With Joe Biden returning to the White House to become the 46th President of the US, his financial regulation agenda is already moving forward based on the people he has chosen for key roles.
Biden’s nominations of Rohit Chopra to head the Consumer Financial Protection Bureau and Gary Gensler to head the Securities and Exchange Commission put two consumer advocates in the best positions to reverse outgoing President Donald Trump’s deregulation while increasing oversight of cryptocurrency and payday loans strengthen.
Chopra, a Federal Trade Commission commissioner, was formerly an associate director of the CFPB and helped found the office championed by Sen. Elizabeth Warren, D-Mass. Biden also appointed Gensler, former chairman of the Commodity Futures Trading Commission, to become chairman of the SEC. Both Chopra and Gensler have careers in government associated with the Obama-era reforms and regulations following the 2008 banking crisis.
As an ally of Warren, Chopra will face one of the more contentious Biden cabinet confirmation hearings, but Democrat victories in the Georgia runoff make his path to the CFPB’s top job relatively easier. Additionally, Chopra has already been confirmed in his current post with the FTC and is eligible to serve with the CFPB on a temporary basis.
There will certainly be more financial services regulation as a result of the 2020 election, but the ease of the 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 government given a key Supreme Court Victory that gives the White House more control over management of the CFPB. The Trump administration also rolled back Payday Loan Rules It is designed to protect borrowers from taking on debt they cannot pay.
writing for source of payment, Consumer Federation of America financial services director Christopher Peterson argued that the payday loan reversal was harmful to consumers and called for a cap on interest rates.
In addition, companies that offer early access to wages have become popular during the pandemic and subsequent financial crisis, addressing many of the same financial pressures on consumers that often lead to payday lenders and offering a potential alternative to payday lending. venture capital has flowed to companies with early wage entry in anticipation of the trend becoming permanent.
Chopra will likely push to restore Obama-era rules on payday loans while the CFPB will retain its centralized governance structure, rather than the decentralized structure favored by Republicans. Chopra, who served as a fellow with the Consumer Federation of America, will likely focus on many of that association’s priorities, said Eric Grover, a director at Intrepid Ventures.
“Payday loans and subprime consumer credit are always at the top of activist wish lists,” Grover said, adding that cryptocurrency-related projects like Diem, the Facebook-linked stablecoin project formerly known as Libra, are also coming under more scrutiny could become. Libra has long been the subject of regulatory heat from both liberals and conservatives worldwide.
Crypto on the test bench
In 2019, as FTC Commissioner, Chopra joined Britain’s Information Commissioner Elizabeth Denham, the EU Data Protection Commissioner and other international regulators in calling for strict scrutiny of Libra. Gensler’s appointment to head the SEC may have been bad news for Ripple since then Gensler in the past has said that initial coin offerings should be regulated as securities, a stance the SEC is at odds with Ripple’s attitude that XRP is a utility. Gensler also worked on cryptocurrency technology at MIT and is a proponent of strong cryptocurrency regulation.
“In the past, the CFPB has warned about the risks of cryptocurrencies,” Grover said. “If they become more mainstream when Diem starts, expect the CFPB to do more.”
A push to restrict payday loans could open up opportunities for fintechs that offer payroll flexibility without incurring the strain of payday loans. Blockchain and AI driven In recent years, services have emerged that use faster payment processing and alternative underwriting for less expensive short-term borrowing from the issuer.
Other early Chopra priorities will likely include restoring the Fair Lending Unit and increased enforcement. Advance notice of proposed rulemaking is also likely to come for open banking, signaling more rules for data aggregators like Plaid. Visa recently withdrew its offer acquire plaid, partly due to a regulatory review, according to Benjamin Saul, a Washington banking partner at Bryan Cave Leighton Paisner.
“There will continue to be a focus on consumer ownership of data, as well as third-party access to banking information when shared by consumers,” Saul said, adding that the CFPB is likely to continue programs to encourage payments and fintech Innovate like the Trial Disclosure Sandbox will do. “However, the success of fintechs pursuing these avenues will depend much more on the bureau’s assessment of the net benefits of a particular product or service to consumers.”