Business

How the White House Rolled Back Financial Regulations


Rent-a-bank rules: Many states have caps on the interest rate that lenders can charge on loans. But there’s a catch: Lenders can skirt the rule by partnering with a bank in another state — one without rate caps — and having that bank issue its loans. The bank then sells the loan to the lender. The tactic, often used by online lenders, is known as “rent-a-bank,” and the Office of the Comptroller of the Currency — under Brian P. Brooks, the acting head of the office — finalized two rules this year, one in May and one last week, affirming that the maneuver is legal. The Federal Deposit Insurance Corporation also issued a rule in June giving the arrangement a green light. (Both the F.D.I.C. action and the O.C.C.’s May rule have been challenged by state attorneys general in lawsuits that are pending.)

Fiduciary rule rollback: The Obama-era Labor Department imposed a rule that would have forced financial advisers and brokers handling retirement and 401(k) accounts to act as “fiduciaries,” a legal standard that requires putting customers’ interests first. But in 2018, a federal appeals court ruled that the agency had overstepped its authority, and the Trump administration didn’t challenge the decision, which killed the rule. One silver lining for consumers: Some economic research has found signs that the high-profile fight over the rule, and the increased attention it brought to how brokers are compensated, led the financial-services industry to alter its behavior and reduce brokers’ incentives to push costly retirement products.

Debt collection rules: The C.F.P.B. finalized new debt-collection rules last week that will, for the first time, let collectors contact borrowers through text messages, emails and social media direct messages. Electronic messages will be required to include an opt-out option. Collectors say the long-sought change will make it easier for them to reach borrowers; consumer advocates fear it will unleash a fresh barrage of intrusive communications. The new rules added one new protection for consumers: Collectors, who are notorious for their deluge of phone calls, will be limited to seven calls per week to a borrower.

Tracking bias in home loans: This spring, citing the “operational challenges” banks and other mortgage lenders were facing as a result of the coronavirus pandemic, the C.F.P.B. announced that it would stop collecting detailed data on new mortgages, including information about the borrower’s race and location, which researchers and community groups say is crucial to ferreting out discrimination in home lending. Democratic lawmakers have asked the agency to start collecting the data again, but so far it has not done so.

The Community Reinvestment Act: In May, the O.C.C., which regulates banks, revised its requirements for those institutions to do business in low-income and minority communities, despite objections from Fed officials and a refusal by another bank regulator, the F.D.I.C., to sign on to the new rules. It was a rare regulatory split caused chiefly by a concern that the new methods did not make sense and could allow banks to win credit for activities that had little meaningful impact on the communities they are required to serve.



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