It has been a year since President Donald Trump took office with the promise of cutting red tape and removing hundreds of regulations from previous administrations. But has there been a noticeable change in the financial regulatory landscape yet?
The New York Law Journal spoke with Alexandra Megaris, counsel at Venable’s New York office, whose practice focuses on regulatory matters involving state attorneys general, regulatory agencies and the Consumer Financial Protection Bureau on the topic. She advises banks and nonbanks on regulatory and compliance issues.
Questions and answers have been edited for clarity and brevity.
Q: How has the financial regulatory landscape changed since the Great Recession?
Alexandra Megaris: After the Great Recession, regulations over financial institutions really ramped up; the Dodd-Frank Wall Street Reform and Consumer Protection Act and a brand new federal agency [the Consumer Financial Protection Bureau]. It’s pretty rare to see a completely new agency that was created with broad regulatory and enforcement power under one roof with the authorities built into the statute, which really became the driver of regulation and reshaping the landscape for the country. States were playing catch up, following the CFPB’s coattails. The CFPB also lets the states’ attorneys general [have] the authority to enforce. Didn’t necessarily give them the resources, but it gave them the authority.
Q: How have those changes affected the way banks and other financial institutions operate?
Megaris: It had a very big impact on banks, and later nonbanks. The earliest cases were against banks. But banks have been used to regulation. It was the nonbanks [including lending and depositing services] such who didn’t have supervision on the federal level, and these new regulations caught nonbanks off guard. They’ve really had to step their game up in the last four years and build a strong, independent compliance program.
Q: How have states reacted ?
Megaris: Certain states were trying to mimic the CFPB. In New York, there was the creation of the Department of Financial Services. Unlike the Attorney General’s Office, which has broad authority to investigate any business and nonprofit, the DFS has an expertise, just like the CFPB.[The New York State Banking Department and the New York State Insurance Department were abolished and both agencies' functions and authorities were transferred to the New York state Department of Financial Services in October 2011.]
Q: We’re closing on a year since President Donald Trump took office. How is his financial deregulation agenda going?
Megaris: There has not been a drastic shift following the 2016 election. On the federal side, you’ve seen the slowing down of things and it’s harder to get answers back. But that’s more a result of the transition taking longer that most transitions do, and personnel not being appointed or hired as quick. CFPB cases have slowed down and there are fewer of them and the monetary portions of the settlements are smaller, so there’s a little bit of change in terms of intensity and frequency. Otherwise, it seems like they’re proceeding as normal. The CFPB was the one agency that everyone was closely tracking because of a lawsuit that argued that the agency’s structure was unconstitutional. People really thought President Trump would fire CFPB Director Richard Cordray, but that hasn’t happened and it’s essentially business as usual.
Q: Are New York and the state Department of Financial Services increasing their financial regulatory activity now that there’s a Republican federal administration?
Megaris: haven’t noticed any uptick in the type or volume of activity by DFS. You have seen the New York Attorney General Eric Schneiderman taking a more active role in enforcement of laws that traditionally one would look to the federal government [to enforce], like environmental laws. But on the financial regulation front, I haven’t noticed any shift or move by New York to fill a void. In those other areas that the attorney general acted on, there was an immediate and urgent need. Whereas, the CFPB still exists unchanged.
New York has been at the head, as it typically is, on consumer protection issues. New York is probably not going to have too many new laws because it’s been so out in front on the issue of debt collection.
Q: What do you expect will be the next financial regulatory issue to be on the horizon that could impact debt collectors?
Megaris: I’m somewhat surprised that New York has not taken a larger role on the student loan front. It’s the next big area, the way mortgages were eight years ago. There’s conflicting and overlapping requirements, which makes it a difficult landscape to navigate perfectly. I know most companies in that space want to do the right thing and want to be in compliance, but sometimes it’s not clear what those obligations are. There needs to be more transparency with the rulemaking or guidelines.