The future of the Consumer Financial Protection Bureau is at least somewhat in question following the election of Donald Trump, prompting payments players to weigh their options.
Trump’s team has promised to “dismantle” the Dodd-Frank regulations, and throughout his campaign he pledged far less regulatory scrutiny. One possible outcome is a less powerful CFPB, which could bode well in terms of not stifling innovations in payments, says payments consultant Richard Crone, who specializes in mobile commerce strategy.
“Fintech is one of the most aggressive industries in the economy today, pushing the boundaries and redefining how financial services are delivered altogether,” Crone says.
He points to the example of the rules CFPB developed rules to put strong federal protections on prepaid products. The rules centered on better disclosure for prepaid cards. But the bureau cast a wide net and included prepaid accounts in general in those rulings.
“This current environment provides us with some wiggle room to make sure the innovation can reach its full potential. That’s the key here,” Crone says.
There are also instances in which extra rules and oversight might apply to things in a card-based world, but don’t always make sense in a mobile payments world.
“We’re pushing the edge of the envelope with new ways of serving customers, especially in mobile, and the CFPB applies old-school rules that may not apply," Crone said.
Questions about the CFPB’s future started even before the election, following a court ruling that limited the bureau’s constitutional authority. Last month, the U.S. Court of Appeals for the D.C. Circuit ruled that the agency’s director had too much power and too little oversight.
The ruling opened up a floodgate of litigation in terms of how CFPB might interpret its regulatory jurisdiction. Now with Trump's victory, those jurisdictions could be rewritten or thrown out altogether.
Payments attorney Stephen Aschettino of Foley & Lardner LLP clarifies that the court ruled that structure of the CFPB was unconstitutional, and not the agency itself as some have misinterpreted. The way the bureau’s charter was written makes it so that the director could not be removed by the president, which arguably would make the CFPB director the second most-powerful lawmaker in D.C.
“That issue can be addressed by giving the president the power to supervise and remove the director. So it’s not that complicated a fix, but it hasn’t been addressed yet,” Aschettino says.
Some experts do not see the CFPB’s future in jeopardy. Crone does not see the bureau being disbanded entirely, regardless with what happens to the Dodd-Frank Act that created the CFPB, or Trump’s proposal to pay for a wall by targeting remittances between the U.S. and Mexico. “You could see some real controversy between the CFPB and the presidency if that was the case,” he says.
Mary Winingham, head of sales and program management for third-party processor iStream Financial Services, agrees that it’s unlikely that Trump’s presidency could spell the end of the CFPB. “I don’t think the scope of their influence is going to go away. I think it’s going to be as big a burden on us as it ever was. But if any of this goes to court, it will meet conservative judges.”