The Consumer Finance Outlook Under a Biden Administration

When President-elect Joe Biden takes office in January, it is safe to bet that addressing the pandemic-related financial pressures facing millions of Americans will be at the top of his agenda.  And in particular, the administration is expected to focus on consumer finance, which should give renewed energy and purpose to the Consumer Financial Protection Bureau, an agency the Trump administration all but grinded to a halt.

Pursuant to a recent Supreme Court ruling that gives the President the right to remove the head of the CFPB at will, President-elect Biden will be able to select a new head of the watchdog agency, rather than having to wait for the current CFPB director, Kathleen Kraninger, to finish out her term.  The CFPB will presumably take an active role in upholding federal CARES Act protections relied on by Americans who have been hurt by the pandemic, such as by monitoring mortgage servicers’ compliance with the Act’s rules permitting borrowers to skip payments.  The CFPB’s enforcement arm will also presumably gain renewed fervor, particularly if Democrats fail to gain control of the Senate and have to rely on enforcement, rather than legislation, to carry out their consumer protection goals.  A first step will likely be to undo the Trump administration’s reorganization of the agency, which largely gutted the Bureau’s authority to open fair lending investigations. Defendants may also expect to see harsher penalties as the result of these investigations.

Under the new administration, the CFPB is also expected to reinstate restrictions on payday lending in response to the Trump administration’s backtracking on Obama-era underwriting rules that had required payday lenders to verify borrowers’ ability to pay.  President-elect Biden also campaigned on creating a federal credit reporting agency within the CFPB, which federal lenders would be required to use.  The federal credit reporting agency Biden envisions would compile non-traditional data sources (such as rental history and utility bills) to evaluate credit, which Biden believes will expand access to credit and reduce racial disparities in lending.

Biden’s advocacy for using alternative data sources to evaluate credit may suggest alignment with, and support for, nonbank fintechs, which extend credit to consumers who otherwise would be denied by considering such alternative data sources.  Compatibility with this aspect of fintech lending may give Biden an incentive to promote fintech growth, and perhaps even support granting fintechs national banking charters, something Democrats have previously opposed.

Who Biden appoints to run the Federal Communications Commission will also have consumer finance implications, as the FCC is responsible for drafting regulations to implement the Telephone Consumer Protection Act.  While differing interpretations of the Act’s scope have been playing out in the courts—for example, with the Supreme Court set to address the circuit split on the definition of an autodialer this term—the FCC chairman could significantly affect the direction of the TCPA on any issues left unaddressed by the high Court.  Biden’s inclusion of former FCC Commissioner Mignon Clyburn on his FCC transition team may signal an intent to broaden the TCPA’s reach, as Clyburn had voted in favor of the FCC’s 2015 declaratory ruling that broadened the definition of autodialer.  That definition was struck down in 2018 by the D.C. Circuit Court of Appeals in ACA International v. FCC, and the agency has yet to issue a new interpretation of the term.

The degree to which the new administration will be able to significantly change course from President Trump’s policies will depend in large part on whether Democrats gain control of the Senate and whether Biden’s nominees are confirmed.  And, of course, the degree to which consumer finance remains a top priority will certainly be impacted by the eventual arrival of a vaccine and how quickly unemployment figures improve.  However, based on the current lay of the land, at a minimum, creditors can broadly expect an increased emphasis on pro-consumer policies and enforcement actions.

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