Regulation

Implementation of New York’s Commercial Financing Disclosure Law Delayed

The implementation of New York’s commercial financing disclosure law has been pushed back. Originally scheduled to go into effect in June of 2021, an amending bill changed the date to January 1, 2022.

The only other material change of note is that the exemption from the law for transactions greater than $500,000 has been increased to $2.5 million.

You can read the fully passed amendment here.

CFPB, SEC Chair Appointments Begin Senate Hearing

CFPB Chair Nominee Rohit Chopra (“Chopra like Oprah” he explained) and SEC Chair nominee Gary Gensler faced questions from Senators in the first confirmation hearings on Tuesday.

The pair were fielded questions over a video call. The confirmation hearings are mostly ceremonial; with a partisan house and senate, it is unlikely either appointment will be blocked.

Senators used their time to make question-statements featuring popular political talking points. Topics ranged from student loan finance reform, Bitcoin and crypto regulation, environmental reform through business regulation, and retail stock trading protections.

The appointees answered in the uniform tone of life-long public servicemen that have mastered the art of not directly answering questions. Each demonstrates their respective regulator points of view through action. By Reading each appointee’s resume, it becomes clear why they were chosen for Biden’s regulatory offices.

Chopra became a secretary at the CFPB when the organization was minted in 2008, and he focused on regulating student loans. The CFPB under Chopra will likely focus on extending CFPB regulatory controls over lending, payday lending, student debt, and possibly even fintech lending.

Gensler was the Commodity Futures Trading Commission’s chair, and he helped scale up securities regulation following the housing crisis, his work creating the Dodd-Frank act. The SEC will likely ramp up regulatory action over crypto-currency and address concerns with retail investing and public security sales.

“Technologies change, and markets change, but we should always evaluate new approaches to markets,” Gensler said in response to questions about stock trading and gamification.

Steve Daines, a Republican from Montana, asked Chopra his opinion whether the CFPB should be led by a multiple-member commission to avoid politicization over the leadership. Chopra said it wasn’t up to him.

“It’s the job of Congress to decide the agency structure. In my view, regardless if it’s a single director, there needs to be accountability, responsiveness,” Chopra said. “Where I sit at the FTC, this agency has missed some of the worst engagements when it comes to big tech privacy, while the CFTC under Gary did take action and was transparent.”

When the Trump administration attempted to appoint a new CFPB director, the Obama chair claimed it was illegal for the president to seat a new chair. In June last year, the Supreme Court said that was unconstitutional, and like most other executive offices, the president has the power to appoint leaders.

Chopra did say that regulating student loan debt was something under the purview of the CFPB. He was asked if CFPB had the authority to address the $1.7 trillion in student loan debt.

“Yes, my understanding is that the existing law and regulations, those financial services are covered.” He said.

Senator John Kennedy, a Louisianan democrat who tuned republican after 2007, asked Gary Gensler about the great recession and his time creating regulation at the US Treasury in the aftermath.

“Why didn’t anybody go to jail?” Kennedy said.

“Well, I wonder the answer to that question too; I was pursuing civil cases. It is largely up to the Department of Justice,” Gensler tried to answer. “These cases are hard to try and hard to find intent.”

Bill Hagarty, a Republican from Tennessee, asked Gensler about using business regulatory offices for social reforms, using the local proverb “You don’t shoot where the rabbit was.”

CFPB’s Reach May Extend to PPP Lending

The CFPB’s Winter 2021 Supervisory Highlights Report that was published late last month, covered a section on small business lending. And it’s not related to the Bureau’s work on Section 1071.

The foray into non-consumer finance was instead driven by PPP lending.

“Consistent with its authority to ensure compliance with the Equal Credit Opportunity Act (ECOA), the Bureau conducted [Prioritized Assessments] to assess potential fair lending risks attendant to the institutions’ participation in the [PPP] program,” the report said.

Accordingly, the CFPB determined that small business lenders that restricted or limited eligibility such as banks who only permitted applications from existing customers, for example, “may have a disproportionate negative impact on a prohibited basis and run a risk of violating the ECOA and Regulation B.”

The CFPB conceded that it had not actually investigated if violations occurred and noted that the majority of institutions had argued that such limitations were either in place to comply with Know Your Customer legal requirements, to prevent fraud, or both.

The CFPB did not say that it had supervisory authority over non-banks that participated in PPP, but it did signal that its purview was larger than just consumers when it came to the institutions it supervised.

The report can be viewed here.

The CFPB is expected to have more proactive involvement in small business finance under its new incoming director, Rohit Chopra. Chopra’s nomination was formally submitted on February 13th. Dave Uejio, the Bureau’s Chief Strategy Officer, has been serving as Acting Director since President Biden took office.