Now that he’s in office, Trump aims to enact his agenda swiftly and boldly, through a reverse “2-for-1” approach in which two existing regulations are repealed for every new one passed.
For all the big, contentious regulations out there, there’s perhaps none bigger and more contentious than the Dodd–Frank Wall Street Reform and Consumer Protection Act.
Earlier this month, the president embarked on the first step in his avowed plan to repeal and replace Dodd–Frank, signing a memorandum that orders the Department of Labor to review the forthcoming “fiduciary duty rule.” Created during the Obama administration, the rule obliges financial advisors who give retirement advice to put their clients’ interests ahead of their own. The rule would have gone into effect April 10; now, its future isn’t so clear.
The same is true for Dodd–Frank as a whole, though the question of whether the president can fulfill his promise to dismantle the law—as well as the extent and timing of repeal—remains to be seen.
Fair Lending in the Trump Era
Drafted in response to the 2007–2008 financial crisis, Dodd–Frank is a large and complex body of legislation that affects everything from FDIC coverage to debt collection to the marketing of loan products. In the absence of Dodd–Frank, financial institutions could potentially legally engage in activities labelled “unfair, deceptive, and abusive acts and practices.” Banks could take on more risk, and thereby provide loans at lower rates to subprime borrowers. There could be a Consumer Financial Protection Bureau with diminished oversight, or no agency at all. In short, banks would likely have fewer responsibilities and consumers would bear a greater burden.
Regardless, it probably won’t happen in a week, a month, or even a year. The Executive Branch can’t override a law without Congressional support. And Democrats in the House and the Senate are likely to put up a fight. History indicates that change is a slow process, and that laws eventually reach a balance between two diametric points of view. It’s likely that by 2020, the regulatory environment may be less rigorous than it is now, but it’s unlikely that your compliance obligations will disappear overnight, or all at once.
At least, that’s the safe prediction—the one based on how these things have typically gone down. But—and this is where his proponents and critics actually agree—Trump is anything but a typical president.
Our advice? Regardless of your thoughts and hopes for the CFPB and Dodd–Frank, stay informed and prepare to remain compliant with existing regulations. Otherwise, you’re setting yourself up for further uncertainty in the form of audits, fines, lawsuits, tensions with your capital provider, and blowback from consumers. Whether US regulatory framework gets torn down all at once, or brick by brick, it’s crucial that your compliance management system is able to keep up.
Just a Reminder: We’re not your lawyer (of course, right?) Since we’re not, remember that this article’s for informational purposes and not intended to provide legal advice.