On September 21 and 22, chief executives from the nation’s seven largest banks faced questioning before Congress, marking the third time senior bank officers have testified before Congress in the last three years. Senators remarked that only two were the same due to changes in CEOs and a decision to bring in super-regionals.

The first day of hearings took place before the House Committee on Financial Services. Committee Chairwoman Maxine Waters (D-CA) delivered opening remarks titled, “Holding Megabanks Accountable: Oversight of America’s Largest Consumer Facing Banks,” which highlighted key hearing topics. “Our nation continues to battle an ongoing pandemic, inflation that’s affecting every household’s budget, Russia’s invasion of Ukraine, rising interest rates, and other crises that have battered our economy. In this environment, the role that banks play to protect consumers and provide access to affordable credit is absolutely critical.”

The bank panel acknowledged the gravity of the issues facing the industry, with one panel member stating: “We are living through unprecedented times in which history will judge the leaders of government and industry by actions we take to address the health and economic crises and longstanding structural inequities.”

Highlights from the first day included:

  • Soaring Inflation. Overall, the bankers testified that consumers continue to be in good shape with spending holding up well. When asked if they had confidence in the Fed’s resolve to tackle rising prices, there was unanimous approval.
  • War in the Ukraine. The bankers testified there is a chance of a mild recession, which could worsen depending on the evolving war in the Ukraine and noted that the war has also created uncertainty over energy and food supplies.
  • Merchant Code for Gun Transactions. In reference to a new separate merchant code for gun sales that several major credit card companies have said they will adopt, and that some advocates argue will aid in the tracking of potentially illegal firearm sales, testimony did not reveal any immediate plans to incorporate such a code by the bank panel. When questioned, all of the CEOs offered reassurance that they would not stop legal gun sales and would protect consumers’ privacy.
  • Climate Change. Several of the bankers said their banks are already planning for climate-related risks, with one noting that the data wasn’t yet available to tie those plans to capital requirements.

While the hearing mainly focused on the challenges before the banking industry, several members of the House committee thanked the CEOs for their performance during the COVID-19 pandemic. “I want to thank our panel for their leadership during this pandemic. None of us expected it, and I just thank you for your leadership,” said Committee Member Ed Perlmutter (D-CO).

A transcript of testimony from the first day is available here.

The second day of hearings took place before the Senate Committee on Banking, Housing, and Urban Affairs and was billed as the “Annual Oversight of the Nation’s Largest Banks.” Chairman Sherrod Brown’s (D-OH) statement included a roadmap of steps he expected the banks to take going forward. “I expect you to take steps to make banking work better for your customers and your workers. Steps like: eliminating overdraft and excessive fees, lowering the costs of basic bank accounts, ending forced arbitration, offering affordable home loans to all eligible borrowers in all communities. It means paying your workers — including contractors who feed you, who clean your office, who keep your banks and offices safe — a living wage.”

Ranking Member Pat Toomey (R-PA) raised concerns in his opening statement about the growing trend of banks embracing an ESG agenda, making “net zero” pledges, and inserting themselves into highly charged social and political issues unrelated to their business. “If banks don’t cease and desist from weighing in on social and cultural issues, don’t be shocked if Republicans, once back in power nationally, seek to pressure banks to advance their goals.” Senator Toomey ended with the suggestion that if banks don’t stay out of highly charged social and political issues, they “risk being treated as public utilities — by both parties — in the future.”

In their opening remarks, each of the bank leaders delineated in detail their recent efforts, accomplishments, and pledges to their customers, employees, and communities.

One main second-day topic focused on peer-to-peer money transfer services. These apps have come under scrutiny because of rising complaints of customers who unknowingly authorize payments to scammers and are unable to get back their funds. In contrast, fraud and scams on credit cards are generally covered by the credit card companies. Committee Member Elizabeth Warren (D-MA) argued: “You profit from every transaction on the system, and you tell people that it is safe. But when someone is defrauded, you claim that’s the customer’s problem.”

One bank panel member retorted that when “a customer authorizes a transaction and it later turns out to be a scam, banks shouldn’t be on the hook for that.” That same panel member also assured the committee that scams account for a very small percentage of the transactions that take place on money transfer apps. The bank leaders acknowledged some of the challenges of money transfer services, but also noted that nonbank “peer-to-peer” payment programs have far greater levels of fraud than those subject to bank regulations.

While the two days of congressional testimony displayed partisan drama, reality permeated, and banks need to be cognizant of the messages congressional leaders conveyed. Those messages align with the regulatory oversight and enforcement activity all banks see and experience at the federal and state level.

A transcript of testimony from the second day is available here.

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Photo of Susan Flint Susan Flint

With vast experience in financial services litigation, Susan has a deep hands-on understanding of litigation facing the financial services industry. She is known for her strategic partnership with clients and effective advice and counsel on complex and difficult business and litigation matters.

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Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

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Mary Zinsner is a partner in Troutman Pepper’s Washington, D.C. office who handles high stakes matters for banks nationwide. Mary focuses her practice on litigation and strategy in lender liability, check and bank operation, class action, consumer finance, fiduciary matters, and creditor’s rights…

Mary Zinsner is a partner in Troutman Pepper’s Washington, D.C. office who handles high stakes matters for banks nationwide. Mary focuses her practice on litigation and strategy in lender liability, check and bank operation, class action, consumer finance, fiduciary matters, and creditor’s rights disputes. She has also been accepted into the American Arbitration Association’s (AAA) Roster of Arbitrators. Viewed as leaders in the practice of alternative dispute resolution (ADR), AAA arbitrators are required to receive ongoing education in the art and science of arbitration and demonstrate knowledge, prowess, mastery, and proficiency in a particular field.