“[The House Financial Services Committee] can issue subpoenas and other requests for information from financial institutions that highlight practices the Democratic members of the committee take issue with,” Willis said. “The House can’t make any regulations, but it can put practices into the news to get the attention of a congressional committee.”
In spite of a political change in the House, control of the Consumer Financial Protection Bureau is slated to remain Republican — keeping the deregulatory environment in place.
The Senate will likely confirm President Donald Trump’s nominee Kathy Kraninger as CFPB director following the Thanksgiving holiday, Willis said.
With Kraninger at the helm of the bureau, the likelihood of any significant regulatory change is slim. Still, with Rep. Maxine Waters (D-Calif.) as the new chair of the House Financial Services Committee, financial institutions can anticipate a lot of push for more regulation.
“I’d be shocked if Maxine Waters didn’t attempt any legislative restore to the policies that [former director] Richard Cordray made and [acting director] Mick Mulvaney set aside,” Michael Benoit, chairman of Hudson Cook LLP and a partner in the firm’s Washington, D.C., office, told AFN. However, the efforts of the House might not amount to anything more than “some entertaining hearings,” Benoit added.
Lenders’ concern should lie with state attorneys general since they have more power to enforce financial regulation. With four more Democratic state AGs following the midterm election, state regulation will likely “accelerate,” Willis said.
Individual states might draft their own legislation, much like California did in June with its Consumer Privacy Act, which gives consumers the authority of their personal information and how institutions use it. “The impact on auto finance is much more significant on the state level than on the federal level,” Willis said.
In fact, states could implement their own forms of disparate impact regulation, separate from the CFPB’s efforts to reconsider a rulemaking. “A state could have a fair lending law and write in the law that it is illegal to discriminate intentionally and it’s illegal to have a neutral policy that has a disparate impact,” Willis added.