What a Biden Presidency can imply for client safety
President-elect Joe Biden on November 9, 2020 at the Queen Theater in Wilmington, Delaware.
Joe Raedle | Getty Images News | Getty Images
Joe Biden’s presidency could have a huge impact on everyday Americans when it comes to financial protection.
With Senate control still in balance, it remains unclear to what extent the Biden government can deliver on its election promises.
But there are other ways in which the elected president can leave his mark. Here are some of the issues that Biden and his team are likely to prioritize once they take office in January.
Financial consumer protection
According to consumer advocates, one of the Biden government’s top priorities is likely to be to mitigate the economic impact of the coronavirus pandemic on households and to become more aggressive compared to monitoring Wall Street.
The installation of a new head at the Consumer Financial Protection Bureau, which became negligent in regulating financial firms during the Trump era, is likely to be one of the first steps the Biden team takes.
The federal agency, created by the Dodd-Frank Financial Reform Act after the Great Recession, protects consumers from financial abuse and predatory practices on popular financial services such as credit cards, mortgages and loans.
“The CFPB did a 180 under Trump,” said Prentiss Cox, a professor at the University of Minnesota who specializes in consumer law. “I expect a very quick change in leadership and when that happens you will likely see a very quick change.”
A recent Supreme Court ruling allows the President to dismiss the CFPB director at will. Kathy Kraninger, the current director of the consumer agency, is a Trump-appointed person. (She replaced then incumbent director Mick Mulvaney in 2018.)
“Under the leadership of Director Kraninger, the CFPB has worked tirelessly to ensure that consumers are protected in the financial market,” said a spokeswoman for the CFPB. “When [consumer] Damage has occurred. She has forcibly used the Bureau’s enforcement tool to prosecute bad actors on behalf of consumers.
“And for further prevention, it has developed an aggressive education, regulation and oversight agenda to achieve that goal,” she added.
The government of Biden (for example, through the CFPB and executive action) will also seek to mitigate the economic impact of the coronavirus pandemic, which has driven the country into its deepest recession in modern history.
“The natural starting point for consumer protection is to make sure people don’t get further distress,” said Linda Jun, senior policy counsel at Americans for Financial Reform, an advocacy group.
For example, the federal law on the CARES Act, which came into force in March, extended certain protective measures to homeowners and tenants.
Among other things, the law prevented lenders or credit service providers from preventing the foreclosure of houses with a state-secured mortgage until at least December 31. CFPB officials are likely to monitor such companies more closely to ensure consumers do not illegally lose their homes, experts said.
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The federal agency is also well positioned to prevent evictions and vehicle withdrawals, reduce loan losses and defaults, and closely monitor collection agencies and credit bureaus, as Richard Cordray sent in a letter to Kraninger from former CFPB officials, including the former director, in April man appointed by Obama.
Like the Trump administration, the Biden camp could also sign executive measures to ensure financial security during Covid-19, experts said.
In August, President Donald Trump misappropriated the federal disaster fund, for example to temporarily boost unemployment benefits by USD 300 per week and, for example, to suspend payments on federal student loans until the end of the year. The Centers for Disease Control and Prevention issued a temporary eviction moratorium in September.
A new CFPB director would likely focus more on the misconduct of big banks and other financial institutions, which was less of a priority in the Trump era, and try to rewrite certain rules like the one on payday loans, according to consumer advocates.
New leadership would also likely focus on regulation that affects lower-income and minority consumers, such as fair housing, fair lending, and overdraft fees, they said.
This would be in line with the racial justice outlined as the main focus by the Biden transition team.
According to Patricia McCoy, a professor at Boston College Law School and a former CFPB official, a firm that violates fair lending rules, for example, can offer white borrowers a lower interest rate to black people even if it checks their creditworthiness.
The Biden warehouse has also helped expand access to banking, possibly through free or low-cost bank accounts, McCoy said. Being “unbanked” disproportionately affects people with color, she said.