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The Legal Description > News > Senators introduce bill to keep CFPB out of state insurance regulation

Senators introduce bill to keep CFPB out of state insurance regulation

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Legislative Developments
Monday, January 22, 2024

U.S. Senators Joe Manchin (D-WV) and Tim Scott (R-SC) introduced bipartisan legislation to protect the nation’s state-based insurance regulatory system and ensure the Consumer Financial Protection Bureau (CFPB) does not overstep its statutory authority. Their bill, the Business of Insurance Regulatory Reform Act, would clarify the jurisdiction granted to the CFPB by the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and affirm that state insurance regulators are best positioned to oversee insurers and safeguard the interests of consumers.

“I am proud to reintroduce the Business of Insurance Regulatory Reform Act, which reaffirms the 150-year precedent of regulating insurance at the state level and keeps costs down for insurance holders,” Manchin said. “This commonsense legislation would better codify the Consumer Financial Protection Bureau (CFPB)’s current boundaries and hold it to the same standard as the Federal Insurance Office, preventing CFPB from regulating the business of insurance and reminding the agency that this authority resides with states. I encourage my colleagues on both sides of the aisle to support this bipartisan legislation.”

“With 23 years of experience in the insurance industry, I’ve seen firsthand the value of our state-based insurance system. As the CFPB continues to overstep its authority and operate beyond its jurisdiction, this bill will protect our unique system of state-based insurance regulation that has resulted in highly competitive, fair markets across the country from unchecked bureaucrats in Washington,” Scott said.

Title X of the Dodd–Frank Wall Street Reform and Consumer Protection Act created the CFPB and granted the bureau the authority to regulate “financial products or services.” Congress explicitly gave states the regulatory power over the business of insurance through the McCarran-Ferguson Act of 1945, and in Dodd-Frank, excluded the “business of insurance” from the CFPB’s purview such “financial products or services.”

The bill states, “With respect to a person regulated by a state insurance regulator, if that person is offering or providing a consumer financial product or service, the bureau may not enforce this title with respect to that person to the extent that the person is engaged in the business of insurance; or if that person is subject to any enumerated consumer law or any law for which authorities are transferred under subtitle F or H, the authority of the bureau to enforce that law with respect to that person shall be narrowly construed to the extent that the person is engaged in the business of insurance.”

It further states, “the enforcement of this title shall be broadly construed in favor of the authority of a state insurance regulator with respect to a person regulated by the state insurance regulator.”

Several associations, including the American Land Title Association, wrote a letter in support of the legislation.

The letter states, “As you are aware, Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) exempted the business of insurance from the purview of the CFPB and reiterated that the regulation of insurance had been delegated to the states. We believe that additional revisions to the Dodd-Frank Act are needed to underscore the broad scope of the business of insurance exemption and to place parameters around the CFPB's regulatory actions.

The letter continues, “The state-based system of insurance regulation has been effective in promoting consumer protection. By further clarifying the limits of CFPB’s regulatory authority and affirming the presumption of exclusive authority of a state insurance regulator, this key legislation will create certainty for insurers, agents, and consumers that there will not be duplicative or conflicting consumer protection regulations in the future.”

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