What President Trump’s record on regulatory reform means for payments and financial services so far, and what comes next
Compiled by Loraine DeBonis, Editor-in-Chief
Despite talk of dismantling Dodd-Frank, only one of President Donald J. Trump’s more than 30 executive orders since he took office relates specifically to financial services. The White House has several priorities that may keep financial services regulatory reform on the back burner, including health care, trade and border security. Still experts are hopeful that the force behind a “1-in-2-out” approach to regulation will ultimately prove good for business.
We asked industry thought leaders to weigh in on the key highlights for the industry from President Trump’s first 100 days and what to expect in the next three months. Here’s what they had to say:
President Trump’s significant focus on de-regulation through a series of executive orders should start to decrease the flow of new regulations, which mushroomed under the prior administration. In particular, the Priebus Memo on Jan. 20th prohibited sending new regulations to the Office of Federal Register until an agency head appointed by the new president reviews and approves the regulation, and it delayed the effective date of certain pending regulations by 60 days. Then President Trump passed the 2-for-1 Executive Order on Reducing Regulation and Controlling Regulatory Costs, which required “for every one new regulation issued, at least two prior regulations be identified for elimination.” Under the same executive order, the president also mandated that the total incremental cost of all new regulations, including repealed regulations, to be finalized in 2017 shall be no greater than zero. While this new focus on decreasing the burden from expensive new regulations will be helpful, it unfortunately doesn’t unwind the significant cost burden of existing regulations such as the 1,689-page CFPB final rule on prepaid accounts. We hope that the new administration will push more measured regulation that balances the need for sensible consumer protections with the costs to industry in order to promote continued innovation in the financial services industry.
Now that President Trump has executed on several other priorities including the passage of health care reform in the U.S. House, I believe that he will start focusing more on financial services issues over the next three months. While he has already issued some executive orders on financial services issues such as directing the Treasury Secretary to review the Financial Stability Oversight Council, which designates financial institutions as systemically important or “too big to fail,” I believe that he will start pushing more financial services legislation as part of his reform agenda. For example, it has been reported that President Trump supports the overhaul of the Dodd-Frank Wall Street Reform Act through the Financial CHOICE Act, which passed the House Financial Services Committee on May 4th along party lines. I believe that this is just the first step in lowering compliance costs and fostering more innovation in the financial services industry.
—Brad Fauss, General Counsel and Vice President, Compliance and Governmental Affairs, Wirecard North America Inc.
Not surprisingly, financial services regulations seem to have taken a bit of a backseat during President Trump’s first 100 days to attend to more pressing issues. Notably, in Trump’s first nationwide address to a joint session of Congress back in March, there was no mention of Dodd-Frank or CFPB relief. However, a couple weeks later the Department of Justice on behalf of the Trump administration officially joined the PHH legal challenge arguing that the CFPB structure is unconstitutional, so that was definitely an encouraging highlight. A couple weeks ago, the Trump administration also officially took steps to begin scaling back certain ‘too-big-to-fail’ policies under Dodd-Frank. Although the order is unlikely to impact the payments industry in any meaningful way, it’s a least a step in the right direction and hopefully overly burdensome financial services regulations will soon be the next area of focus for the president.
I expect Trump to give more attention to financial services during the next three months than he has during his first 100 days of office, but there are still some critical foreign policy issues and other problematic aspects of Dodd-Frank to contend with first, so I’m not expecting a whole lot of significant action from the White House any time soon as it relates to the financial services industry. However, we’ve seen quite a bit of positive activity happening in both houses of Congress relating to financial services so hopefully Congress can keep the momentum going and help obtain some regulatory relief for the industry until the president is able to give more attention to these issues.
—Amy Ross Lauck, Partner, Payment Systems and Consumer Financial Services, Lindquist & Vennum LLP
The biggest highlights for the financial services industry during President Trump’s 100 days are the many dogs that didn’t bark. Trump signed Executive Order 13772, titled “Core Principles for Regulating the United States Financial System,” but there hasn’t been much in the way of a public move to operationalize it. Trump didn’t try to replace Cordray (although his Justice Department did file a brief in the PHH litigation supporting his right to do so). And for his part, Cordray hasn’t done anything to antagonize the administration, like finalize the arbitration rule (which I predict would have happened by now if Clinton had won the election). Comptroller Curry is out, but deciding not to reappoint the head of an agency at the end of his scheduled term isn’t quite on par with the bold and controversial moves the president has shown himself willing to take in other areas, and the fact that a permanent replacement hasn’t been identified may reflect the difficulty the administration is having working through the appointments process.
In the next three months, the financial services industry should keep an eye on Congress. Hensarling’s Financial CHOICE Act has cleared the House Financial Services Committee, and it promises a big shakeup to the federal financial regulatory apparatus—although pundits don’t give it much hope of passing the Senate in anywhere near its present form. The question will be whether the Trump administration decides to back it—or push forward a competing bill based on Executive Order 13772.
—David Beam, Partner, Financial Services Regulatory & Enforcement Practice, Mayer Brown LLP
|“Trying to predict what President Trump is going to focus on is a little bit like trying to figure out which horse is going to win the Kentucky Derby; even the most seasoned betters are often surprised.”|
I think what is most notable for financial services industry from President Trump’s first 100 days, is just the absence of any substantial attention. Leading into the 2016 election, the financial services industry speculated into what a Trump administration would mean for financial services regulations.
Now that the first 100 days have unfolded, what can be seen from President Trump is that financial services do not appear to be a top priority for his administration. President Trump has signed more than 30 executive orders in his first 100 days; only 1 dealt with financial services. However, President Trump is focused on dismantling the legacy left by President Obama. Therefore, once he gets through with health care, tax reform, immigration, and countless other topics ranging from international trade to net neutrality, then President Trump will look to reform financial service regulation.
Trying to predict what President Trump is going to focus on is a little bit like trying to figure out which horse is going to win the Kentucky Derby; even the most seasoned betters are often surprised. Nevertheless, what is known at this point is that both tax reform and revisions to Dodd-Frank are coming in some form or another.
With the House Financial Services Committee recently approving a measure to revise and repeal certain sections of the Dodd-Frank Act, it will be interesting to see how long this process ultimately takes. Dodd-Frank is massive and unweaving parts of it is going to present challenges and require multi-agency cooperation to ultimately roll out.
The makeup of the CFPB is going to change, but I do not think it’s going away. The big question if I am a financial services company is what should I do in my business to prepare for the changes? We have been advising clients to maintain compliance with current laws and regulations, and to pay close attention to state oversight because the states are going to be more active as the federal framework’s uncertainty continues.
—Joel Sherwin, President, U.S. Operations, Neopay
President Trump began the first 100 days by moving away from his populist attacks on banks and other financial institutions and instead emphasized reducing regulations that apply to these institutions. However, while it initially seemed possible that Trump would seek to repeal or dramatically alter Dodd-Frank, it now seems likely that the core framework of Dodd-Frank will remain. Similarly, rather than launch an immediate attack on CFPB Director Richard Cordray, the Trump administration appears to be waiting, possibly to see whether Cordray voluntarily resigns to run for governor of Ohio. Overall, the theme of the first 100 days has been a movement toward moderation.
President Trump has moderated his rhetoric concerning financial services and seems to have recognized that this is not an easy area in which to get dramatic wins. Unwinding financial regulation is complicated and generally requires buy-in from Congress, which takes time to achieve. Trump appears to lack an appetite to wade into the quagmire of financial regulatory battles, so I do not expect him to increase the attention he devotes to financial services over the next few months.
—Jeffrey Alberts, Partner, Litigation, Banking & Finance and Fintech Groups, Pryor Cashman LLP
The biggest highlight from President Trump’s first 100 days would probably be the CFPB’s extension of the effective date for the prepaid accounts rule, as well as the bureau’s signaling that it is open to revisiting certain substantive issues in the rule. Extending the effective date will benefit industry by helping providers to comply with the rule’s many complex requirements and the possibility of redressing some of the more problematic aspects of the rule is very promising. One could argue that the bureau may have taken these actions regardless, but it certainly seems that having a credible threat that Congress and the administration could have invalidated the rule through the Congressional Review Act was a driving force in the bureau’s decision.
It’s hard to say for sure [what’s ahead], but my feeling is that the president will remain primarily focused on health care and tax reform over the next three months and will not pay much attention to financial services issues more broadly.
—Eli A. Rosenberg, Associate, Banking & Payment Systems, Baird Holm LLP
- Regulation Review Could Be Start of Trump’s Bid to Chip Away at Dodd-Frank
- Trump Order Calls for ‘1 In, 2 Out’ Rule on Regulations
- Viewpoint: What Can the Payments Industry Expect from Trump?
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