Every new presidential administration gets to make its imprint on regulations — and by extension, the financial services industry.
In the midst of grappling with the pandemic and the headwinds still buffeting the U.S. economy, the President Joe Biden administration may be gearing up to take a closer look at the way firms, particularly debt collectors and payday lenders, interact with consumers.
That means the Consumer Financial Protection Bureau (CFPB) may become more active in various ways than had been seen under the previous administration, including more scrutiny over how companies charge and collect fees, or go after what’s owed to them. We may even see changes, elsewhere, governing how Wall Street operates as far as retail investors are concerned.
We’re in the midst of an economic downturn (and depending on how you look at it, rebound) that no one could have anticipated, and we’re seeing a shift in the very ways in which financial services firms interact with their end customers. The digital age is fully upon us, and we’ve gotten a glimpse of how digital-first companies may get greater scrutiny moving forward.
As PYMNTS previously reported, a new director is likely on the horizon for the CFPB. Biden has nominated Rohit Chopra to replace Kathy Kraninger, who stepped down last month. In the meantime, the agency is being helmed by Acting Director Dave Uejio.
That might mean, in general, more fines ahead for some of the marquee names that are bringing financial services to mobile conduits, ensuring that commerce is always on everywhere.
News came this week that PayPal’s Venmo is under investigation by the CFPB. The investigation, PYMNTS reported, is focused on the company’s debt collection processes and allegations that Venmo conducted unauthorized fund transfers. PayPal said it is cooperating with the CFPB’s investigation.
To get a sense of Venmo’s scale and reach, in its latest quarterly earnings report, PayPal said that in the fourth quarter, the company processed $47 billion in total payments volume, up 60 percent year over year, and active accounts grew 32 percent in the same period to 70 million.
Reading the tea leaves as to what a regulatory body will do, especially with new management, so to speak, is as much art as science. Better to be generally right than precisely wrong, as the old investing maxim goes.
Complaints Trending Higher
In the most recent semi-annual report, the CFPB said that during the period from Oct. 1, 2019, through Sept. 30, 2020, the bureau received approximately 467,200 consumer complaints. This is an approximately 26 percent increase from the prior period. In the same time frame, the CFPB collected a bit more than $34 million in civil penalties.
In the past, as reported by The Wall Street Journal, Venmo has told users it would send debt into collections and gave itself the authority to seize money from customers’ other PayPal accounts.
Debt collection — as a practice — is likely to be in the spotlight as the new administration takes over more fully. As PYMNTS reported late last year, the CFPB issued a final rule that allows debt collectors to engage with borrowers more often and over more channels.
And as CNBC noted, the payday lending is likely to be re-examined, particularly the provisions that remove the “ability to repay” tests. As far back as 2017, under the leadership of Richard Cordray, the CFPB would have mandated such ability to repay be established.
We’d contend, too, that the recent volatility in the stock market will bring the other watchdogs (for example the Securities and Exchange Commission) to examine the role of trading platforms (such as Robinhood) and how much financial education might be necessary for retail and novice investors. PYMNTS reported about the gamification of stock trading. But the overarching theme of the new administration may be that new rules are in the offing, eyeing the way we live so much of our lives now digitally.