FedFin Forecast: Consumer-Finance Regulation in the Racial-Equity Era
On Monday, the Biden transition released a readout of a meeting between Treasury nominees Janet Yellen and Wally Adeyemo with various racial-equity associations, reinforcing the importance this issue will have in crafting financial regulation in the Biden Administration.  We thus forecast a far-reaching consumer-finance overhaul accomplished through a new CFPB, new banking-agency rules, demands for the first time on insurance companies and nonbanks, and an array of legislative initiatives.  Statutory change depends of course on Senate control, but some proposals – e.g., expanding CRA – may enjoy more bipartisan support than conventionally anticipated.  However, if delinquencies and defaults increase as forbearance ends, prospective rules may play a secondary role to mandatory loan modifications accomplished via new federal backstops, enforcement actions, bankruptcy reform and policies addressing credit-availability concerns.