What a Biden Presidency Means for Fintech and Banking in the Short Term: Enforcement, Enforcement, Enforcement

When President-Elect Biden takes office on January 20, many in the banking industry are hoping that he is met with a divided Congress and a Senate under Republican control. The general wisdom behind such thinking is that a divided Congress is unlikely to pass any significant legislation impacting financial services,  and certainly not the sort of grand sweeping changes advocated for by Senator Bernie Sanders and other members of the Democratic Party, and thus it will be “business as usual” for banks and fintechs.

Still the banking industry should take note that, even without a realistic prospect of legislation, the Biden administration is very likely to take several actions early on that will have a significant impact on payments and fintech companies for at least the next several years.

Chief among the early actions of then President Biden will likely be the appointment of a new director of the Consumer Financial Protection Bureau (“CFPB”). The current CFPB Director, Kathy Kraninger, thanks to the landmark Supreme Court decision in Seila Law this past June, is removable at will by the President. The CFPB is an incredibly powerful agency, with broad authority to impact the financial services industry at all levels through rule makings, enforcement actions, and, in some cases, direct supervisory authority. Given the CFPB’s importance, it is highly likely that Director Kraninger will resign or be fired shortly after, or even before, President Elect Biden takes office.

Whomever is selected to replace Director Kraninger, it is highly likely that we will see a return to form of the CFPB as “chief cop” of banking and fintech. This means a return to heavy enforcement activity at the federal level. Such a return may come as a shock to those who don’t remember life under the CFPB before the inaugural Director, Richard Cordray, stepped down in November of 2017.

To illustrate how much of an “uptick” we can expect from the agency, consider that during former Director Cordray’s tenure, the CFPB collected $12 billion in fines over consumer abuses. Contrast that with the amount of fines collected by the CFPB under Director Kraninger in the second quarter of this year – $8.[1]

Regardless then of the make-up of the Senate, financial services providers should prepare for a world that looks very different with respect to enforcement under soon-to-be President Biden.

[1] Aaron Klein, Top 5 Financial Regulatory Priorities for the Biden Administration, Brookings.edu, Nov. 9, 2020, available here.