Accruing interest

Will the states step up as the federal government rolls back consumer protections? Who’s going to regulate fintech? And what, under Trump, is a bank? A look at the trends affecting banking, financial and tax law

Will the states step up as the federal government rolls back consumer protections? Who’s going to regulate fintech? And what, under Trump, is a bank? A look at the trends affecting banking, financial and tax law

By Tequia Burt
Chicago Lawyer correspondent

As the Trump administration continues to loosen federal regulatory oversight, in particular those that protect consumers, what should banking and finance legal professionals be paying attention to?

Here are three areas to keep an eye on as regulatory uncertainty shows every sign of being an ongoing challenge for the banking and finance industry.

How will states react to the federal rollback of regulatory enforcement?

After he was appointed head of the Consumer Financial Protection Bureau last November, Mick Mulvaney made clear his goal was to “dramatically” shift the agency’s priorities.

“Anybody who thinks a Trump administration’s CFPB is going to be the same as an Obama administration CFPB is being naïve. Elections have consequences,” Mulvaney said at a news conference on his first day on the job.

An Obama-era consumer watchdog agency created in the wake of the financial crisis as part of the 2010 Dodd-Frank Act, the CFPB functions as one of the federal government’s main financial services regulators. The agency protects consumers by making sure financial companies are following the law; collecting and responding to consumer complaints; enacting protections to ensure consumers are treated fairly; and promoting financial transparency.

The CFPB has supervisory authority over banks, thrifts and credit unions with assets of more than $10 billion as well as their affiliates. Additionally, the agency has supervisory authority over nonbank mortgage originators and servicers, payday lenders and private student lenders of all sizes. During its seven-year history, the CFPB has taken on everything from the prepaid card industry to the mortgage servicing business.

During his tenure Mulvaney has moved to undermine the agency, including making a budget request of zero dollars this year, and has continually urged Congress to weaken the CFPB. The Trump administration has made a number of moves to diminish the agency’s power, including stripping the CFPB’s Office of Fair Lending and Equal Opportunity of enforcement power. Previously, the office had forced payouts in several well-known cases, including settlements from lenders it alleged had systematically charged minorities higher interest rates.

So how will the states’ attorneys general respond to this rollback on a federal level? According to several legal experts, states, including Illinois, are poised to fill the gap.

Read more

Originally published in November 2018 in Chicago Lawyer

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