With Donald J. Trump now in the White House, the payments industry is hopeful that regulatory burdens will ease. But nobody really knows what to expect. At a panel discussion two weeks ago, I discussed what the future may hold with Liz Nutting of BofI Federal Bank. While our discussion with the audience was speculative, a few key areas emerged where change is possible, if not likely.
Statements by Trump and key influencers indicate strong hostility to the Dodd-Frank Act that Obama signed in July 2010:
- Trump’s transition Website announced that “The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”
- Trump’s Treasury Secretary nominee, Steven Mnuchin said in interview with CNBC: “We want to strip back parts of Dodd-Frank and that will be the number one priority on the regulatory side.”
- Republican Representative Jeb Hensarling, who leads the House Financial Services Committee, said “I will not rest until Dodd-Frank is ripped out by its roots and tossed on the trash bin of history.”
However, given the sweeping scope of the Dodd-Frank Act, it isn’t clear what portions of the law Trump will seek to repeal. Many of the regulations have a much more direct impact on large, money-center banks than on payments companies.
A battle is brewing over the CFPB. Many on the right want to put an end to the agency altogether. However, Sen. Elizabeth Warren (D-Mass) has generated strong support on the left for the CFPB, and recent CFPB actions, such as the $100 million fine imposed on Wells Fargo, have strong popular support. At a minimum, it’s likely that Trump will seek to replace the current director, Richard Cordray. This could be a real brawl, the outcome of which will have a huge impact on payments companies.
Even if Trump puts the brakes on federal regulation of the payments industry, state regulators are poised to swerve into the open lane that creates. In particular, the New York Department of Financial Services has made clear that it views itself as a leading regulator of fintech companies. This was underscored earlier this week when DFS Superintendent Vullo submitted a comment letter opposing the proposal by the Office of the Comptroller of the Currency to create a new national bank charter for fintech companies. The DFS made clear that it will use sharp elbows to defend its regulatory territory, arguing that it is “better equipped to regulate cash-intensive nonbank financial service companies which requires strict oversight and enforcement of anti-money laundering, consumer identification and transaction monitoring statutes and regulations.”
While there is some basis for payments companies to believe that Trump may reduce regulatory hurdles, if state regulators use this as a justification to increase their role in regulating payments companies, the net result could be the opposite of what these companies are hoping for.
Jeffrey Alberts is a partner in Pryor Cashman’s fintech, litigation and banking and finance groups. He has in-depth knowledge of the growing virtual currency sector and the subsequent government efforts to regulate virtual currency companies, and is frequently sought out by the media for his insights in these areas. Additionally, Jeffrey is a participating attorney in the newly launched Digital Currency & Ledger Defense Coalition (DCLDC), an organization which protects individual constitutional rights and civil liberties in connection with regulatory and law enforcement scrutiny relating to digital currencies and ledgers. This article originally appeared at https://www.pryorcashman.com/blog-fin-tech-monitor/what-can-fintech-expect-from-trump.html.
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