The U.S. voters have spoken and Donald J. Trump will be the new Commander-in-Chief with a Republican-controlled House and Senate. With a victory that took the pollsters by surprise, Trump’s win sent the markets plummeting overnight. Although reports suggest markets are steadying, what’s in store for the U.S. payments and financial services industry in the wake of this election? The early consensus among payments and financial services experts is that change is coming—likely in the form of regulatory relief.
“Any time the presidency changes parties, you have to expect some significant realignment in regulatory and enforcement policies, and priorities. Due to the divisiveness of this election, I think we can expect a lot of gridlock. On the other hand, with the Senate, the House and the Presidency under one party, there’s also a reasonable chance some major changes in existing law could be implemented. From a payments perspective, I’d keep an eye on Dodd-Frank and the CFPB, both of which will likely come under fire. Overall, the banking and financial services industry might benefit from a reduction in overall regulatory and enforcement burdens.”
—Judith Rinearson, Partner, K&L Gates LLP
“Who knows if the next four years will be a case of ‘shock and awe’ or punctuated with the shrieking sound of President Trump putting the brakes on the hyperbolic promises of Candidate Trump. That said, two institutions, and those effected by them, are likely to change in the first 10 days. First, the CFPB, and its often embattled leader, will be toned down if not neutered entirely. And, fortunately for the payments industry, the Supreme Court does not appear to have any impactful decisions pending on the current session’s early calendar. Election night’s potential erosion of U.S. IRA and 401(k) value hopefully will be temporary yet the ‘U.S.-first, Donald’ signal sent by voters last night will likely echo for years to come.”
—John MacAllister, Principal, Dorado Industries
The election results will likely lead to significant changes in financial services regulation priorities and enforcement. The recent DC Circuit Court ruling in the PHH case treating the CFPB as an executive agency (rather than an independent agency), if upheld, would allow President Trump to replace the Director of the CFPB at any time. President Trump would be likely to exercise that right—which would lead to major changes in rulemaking and enforcement at the CFPB. Even if the DC Circuit Court’s PHH decision is reversed and the CFPB Director cannot be removed without cause, President Trump will still be able to nominate a new Director of the CFPB in the summer of 2018 with both houses of Congress under Republican leadership.
The national election results will also lead to a shift in appointments to the federal bench, including any new vacancies on the U.S. Supreme Court. The current vacancy on the Supreme Court will certainly be a contentious issue in the final months of the Obama administration.
Less noticed but also important for state-licensed institutions, the Republican Party appears to have increased their number of governors. Aggregate results for state legislatures and state attorneys general are not yet available but it appears that Republicans may have picked up an additional attorney general spot. This continues a trend of strong Republican performance at the state level.”
—Kevin D. Leitão, Of Counsel, Ballard Spahr LLP
Trump and his allies may try to repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB. If this occurs, the CFPB’s new prepaid card rules will be repealed along with the agency, and another entity will be created to replace it.
If the CFPB remains in place, President Trump will work with Congress to reduce its funding, which would mean fewer resources for enforcement actions. In the latter case, the prepaid accounts rule in all its complexity would remain intact.
Trump also will lower taxes on small businesses, fostering growth and the need for more merchant accounts and services.
—Lori Breitzke, Founder, E&S Consulting