As the wildest, weirdest U.S. presidential election cycle possibly ever approaches an end (we hope), executives from the banking and payments sectors are wondering how the outcome might affect the nation’s regulatory environment over the next four to eight years and beyond.
At least one industry observer believes that the current state of financial regulation is in “enormous flux” leading up to Election Day, Nov. 8.
“It’s hard to watch what’s going on and not have the sense that the elections matter enormously,” said Neal Wolin, former deputy secretary of the U.S. Treasury Department. “Not only is the presidency at stake; with the presidency comes appointments in cabinet that could affect the financial services sector. It’s an enormous moment in time we should be paying attention to.”
Wolin’s remarks were delivered on Sunday, the first day of the annual Money20/20 conference in Las Vegas. His panel discussion on the impact of the election on financial services regulation took place a couple of hours before Richard Cordray, director of the Consumer Financial Protection Bureau, addressed the crowd about recent developments regarding that agency.
Wolin and Financial Services Roundtable CEO (and former Minnesota Governor) Tim Pawlenty, took time during their panel to discuss the CFPB.
The agency, which has always been a punching bag for Republican members of Congress, took incoming fire recently when the U.S. Court of Appeals for the District of Columbia Circuit ruled that the structure of the CFPB violates the U.S. Constitution.
The financial services industry praised the decision, which came about a week after the agency published its final rule on prepaid account protections for consumers.
Appeals court decision aside, Pawlenty and Wolin believe the post-election status of the CFPB will be business as usual.
Polls show Democratic Party candidate Hillary Clinton with a healthy lead over her Republican counterpart Donald Trump as the country barrels toward Election Day.
A Clinton win should mean status quo for the CFPB — at least until the bureau can request a hearing before the U.S. Supreme Court.
“[The CFPB] will continue and the government will appeal that decision [by the D.C. circuit court],” Wolin said. “Until there is a final ruling, it will remain as it is. The bureau will continue to do its thing.”
And if the CFPB should prevail in a Supreme Court decision, the bureau will most likely continue to do its thing indefinitely, Pawlenty said.
“While there is a great intellectual argument to make changes [to the structure of the CFPB], there aren’t enough votes in Congress to make that happen.”
As to how the presidential election will affect the fintech sector, Pawlenty and Wolin said there is not much to go on from either candidate. Neither has said much about fintech.
Wolin said he is not aware of Trump having mentioned the subject. The Republican nominee’s official campaign website does not say anything about financial regulation specifically.
“Clinton hasn’t said a lot, but if you look at some of her policy papers, she expressed interest in fintech as it relates to extending services [to citizens],” Wolin said.
Pawlenty agreed that neither candidate “has put much meat on the bone when it comes to fintech.” He believes that Congress will likely steer clear of fintech issues unless something goes wrong on the scale of the Wells Fargo scandal.
“Any action on fintech will unlikely happen in Congress,” Wolin said. “There will be very little to no legislation. It’s going to come from policymakers and from a range of bureaus.”
Which brings us to Cordray’s comments at Money20/20.
The agency recently extended its new prepaid rules beyond the “normal” prepaid card providers. The rule now applies to P2P providers such as Venmo and Square Cash, whose products have a “wallet” feature where users can hold funds separately from a linked account.
All companies that fall under the CFPB ruling will be required to provide consumers with certain disclosures and account protections when the requirements go live Oct. 1, 2017.
Cordray said during prepared comments at Money20/20 that the current pace of innovation in the financial services industry “raises challenging issues for all of us.”
“We recognize evolving tech holds great promise,” he said. “[But recent rulings] should not be misread or over-read.
“Our enforcement actions have addressed meat-and-potatoes issues such as misrepresentation [by companies serving consumers].”
Cordray said the CFPB believes in new technology revolving around mobile and the blockchain, but that the agency must perform due diligence with new product developments. To address this, the agency seeks insight from companies that are piloting new products, so that it can better understand their use.
“We’re not content to sit passively by,” Cordray said.
Cordray also wanted to make sure companies are aware of two things when it comes to the agency:
Firstly, that every company must meet basic laws regarding consumer protection. “They need to think about putting the interests of the consumers first,” he said.
Secondly, that the agency will seek to support consumers, and not just protect them as the name of the agency suggests.