With Joe Biden returning to the White House to become the 46th President of the United States, his financial regulation agenda is already advancing, depending on who he has chosen to fill key roles.
Biden’s appointments of Rohit Chopra as head of the Consumer Financial Protection Bureau and Gary Gensler as head of the Securities and Exchange Commission put two consumer advocates at the forefront of reversing deregulation of incumbent President Donald Trump while strengthening oversight cryptocurrency and payday loans.
Chopra, a commissioner at the Federal Trade Commission, was previously deputy director of the CFPB and helped found the office defended by Senator Elizabeth Warren, D-Mass. Biden also appointed 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 the Obama-era reforms and regulations that followed the 2008 banking crisis.
As Warren’s ally, Chopra will face one of Biden’s most controversial cabinet confirmation hearings, but Democratic victories in Georgia’s runoff are making her way to the top CFPB position easier. Additionally, Chopra has already been confirmed to his current position at the FTC and may serve on the CFPB on an interim basis.
More financial services regulation is certain to come in the wake of the 2020 election, but the ease of confirmation hearings will go a long way in determining just how aggressive the Biden administration can be.
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 down payday loan regulations designed to prevent borrowers from taking on debt they could not pay.
Write for Payments SourceChristopher Peterson, director of financial services for the Consumer Federation of America, argued that the reversal of payday loans was damaging consumers, calling for interest rate cuts.
In addition, companies that offer early access to salary became popular during the pandemic and subsequent financial crisis, and respond to many of the same financial strains among consumers that often lead to payday lenders, offering a potential alternative to payday loans. Capital risk has flocked to early access payroll companies in anticipation of the trend continuing.
Chopra will likely push for reinstating the Obama-era rules for payday lending, while the CFPB will retain its centralized leadership structure rather than the decentralized structure Republicans prefer. Chopra, who was 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 credit are still high on activists’ wish lists,” Grover said, adding that there may also be a more in-depth look at crypto-related projects. currency like Diem, the Facebook-affiliated stablecoin project formerly known as Libra. Libra has long been subjected to the regulatory heat of liberals and conservatives around the world.
Crypto under surveillance
Acting as FTC Commissioner, Chopra joined UK Information Commissioner Elizabeth Denham, the EU’s Data Protection Supervisor and other international regulators in 2019 in calling for a close scrutiny of Libra. . Gensler’s appointment as head of the SEC could be bad news for Ripple, as Gensler in the past has said that initial coin offerings should be regulated like securities, a position that puts the SEC at odds with Ripple’s position that XRP is a utility. Gensler has also worked on cryptocurrency technology at MIT and is a proponent of strict cryptocurrency regulation.
“In the past, the CFPB has warned about the risks of cryptocurrencies,” Grover said. “If they become more common, if Diem goes for it, 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 compound flow of payday loans. Blockchain and AI services have emerged in recent years using faster payment processing and lower cost alternative underwriting to short-term credit for issuers.
Chopra’s other top priorities will likely include restoring the fair loan unit and increased enforcement. Notice of proposed regulations will also likely come for open banking, signaling more rules for data aggregators like Plaid. Visa recently canceled its offer of acquire Plaid, in part because of regulatory oversight, according to Benjamin Saul, Washington banking partner at Bryan Cave Leighton Paisner.
“The focus will 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 to encourage payments and fintech 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.”