As Donald Trump retakes the presidency, the credit and collection industry is bracing for significant regulatory changes that could impact operations and strategies.
Why it matters: Trump’s return to the White House, coupled with Republicans regaining control of the Senate, introduces uncertainty around the Consumer Financial Protection Bureau’s ambitious rulemaking agenda. Changes in leadership and policy direction at the CFPB could alter the regulatory landscape for collection agencies, law firms, debt buyers, fintechs, banks, and credit unions.
The big picture:
- CFPB Leadership in Flux: CFPB Director Rohit Chopra, appointed in 2021 after President Joe Biden removed former Director Kathy Kraninger the day he took office, with a term set to expire in 2026, may face an uncertain tenure. The Supreme Court ruled in 2020 that the president has the authority to fire the CFPB director, paving the way for Trump to appoint his own choice.
- Changes Coming to Senate: There will also be a new chairman of the Senate Banking Committee with Republicans taking control of the Senate and Sen. Sherrod Brown [D-Ohio] losing his race for another term. Sen. Tim Scott [R-S.C.] was the Banking Committee’s top Republican and stands to become chairman when the new legislative session is gaveled into order in January.
- Regulatory Rollbacks Anticipated: A new CFPB director aligned with Trump’s policies could halt or reverse existing and proposed regulations that have significant implications for the industry.
Key regulations under the microscope:
- Open Banking Rule (Section 1033):
- What’s happening: The CFPB’s finalized open banking rule aims to give consumers control over their financial data, promoting competition among financial service providers.
- Industry impact: Banks and credit unions have raised concerns about data-sharing liabilities and compliance timelines. A leadership change could stall or modify this rule.
- Buy Now, Pay Later (BNPL) Regulations:
- The issue: The CFPB proposed extending credit card-like disclosure requirements to BNPL providers.
- Potential change: A rollback could ease compliance burdens for BNPL companies, affecting how they disclose information to consumers.
- Remittance Transfers (Regulation E):
- Current status: The CFPB proposed amendments to ensure transparency in fees and information for consumers sending remittance transfers.
- What could change: The proposal is still open for comment and could be shelved or altered under new CFPB leadership.
- Earned Wage Access (EWA) Programs:
- The proposal: Classifying certain EWA products as loans, bringing them under federal lending laws.
- Industry concern: EWA providers argue this could force a reconfiguration of their business models. A regulatory shift might alleviate these concerns.
- Medical Debt Reporting:
- New rule: The CFPB issued a rule removing medical debt from credit reports.
- Implications: Critics argue this could negatively impact credit systems. A change in leadership might reverse this rule, affecting how medical debt is reported and collected.
Between the lines:
- Capital Requirements for Banks: There’s speculation that Trump’s administration may halt proposed capital requirement increases for large banks, potentially affecting lending practices and risk assessments.
- Agency Leadership Overhaul: Key regulatory bodies like the Federal Reserve, FDIC, SEC, and CFPB are expected to see leadership changes. New appointees may prioritize deregulation and industry-friendly policies.
What they’re saying:
- Industry experts anticipate swift action: “We may see some current appointees decide they would prefer not to serve out their terms in a Trump Administration,” rather than wait to be fired, said Michele Alt of Klaros Group.
- Financial markets react positively: Financial services stocks have soared, with expectations of regulatory rollbacks boosting investor confidence.
