The results of the presidential and congressional elections could have far-reaching implications for the fintech industry.
Associated Press
TThe intersection of economic services and technology, also often called fintech, has come under increasing federal scrutiny, particularly as latest firms have attempted to supply traditional banking services without having a banking license. To higher 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 where changes could occur: the Consumer Financial Protection Bureau (CFPB), the partnerships that fintechs form with banks to supply banking services, and the CFPB’s latest 1033 rule, which puts consumers’ control over regulates your bank details.
Almost everyone we spoke to said probably the most visible changes will come to the CFPB, a federal agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The CFPB’s mission is to “protect consumers from unfair, deceptive, or abusive practices and to take action against companies that violate the law.” Over the past 4 years, the agency has been more lively than it was under President Trump, a dynamic that’s reflected within the variety of public statements the CFPB makes, the requests for information it has sent to firms and the fines it has issued, Katherine said Flacken, principal of regulatory consulting firm FS Vector in Washington, DC. In 2023, the CFPB ordered $3.1 billion in fines and restitution for consumer relief, the biggest amount it had ordered since 2015.
If Kamala Harris wins the election and Democrats retain some control of Congress, an identical level of CFPB enforcement and oversight activity as under President Biden could proceed, Flocken believes. If Donald Trump wins and Republicans take control of Congress, this activity will slow. “[The CFPB] Under a Republican administration and certainly under a Republican-controlled Congress, this would definitely be less robust,” Flocken says.
Jackie Reses, co-founder and CEO of Lead Bank, a Kansas City bank that works with fintechs to supply banking services, agrees there will likely be big changes to the CFPB if Trump is elected. She believes some CFPB rules could potentially be rolled back, corresponding to one the CFPB adopted earlier this 12 months that goals to extend the late fees consumers pay on bank card payments to $8 from a median of $32 reduce.
“If there’s a win either way — if we have Harris blue or Trump red — that’s huge,” Flocken adds, referring to scenarios during which Harris wins and the Democrats win each the House and Senate conquer, or during which Trump wins and the Republicans take full control of Congress. “There will be much faster and more aggressive changes on both sides.”
Michele Alt, co-founder and partner at consulting firm Klaros and a former attorney on the Office of the Comptroller of the Currency, is more skeptical that we’ll see major changes within the fintech industry. She points to 4 recent Supreme Court cases, including Loper Bright Enterprises v. Raimondo, This has limited the ability of presidency agencies to interpret ambiguous laws and shifted that burden to the courts. “It doesn’t matter who gets elected because the Supreme Court has basically brought the executive branch to its knees with these decisions by saying they all have to go through the judicial branch,” she says. According to them, this may lead to a “regulatory cold” in the approaching years, with weaker regulatory power and weaker enforcement. She fears that not all supervisory authorities will have the option to react as quickly as they need to in times of economic crisis.
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bAnk-Fintech partnerships, where non-bank fintech firms work with traditional banks to supply banking services corresponding to checking accounts and loans, have been under intense scrutiny over the past two years, with increasing regulatory enforcement motion in areas corresponding to anti-money laundering rules. If Harris wins, Flocken expects tight control would proceed, while pressure would likely ease if Trump is elected, although she adds a number of caveats. She says she would regulate the innovation offices under a Harris presidency to see in the event that they increase staffing and adopt an open-door policy, and under a Trump presidency she would examine whether the administration begins a certification process to enable it Fintechs to voluntarily comply with the standards set by regulators.
Reses doesn’t expect major changes to bank-fintech partnerships, no matter who wins. “The FDIC has a bipartisan board,” she says. She believes some changes will move forward regardless of who wins, corresponding to the FDIC’s proposed rule that goals to require fintechs and their banking partners to reconcile every customer’s account at the tip of every day. The rule could prevent a disaster just like the one at Synapse, during which hundreds of consumers lost access to their funds. “I think it’s good policy,” Reses says. The way the rule is implemented may vary by some governments, she adds, but she expects the rule to evolve in each directions.
Nor does it expect any changes in the way in which anti-money laundering laws are enforced or implemented into regulations. “Both parties respect the need for this type of information and oversight from banks,” she says.
Michele Alt believes greater Republican control of Congress and a Trump victory could pave the way in which for more fintechs to potentially receive banking licenses, a door that was virtually closed in the course of the Biden administration. She also thinks that is the case within the wake of recent Supreme Court decisions runner shiny, A well-funded fintech company that has been denied a banking license could sue certainly one of the agencies that handle banking licenses. In this case, “regulators wouldn’t have much to show for it.” [the court] They didn’t exceed their authority,” she says.
LLast month, the CFPB released a 1033 final rule that sets guidelines for consumers’ control over their banking data and the way in which banks store, manage and make accessible that data. The issue has develop into a key battleground between major banks and fintechs like Plaid, which 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 consider it should since it is a bipartisan rule.
Alt points out that the CFPB’s final 1033 rule was challenged almost immediately after its release by the Bank Policy Institute and the Kentucky Bankers Association sued the CFPBan event that they are saying demonstrates the increased confidence of individuals and organizations in search of to defy regulators.
But she also believes 1033 has a superb probability of moving forward in either direction since it has populist appeal. “The average person doesn’t really care about the capitalization of banks,” she says. “But when you ask, ‘Hey, do you’re thinking that you need to have the option to transfer your accounts more easily?’ Do you think you need to own your individual data? 100% of individuals will say yes.”
