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The payments industry expected the new administration to bring with it a wave of deregulation, but the reality seems to be a little different from the expectation.
Under the leadership of Russell Vought, Consumer Financial Protection Bureau has withdrawn 67 guidance documents since January. This includes eight policy statements, seven interpretive rules, 13 advisory opinions, and 39 other guidance documents. An overdraft-fee cap and digital-payments apps oversight rules were overturned by the Congressional Review Act.
The Bureau also tried to withdraw its open-banking rule, but it is currently facing a court fight with the Financial Technology Association over that.
So, the new administration has done work to make compliance easier for financial-services companies. But at the same time, the rollback has not touched any existing regulations. For example, the prepaid final-accounts rule still requires every purchaser of a prepaid card to get three separate pieces of disclosure – a short form, a long form, and the terms and conditions – before they can get the card.
To be fair, the Administrative Procedure Act sets out requirements for any rules that an agency wants to promulgate. Proposed rules must be published in the Federal Register at least 30 days before their effective date, and the agency must give the public the right to participate in the rulemaking by commenting on the rules. It then must take those comments into consideration before adopting a final rule.
While the law does not specify how long a comment period must be, the agencies do need to allow time for both public comment and review. The regulatory agencies have varied the allotted times for comment periods based on how large and complex the proposed rules are. They have also extended and reopened comment periods when a proposed rule has drawn a ton of interest from the public. Usually, an extended comment period will result in an extended time between the proposed rule, the final rule, and the effective date.
The question is whether there are any plans for new rulemakings to restructure or roll back any existing rules. The signs suggest this is not at the top of the list for the administration.
Remember that in February the CFPB ordered its workers to stay home and stop all work unless approved by the administration or required by law. In the recent budget bill, the bureau’s budget was cut in half. The Administration has tried to cut about 1,500 positions at the Bureau and reduce the staff to about 200. This may cause some in the industry to cheer, but there is a downside. Who will be left to rewrite the regulations?
As I noted in a column earlier this year, rules that remain on the books could become fodder for state regulators and plaintiffs’ attorneys who may look to step into the gap left by federal regulators.
Also, every regulation that goes unchanged is one that could come back to haunt the industry if things change after the next election, or if there is a crisis that leads the current administration to believe that enforcement needs to be stepped up. Remember that under the first Trump administration, there were more enforcement actions than under the Biden administration.
The industry should continue working with the regulators and Congress to make sure the regulatory environment is sensible while also protecting consumers. Instead of assuming that now is a time when Washington can be safely ignored, the industry should increase its engagement. That way, the industry can make lasting changes while not risking a return to the status quo that existed before the current administration.
—Ben Jackson bjackson@ipa.org
