With Joe Biden returning to the White House to become the 46th President of the United States, his financial regulatory agenda is already moving forward, depending on who he chooses to fill in key roles.
Biden’s appointments of Rohit Chopra to head the Consumer Financial Protection Bureau and Gary Gensler to head the Securities and Exchange Commission put two consumer advocates front and center to reverse incumbent President Donald Trump’s deregulation while strengthening oversight cryptocurrency and payday loans.
Chopra, commissioner of the Federal Trade Commission, was the deputy director of the CFPB and helped found the office championed by Sen. Elizabeth Warren, D-Mass. Biden also named Gensler, the former chairman of the Commodity Futures Trading Commission. , to be chairman of the SEC. Both Chopra and Gensler have careers in government that tie them to Obama-era reforms and regulations that followed the 2008 banking crisis.
As Warren’s ally, Chopra will face one of the most divisive confirmation hearings in the Biden cabinet, but Democratic wins in the Georgia playoffs are making his path to the CFPB’s top job relatively easier. Additionally, Chopra has already been confirmed to his current position at the FTC and can serve at the CFPB on an interim basis.
Greater regulation of financial services will certainly result from the 2020 election, but the ease of confirmation hearings will go a long way in determining how aggressive the Biden administration can be.
The CFPB was heavily deregulated during the Trump years, with the Republican administration getting a key Short Supreme victory giving the White House more control over the management of the CFPB. The Trump administration has also backed off payday loan regulation designed to prevent borrowers from going into debt that they could not repay.
write for PaymentsSourceChristopher Peterson, director of financial services for the Consumer Federation of America, argued that canceling payday loans was hurting consumers, calling for restrictions on interest rates.
Additionally, companies that provide early access to salary have become popular during the pandemic and subsequent financial crisis, and address many of the same consumer financial stresses that often drive payday lenders, providing a potential alternative to payday loans. Capital risk flocked to early wage access companies in anticipation of the trend continuing.
Chopra will likely push to reinstate Obama-era payday loan rules, while the CFPB will retain its centralized leadership structure rather than the decentralized structure favored by Republicans. Chopra, who has been a member of the Consumer Federation of America, will likely focus on many of that association’s priorities, said Eric Grover, director of Intrepid Ventures.
“Payday loans and subprime consumer loans are always high on activists’ wish lists,” Grover said, adding that there may also be more scrutiny of cryptocurrency-related projects. like Diem, the Facebook-affiliated stablecoin project formerly known as Libra. Libra has long been subject to regulatory heat from liberals and conservatives around the world.
Crypto under scrutiny
Acting as commissioner of the FTC, in 2019 Chopra joined UK Information Commissioner Elizabeth Denham, the European Data Protection Supervisor and other international regulators in calling for Libra to be scrutinized. Gensler’s appointment as head of the SEC could be bad news for Ripple, as people in the past has said initial coin offerings should be regulated as securities, a position that puts the SEC at odds with Ripple’s stance that XRP is a utility. people also worked on cryptocurrency technology at MIT and is a proponent of strong cryptocurrency regulation.
“In the past, the CFPB has warned of the risks of cryptocurrencies,” Grover said. “If they become more mainstream, if Diem launches, expect the CFPB to do more.”
A push to cut payday loans could open up opportunities for fintechs that offer payroll flexibility without creating the compounding flow of payday loans. Blockchain and AI have emerged in recent years, using faster payment processing and alternative underwriting to issue short-term credit at lower cost.
Chopra’s other top priorities will likely include restoring the Fair Lending Unit and increased enforcement. A regulatory proposal notice will also likely come for open banking, which signals more rules for data aggregators such as Plaid. Visa recently canceled its offer of acquire Posterpartly because of regulatory scrutiny, according to Benjamin Saul, a Washington banking partner at firm Bryan Cave Leighton Paisner.
“The focus will continue to be on consumer ownership of data as well as third-party access to banking information when approved by consumers,” Saul said, adding that the CFPB will likely continue its programs. aimed at encouraging fintech payments and innovation, such as the trial disclosure sandbox. . “However, the success of fintechs pursuing these avenues will depend much more on the bureau’s assessment of the net benefit to consumers of a given product or service.”