Consumer Financial Protection Outlook
November 19, 2020
With only weeks until the US presidential administration changes hands, companies and consumers alike are anticipating what a Biden presidency will mean for consumer financial protection and for the Consumer Financial Protection Bureau (CFPB), the agency charged with overseeing it. Partner Robin Nunn and of counsel Eamonn Moran outline some of the changes that may lie ahead.
Who Will Be at the CFPB Helm and Other Structural Considerations
- Upon taking office, President-Elect Joe Biden is expected to appoint a new acting director at the CFPB. He will then nominate someone to go through the US Senate confirmation process. It’s likely that his choice will be an individual with the same heft as the person who typically holds the position of US Securities and Exchange Commission (SEC) Division of Enforcement director.
- Once under new leadership, the CFPB will abolish or reconstitute the agency’s Task Force on Consumer Financial Law.
- Director Kathleen Kraninger’s recent effort to reorganize the CFPB’s Supervision, Enforcement, and Fair Lending (SEFL) Division has been shelved (at least temporarily), which means that any reorganization will likely be decided by the bureau’s new leadership.
What’s on the Agenda
- It’s likely that President-Elect Biden will reverse many of the rules and guidance policies put in place by CFPB Acting Director Mick Mulvaney/Director Kraninger. This can be done without much difficulty through the CFPB’s regulatory process and will not require legislation. Included in this effort will be a resumption in rulemaking governing everything from overdrafts to readopting a strict payday lending rule. The final rule issued at the end of October 2020 that allows debt collectors to engage with borrowers over a broader range of communication channels than before – including digital ones – will likely be revised under the new administration.
- President-Elect Biden has proposed the creation of a Public Credit Reporting Agency within the CFPB to compete with the three credit bureaus that will employ algorithms that will not result in discrimination and use nontraditional data sources, such as utility bill payments.
- The new CFPB will also re-examine debt validation or “ability to repay” determinations.
- President-Elect Biden will focus on softening the economic impact of the coronavirus (COVID-19) pandemic on households and more aggressively police Wall Street. The federal CARES Act relief law extended certain protections to homeowners and renters and the CFPB will probably step in more closely to monitor businesses and make sure consumers aren’t pushed further into distress (i.e., avoid evictions and vehicle repossessions, reduce loan delinquencies and defaults, and monitor debt collectors and credit reporting agencies). Mortgage-related investigations are going to be laser-beam focused on COVID-19-related issues, and what servicers are doing to help and not harm consumers during this time.
- President-Elect Biden may also aim to promote racial equity through financial policies and programs.
- The key issue for a Biden administration is enforcement. The CFPB’s approach to the exercise of its authorities is likely to reflect criticism that the agency has been lax in its approach to industry under Acting Director Mulvaney/Director Kraninger’s leadership. More specifically, in contrast to the CFPB’s current approach of handling more matters in supervision, there will likely be more enforcement cases involving larger dollar amounts and a more aggressive focus on fair lending/Unfair, Deceptive, or Abusive Acts or Practices (UDAAP).
- State attorneys general and regulators, many of whom have taken on a more active role during the Trump administration to fill a perceived gap in enforcement by the CFPB, will likely remain very active and receive significant support from the CFPB, and may oftentimes partner with the CFPB on enforcement matters.
- The new administration may not be supportive of some of the CFPB’s most recent regulatory developments, including the different qualified mortgage proposals, the small business data collection proposals under consideration, and the recently issued debt collection final rule, which may cause those rulemakings to be modified or scrapped altogether.
- Other projects, such as consumer access to financial records, small business lending data collection, and the congressional mandate in the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) that the CFPB prescribe certain regulations relating to “Property Assessed Clean Energy” (PACE) financing, may get expedited.
- The CFPB will likely renew its focus on overdrafts and payday lending, including by reopening the payday rulemaking with the goal of restoring an ability-to-repay standard.
- More rulemaking on “open banking” is expected, as are rules for fintechs, data aggregators, and any illegitimate institutions that want to do business in the banking space.
- It’s unclear what will happen to the bureau’s Office of Innovation, the fintech-friendly initiatives it has undertaken, and the innovation policies it has implemented. However, President-Elect Biden’s support of ensuring greater access to financial services, creating a public credit reporting agency alternative, and promoting fair lending practices could be a positive development for fintech growth – even if it means going in a different direction than what we have seen so far. This environment could facilitate partnerships between banks and fintech companies to provide more affordable financial services and products to a broader segment of the US population.