Alternative Credit Data, Fair Loans May Focus Under Biden

Editor’s note: This story is part of a series on the trends that will shape the industry in 2021. You can find all the articles on our trend line.

After President Joe Biden’s inauguration on Wednesday and a run-off election in Georgia that gave Democrats control of the Senate, financial regulation and the political agenda appear to be in Democrats’ hands for at least the next two years.

Stakeholders in the banking sector have said that some of the issues the new administration is focusing on are alternative credit data, oversight of big banks and fair lending.

“Alternative data is going to become incredibly important, and the Biden administration has signaled a real openness to it,” said John Pitts, policy manager at data aggregator Plaid.

After a year in which student loans and mortgage payments were put on hold amid the coronavirus pandemic, consumers are facing big gaps in their credit histories.

Among his first actions as president, Biden signed an executive order on Wednesday ordering the Department of Education to extend the pause on student loan payments until September 30.

“This is the longest period of significant regulatory mitigation from normal financial services reporting that we have ever seen,” Pitts said. “We’re going to have a year of irrelevant information on people’s credit reports, and we’ve never really had such an environment.”

As a result, Pitts said he believes cash flow underwriting will become an important practice during the Biden administration.

“This is an area where fintechs have really been the leaders over the past five years, and large financial institutions have always done with small businesses but not as often with consumers,” he said. “I think having leadership at [Office of the Comptroller of the Currency] and the [Consumer Financial Protection Bureau] who are looking at these types of innovations and ensuring that consumers are protected when they do so will be extremely important. “

With Democrats heading up Senate and House financial and banking services committees, CEOs of big banks should expect an increase in banking watch hearings.

Senator Sherrod Brown, D-OH, who will replace Senator Mike Crapo, R-ID, as Chairman of the Senate Banking Committee, is expected to strengthen sector surveillance and expressed a desire to hear more often from the CEOs of the country’s largest banks.

“[T]”They have a lot of power and we need to know more about the way they do their business,” he told reporters last week. “The more we hear from them, the better.”

Bank CEOs could be given a little more time to prepare for future Congressional hearings as Democrats may want to postpone some of the “blockbusters” until the pandemic is over, Partner Aaron Cutler said. from the Government Affairs Unit of Hogan Lovells.

“It’s not as dramatic to have people raising their hands and taking an oath on Zoom rather than in the committee room,” he said.

In the meantime, Cutler said banks should prepare testimonials and manage responses to topics Democrats are likely to focus on, such as diversity and inclusion, fair lending and climate change.

“Fair lending is one of the areas that evolves with party affiliation in administration, more than other types of financial services regulation,” said Christopher Willis, co-head of the financial services group. consumers of Ballard Spahr. “We expect an increase in the attention given to fair lending under this administration. This is a particular area of ​​law that banks need to be concerned about.”

The Obama administration has actively enforced anti-discrimination laws, such as the Equal Credit Opportunity Act and the Fair Housing Act, while the Trump administration has taken the opposite approach, Willis said.

“This is an area where historically you see a lot more in a Democratic administration, and so we expect that to happen again,” Willis said.

Despite democratic control by the House and Senate, the margins are still too narrow for lawmakers to pass significant bills that could impact the banking industry, Cutler said. But, he added, leadership changes in regulatory bodies will have a greater impact on the industry.

Biden has appointed nine-year CFPB veteran Dave Uejio, who was the office’s last chief strategy officer, as the agency’s acting chief following the resignation of CFPB director Kathy Kraninger, the report said Thursday. White House, according to Reuters.

Rohit Chopra, a member of the Federal Trade Commission, was presented as a likely choice to lead the CFPB on a permanent basis.

The president is also expected to appoint Michael Barr, former Ripple adviser and head of the Treasury Department, as the head of the OCC, The Wall Street Journal reported wednesday.

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