Financial Institution Customer Protection Act of 2017

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, H.R. 2201 would create an unnecessary and potentially dangerous loophole in Federal and State securities laws by allowing companies to sell unregistered securities without important safeguards that normally apply to such transactions. Specifically, the bill would allow a company to raise up to $500,000 from 35 or fewer investors, subject only to the requirement that each of these investors has a substantive preexisting relationship with the company.

Currently, before a company can offer or sell its securities, it must either register the offering with the Securities and Exchange Commission--that is the SEC--or qualify for at least one of several existing exemptions from registration. These exemptions provide reduced regulatory requirements for businesses conducting the offerings, but are limited to investors who have the financial sophistication to understand the risks, or enough assets to bear losses without the full protections of the securities laws.

Additionally, unlike H.R. 2201, these existing exemptions include several critical investor protections, such as notice to regulators, limitations on advertising, and restrictions on resale. For example, securities offered pursuant to rule 506 of regulation D are restricted, meaning they cannot be resold for at least a year without registering them; that is, re-registering them.

Additionally, the re-registration exemptions available under the crowdfunding rules and regulation A impose limitations on the amounts an individual can invest in a year, thereby placing a cap on potential losses.

H.R. 2201's lack of basic safeguards would leave investors vulnerable to an array of investment scams. For example, a purchaser of securities offered pursuant to H.R. 2201 would be able to immediately resell the securities in secondary transactions. In the past, the failure to restrict the resale of unregistered securities has exposed secondary investors to ``pump and dump'' schemes, a form of fraud that involves hyping up cheap junk stock in order to resell it at a higher price to unwitting investors.

Additionally, investor and consumer advocates, like Americans for Financial Reform, Center for American Progress, and Public Citizen, oppose H.R. 2201 because it would enable a particularly deceptive scam known as ``affinity fraud.'' Bad actors perpetrating affinity fraud could use H.R. 2201 to prey upon religious communities, ethnic groups, and the elderly.

Just a few years ago, the SEC shut down a scheme targeting the Hispanic community in southern California. The perpetrators raised more than $800,000 by representing to close friends and family members that their investment would be used to develop a financial services firm serving the Hispanic community.

The SEC found that, instead of developing the purported business, the scammers ``used a large part of the investors' money to engage unsuccessfully in high risk `day-trading' of stocks; pay personal living, travel, and entertainment expenses; or make other unexplained expenditures with no connection to the purported startup business activities.''

H.R. 2201 would provide a roadmap for bad actors to similarly rip off investors. The bill's $500,000 cap on offerings does not eliminate the need for robust safeguards against fraud and abuse. In fact, these protections are even more important for offerings of this size, given the proliferation of investment schemes in the smaller offering space.

The SEC has found that ``fraud in the micro cap stock markets is of increasing concern to regulators, as such markets have proven to be fertile grounds for fraud and abuse.''

While $500,000 may not seem like a lot on Wall Street, for Main Street Americans, losing even a fraction of that amount would destroy the hope of one day retiring with dignity. Existing exemptions such as those available under the SEC's regulation D, regulation A, and crowdfunding rules provide ample opportunities for companies to raise capital while also protecting investors.

H.R. 2201 would only expose hardworking Americans to a new and wholly unnecessary risk. For these reasons, I urge my colleagues to vote ``no'' on H.R. 2201, and I reserve the balance of my time.

General Leave

Mr. Speaker, I yield such time as he may consume to the gentleman from Rhode Island (Mr. Cicilline).

Mr. Speaker, may I inquire as to how much time I have remaining.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, we have laid out this morning exactly how vulnerable groups and individuals can be taken advantage of with legislation like this. I don't know exactly where this legislation originated, but I can almost guarantee you that we are creating opportunities for individuals who don't have the best interest of our constituents at heart to literally get small groups together, 35, I guess, or less, and sell them on ideas where they are raising funds that probably will not result in profits as expected by those who are investing in these schemes.

No, there are no protections. There is no notice. The SEC will not know when and where these schemes are arising. So I would say to my colleagues on the opposite side of the aisle: When are we going to act as if we have the best interests of our constituents at heart? When are we going to be about protecting consumers rather than opening up opportunities for them to be the victims of fraud?

We have fraudulent schemes that are directed at the most vulnerable people. I know where those people who are organizing these schemes will go. They will go to our churches where well-meaning ministers and parishioners will be taken advantage of.

In these vulnerable communities that are always taken advantage of, we have people who are the victims of payday loans where they are paying 400 percent for moneys that they are borrowing when they are desperate in between paychecks. We have rent-to-own schemes. We have all kinds of schemes where these convenience stores, in places where we have food deserts, are charging extremely high prices for food that is basically being sold for regular, ordinary, good prices in other communities.

In some communities, even in California, the gas taxes are rising. We have the rental market that is going off the scale all over this country with people not being able to afford a decent lease or a decent rental space, and so here we are just opening up another opportunity for folks to be ripped off.

It is going to happen; I can guarantee you that. When you have something like this that is passed by the Congress of the United States, it is going to be taken advantage of, and the way that this is constructed, it almost begs to be taken advantage of.

So do you know what happens when this kind of thing takes place and Members of Congress put their reputations on passing this kind of legislation? When the rip-offs start and people are harmed a few years later, then they are going to come back with legislation talking about how they are correcting the fraud and the rip-offs that we caused in the first place.

When is this going to stop? We have a Consumer Financial Protection Bureau that is struggling every day to protect our consumers. Prior to Dodd-Frank, we had our oversight agencies with the responsibility of protecting consumers, but they didn't have any real protection. So Dodd-Frank reforms helped to create opportunities for Members of Congress to be able to protect their consumers and not to be involved in these kinds of schemes.

But the opposite side of the aisle has spent an inordinate amount of time trying to kill off the Consumer Financial Protection Bureau, and they have done it in so many ways. Not only do they come up with amendments time and time again to try and shut down the Consumer Financial Protection Bureau, they treat the Director of the Consumer Financial Protection Bureau so badly that they almost deny him the opportunity to come before our committee and to be heard.

So I don't know whose side legislators are on who create this kind of crap. I don't understand why it is deemed to be important to open up the opportunity for schemes and to not give the SEC the ability to know when they are getting started, to have the

kind of disclosures, and to have the kind of oversight that would protect the most vulnerable people in our society.

Mr. Speaker, yes, this legislation will probably pass today. The Republicans have the majority votes in this Congress, and I suppose they are going to get all of their people to vote for this bill that is going to rip off some of their constituents, and, again, we won't be able to stop it because, again, they have the majority votes.

But I want the people of this country to know and understand what is happening, who is doing it to them, and why they are having a difficult time. At a time when the rental market is going off the scale and they can't afford to pay the first and the last month's rent to get into a place, I want them to know who is creating the difficulties in their lives when their jobs have not increased their pay, they are still trying to have a decent quality of life for their families, despite the fact that the pay does not match the job that they are doing, and they haven't had the pay increases.

When are we going to show that we stand up for the least of these? When your churches get ripped off--and we are working on some of those schemes now where, even with the responsibilities that the SEC has, we have people who are getting ripped off, and here we come with another piece of legislation. Then what we do is we shade it in terms of this is for small business development. Then we hear from the opposite side about all the other companies who started as little-bitty companies in their garage. Well, they all started without this bill. They didn't need this bill to start.

So why are you doing this? Yeah, you are right; there are a lot of companies, and you have named them, particularly in the high tech industries that started, and they had some of their own money to get started with, and maybe the family helped them, I don't know, but they didn't have this legislation. They didn't need this legislation. Nobody needs this legislation.

This legislation is harmful, and I would ask my colleagues to vote against the bill. If there are any Members on the opposite side of the aisle who really are concerned about their constituents, I would ask them to defy their leadership and vote against this bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, by allowing entities to sell unregistered securities based solely on a preexisting relationship with the investor, H.R. 2201 would create a road map for affinity fraud.

Affinity fraud is a type of investment scam where swindlers prey upon members of identifiable groups such as ethnic or religious communities or the elderly. Often, affinity fraudsters take advantage of preexisting relationships to engender trust and convince victims that a dubious investment is legitimate.

The Securities and Exchange Commission has found that such frauds pose heightened risks to investors because they can be difficult for regulators or law enforcement officials to detect, particularly where the fraudsters have used respected community or religious leaders to convince others to join the investment.

The following cases represent a sampling of recent affinity fraud actions from around the United States.

In August, 2013, the SEC halted an offering fraud scheme where Steven Bruce Heinz, a Utah resident purporting to be an investment adviser, sold phony investment contracts to more than 15 of his former clients, family members, and friends. According to the SEC's complaint, Heinz raised $4 million in investor funds he used to engage in high-risk trading of future contracts and to pay his own personal expenses such as family vacations to Mexico and a $600,000 loan.

Among the investors taken in by Heinz scam was ``the recent widow of a church associate of Heinz who invested with Heinz after he volunteered to assist her with her finances and investments after her spouse died.''

In 2012, the SEC stopped a $7.5 million fraud operation targeting the Persian-Jewish community in Los Angeles. The SEC's assistant regional director stated that Shervin Neman ``deceived members of his own community to raise money in this fraudulent Ponzi scheme. By exploiting investors' trust in him, Neman was continually able to raise more money to pay back existing investors and finance an extravagant lifestyle.''

According to the SEC's complaint, among other things, Neman spent investor funds to pay for his wedding and honeymoon, his wife's engagement ring, luxury cars, and VIP tickets to entertainment venues.

In 2015, the SEC permanently barred John Allan Russell from the securities industry after Russell pled guilty to securities fraud in Colorado State court. The SEC's administrative law judge found that Russell obtained almost $300,000 by selling debt securities to an elderly victim who suffered from dementia and Alzheimer's disease. The ALJ also determined that ``Russell's scheme may have involved affinity fraud because the misconduct began a few years after the victim acted as Russell's godfather at his baptism.''

These cases demonstrate that H.R. 2201's preexisting relationship requirement would not provide any meaningful deterrent against abuse. On the contrary, it would encourage opportunistic conduct targeting communities.

Mr. Speaker, I urge my colleagues to join me in voting ``no'' for this bill.

Given all that the SEC is able to do, they can't keep up with these schemes, and now you are going to open up the door for them to have to wrestle with trying to help people who are victims of these kinds of schemes.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, the North American Securities Administrators Association sent this letter of concern. They said that H.R. 2201 would result in an overly broad Federal exemption that would allow public solicitation and sales to any investor, regardless of sophistication or financial wherewithal, subject only to the requirement that there be a previously existing relationship, a standard that is not difficult to establish.

In practical terms, this means that Main Street investors could be solicited and sold up to $500,000 in private security by bad actors, including persons having been convicted of crimes or subject to one or more previous State enforcement actions, without any disclosure to the investor and without any notice to State or Federal regulators.

There is no valid basis for Congress to prevent State officials charged with protecting their constituents from making decisions about purely local or regional issues that would rely on the exemption established by H.R. 2201.

Further, preemption of State review or even notification for the type of small, localized offerings contemplated by H.R. 2201 would effectively handcuff the regulators best positioned to oversee such offerings.

Public Citizen said this bill ``would permit small offerings with no investor protections, such as notice of the offerings. It will enable a type of affinity fraud, where the seller can unload dubious securities, provided there is some relationship between seller and purchaser. This bill assumes that a preexisting relationship will deter abuse, which is a tenuous foundation, at best. Further, the relationship can begin with the offer.''

They don't have to have a previous relationship. It would start when the offer takes place.

Public Citizen further stated that ``the bill says the relationship must only exist before the purchase.''

Mr. Speaker, I include in the Record letters from these groups, as well as a letter from Americans for Financial Reform.

North American Securities

Administrators Association, Inc.,

Washington, DC, November 7, 2017.

Re H.R. 2201--The Micro-Offering Safe Harbor Act.

Hon. Paul Ryan,

Speaker, House of Representatives,

Washington, DC.

Hon. Nancy Pelosi,

Democratic Leader, House of Representatives,

Washington, DC.

Dear Speaker Ryan and Leader Pelosi: On behalf of the North

American Securities Administrators Association (``NASAA''), I

write to express concern and raise specific objections to

certain provisions of H.R. 2201, The Micro-Offering Safe

Harbor Act, which is scheduled to be considered by the House

of Representatives this week. The legislation would amend

securities laws in ways that could be profoundly detrimental

to investors, and detract from the viability of the

marketplace for offerings from new or smaller issuers that

are compliant with securities law.

The Micro-Offering Safe Harbor Act amends Section 4 of the

Securities Act of 1933 to create a new exemption from

registration. To qualify for the exemption, an offering would

have to meet certain criteria regarding the number of

purchasers, their relationship to the issuer, and the amount

of capital raised. However, as more fully discussed below,

the legislation fails to include critical investor protection

measures and would preempt state regulatory authority.

State securities regulators understand the need of small

businesses to efficiently raise capital and the role strong

investor protection plays in facilitating this goal.

Unfortunately, the changes embodied in H.R. 2201, while well

intended, are ill-advised and potentially quite dangerous.

For example, unregistered securities purchased under the

exemption established by H.R. 2201 would not be

``restricted,'' and could thus be sold immediately, exposing

investors to classic ``pump and dump'' schemes. Furthermore,

NASAA is aware of no evidence to support the proposition that

Congress should create a ``safe harbor'' to permit

unregistered securities offerings to be offered and sold,

including through general solicitation, regardless of

investor sophistication or financial wherewithal. Even as the

bill stands to introduce new and totally unnecessary risk

into securities markets--failing to even disqualify ``bad

actors'' from these markets--the goal of the legislation

remains unclear and its necessity is, at best, not well-

established. It is clear, however, from the terms of the

exemption, and its failure to impose even the modicum of

regulatory oversight that exists for similar ``private''

offerings under SEC Regulation D Rule 506, that offerings

made under the new exemption are likely to be

disproportionately risky and illiquid. This fact alone should

be cause for concern by Congress.

Beyond stark new risks to investors, this legislation

threatens to jeopardize the continued viability of

established markets geared to smaller issuers, many of which

operate lawfully within existing federal and state securities

laws. Such markets include securities sold pursuant to SEC

Rule 506, new federal exemptions established by the JOBS Act,

and exemptions adopted in many states to permit intrastate

crowdfunding. Without effective investor protection measures

a potential effect of H.R. 2201 could be to cause investors

to abandon the markets for smaller issues.

In closing, NASAA reiterates strong opposition to the

preemption of state registration and notice filing authority

in H.R. 2201. There is no valid basis for Congress to prevent

states from making decisions about the local or regional

issues that H.R. 2201 seeks to encourage. Failure to register

or at the very least, to notice file with state regulators

results in unknown sales, by unknown actors of unknown

enterprises and result in no gatekeeper function to protect

retail investors whose only source of recourse for fraudulent

sales are the state securities regulators. At a minimum H.R.

2201 should:

1) Include bad actor disqualifications;

2) Establish a holding period to reduce the likelihood of

``pump and dump'' schemes;

3) Provide at least a notice filing with state regulators

so that in the event of a fraudulent offering, state

regulators can begin an investigation to try and protect

retail investors;

4) Limit the sale amount to retail investors so that

investors are not ``encouraged'' to place all their eggs in

one basket; and

5) Prohibit or restrict general solicitation of what are

clearly high risk securities.

Thank you for your consideration of NASAA's views.

Sincerely,

Joseph P. Borg,

NASAA President and Alabama

Securities Director.

Mr. Speaker, I don't understand why Members of Congress would disregard what the State regulators are saying. State regulators are saying: Don't do this. Don't preempt us. Don't pass legislation that would undermine our ability to protect your constituents.

Yet they are ignoring this altogether. I know that they received this information. I know that they know that the association had cautioned against this legislation. Let me just make sure that everybody knows. It is the North American Securities Administrators Association. They represent all of the States in cautioning against this legislation.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

For my colleagues on the opposite side of the aisle who are bemoaning the fact that small businesses don't have access to capital, they have these relationships with all of these big banks.

Why don't they get to the big banks and tell them they ought to be making loans to small businesses?

I don't hear them, as a part of, you know, their rhetoric, talking about how many of the big banks are not being responsible. And so my colleague on the opposite side of the aisle and my friend talk about what is common sense. I tell you what is common sense. Common sense is not to place vulnerable people in a position where they are going to get ripped off.

Mr. Speaker, H.R. 2201 is a harmful bill that would simply serve as an invitation for investment scams. The bill fails to take into account the numerous other exemptions we have for small-dollar offerings, including under regulation D, regulation A, and crowdfunding rules. These exemptions already permit small businesses to raise capital while also protecting against fraud.

In light of these exemptions, there seems to be no reasonable explanation for the amount of legislative effort that has been wasted on this bill. Instead of H.R. 2201, which is unwarranted and may actually harm investors and the integrity of our markets, the House should be focused on passing legislation that can actually improve the lives of the Americans whom we serve.

Mr. Speaker, I urge my colleagues to vote ``no'' on H.R. 2201. Don't be a part of enacting one more scheme that is going to rip off our constituents, and then, you know, a few years later, come back here and talk about what a terrible thing it is that people are being ripped off by these investors, some of them who are criminals, but nobody knows it. The disclosure does not have to take place. They don't know that they have people who have already been involved in crimes who are coming to them talking about: let me help you earn some profits on this investment.

We know better. Common sense tells us better. If, in fact, we are committed to the proposition that we have a responsibility to protect our constituents from rip-offs, from fraud, from being taken advantage of, we will not support this bill. And I would hope that my friends on the opposite side of the aisle, despite how far they have gone in trying to represent that this bill is something that it is not, would at least change their minds today and support their constituents and vote ``no'' on this bill.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I claim the time in opposition to the amendment, even though I am not opposed.

Mr. Speaker, under the current language of H.R. 2201, investors could be sold private securities by persons who have committed fraud or have violated security laws. Representative Emmer's amendment purports to add a layer of investor protections by adding a provision to so-called disqualify certain bad actors from utilizing the exemption.

While I applaud Mr. Emmer's attempt to add this most basic guardrail to a bill that otherwise creates an unmitigated safe harbor for fraudsters, I wonder why this provision was dropped from a similar bill that Mr. Emmer introduced last Congress.

Unfortunately, this amendment is woefully inadequate to address the otherwise dangerous new exemption created by H.R. 2201. Because the underlying bill requires no disclosure to investors and imposes no obligation to notify regulators of the offering, even if amended, H.R. 2201 would lead convicted fraudsters and lawbreakers to police themselves.

Moreover, the bill ties the hands of State securities regulators, who are the primary watchdogs over small, local securities offerings. If enacted, H.R. 2201 would leave a gaping hole in oversight of the very offerings it permits.

H.R. 2201 is a misguided attempt to support small businesses that is not meaningfully improved by the meager protections of this amendment. For these reasons, I continue to oppose this bill, and I urge all of my colleagues to vote ``no'' on H.R. 2201.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I would like to warn the Members of this House not to take the compliments seriously that are being given by the gentleman who would have you believe that somehow I have totally embraced this amendment because I think it is going to change the fact that there is no disclosure to those who would be investing and no notice to the SEC.

So don't take him seriously when he talks about thanking me for encouraging and embracing. I have not done that. I am going to tolerate this amendment. It is late. It doesn't do what he says it is going to do. The bill is still a bad bill. It is a bill that is going to harm people. It is a bill that targets the most vulnerable people in our society. It is a bill where fraudsters are going to go into churches and convince ministers and parishioners that they are out to help them.

Members of Congress, do the right thing. Today, stand up against another attempt by misguided folks who would have you believe that they are helping people when, in fact, they are opening up opportunities for them to be ripped off one more time, ripped off in ways that could have been avoided.

Mr. Speaker, I oppose this bill. I ask everybody to vote against this bill.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise today to speak in opposition to H.R. 2396, the Privacy Notification Technical Clarification Act.

Contrary to the bill's title, this bill is far from a technical clarification. So I want to be very clear about what this bill would actually do.

H.R. 2396 would reduce the meaningful and clear disclosures that financial institutions must currently provide to their customers every year, even if those companies share their customers' nonpublic personal information broadly with nonaffiliated third-party companies.

Unlike other privacy bills Congress has considered, this bill comes with no guardrails whatsoever to discourage the company from broadly sharing consumer-sensitive personal information.

While the bill provides several alternative mechanisms to deliver privacy reminders, one option would result in the customer receiving no written disclosure at all.

The current annual privacy notices serve as a reminder describing a customer's right to restrict the sharing of their nonpublic, personal information to nonaffiliated third parties and information about how to exercise this right if they so choose.

This privacy right was created in the Gramm-Leach-Bliley Act, which was signed into law in 1999. I served on the conference committee, so I know firsthand that the initial and annual privacy notices in the Gramm-Leach-Bliley Act were enacted partly in response to public concerns about the sale of personal data for marketing purposes that were highlighted in a number of legal actions brought by State attorneys general at the time.

In 1999, for example, there was a settlement between the Minnesota attorney general and U.S. Bank resolving allegations that the bank misrepresented its practice of selling highly personal and confidential information about its customers to telemarketers.

These concerns are just as relevant today. In fact, I find the timing of the consideration of this bill very troubling, as it is being brought to the floor just months after the massive Equifax data breach.

In the Equifax breach, 145.5 million Americans had their Social Security numbers, dates of birth, and other sensitive financial and personally identifiable information exposed to thieves.

Equifax is not the only major credit bureau to experience a large data breach. About 2 years ago, Experian, one of the other three major credit bureaus in this country, had a breach that exposed millions of T-Mobile customers' information.

These breaches are on top of a long list of other breaches we have seen at other companies where sensitive customer information was compromised. Consumers have called on their Representatives in Congress to enact tougher laws that would strengthen their control over their personal information, not weaken it.

Consumers are increasingly wary about the unfettered sharing of their personal information by financial firms to nonaffiliated third parties that can result in consumer profiling, fraud, aggressive target marketing, and identity theft.

Unfortunately, this bill goes in the opposite direction. Instead of working to strengthen consumers' privacy protections, H.R. 2396 would ease obligations on financial institutions to provide notices to their customers describing their privacy practices and policies, and importantly, fully explaining to these customers their right to restrict the sharing of their information to nonaffiliated third parties.

This is commonly referred to as a consumer's right to opt out of having a financial institution share their information to companies that are outside of their common corporate structure or organization. These nonaffiliated third-party companies are generally not ones that the consumers have an existing relationship with, meaning that they have not received a product or service from the company in the past.

The proponents of H.R. 2396 may say the bill has nothing to do with Equifax, or that Equifax would not be covered, if the amendment being offered later today is agreed to. But the bill would roll back privacy notice requirements for many financial institutions that engage in vehicle financing, including megabanks like Wells Fargo, even if they broadly share their customers' nonpublic, personal information with other companies.

Let's discuss Wells Fargo and their auto lending practices and their work with nonaffiliated third parties. Earlier this year, the Democratic staff of the Financial Services Committee produced a report on Wells Fargo's egregious misconduct, which has consulted in extensive consumer harm.

For example, Wells Fargo charged over 570,000 consumers for automobile insurance policies they did not need, which resulted in at least 20,000 customers, including Active Duty servicemembers, having their vehicles inappropriately repossessed. These auto insurance policies were provided through a nonaffiliated third-party company called National General Insurance.

The bank has also demonstrated a clear pattern of misusing millions of their customers' information to open accounts in their name without their permission.

So why should Congress consider relaxing the privacy requirements for a recidivist bank like Wells Fargo?

Let me also address arguments that suggest customers don't read these notices anyway. That is a quote that we hear oftentimes.

As I have discussed, I think consumers are paying closer attention now after the Equifax incident. Proponents say that a company posting a link on their website isn't so bad, and the Consumer Financial Protection Bureau allowed for it.

But the Consumer Financial Protection Bureau provided an alternative to the annual privacy notices for companies that do not share data in ways that trigger consumers' opt-out rights under the law. Over the last decade, Congress has heard repeatedly from banks and credit unions that if a company does not share personal information with an unaffiliated third party that allows consumers to opt out from having it shared, and if they do not change their privacy policies, they should be exempt from the annual notice requirements. In those instances, the customer does not have the ability to opt out of having the information shared.

After several years of research and debate, we made that targeted change in the last Congress. Since then, other companies, specifically captive auto finance companies, have made the case they should have more flexibility satisfying the annual notice requirement because they have a unique and close relationship with automobile dealers they work with that still requires them to send the annual notice.

This unaffiliated third-party relationship triggers a consumer's right under the law to opt out and not have their information shared. I offered an amendment in committee that would have granted this targeted relief, but it was rejected.

So, while I appreciate that H.R. 2396 provides flexibility to captive auto finance companies, the bill is not limited to them and goes much, much further. Mr. Speaker, over 30 consumer, community, privacy, and civil rights groups have publicly opposed this bill, including U.S. PIRG, and so do I. This is an area where more study is needed before policymakers craft sweeping changes.

The bottom line is that I believe we should not open the door too widely at this time to give this same degree of flexibility to all and every financial institution, including recidivist banks like Wells Fargo.

Furthermore, there needs to be more, not less, privacy protections and consumer control relating to personal information following the massive data breach at Equifax this year.

Mr. Speaker, for all of these reasons, I urge opposition to H.R. 2396, and I reserve the balance of my time.

Mr. Speaker, I yield 3 minutes to the gentlewoman from New York (Ms. Velazquez), a senior member of the Financial Services Committee and the ranking member of the Small Business Committee.

Mr. Speaker, I yield myself such time as I may consume.

I have heard, more than once, Members speaking for consumers, saying: These privacy notices are not that important. Nobody reads them. They throw them in the wastebasket.

Well, I don't know how Members would know that, and I don't think that we should be satisfied that consumers are being represented that way with indications that they don't really care about these notices and the opportunity to opt out so that their information won't be shared.

But let me tell you what consumers are saying to us. I have, here, letters that have been sent by consumer organizations that really do care about what is happening with this bill today, and I would like to share that information with you.

Let me just tell you who these consumer organizations are and whom they represent:

There is Americans for Financial Reform. Americans for Financial Reform is a nonpartisan and nonprofit coalition of more than 200 civil rights, consumer, labor, business, investor, faith-based, civic, and community groups formed in the wake of the 2008 crisis, working to lay the foundation for a strong, stable, and ethical financial system, one that serves the economy and the Nation as a whole.

Then there is Allied Progress. Allied Progress is a consumer watchdog organization that uses hard-hitting research to stand up to Wall Street and powerful special interests and hold their allies in Congress and the White House accountable.

Then there is Center for Digital Democracy. The Center for Digital Democracy is recognized as one of the leading consumer protection and privacy organizations in the United States; and since its founding in 2001 and, prior to that, through its predecessor organization, the Center for Media Education, CDD has been at the forefront of research, public education, and advocacy, protecting consumers in the digital age.

Then there is Consumer Action. Through multilingual financial education materials, community outreach, and issue-focused advocacy, Consumer Action empowers underrepresented consumers, nationwide, to assert their rights in the marketplace and to financially prosper.

There is the Consumer Federation of America. The Consumer Federation of America is an association of nonprofit consumer organizations that was established way back in 1968 to advance consumer interests through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's board of directors. CFA is a research, advocacy, education, and service organization.

Then there is Consumer Watchdog. Consumer Watchdog is a nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government, and politics, and they describe themselves as deploying an in-house team of public interest lawyers, policy experts, strategists, and grassroots activists to expose, confront, and change corporate and political injustice in every way, every day, saving Americans billions of dollars and improving countless lives. For decades, Consumer Watchdog has been the Nation's most aggressive consumer advocate, taking on politicians of both parties and the special interests that fund them.

Then there is the National Association of Consumer Advocates. The National Association of Consumer Advocates is a nonprofit association of more than 1,500 attorneys and consumer advocates committed to representing consumers' interests. Our members, they say, are private and public sector attorneys, legal services attorneys, law professors, and law students whose primary focus is the protection and representation of consumers. They have represented hundreds of thousands of consumers victimized by fraudulent, abusive, and predatory business practices.

As a national organization fully committed to promoting justice for consumers, NACA's members and their clients are actively engaged in promoting a fair and open marketplace that forcefully protects the rights of consumers, particularly those of modest means. NACA also has a charitable and educational fund incorporated under 501(c)(3).

There is another very prominent consumer organization, the National Consumer Law Center, working on behalf of low-income clients. Since 1969, the nonprofit National Consumer Law Center has used its expertise in consumer law and energy policy to work for consumer justice and economic security for low-income and other disadvantaged people, including older adults in the United States. This organization's expertise includes policy analysis and advocacy, consumer law and energy publications, litigation, expert witness services, and training and advice for advocates.

This organization works with nonprofit and legal services organizations, private attorneys, policymakers, and Federal and State government and courts across the Nation to stop exploitative practices, help financially stressed families build and retain wealth, and advance economic fairness.

Then there is Privacy Times. Privacy Times is the leading subscription-only newsletter covering privacy and freedom of information law and policy. It is read largely by attorneys and professionals who must stay abreast of the legislation, litigation, and executive branch activities, as well as consumer news, technology trends, and business developments. Since 1981, Privacy Times has provided its readers with accurate reporting, objective analysis, and thoughtful insight into the events that shape the ongoing debate over privacy and freedom of information.

Then there is the Privacy Rights Clearinghouse. Privacy Rights Clearinghouse, a nonprofit consumer education and advocacy organization located in San Diego, California, their mission is to engage, educate, and empower consumers to protect their privacy. They engage in outreach, provide educational materials and services to individuals nationwide, and have an active media presence. The PRC uses the information we learn directly, they say, from consumers to form the basis of their advocacy work.

Then there is Public Citizen. Public Citizen has a team of researchers. They uncover the facts. Their staff brings their findings to the public through the media as well as one-on-one interactions. Their advocates bring the voice of the public to the halls of power on behalf of consumers.

Then there is Public Knowledge. Public Knowledge promotes freedom of expression and open internet and access to affordable communication tools and

creative works. They work to shape policy on behalf of the public interest.

Then there is Reinvestment Partners. Reinvestment Partners' mission is to advocate for economic justice and opportunity. They do this by providing direct services to people, revitalizing places, and advocating for just policies. Founded as a project of Legal Services in 1986 as the Community Reinvestment Association of North Carolina, the agency has worked to ensure fair lending to underserved communities in order to build and protect wealth. In 2012, they changed their name to recognize the expanded diversity of their programs and their local and State and national outreach.

And then there is U.S. PIRG. U.S. PIRG is an advocate for the public interest, working to win concrete results on real problems that affect millions of lives and standing up for the public against powerful interests when they push the other way. They say: ``The problems we face don't care if you are liberal or conservative, if you live in a red or blue State. They affect each and every one of us.'' That is why, for decades, they have taken a nonpartisan, facts-driven, results- oriented approach to their work.

Mr. Speaker, I do not like hearing that our consumers don't care, that they don't need a yearly notification about their privacy rights, that they simply throw this information that describes their rights into the wastebasket; and I am so pleased that, over the years and through the history of this Nation when too many consumers have been ignored, taken advantage of, didn't know what their rights were, all of these organizations that I have taken time to share with you today work on behalf of consumers. They work not only in organizing and educating, but they send this information to their Members of Congress. All of these organizations have sent in this information not only about their backgrounds, but about this bill.

Mr. Speaker, I reserve the balance of my time

Mr. Speaker, I yield myself such time as I may consume.

Again, it is interesting how my colleagues on the opposite side of the aisle describe their consumers. These are people, they say, who don't want to be inundated with useless information. They are saying that the privacy information is of no use.

It is interesting that Mr. Loudermilk said he read his privacy notice, unlike most other Americans who don't read their privacy notice. I think that is very interesting to describe himself as someone who read his privacy notice, but able to speak for all other Americans who don't read their privacy notice.

What is very interesting also about his comments is he refers to the consumer groups as special interests, while he is representing the banks and the financial institutions, the real special interests.

Why is it Representatives who come to this Congress to represent people who vote for them somehow see their responsibility to protect the real special interests, such as the financial institutions who have lobbyists running up and down these Halls every day, who make contributions to Members of Congress, rather than the consumers who are represented by the kinds of groups that I have taken time to describe here this morning, because these individuals and the average citizen do not have paid lobbyists from financial institutions and banks representing them here.

So it is also interesting that Mr. Loudermilk talked about how many of these consumers are going to be buying automobiles because of the tax fraud bill that he is referring to that is being advanced by the opposite side of the aisle. The only thing that bill is going to do for consumers, which will hurt our economy, is create a $1.5 trillion debt.

Well, he said that consumers were going to be buying more cars. Yeah, the wealthy will be, the ones who are given the breaks in this tax bill. The wealthy may be buying more automobiles, but the very people who are represented by these consumers that I have shared the information on this morning, they won't be able to buy automobiles because they are going to be harmed. It is only the wealthy, only those who are making extraordinary amounts of money, and corporations, that are going to benefit from the tax bill.

I don't even know how and why he talked about it in the same breath that we are talking about our consumers being able to be respected with privacy information that they would get because we have laws that give them the right to have this information.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I have no other Members, so I yield myself the balance of my time to close.

It is very simple. The consumer groups that I took time to help people to understand who they are and what they do, representing the consumers, are the folks who are concerned about people knowing their rights. This is what they work at doing.

Those of us who align ourselves with consumer groups care about the average citizen. We care that the average citizen gets the kind of information that is going to make their lives much easier.

The people on the opposite side of the aisle represent banks and financial institutions. We are not opposed to business, and we work with businesses in various ways.

We are opposed to rip-offs. We are opposed to fraud. We are opposed to denying consumers the opportunity to know their rights.

But those Members of Congress who come here and basically mimic and mock the consumers by talking about those consumers who wait by their mailboxes for privacy information certainly are not representing the citizens of their district.

I can tell you this: When you take a look at who the real special interests are, who is representing the interests of the special interests, who in this House stands up for banks, financial institutions, and Wall Street and hedge funds, you look at the opposite side of the aisle, time and time again, and you will find them putting all of their time and their effort into representing those special interests.

For those of us who stand on the side of the average citizen, yes, we align

ourselves with consumer groups. No, we don't dismiss them as unnecessary people just messing around in the business of big business.

These are the representatives, again, of people who don't have fancy lobbyists walking these Halls and following the Members of Congress, getting into their area and influencing them.

Mr. Speaker, I stand today with our consumers. I applaud all of our consumer groups and I stand on the side of our consumers being able to know their rights and all of the work that went into providing this opportunity in law. I stand with them and I resist any effort by the opposite side of the aisle to deny the right of our citizens to be notified about their rights and their ability to opt out if they do not want their information shared with these unaffiliated groups.

Mr. Speaker, I am very proud. I know that we are doing what our citizens want us to do, why they sent us to this Congress.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I claim time in opposition to the amendment.

Mr. Speaker, I appreciate Mr. Clay's effort to make the bill better. He is absolutely correct, we have been attempting to work together to see if there was a way that we could deal with the issue at hand and absolutely ensure that our consumers not only have a right to information that explains to them what their rights are and how they can opt out when their information is being sold, really, to unaffiliated organizations.

Mr. Speaker, just in case people are not following exactly what we are talking about when we talk about opt-out rights, let me draw your attention to the fact that you oftentimes are receiving loads of mail in your mailbox, everything from somebody who is selling pet food to clothing, to services, to all kinds of products, and you don't know why they are sending you all this junk. Well, they are sending you this junk because somebody sold your information to all of these organizations because you didn't know that you had not opted out. You maybe didn't know what your rights are. But citizens have a right to have that information, and they have a right to be respected and not thought to be simply throwing it into the wastebasket.

It doesn't matter whether it is for all businesses in the United States or just for automobile dealers. It is about every citizen having the right to have their privacy protected and not having people sell their information to unaffiliated organizations that will cause them to be pressured or solicited over and over again and their mailboxes filled with information because their privacy information has been sold to one of those unaffiliated organizations.

Mr. Speaker, I think that Mr. Clay is attempting to streamline the bill. I appreciate the efforts that he has put into attempting to do this, but this does not correct the problem. This undermines the efforts of all of these consumer groups that worked for years to get these notices sent to our consumers.

Mr. Speaker, despite the fact that we have tried and we have worked and we have listened to each other, I would ask for a ``no'' vote on the amendment.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I have a motion to recommit at the desk.

Mr. Speaker, I am opposed to the bill.

Mr. Speaker, this is the final amendment to the bill, which will not kill the bill or send it back to committee. If adopted, the bill will immediately proceed to final passage, as amended.

My motion would prevent institutions that have engaged in a pattern or practice of unsafe or unsound banking practices and other violations related to consumer harm from being able to evade important consumer protections.

When companies repeatedly exhibit indifference to consumer protection and demonstrate that they are incapable of complying or are unwilling to comply with U.S. laws and regulations, they should not be allowed to benefit from those bad actions.

As I have already mentioned, under this bill, as amended, companies like Wells Fargo would be free to share or sell customer information with any company, with minimal reminders to their customers.

We all know that Wells Fargo has engaged in illegal student loan servicing practices, inappropriate checking accounts, overdraft fees, unlawful mortgage lending practices, overcharging veterans for refinanced loans, enrolled customers in life insurance policies without their consent, delayed mortgage closing dates until after the expiration of the borrower's interest rate lock to levy additional fees, and charged over 570,000 customers with auto insurance policies they did not need, which resulted in at least 20,000 customers, including Active-Duty servicemembers, having their vehicles inappropriately repossessed.

Companies like Wells Fargo are why I introduced H.R. 3937, the Megabank Accountability and Consequences Act, to make sure that lenders that have engaged in abusive practices face real consequences for their wrongdoing. It is time we truly hold companies that demonstrate a pattern of harming consumers accountable. These institutions must no longer be allowed to abuse hardworking Americans.

Mr. Speaker, I urge adoption of my motion, and I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, pursuant to House Resolution 657, I call up the bill (H.R. 2396) to amend the Gramm-Leach-Bliley Act to update the exception for certain annual notices provided by financial institutions, and ask for its immediate consideration.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and include extraneous material on the bill under consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise today in support of H.R. 2396, the Privacy Notification Technical Clarification Act, which is an important bill cosponsored by a bipartisan group of Members of the House and a bill that was approved by the Financial Services Committee with a strong bipartisan vote of 2-1, quite literally: 40-20. Additionally, this bill builds upon an issue that has a long track record of strong bipartisan support in Congress.

I thank Congressman Trott, a member of the Financial Services Committee, for introducing this legislation and for leading congressional efforts to modernize the privacy notification process for consumers and to provide regulatory relief for our struggling financial institutions.

There is a serious issue, Mr. Speaker, with the sheer volume, complexity, weight, load, and cost of the regulatory burden upon, particularly, our struggling community financial institutions, our community banks, and credit unions.

It is no one specific regulation, but the totality, the combination of them all, are causing us to lose a community bank or credit union a day in America. As we lose them, our constituents lose their opportunity for credit opportunities to share in their version of the American Dream. It makes it more costly, more difficult for them to finance someone to go to college, for them to perhaps buy an auto to get them to work, or perhaps capitalize their own small business. So we frequently hear from our community financial institutions.

I heard from a community banker in Nebraska, not long ago, who explained: ``I have explained about how things have changed since I started in banking 10 years ago. In efforts for our government to make things more fair or easier for consumers, it has actually become increasingly more difficult for people to obtain favorable loan terms and, not to mention, obtain loans in a timely manner.''

I heard from a banker in Alabama about real estate regulations, who said: They were intended to help customers, but it is actually hurting them. As wait times increase and banks are no longer offering certain products, not all of these people can be protected from themselves, no matter how many rules and regs the banks follow to protect them.

I heard from a community banker in Utah, who said: I have been in banking for 29 years. In that time, the regulatory burden has increased dramatically. The ability to help customers and small businesses succeed in rural America has been greatly hampered by regulation intended to protect the customer from Wall Street banks, but in the process, smaller community banks, such as mine, have been caught in the fray or broad brush of regulations.

A banker in Oklahoma said that, because of Dodd-Frank regulations: ``We no longer offer/purchase house loans.''

The list goes on and on and on.

So this is one regulation that simply says: under the Gramm-Leach- Bliley Act, if a financial institution doesn't change their privacy notification, they don't have to send out a piece of paper annually--a piece of paper like this that 99 percent of the time customers throw away and don't read in the first place.

Don't take my word for it. Professor Adam Levitin, who is a frequent Democrat witness before the House Financial Services Committee testified before our committee: ``One thing that I think should go the way of the dodo bird are the Gramm-Leach-Bliley privacy notices. Nobody reads them.''

That is a Democrat witness, Mr. Speaker. It is not a Republican witness. It is a Democrat witness.

He goes on to say: ``There's no reason anyone should--even the large banks--should be spending money on giving these notices.''

But that is not what this bill does. It just simply says, if a financial institution does not change their privacy notification, they don't have to send out a paper notification that creates more costs, that gets passed on to the customer, and that nobody reads in the first place.

Number one, it is important regulatory relief for our financial institutions. But it is also important when we think in terms of the sheer volume of financial disclosures that our constituents receive.

This goes back to the fact, Mr. Speaker, if you disclose everything, you effectively disclose nothing because you overwhelm the customer.

So we must vigilantly ensure that our constituents are receiving effective disclosure, not just voluminous disclosure, but effective disclosure of material items written in clear, understandable, common language. Again, not voluminous disclosure of irrelevant items written in legalese and fine print. That doesn't do anybody any good, Mr. Speaker.

Again, I want to thank the gentleman from Michigan for his leadership. The bill that he is bringing today has earned bipartisan support because it is a simple technical correction to clarify that customers have to be physically mailed an annual privacy notice only when the privacy policies have actually changed from the previous year.

Importantly, this bill was carefully crafted to maintain and retain current privacy and opt-out policies and does not exempt any financial services provider from an initial privacy notice, nor does it allow any loopholes for an institution to avoid issuing an updated notice.

In fact, this legislation, Mr. Speaker, does not change privacy provisions at all, just how they are delivered. Let me repeat: the legislation does not change privacy provisions at all, just how they are delivered.

Again, Mr. Trott's bill has strong bipartisan support. It provides a simple and flexible approach that modernizes privacy notification to the benefit of our customers and to the benefit of our financial institutions.

Mr. Speaker, I urge adoption of the measure and urge every Member to vote for it, and I reserve the balance of my time.

Mr. Speaker, I yield myself 30 seconds to say that I listened very carefully. It was a fascinating speech from the ranking member. Too bad it has absolutely nothing to do with the bill that is before us. Ms. Waters was speaking of privacy policies. The bill has to do with notification.

But I do agree with the ranking member that we do need more effective disclosure. In H.R. 2396, we require financial institutions to make their current policies available on its website at all times. That actually improves disclosure. The only people who can be for the status quo are those who own paper mills so that we can waste more paper.

Mr. Speaker, I yield 5 minutes to the gentleman from Michigan (Mr. Trott), the sponsor of this legislation and an outstanding, hardworking member of the Financial Services Committee.

Mr. Speaker, I yield 5 minutes to the gentleman from Missouri (Mr. Luetkemeyer), the chairman of the Financial Services Subcommittee on Financial Institutions and Consumer Credit.

Mr. Speaker, I yield myself 1 minute to say I hope that schoolchildren from around the Nation have been listening to this debate because they would be educated on the House version of the filibuster.

I thought that the ranking member was going to break out the Washington, D.C., phone book and begin to read from it. It was a fascinating discussion of a litany of Washington-based special interest groups. I know they appreciated the shout-out; I know it will help them in their fundraising efforts; but it has absolutely nothing--nothing-- to do with the bill that we are debating, nothing to do with the bill that we are debating.

So the ranking member said how important it is that consumers receive an annual--an annual--notice of the privacy policies of financial institutions. Well, under this bill, H.R. 2396, they don't get it annually, they get it monthly. They get it weekly. They get it daily. They get it hourly.

I yield myself an additional 1 minute.

In fact, under H.R. 2396, the privacy notification must be continuous. It has to be put on the website. This helps the consumer. The consumer has access 24/7 to the privacy notification under the gentleman from Michigan's bill, as opposed to the status quo being defended by my friends on the other side of the aisle, who say, once a year--once a year--you ought to get a piece of paper that is probably going to end up in the round file anyway.

Again, Mr. Speaker, this debate has nothing to do with the privacy policies of financial institutions. It has everything to do with the notification of such policies. What we provide for is the continuous notification; and should that policy change, then, and only then, does that necessitate the killing of trees.

Mr. Speaker, I yield 5 minutes to the gentleman from Georgia (Mr. Loudermilk), an outstanding member of the Financial Services Committee.

Mr. Speaker, I yield 3 minutes to the gentleman from Michigan (Mr. Trott), the sponsor of this legislation.

I yield the gentleman from Michigan an additional 30 seconds.

Mr. Speaker, how much time do I have remaining?

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, there have been several surreal moments on the House floor this week, and today certainly is one more of them.

The debate today is not between regulation and deregulation, but in many respects, the debate is between smart regulation and dumb regulation. What we have today is a dumb regulation that forces a number of financial institutions annually to send out a paper notification even if they don't change their privacy policy; cut down trees, engage an expense--by the way, an expense that, my guess is, doesn't come out of executive bonuses, but probably comes out of the credit availability and the credit cost to the customer. It gets passed on to the consumer.

What we are also having a debate about--and I would encourage all my friends on the other side of the aisle, if in doubt, read the bill.

In this particular case, guess what, Mr. Speaker. It is a 2-page bill. It really doesn't take that long to read. If you read it, what you will find out is that this is a bill that is pro-consumer because we go from a notification that happens once a year to a continuous notification. We improve the consumer notification by ensuring that it is consistently on the website of the financial institution.

What we hear from the ranking member is: No. I want to stay in the 20th century. Gramm-Leach-Bliley is a law from the 20th century.

But, Mr. Speaker, we are in the 21st century. Why don't we ensure that the privacy notification for the consumer is actually on the website?

This is what is truly pro-consumer, not forcing people to go and subsidize the paper mills and the U.S. Postal Service by sending out a notification on paper that doesn't change anything and merely confuses consumers. If you are really pro-consumer, then try to respect their markets and try not to pass additional cost on to them.

Again, regardless of what you have heard from the other side of the aisle, this is everything to do with how we notify people of privacy policies, not the underlying privacy policy itself. It is 21st century. It is not 20th century. It is pro-consumer, regardless of all the special interests and Washington, D.C.-based lobbyists that the ranking member has cited.

The gentleman from Michigan brings us pro-consumer legislation, the Privacy Notification Technical Clarification Act. I am kind of embarrassed that we are having to spend this much time debating something that should have been on our expedited suspension calendar. It is almost like there is just simply a knee-jerk reaction anytime we attempt to modify any government regulation.

This is pro-consumer. Frankly, it is pro-environment. Every Member of the House should embrace H.R. 2396. I am sorry we have had to take up so much time for it, but there are thousands and thousands of regulations that hurt our financial institutions, that hurt our consumers. We are trying to get rid of every dumb one, one at a time.

Again, this should be passing unanimously. I don't understand it, but I am glad the American people could see this debate for what it is.

Mr. Speaker, again, let's be pro-consumer, let's be pro-community financial institution, let's be pro-environment, and let's enact H.R. 2396.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I claim the time in opposition to the amendment.

Mr. Speaker, again, I would encourage the ranking member and all Members on the other side of the aisle to read the underlying bill. It is 2 pages long. It has now been amended by perhaps a 1-page amendment. This has nothing to do with Wells Fargo. It has nothing to do with Equifax. It is limited to the annual paper notification from auto finance companies, pure and simple.

Again, for those who listened to the earlier debate, the question is whether or not these auto finance companies are going to be forced to spend money that comes out of their customers' pockets to send out a paper notification of privacy policies even when the policy doesn't change, or whether or not we should modernize into the 21st century and ensure that there is continuous notification on a website and that a paper notification only goes out upon a change, an actual change.

What the ranking member is doing with the motion to recommit is once again empowering the unconstitutional and unaccountable CFPB to engage in even more activities that harm consumers. It ought to be rejected, and we ought to ensure that we adopt H.R. 2396 and simplify and modernize one regulation that is harming consumers and harming financial institutions.

Mr. Speaker, I urge rejection of the motion to recommit, and I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, while government isn't meant to create jobs, with the help of the President, Congress can set Federal policies that establish a pro-worker, pro-business environment that lifts people out of poverty, helps families, and drives our country forward.

One problem today that is impeding job growth is access to capital for small businesses. American businessmen and -women are often unable to get the loans they need to start a new enterprise or to grow an existing one.

Additionally, if a firm would like to publicly sell stock to raise money, it must register with the Securities and Exchange Commission, which costs $2.5 million, on average; an amount most small businesses simply cannot afford.

Small and emerging businesses are a key to the economic engine in America. The Small Business Administration found that these businesses create over half of the new jobs on an annual basis in this country. More importantly, today's small businesses are tomorrow's success story.

Just think of all the great businesses in this country that started with a dream in a garage: Amazon, Apple, Microsoft, Disney, Harley- Davidson, and Minnesota's own Medtronic. We want to empower the entrepreneurs in this country to dream, innovate, and create jobs that grow our economy.

That is why I introduced the Micro Offering Safe Harbor Act. This bill will make it easier for entrepreneurs and

small businesses to raise money from family, friends, and their personal network without running afoul of the vague and undefined ``private offering'' safe harbor provisions in the Securities Act of 1933.

Thus, the Micro Offering Safe Harbor Act helps bring clarity to existing law so that our current and future job creators can easily raise capital within the confines of an easy-to-understand provision without the help of an expert.

This legislation requires three specific criteria to be met simultaneously in order to trigger a safe harbor exemption for a security offering instead of just one or more. These criteria ensure that: one, each purchaser has a substantive preexisting relationship with an owner; two, there are no more than 35 purchasers of securities from the issuer that are sold in reliance on the exemption during the 12 months proceeding; and, three, the aggregate amount of all securities sold by the issuers does not exceed $500,000 during the 12- month period preceding the offering. The bill also exempts any of the aforementioned security offerings from blue-sky laws, while maintaining antifraud provisions at the Federal and State level.

These provisions protect Americans from criminals trying to swindle them out of their hard-earned money, while making capital more accessible to businesses by investors from around the country.

In fact, I will be offering an amendment to enhance these antifraud provisions. This amendment, which incorporates the suggestions made by my colleagues on the other side of the aisle during a legislative hearing in the last Congress, will ensure that individuals who have been disqualified under the ``bad actor'' disqualification standard, as is listed under current law, are prohibited from using the exemption provided under H.R. 2201, establishing yet an additional layer of investor protection.

Entrepreneurs and small-business owners need access to capital in order to achieve the American Dream. Although small businesses accounted for 99.7 percent of all the businesses in the United States last year, only half of them will survive longer than 5 years, according to our Bureau of Labor Statistics.

Lack of capital or difficulty accessing capital is one of the main causes of failure for many of these small businesses. A 2015 survey conducted by BlueVine found that 75 percent of small and emerging businessowners reported their primary source of funding comes from their own personal finances, followed by banks at 16 percent and family and friends at 6 percent.

While banks and credit unions do their best to offer the funding these businesses need to grow and thrive, there are still 3 million fewer small business loans made annually, today, than there were before the 2008 financial crisis. H.R. 2201 seeks to build off the success of the Jumpstart Our Business Startups Act of 2012, better known as the JOBS Act, and will continue to spur capital formation for the true job creators and drivers of our country's economy.

The Micro Offering Safe Harbor Act helps small and emerging companies add another tool to the toolkit, enabling them to confidently find alternative ways of raising these funds without having to pay for costly securities experts and without the fear of lawsuits if they operate within these easy-to-understand parameters.

That is why the Micro Offering Safe Harbor Act is endorsed by the National Small Business Association; the Small Business & Entrepreneurship Council; the National Federation of Independent Business; the Chamber of Commerce; Heritage Action; and Engine, ``The Voice of Startups in Government.''

The House approved an identical version of this legislation during the 114th Congress as part of the Accelerating Access to Capital Act, and language similar to H.R. 2201 was included in the Financial CHOICE Act, which was adopted by this Chamber in June.

Mr. Speaker, the time has come for Congress to come together and help small businesses help themselves by making this important update and improvement to the Securities Act of 1933.

I want to thank Chairman Hensarling; Capital Markets, Securities, and Investment Subcommittee Chairman Huizenga; and all of the staff on the Financial Services Committee for their hard work on this legislation.

Mr. Speaker, I urge my colleagues to support this legislation and hope that both parties will use H.R. 2201 as a way to show their support for more opportunities and better lives for our job creators.

Mr. Speaker, I include in the Record letters from the National Small Business Association, the Small Business & Entrepreneurship Council, the United States Chamber of Commerce, Heritage Action for America, and Engine.

National Small Business Association.

Hon. Tom Emmer,

House of Representatives,

Washington, DC.

Dear Representative Emmer: On behalf of the National Small

Business Association (NSBA), the nation's first small-

business advocacy organization, with more than 65,000 small-

business members representing every state and every industry

across the country, I commend your leadership for introducing

the Micro Offering Safe Harbor Act (H.R. 2201) as it will

have an immediate and direct impact on small businesses

looking to raise capital. NSBA has long supported the kind of

simplification this legislation would bring for small

businesses.

Capital is the lifeblood of any small business, and often

small-business owners need capital at various stages; some at

their startup and others later when they are looking to

expand. Despite this ongoing need, small-business lending

from banks has decreased over the last decade and many small

businesses have few options for obtaining capital. According

to NSBA's 2016 Year-End Economic Report, small-business

access to capital remains stubbornly unchanged since the

previous year, with just 69 percent of small firms reporting

they are able to get adequate financing. This drop has real-

world implications: 41 percent said lack of capital is

hindering their ability to grow their business or expand

operations, and 20 percent said they had to reduce the number

of employees as a result of tight credit.

Therefore, raising capital though securities is an

attractive alternative option for many small-business owners.

However, the current regulatory requirements are quite

onerous for small businesses, often requiring expensive

specialized counsel for even very small securities offerings.

NSBA supports this targeted legislation that creates a safe

harbor for small securities offerings which meet requirements

clearly identified in the legislation. Under the legislation,

these exemptions include offerings in which each purchaser

has a substantive pre-existing relationship with the owners,

where the issuer has less than 35 purchasers utilizing the

exemption in the preceding 12 month period, or where the

total amount raised during the preceding 12 month period is

less than $500,000. By creating three safe harbor exemptions

for ``non-public offerings,'' businesses can operate with

clarity and a clear conscience knowing that they would be

exempted from registering with the Securities and Exchange

Commission (SEC). Additionally, the legislation also exempts

transactions meeting the specified requirements from state

registration requirements, commonly referred to as ``blue sky

laws.''

Raising capital for small businesses from friends and

family already takes place on a regular basis, except those

transactions often lack the legal protections and structure

of securities law. In addition to expanding access to capital

for small businesses, this legislation will bring those

transactions under a recognized legal framework, and make

resolving disputes that arise much more efficient. Finally,

bringing these existing transactions under an existing legal

framework will provide a sound legal basis for subsequent

larger offerings requiring registration with the SEC.

Access to capital continues to be one of the most pressing

issues facing the small-business community. All small

businesses need an injection of capital at one point or

another, unfortunately in the past several years it has

become difficult for small businesses to get the funds they

need to grow and expand. NSBA is pleased to support the Micro

Offering Safe Harbor Act as it will help small businesses

around the country expand and create new jobs in their

communities.

Sincerely,

Todd McCracken,

President & CEO.

Mr. Speaker, I have an amendment at the desk.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, the amendment I am offering today will enhance antifraud and consumer protections for small businesses and startups seeking to take advantage of the micro offering exemption outlined in the underlying bill.

While the legislation itself requires three specific criteria to be met simultaneously in order to trigger a safe harbor exemption for a security offering, my amendment adds an additional layer of protection to further safeguard investors from bad actors.

Specifically, my amendment prohibits the exemption from being available for those who have been disqualified under the bad actor disqualification standard established by the SEC. This language was included with the support of my colleagues from both sides of the aisle during consideration in committee in the 114th Congress, and I am hopeful they will support its inclusion again in the 115th.

I want to reiterate that nothing in the base text of this bill erodes or limits the ability of Federal or State regulators to prosecute fraud, nor would it prevent private common law causes of action for fraud or breach of contract between the interested parties.

This amendment builds upon these existing protections and drives home the point that the Micro Offering Safe Harbor Act is purely focused on helping our small businesses and entrepreneurs access the tools they need to grow and create jobs in an orderly and legal manner.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I will close at this point.

Mr. Speaker, I want to thank the ranking member for her encouragement and her compliments, and I want to just point out that the Micro Offering Safe Harbor Act was actually improved as a direct result of the ranking member's suggestions.

So, again, I want to thank her for her compliments here today, her encouragement in helping us make this an even better bill for entrepreneurs and small businesses across the country. At this point, I would encourage support for the amendment.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, pursuant to House Resolution 609, I call up the bill (H.R. 2201) to amend the Securities Act of 1933 to exempt certain micro-offerings from the registration requirements of such Act, and for other purposes, and ask for its immediate consideration in the House.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, we know that, unfortunately, after 8 years of bad economic policies from the Obama administration, working people did not receive a pay increase. We know that we had one of the lowest labor participation rates in modern history. We know that the economy was limping along at 1\1/2\ to 2 percent economic growth.

But, fortunately, Mr. Speaker, a new day has dawned and now, all of a sudden, we see that, with the policies of Republicans in Congress, with the policies of the Trump administration, we are seeing promising signs. What we are seeing all of a sudden now is 2 quarters, Mr. Speaker, of 3-plus percent economic growth. This means a difference to working families. They are finally seeing increases in their paychecks, increases in their take-home pay.

That is why one of the most exciting policies that are being worked upon today that we hope to see soon is fundamental, pro-growth tax reform for the entire American economy; one that would grow our economy and that makes a Tax Code fairer, flatter, simpler, more competitive; one that would lower rates for families and allow 90 percent of Americans to fill out their forms on something akin to a postcard; something that would help our small businesses and entrepreneurs.

I look forward, Mr. Speaker, to having that legislation on the floor soon. But we have legislation today that is also important to our small businesses and our entrepreneurs, H.R. 2201, by the gentleman from Minnesota.

What is so important about this legislation, Mr. Speaker, is that it would allow our entrepreneurs and our small businesses to more effectively be able to reach out to family and friends to get the needed capital to start their businesses.

A 2014 survey by the Kauffman Foundation found out that over 28 percent of startups raise their funding from their personal network. Mr. Speaker, we have a challenge, and that is the Securities Act does not clearly define what is a public offering or, conversely, a nonpublic offering. So this makes it very difficult for our early-stage entrepreneurial growth companies to go out and do any kind of private placement to raise funds from friends and family.

Now, we know that a private placement is already something that is established in law. But what isn't established is a bright line, safe harbor for these business enterprises to go out and raise these funds.

So what we also know, unfortunately, from our Securities and Exchange Commission is that a registered offering is simply not economically

feasible for a small business, an entrepreneur, an issuer who is seeking to raise less than $1 million.

So too often, Mr. Speaker, we have a number of these enterprises that, frankly, just never get jump-started because they don't have the opportunity for a private offering. That is why it is so important.

I want to thank the gentleman from Minnesota (Mr. Emmer) for his leadership in bringing this legislation to the House floor today.

So it is a simple piece of legislation. Again, it simply allows a bright line, safe harbor for very small offerings. It requires that each purchaser has a substantive preexisting relationship with an officer, director, or shareholder of the issuer.

The issuer must reasonably believe that there are no more than 35 purchasers of the securities, and the aggregate amount of all securities sold by the issuer cannot exceed $500,000 in a 12-month period.

So, Mr. Speaker, we are talking about a very small portion of startups, but a very vitally important section of our startups that need capital.

Mr. Speaker, a few decades ago there was a company where a gentleman borrowed money from his father to import Japanese sports shoes, and he purchased 200 pairs of these Japanese sports shoes. He started a business called Blue Ribbon Sports, and today we know it as Nike.

A few decades ago there was an investor out in Omaha, Nebraska, who borrowed money from seven friends and family members, including his sister Doris and Aunt Alice. Over the next 9 years, this initial investment grew, and this gentleman purchased something called Berkshire Hathaway, the textile company that has now led to the Berkshire Hathaway empire.

In 1994, there was a gentleman who took a loan from his parents, moved to a two-bedroom, small apartment, and launched a company called Amazon.

We want to make sure that the next Berkshire Hathaway, the next Amazon get launched, and that is why it is so critical we enact H.R. 2201.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and submit extraneous material on the bill under consideration.

Mr. Speaker, I yield 5 minutes to the gentleman from Minnesota (Mr. Emmer), the sponsor of the legislation and an outstanding member of the Financial Services Committee.

Mr. Speaker, I yield an additional 30 seconds to the gentleman from Minnesota.

Mr. Speaker, I yield myself 30 seconds, just to say, as I listen to the gentleman from Rhode Island and the ranking member, their comments are very interesting, but everything they described is already illegal. Their remarks acknowledge that the SEC can and does bring actions to enforce the securities laws and shut down fraud when they discover the fraud.

Nothing in H.R. 2201 eliminates the DOJ's ability to pursue criminal prosecutions or fraud. Nothing in it impacts the SEC's ability to pursue civil actions against issuers who engage in fraud under section 17(a) of the Securities Act of 1933. It is just a red herring. It is one of the reasons we have had such poor economic growth under the Democratic regime.

Mr. Speaker, I yield 3 minutes to the gentleman from Missouri (Mr. Luetkemeyer), chairman of the Financial Institutions and Consumer Credit Subcommittee of our committee.

Mr. Speaker, number one, I was very pleased to hear one of the most compelling indictments of 8 years of the Obama administration I have ever heard on the House floor, and I thank the ranking member for it.

Mr. Speaker, I yield 3 minutes to the gentleman from Pennsylvania (Mr. Rothfus), who is the vice chairman of the Financial Institutions and Consumer Credit Subcommittee.

Mr. Speaker, I yield 3 minutes to the gentleman from Colorado (Mr. Tipton), who is the vice chairman of the Oversight and Investigations Subcommittee.

Mr. Speaker, I yield myself 10 seconds just to say I heard the word ``protection'' often used by my friend, the ranking member, but she and her friends on the other side of the aisle had 10 years to protect paychecks, protect savings, and protect economic opportunity and the American Dream, and they failed miserably.

Mr. Speaker, I yield 2 minutes to the gentleman from Ohio (Mr. Davidson), a member of the Financial Services Committee.

Mr. Speaker, I yield 2 minutes to the gentleman from Indiana (Mr. Hollingsworth), another member of the Financial Services Committee.

Mr. Speaker, I yield 2 minutes to the gentleman from South Carolina (Mr. Norman), he is not a member of the Financial Services Committee, but we would be proud if he were.

Mr. Speaker, I yield 1 minute to the gentleman from Wisconsin (Mr. Duffy), the chairman of the Housing and Insurance Subcommittee.

Mr. Speaker, I yield an additional 30 seconds to the gentleman from Wisconsin.

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, as always, I listen very carefully to my friend, the ranking member. I know that she started off her closing remarks by saying: We don't need this bill, H.R. 2201, because the big banks can loan to the small businesses.

Well, that is fascinating to me, Mr. Speaker, because of the Dodd- Frank Act, which she so jealously supports, all of a sudden, the risk- based capital standards say that the banks have to reserve more for small business loans than they do for sovereign debt and municipal debt.

So all of a sudden, it is because of Dodd-Frank. In addition, we know that the ranking member supports the Federal Reserve policy of paying interest on excess reserves where the Federal Reserve takes taxpayer money to pay the big banks not to loan money. So if the ranking member was curious why the big banks aren't loaning to the small businesses, which they aren't--and prior to the Trump administration, we know that small business lending by banks was at a 25-year low--it is the very reason, Mr. Speaker, that we need the bill, the legislation of the gentleman from Minnesota (Mr. Emmer) so that we can unlock this.

Again, there is no surprise why, after 8 years of Obamanomics and the thinking from my friends on the other side of the aisle, small businesses have languished and why the economy has dropped down to a 1\1/2\ to 2 percent GDP growth. In fact, I think President Obama is one of the few Presidents in American history never to enjoy a year of 3 percent economic growth.

Now, he may personally have enjoyed it, but the American people didn't, Mr. Speaker. But the good news is that there is a change in administration and a change of attitude. That is why it is so important that we be able to get capital to our entrepreneurs, to our small businesses. Let them thrive again on Main Street.

We hear so often the ranking member decry Wall Street. We are talking about offerings of a half a million dollars. No on in Wall Street would touch that with a 10-foot pole. This is about Main Street, not Wall Street, Mr. Speaker.

It is interesting, as I listen to my friend, the ranking member, decry the fact that someone might be able to raise capital under this particular set of circumstances. Well, I have a news flash for all my colleagues. Already the SEC can grant a private offering for exactly the set of circumstances that my friend, the gentleman from Minnesota, puts into his bill. All the gentleman is doing is creating a bright line, safe harbor, so that the next Nike or the next Amazon isn't stopped from launching their enterprise by having to spend a million dollars on lawyers and accountants trying to navigate this uncertain murky labyrinth of SEC waters trying to determine what is a private offering and what is a public offering. That is all he is doing.

Again, this is already legal. It simply is discretionary to decide what is a private offering and what is a public offering by the Securities and Exchange Commission.

We now, Mr. Speaker, have had two quarters of 3-plus percent economic growth. We are seeing working Americans. We are seeing their paychecks increase yet again. We are seeing hope and resilience in the American Dream yet again, but we have so much more work to do, and that is why H.R. 2201 is so critical.

It takes small businesses today to be the big businesses of tomorrow. They are the creators. They are the job engine of America. They are the drivers of increased paychecks, greater economic opportunity, and a bigger, bolder American Dream. I thank the gentleman from Minnesota for this great legislation. I encourage all of my colleagues to adopt it.

Mr. Speaker, I yield back the balance of my time.