland Funding, LLC has introduced uncertainty into the lending market and will likely limit loan opportunities for consumers.

The House has already passed a bill that codifies the valid-when-made standard, and the Senate is considering similar legislation. To protect consumer access to credit, the two chambers should reconcile any outstanding differences and put a bill on the president’s desk. 

Third, Congress should open private investments to the non-rich. Currently, only accredited investors meeting certain arbitrary and excessive financial criteria can invest in privately held companies or certain limited offerings. This standard effectively bars the vast majority of Americans from investing in fledgling companies.

In 2015, the Securities and Exchange Commission (SEC) recommended loosening the accredited investor criteria. The proposed changes would include people with certain professional credentials (perhaps a software engineer could invest in a tech company, for instance) or people who passed an accredited investor exam.

The House passed a bill in 2017 that generally follows the SEC’s recommendations. The Senate should follow the House’s lead. A broader pool of qualified investors would mean a more dynamic marketplace and more choice for consumers. 

Finally, Congress should utilize the lame-duck session to confirm Kathy Kraninger as director of the CFPB. The agency has been without a permanent head since last November, when the previous director resigned. Mick MulvaneyJohn (Mick) Michael MulvaneyTrump administration asks Supreme Court to take up challenge to consumer bureau NOAA chief praises agency scientists after statement backing up Trump tweet The Hill's Morning Report — Biden steadies in third debate as top tier remains the same MORE, director of the Office of Management and Budget, has since served as the bureau’s interim leader. 

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Kraninger is an experienced and competent administrator who would foster the empirically-driven reform the agency needs. Partisan fighting in the “world’s greatest deliberative body” has stalled her confirmation since July. The Senate can best serve consumers by resolving that gridlock and installing Kraninger as CFPB’s director. 

The 115th Congress shouldn’t phone-in its last three months in session. Even representatives departing Capitol Hill come January can still do good as they walk out the door.

By passing three laws and confirming an agency head, lame-duck lawmakers could wrap up their final session with a swan song — one that ends on a high note for American consumers. 

Beau Brunson is a senior policy advisor at Consumers' Research, the nation's oldest consumer organization.