In the spirit of the new year, we decided to take our Ouija board out of the attic and venture a few predictions for 2016 in financial services regulation. The financial regulatory agencies have been relatively quiet for the last few weeks, but we expect to see significant regulatory activity in 2016. So, we have consulted the spirit of FinReg Nostradamus and assembled a list of some of the regulatory actions that we expect to see this year.

  • Incentive Compensation Rules: The financial agencies’ 2011 proposed rules regarding incentive compensation were never finalized, and the agencies are reportedly engaged in discussions regarding the framework of the incentive compensation rules and intend to release a new proposed rule this year. Key issues that the new proposed rule will likely address include triggers for required clawback of compensation and the scope of clawback powers, mandatory compensation deferral requirements and time periods, and application of the rules to alternative compensation arrangements, such as carried interest.
  • Net Stable Funding Ratio: Although the Basel Committee on Banking Supervision (Basel Committee) finalized the net stable funding ratio (NSFR) standards of Basel III at the end of 2014, proposed regulations that implement the NSFR have yet to be issued by the US federal banking agencies. The agencies and industry representatives have been engaged in ongoing discussions with respect to the NSFR regulations. Considering the NSFR standards are required under Basel III to be fully implemented by January 2018, barring any unexpected delays, we should see proposed NSFR regulations in the first half of 2016.
  • Consumer Financial Protection Bureau (CFPB): A number of rulemakings from the CFPB are expected this year, including long-awaited rulemakings on debt collection and prepaid accounts. We also expect proposed rules on mortgage servicing and on short-term lending (e.g., payday and auto title loans) based on the framework that the CFPB released in 2015. Also on the CFPB’s regulatory agenda for 2016 are mandatory arbitration clauses, checking account overdraft programs, and larger participants in the consumer installment loan and title loan markets.

The California Department of Business Oversight (DBO) has launched an inquiry into the increasingly popular marketplace lending industry. The stated purpose of the inquiry is “to assess the effectiveness and proper scope of [the DBO’s] licensing and regulatory structure as it relates to [marketplace] lenders.”

The DBO sent its online survey to 14 marketplace lenders and requested a variety of information, including the volume of business, types of loans, APR, delinquency rates, and investor funding or sale data. The survey requests data from January 1, 2010 through June 30, 2015. Responses to the survey are due by March 9, 2016. Although the DBO has not identified the 14 marketplace lenders that received the survey, reports confirm that the inquiry includes both consumer lenders and commercial and small business lenders.

The DBO’s inquiry follows the Department of the Treasury’s request for information earlier this year seeking public comments on marketplace lending. Given the growing popularity of marketplace lending platforms among consumers and small businesses, further regulatory interest and possible future regulatory action are likely.