I've spent a lot of time fielding questions about the recent upheaval at the CFPB so this week's Tip is devoted to the question of what all of this change really means.
In the short term, I think it is going to mean a lot. Putting aside the legal challenges, Congressional criticism and other tangential issues, the bottom line for me is that the Trump Administration has forcefully indicated it wants to see less regulation. The proposed new Director, Jonathan McKernan, has experience in the financial services sector and we can anticipate that, much like Director Kraninger, who served during the first Trump Administration, he will be less focused on examination, regulation by enforcement, collaboration with state AG's, and is much less likely to get creative in attempts to expand the powers of the CFPB. That's the good news. But don't celebrate just yet, because we also must consider.......
The Other Side of the Coin
If we learned anything during the first Trump Administration it is that when it comes to the CFPB, Newton's Third Law of "for each any every action there is an equal and opposite reaction" remains true. During Trump One, we saw the FTC step into the vacuum and pick up its pace when it came to car sales and finance. We also saw a lot more consumer protection activity coming out of state regulators and Attorneys General, especially those in "Blue" states. It I can be so bold as to make some predictions over the next few years, they'd be this:
1. Lots of these CFPB enforcement attorneys and investigators that have or will lose their jobs will be snapped up by zealous consumer protection state regulators, and they'll have vengeance on their mind if not in their hearts.
2. The state regulators can't give everyone jobs, so you can expect a good number of these attorneys to wind up in private practice, where they'll be likely to carry on their crusade against consumer injustices, real or imagined.
3. As Director Chopra was leaving the CFPB, he penned a rather powerful letter encouraging state regulators to pick up the sword of consumer protection through new regulation, and was pretty detailed in the roadmap he presented. We can expect to see a flurry of activity in this area in those Blue states.
4. Don't expect Senators Elizabeth Warren, Maxine Waters and others of their ilk to take these recent actions laying down. You can count on them to continue to beat the drum (I promise no pun was intended) on restrictions on selling vehicles with an open recall, a national rate cap, and other limiting legislation.
5. Perhaps most importantly, remember that this is Washington D.C., and nothing lasts forever. The deregulation of Trump One became a heavy era of regulation under President Biden. Who's to know what will happen in the mid-terms, now less than two years away, not to mention the 2028 election cycle.
The Tip of the Week Is...
Remain vigilant and remember your biggest threat was never the CFPB or FTC, it always has been and it remains your local attorneys that sue car dealers and finance companies every single day, as well as your state regulators that have a large impact on your business. Bad business practices and lack of transparency will still attract lots of attention. There will still be horror-story-like headlines of consumers being taken advantage of by unscrupulous dealers.
Make sure you aren't the subject of such attention. Pay close attention to your advertising and website, deal documentation, and any complaints from customers. The Administration may have changed but the basics remain the same. If you have any questions please reach out to info@ignitecp.com
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