mutual-flourishing/ADPA/bills/CFSA.md

Consumer Financial Stability Act (CFSA)

118th Congress, 2nd Session
H.R. _____ / S. _____

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A BILL

To protect and strengthen consumer financial protections by preserving the independence and enforcement powers of key regulatory agencies, expanding deposit insurance protections, and preventing harmful deregulation of consumer financial safeguards.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

Section 1. Short Title

This Act may be cited as the "Consumer Financial Stability Act" or "CFSA".

Section 2: Purpose and Definitions

1.1 Purpose

To protect and strengthen consumer financial protections by preserving the independence and enforcement powers of key regulatory agencies, expanding deposit insurance protections, and preventing harmful deregulation of consumer financial safeguards.

1.2 Definitions

• "Regulatory agencies" refers to the Consumer Financial Protection Bureau (CFPB) and Federal Deposit Insurance Corporation (FDIC)
• "Predatory lending" includes but is not limited to deceptive loan terms, excessive fees, and exploitative interest rates
• "Financial institution" includes banks, credit unions, lending institutions, and financial service providers

Section 2: Protection of Regulatory Agencies

2.1 Agency Independence

1. The CFPB and FDIC shall maintain complete operational and budgetary independence
2. Executive branch officials may not:
   • Remove agency leadership without cause
   • Redirect agency funding
   • Modify agency enforcement priorities
3. Both agencies must maintain separate physical and digital infrastructure from other executive departments

2.2 Funding Protection

1. CFPB funding shall be guaranteed at 12% of the Federal Reserve's operating expenses
2. FDIC funding shall be maintained through bank assessments
3. Congress may increase but not decrease these funding levels
4. Agency budgets must be insulated from annual appropriations process

Section 3: Enhanced Consumer Protections

3.1 Deposit Insurance

1. FDIC insurance limits increased to $500,000 per depositor, per bank
2. Additional temporary coverage up to $1 million for:
   • Home sale proceeds (90 days)
   • Insurance settlements (180 days)
   • Inheritance funds (90 days)
3. Annual adjustment of limits based on inflation
4. Creation of an Emergency Deposit Protection Fund for systemic banking crises

3.2 Lending Protections

1. Maximum interest rate cap of 36% APR on all consumer loans
2. Prohibition of forced arbitration clauses in financial contracts
3. Mandatory clear disclosure of all fees and terms in plain language
4. Ban on discriminatory lending practices based on AI/algorithmic decisions
5. Required consideration of alternative data for credit decisions

Section 4: Enforcement Powers

4.1 CFPB Authority

1. Power to examine and supervise all consumer financial institutions
2. Authority to issue civil monetary penalties up to $25 million per violation
3. Ability to ban individuals from working in financial services for serious violations
4. Emergency powers to freeze assets in cases of suspected massive fraud

4.2 Investigation and Prosecution

1. Dedicated financial crimes unit within CFPB
2. Mandatory criminal referrals for serious violations
3. Protected channels for consumer complaints and whistleblowers
4. Public database of enforcement actions and violations

Section 5: Deregulation Prevention

5.1 Congressional Oversight

1. Two-thirds majority required in both houses to:
   • Modify core consumer protection regulations
   • Reduce agency enforcement powers
   • Alter agency independence structure
2. Mandatory 60-day public comment period for any proposed changes
3. Required impact studies before any significant regulatory changes

5.2 Review and Reporting

1. Annual public reports on:
   • Consumer protection enforcement actions
   • Financial institution compliance rates
   • Emerging consumer financial threats
2. Quarterly congressional oversight hearings
3. Independent audits of agency effectiveness

Section 6: Digital Financial Protection

6.1 Cryptocurrency and Digital Assets

1. Mandatory consumer protections for digital asset transactions
2. Registration requirements for crypto exchanges and platforms
3. Required disclosure of digital asset risks
4. Prohibition of deceptive digital asset marketing

6.2 Online Banking Security

1. Minimum cybersecurity standards for financial institutions
2. Mandatory data breach notifications within 48 hours
3. Consumer reimbursement for unauthorized digital transactions
4. Regular security audits and penetration testing

Section 7: Implementation and Enforcement

7.1 Timeline

1. Immediate effect for agency independence provisions
2. 90-day implementation period for new consumer protections
3. 180-day compliance deadline for financial institutions
4. Annual review and updates of implementation progress

7.2 Enforcement Mechanism

1. Joint CFPB-FDIC enforcement coordination
2. State attorneys general empowered to enforce federal standards
3. Private right of action for consumers
4. Whistleblower rewards program

Section 8: Severability

If any provision of this Act is held invalid, the remainder shall not be affected and shall continue in full force and effect.

Section 9: Digital Financial Services

9.1 Fintech Regulation

1. Comprehensive Oversight

   • Banking-level oversight for fintech companies processing >$10B annual transaction volume
   • Mandatory deposit insurance for digital banking services
   • Real-time transaction monitoring requirements
   • Consumer protection standards equivalent to traditional banks

2. Digital Payment Protection

   • Instant fraud detection and reimbursement systems
   • Enhanced authentication requirements for high-value transactions
   • Consumer liability limits for unauthorized digital transactions
   • Mandatory security breach notifications within 24 hours

9.2 Cryptocurrency Consumer Protections

1. Enhanced Disclosure Requirements

   • Clear risk warnings for all cryptocurrency products
   • Real-time price volatility disclosure
   • Mandatory cool-off periods for large cryptocurrency purchases
   • Plain-language explanations of cryptocurrency risks

2. Consumer Safeguards

   • Segregated customer asset requirements for crypto exchanges
   • Insurance requirements for customer crypto holdings
   • Mandatory audit trails for all crypto transactions
   • Consumer right to cryptocurrency transaction reversal in cases of fraud

9.3 AI Lending Protections

1. Algorithmic Transparency

   • Mandatory algorithmic bias testing for all lending decisions
   • Public disclosure of AI lending model factors and weights
   • Right to human review of AI-driven loan denials
   • Transparent credit scoring algorithms with explainable decisions

2. Anti-Discrimination Measures

   • Prohibited use of discriminatory variables in AI lending models
   • Regular testing for disparate impact on protected classes
   • Corrective action requirements for biased lending algorithms
   • Penalties for willful use of discriminatory AI systems

9.4 Digital Asset Custody

1. Custodial Standards

   • Fiduciary duty requirements for digital asset custodians
   • Segregation of customer assets from custodian assets
   • Insurance requirements for custodial services
   • Regular third-party audits of custodial practices

2. Consumer Rights

   • Right to direct custody of digital assets
   • Clear disclosure of custodial risks and fees
   • Guaranteed access to assets during custodian operational issues
   • Protection against unauthorized asset transfers