Special legislation being fast-tracked by U.S. Sen. David Perdue would take a swipe at a federal agency championed by U.S. Sen. Elizabeth Warren while also aiding a Georgia company that has donated to his campaign.
The first-term Republican senator recently used a procedural maneuver to try to speed up passage of a bill that would nullify an Obama-era prepaid credit card regulation before it goes into effect.
The Consumer Financial Protection Bureau rule that Perdue is targeting would require companies that offer prepaid credit cards to disclose to consumers up front their various fees. It also seeks to limit overdraft fees, give consumers easier access to account information such as balances and transaction history, and cut down on consumer losses when cards are lost or stolen.
Proponents say the change would extend basic account protections to tens of millions of predominantly low- and middle-income customers, some of whom use the cards in lieu of traditional checking accounts.
Perdue and his allies say the regulation overreaches and would end up raising prices and limiting options for customers while stifling innovation in the financial technology industry.
Consumers currently pay tens of millions annually in overdraft charges on such prepaid credit cards. Much of that money goes to one Georgia firm, Netspend, whose parent company is the Columbus-based Total System Services.
Perdue has received $17,500 in campaign donations from Total System Services’ political action committee since the 2014 election cycle. He also accepted a similar amount from the company’s current and former top executives in the runup to his election, according to the money-in-politics site Open Secrets.
Bureau in the cross hairs
A businessman before he entered politics, Perdue has made fiscal issues a central part of his portfolio since arriving on Capitol Hill in 2015.
He holds particular disdain for the Consumer Financial Protection Bureau, an independent agency created in the aftermath of the 2008 financial crisis. Like many Republicans, Perdue says the watchdog has been overzealous, and he's twice introduced legislation to overhaul it dramatically by giving the legislative branch control of its funding like a typical federal agency.
When it comes to the agency’s prepaid credit card regulation, Perdue says it’s overly broad and too burdensome. The hundreds of millions it would cost for industry to implement it would likely be passed onto consumers, he said, thus “hurt(ing) the very people it intends to protect.”
"These consumers, who simply want to manage their finances at a low-cost rate, cannot afford a sweeping new rule that would impose higher costs," he and U.S. Rep. Roger Williams, R-Texas, wrote in a recent Forbes op-ed.
The duo also said the regulation would hamstring the growing financial technology market, including digital payment giants PayPal and Venmo. Indeed, several technology companies, including Google and PayPal, have lobbied against aspects of the rulemaking.
Perdue said Congress should scrap the rule and approach the issue in another way.
Supporters of the the rule see things differently.
They frame Perdue’s bill as a naked attempt to aid Netspend. They point to competitors such as the Green Dot that have been supportive of the rule.
Compared with its competitors, Netspend is said to have a business model that relies heavily on overdraft fees. American Banker reported that the CFPB’s rule, if implemented, could cut into the company’s annual revenue by up to 12 percent, or $85 million a year.
The bureau’s new rule, which is scheduled to go into effect next spring, would not ban overdraft charges outright, but it would give consumers three weeks to repay their debt before being charged a late fee. It would also require companies issuing such cards to consider a would-be customer’s ability to pay his or her debts before moving forward.
In a written statement provided to The Atlanta Journal-Constitution, a Netspend spokesman said the company “supports smart regulation of our industry that promotes financial inclusion and empowerment for Americans, including those without access to traditional financial services.”
“We and many others outlined our reservations with the CFPB prepaid rule during the public comment period including thousands of concerned citizens, highlighting the important role prepaid products and electronic accounts play in their lives,” according to the statement.
Allied Progress, a liberal advocacy group that pushes for tougher rules on Wall Street and payday lenders, is planning to kick off a television and digital ad campaign in the days ahead to pressure GOP senators to vote against Perdue’s bill. The six-figure campaign will likely focus on states represented by Republicans who have been critical of the prepaid credit card industry in the past such as Alaska, Maine and Nevada.
“What Senator Perdue is counting on is that people will not be talking more about this subject and that it will happen under the radar and the only people that will know are his donors,” said Karl Frisch, Allied Progress’ executive director. “We’re going to make sure that’s not the case, that people hear about this.”
The ad campaign is likely to skip Georgia outside of some limited internet ads, since U.S. Sen. Johnny Isakson has also signed onto Perdue’s effort.
Ticking clock
Allied Progress’ effort is looking to peel away three Republican senators, which would be enough to kill Perdue’s effort. Most Democrats have banded together to vote against previous Republican attempts to nullify leftover regulations from the Obama administration.
Perdue has the backing of at least 31 GOP senators.
The Republican is looking to stop the CFPB rule using a special type of legislation he’s never deployed before. Created by then-U.S. House Speaker Newt Gingrich in the 1990s, the procedure allows Congress to retroactively nullify any federal regulation within 60 legislative days of it being finalized — while also permanently blocking agencies from moving forward with the same rulemaking at a later date.
The maneuver was rarely used successfully before President Donald Trump came into office. But now that a united Republican government has taken over, GOP leaders in Congress are rushing to undo many Obama-era regulations using the procedure while they still have time.
Perdue’s office estimates that Congress has until May 9 to act on the prepaid credit card rule, which is why the Republican moved to expedite his bill.
Senate Majority Leader Mitch McConnell has not indicated if or when he would be willing to bring up the legislation on the floor before then, but the Kentucky Republican did sign off on Perdue’s effort to fast-track the measure.
A companion bill in the House is backed by Georgia Republican U.S. Reps. Buddy Carter, Doug Collins, Drew Ferguson, Tom Graves and Barry Loudermilk.
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