Rohit Chopra, who was on the shortlist for the CFPB lead role, assumes control shortly after Mr. Biden submits his nominations to Congress. The Washington Post headlines with: “Biden choices for CFPB, SEC signal pivot to robust enforcement.
There are two ironies in the upcoming move. In Donald Trump’s move to take out President Obama’s Richard Cordray appointment, Joe Biden uses the same decision to fill Rohit Chopra into Kerry Kraniger’s role. Also, rather than selecting Elizabeth Warren, the brainchild of the CFPB, Mr. Biden chose one of her former staff members.
It will be interesting to watch where Elizabeth Warren (D-MA) ends up, though since her term expires in 2025, she remains an integral part of the Democratic U.S. Senate stronghold. According to the National Conference of State Legislatures, unlike the House, where it is mandatory to hold an election if a representative resigns, the seat is filled by the state governor if a senator vacates. In this case, Massachusett’s governor, Charlie Baker, is a Republican, so moving Warren would likely upset some long-standing Biden initiatives.
Politico suggests that Ms. Warren has bigger fish to fry, as “private equity’s biggest foe in Washington, will push for a sweeping set of reforms intended to stop what she calls “Wall Street looting.” That unto itself should send agita to the payment industry. As Bain & Company suggests: “The magic behind the curtain is largely invisible to the buying public. But private equity has taken a fervent interest in the fast-evolving ecosystem of companies responsible for it. The so-called payments sector has become a prime hunting ground for buyout firms. “
Our view is that regulatory re-focusing will include:
- Responsible lending will likely include increasing transparency in Buy Now Pay Later (BNPL) lending, following Australia’s lead, where investigations of aggressive fintech lending standards and limited disclosures indicate 20% delinquency rates and overstretched borrowers.
- Creditor solutions to help stressed debtors could cause a shift away from collection workouts that stabilize delinquency in aging buckets, forcing smaller payments. For example, looking at the U.K. might increase charge offs if payment terms extend without a change in the 180-day past due to mandated charge-off.
- Cost of Lending may resurrect with controls to reduce interest spreads, although regulators must be sensitive to the fact that interest revenue controls will likely tighten up lending.
- Extending the scope of the Fair Debt Collection Practices Act (FDCPA) to affect first and third-party calling and contact strategies.
- Influencing consumer bankruptcy standards for student loans and household assets in consideration for the extended economic recovery
One thing is for sure: many facets of our American society are soon to change.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group