The intersection of financial services and technology, otherwise known as fintech, has increasingly come under federal scrutiny, especially to the extent new firms have attempted to offer traditional banking services without having a banking license. To better understand the impact of today’s presidential and congressional elections on the fintech industry, Forbes spoke with several policy experts and executives. They identified three major areas that could see changes: the Consumer Financial Protection Bureau (CFPB), the partnerships fintechs have with banks to offer banking services and the CFPB’s new 1033 rule that governs consumers’ control over their banking data.
Nearly everyone we spoke with said the most visible changes will be in the CFPB, a federal agency created by the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. The CFPB aims to “protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.” Over the past four years, the agency has been more active than it was under President Trump, a dynamic that’s apparent in the number of public remarks the CFPB has made, the information requests it has sent to companies and the fines it has levied, says Katherine Flocken, a principal at Washington, D.C., regulatory advisory firm FS Vector. In 2023, the CFPB ordered $3.1 billion in fines and refunds for consumer relief, the largest sum it had ordered since 2015.
If Kamala Harris wins the election and Democrats retain some control of Congress, a similar level of CFPB enforcement and oversight activity could continue as it has under President Biden, Flocken believes. If Donald Trump wins and Republicans take control of Congress, that activity will slow. “[The CFPB] definitely would be less robust under a Republican administration and certainly with a Republican-controlled Congress,” Flocken says.
Jackie Reses, the cofounder and CEO of Lead Bank, a Kansas City bank that partners with fintechs to offer banking services, agrees there will be major changes to the CFPB if Trump is elected. She thinks some CFPB rules could potentially be rolled back, such as one the CFPB passed earlier this year that aims to reduce the late fees consumers pay for credit card payments from $32 to $8 on average.
“If there’s a sweep either way–if we have Harris-blue or Trump-red–that’s huge,” Flocken adds, referring to scenarios where Harris wins and Democrats take both the House and Senate or where Trump wins and Republicans take full control of Congress. “There will be much faster, much more aggressive changes on either side.”
Michele Alt, a cofounder and partner at advisory firm Klaros and a former lawyer at the Office of the Comptroller of the Currency, is more skeptical that we’ll see big changes for the fintech industry. She points to four recent Supreme Court cases, including Loper Bright Enterprises v. Raimondo, that have reduced government agencies’ authority in interpreting ambiguous laws and redirected that duty to the courts. “It doesn’t matter who gets elected, because the Supreme Court has effectively knee-capped the executive branch through these decisions by saying they all have to go through the judicial branch,” she says. In the coming years, she thinks the result could be a “regulatory chill” of weaker regulatory power and enforcement. She worries that all regulatory agencies consequently won’t be able to respond as quickly as they need to in times of financial crisis.
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Bank-fintech partnerships, where non-bank fintech companies partner with traditional banks to offer banking services like checking accounts and loans, have been under intense scrutiny over the past two years, with a growing number of regulatory enforcement actions in areas like anti-money laundering rules. If Harris wins, Flocken thinks the heavy scrutiny would continue, while if Trump is elected, the pressure would probably ease, though she adds a couple caveats. She says she’d watch the offices of innovation under a Harris presidency to see if they’ll staff up and have an open-door policy, and in a Trump presidency, she’d look to see if the administration opens a certification process that allows fintechs to voluntarily comply with standards set by regulators.
Reses doesn’t expect any major changes to bank-fintech partnerships, regardless of who wins. “The FDIC has a bi-partisan board,” she says. She thinks some changes will move forward no matter who’s victorious, such as the FDIC’s proposed rule that aims to require fintechs and their bank partners to reconcile every customer’s account at the end of each day. The rule could prevent a disaster like the one that happened with Synapse, where thousands of consumers lost access to their funds. “I think it’s good policy,” Reses says. How the rule is implemented might differ under some administrations, she adds, but she expects the rule to move forward either way.
She also doesn’t expect any changes in the way anti-money laundering laws are enforced or translated into regulations. “Both parties respect the need for that type of information and oversight by banks,” she says.
Michele Alt thinks Republicans gaining greater control over Congress and a Trump victory could re-open the path for more fintechs to potentially obtain bank charters, a door that has been effectively closed during the Biden administration. She also thinks that, in the wake of the recent Supreme Court decisions like Loper Bright, a well-resourced fintech that has been denied a bank charter could sue one of the agencies that handles charters. In that case, “The regulators wouldn’t have much to stand on to show [the court] they haven’t exceeded their authority,” she says.
Last month, the CFPB released a final 1033 rule, which sets guidelines for consumers’ control over their banking data and how banks store, manage and make that data accessible. The topic has become an important battleground between big banks and fintechs like Plaid that connect consumers’ bank accounts to fintech apps. Flocken says some have asked her if the rule would go away under a Trump presidency, but she doesn’t think so, since it’s a bipartisan regulation.
Alt points out that the CFPB’s final 1033 rule was challenged almost immediately after it was released when the Bank Policy Institute and Kentucky Bankers Association sued the CFPB, an event she thinks illustrates emboldened confidence among people and organizations that want to oppose regulatory agencies.
But she also believes 1033 has a good chance of moving forward either way because it has populist appeal. “The average person doesn’t really care about bank capital levels,” she says. “But if you ask, ‘Hey, do you think you should be able to transfer your accounts more easily? Do you think you should own your own data?’ One hundred percent of people are going to say yes.”
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