What a Biden Presidency Can Mean for Consumer Protection

Joe Biden’s presidency could have big implications for ordinary Americans when it comes to financial protection.

With Senate control still at stake, the extent to which the Biden administration will be able to deliver on its election promises remains uncertain.

But the president-elect can make his mark in other ways. Here are some of the issues Biden and his team are expected to prioritize after taking office in January.

Reducing the economic impact of the coronavirus pandemic on households and becoming more aggressive towards Wall Street police will likely be top priorities for the Biden administration, according to consumer advocates.

Fitting a new head to the Consumer Financial Protection Bureau, which has become lax in regulating financial firms in the Trump era, will likely be part of the first steps for the Biden team, they said.

The federal agency, created by the Dodd-Frank Financial Reform Act in the wake of the Great Recession, protects consumers from financial abuse and predatory practices in mainstream financial services like credit cards, mortgages and loans.

“The CFPB did a 180 under Trump,” said Prentiss Cox, a University of Minnesota professor of consumer protection law. “I expect a change in direction to happen very quickly, and when it does, I think you will see a change very quickly.”

A recent Supreme Court decision allows the president to fire the CFPB director at will. Kathy Kraninger, the current director of the consumer agency, is a person appointed by Trump. (She replaced acting director Mick Mulvaney in 2018.)

“The CFPB has worked tirelessly under the leadership of Director Kraninger to ensure consumer protection in the financial market,” said a spokesperson for the CFPB. “When [consumer] harm has occurred, she forcefully used the Bureau’s enforcement tool to prosecute bad actors on behalf of consumers.

“And to continue to prevent, she has put forward an aggressive program of education, regulation and supervision to pursue this goal,” she added.

The Biden administration (via the CFPB and executive measures, for example) will also seek to mitigate the economic impact of the coronavirus pandemic, which has pushed the country into its deepest recession in modern history.

“The natural starting point of consumer protection is to make sure people aren’t pushed further into distress,” said Linda Jun, senior policy advisor at Americans for Financial Reform, an advocacy group.

The federal relief act of the CARES Act, enacted in March, extended some protections to landlords and tenants, for example.

Among them, the law has prevented lenders or loan managers from foreclosing on homes with a federally guaranteed mortgage until at least December 31. CFPB officials will likely monitor these businesses more closely to ensure consumers don’t illegally lose their homes, experts have said. .

Learn more about Personal Finance:
Why more coronavirus stimuli could wait until January
Biden could make forgiveness of student loans a reality
US is closer than ever to federal minimum wage of $ 15 after Biden win

The federal agency is also well placed to help prevent evictions and repossessions of vehicles, reduce delinquencies and defaults, and closely monitor debt collectors and credit reporting agencies, according to a letter sent. at Kraninger in April by former CFPB officials, including the former director. Richard Cordray, appointed by Obama.

Like the Trump administration, Biden’s camp could also sign executive measures to ensure financial security during Covid-19, experts have said.

In August, President Donald Trump reallocated federal disaster funds to offer a temporary $ 300 per week increase in unemployment benefits and suspended federal student loan payments until the end of the year, per example. The Centers for Disease Control and Prevention issued a temporary moratorium on evictions in September.

A new CFPB director would likely focus more on the wrongdoing of big banks and other financial institutions, which was less of a priority in the Trump era, and seek to rewrite some rules like the one around payday lending, advocates say of consumers.

The new leaders would likely focus on regulations that impact low-income consumers and minorities, like fair housing, fair loans and overdraft fees, they said.

This would be in line with racial fairness, described by the Biden transition team as a primary focus.

A company that breaks fair lending rules, for example, may give white borrowers a lower interest rate than people of color, even when checking creditworthiness, according to Patricia McCoy, a professor at Boston College Law School and former responsible for the CFPB.

Biden’s camp has also supported expanding access to banking services, perhaps through free or low-cost bank accounts, McCoy said. Being “unbanked” disproportionately affects people of color, she said.