Expert Observers Fear the Bright Outlook for Federal Regulation Could Darken Soon

More than a year after the Trump Administration took power, payments industry executives looking for a friendlier tone from Washington, D.C., are getting it, but it’s questionable just how much tangible benefit this will yield, two expert Washington observers said Tuesday. Meanwhile, the picture could darken this fall if, as the observers predict, Democrats take over the House of Representatives.

In general, regulatory agencies these days are “as friendly as ever to the banking industry,” said Jaret Seiberg, managing director at Guggenheim Securities, a unit of New York City- and Chicago-based Guggenhem Partners. Added Isaac Boltansky, director of policy research at Washington, D.C.-based Compass Point Research & Trading: “The undercurrents are all positive for our industry.”

Both men spoke as part of a panel at Transact, a payments-technology conference in Las Vegas sponsored by the Washington, D.C.-based Electronic Transactions Association.

But complications are rumbling under this serene surface. One of these concerns the management structure of the Consumer Financial Protection Bureau. President Trump has appointed a temporary director, Mick Mulvaney, to succeed the agency’s original chief, Richard Cordray, who came under fire during his tenure for what financial executives saw as a doctrinaire stance on regulation. Mulvaney’s actions, which include nullifying some of the agency’s actions under Cordray, please the industry but are a concern, Seiberg said.

“What’s going on right now with Mulvaney is a mistake,” he told the audience. “The system is set up right now with Mulvaney making changes that are needed but [he’s doing it] in a very partisan way.”

Seiberg fears that if a Democratic administration takes power in 2021, it will simply reverse Mulvaney as Mulvaney has reversed Cordray. The result of that, he argued, will be a “yo-yoing” effect that will confuse the industry. Instead, he said, the CFPB should be run with a bipartisan commission structure, as other federal regulatory agencies are governed, rather than leave in place the original structure in which a single person runs the agency free of interference from Congress.

But Seiberg is pessimistic on that score. “I’m afraid we’re stuck,” he said. “I don’t see any chance for a commission.”

Another complicating factor is that, as federal regulation relaxes, state governments are acting more vigorously. “State attorneys general are incredibly focused on headline issues,” noted Boltansky, who joked that the abbreviation for attorney general, AG, stands for “aspiring governor.” On issues like data-breach regulation, for example, “We’ve got to be cognizant that states can act,” Boltansky said, even if Congress does nothing but hold hearings.

Breach vulnerability made headlines last year with the disclosure of a massive intrusion at the credit bureau Equifax Inc., which ultimately affected 145.5 million records. But while Congress grilled top current and former Equifax managers, so far it has done little to issue legislation. “I think the credit bureaus got off pretty lightly,” observed Boltansky.

But with or without activist state officials, the “positive undercurrents” from Washington may not last much longer, particularly if Democrats reclaim the House in November. Both Seiberg and Boltansky predicted they will, citing President Donald Trump’s low approval rating. “Now we have Democratic voters going into the mid-terms greatly enthused,” said Seiberg. “These are young people who regret not voting in 2016. So we’ll see the House flip.”