Online Cash Advance Industry May Find Regulatory Reprieve Under Trump
The 2008 financial crisis unsettled the country and caused President Obama to request regulatory action reining in Wall Street. In 2010, legislators introduced the Dodd Frank Act to protect consumers. The act brought about ways to prevent another Lehman Brothers incident and decrease the predatory lending practices of the online cash advance industry. When President Donald Trump entered the White House, he announced his intentions to do away with Dodd Frank. His vow means that the online cash advance industry may find regulatory reprieve under Trump.
Under Trump, the Online Cash Advance Industry May Receive Salvation
To decrease Dodd Frank’s regulatory bite, President Trump signed an executive order. As he was signing it, he said, “Today, we are signing core principles for regulating the United States financial system.” According to the Trump administration, the president’s executive order consists of comprehensive principles that are designed to foster economic growth while making it possible for the country’s corporations to compete effectively against their foreign counterparts.
It is worth noting that Trump met with a group of well-known CEOs before the executive order was drafted. This group included Jamie Dimon. Trump said, “There’s nobody better to tell me about Dodd Frank than Jamie.”
Dodd Frank forced financial institutions to endure a host of new regulations while shaving their profitable but illiquid hedge fund and private equity investments. In the finance sector, a few mid-sized banks experienced the might of Dodd Frank. However, it was organizations with billions in assets that felt the full weight of the act along with the entire cash advance online industry.
Forbes reported that not only are financial institutions lobbying for decreased regulations, but banking industry trade organizations are also pushing the president to rollback regulatory oversight on smaller lenders. If he agrees, then the online cash advance industry may receive a much-needed lifeline.
Causing Conflict Between Politicians in Washington
The Dodd Frank Act has become a constant source of conflict between Washington politicians. Republicans allege that the act’s strict rules for financial institutions are hampering the sector’s growth.
Democrats also have a few problems with the legislation. On their side, the complaints have run to whether or not some areas of the law are too broad, causing small and community banks to endure a lopsided regulatory burden compared to large institutions. Despite their reservations, democrats are sure to resist calls to repeal or scale back the Dodd Frank Act.
If the republicans get their way, then cash advance online lenders are sure to breathe a sigh of relief since fewer regulations make it easier for them to stay in business. While they can be predatory, cash advance online providers have earned their place by delivering a needed service to people who have bad or no credit.
What Does this Mean for Online Cash Lending?
Institutions that engage in online cash lending are sure to welcome a change to the last administration’s policies regarding their industry. When Dodd Frank came to town, it brought regulatory bodies like the Consumer Financial Protection Bureau, or CFPB, and the Financial Stability Oversight Council, or FSOC, with it.
Lawmakers created the FSOC to assist large firms that are beginning to fail with the goal of preventing a government bailout or financial crisis. As far as the CFPB goes, the agency was established to protect consumers from financial products that are misleading or abusive.
Last year, a federal appeals court ruled that the agency’s structure was unconstitutional and that Richard Cordray, the agency’s director, has access to “massive, unchecked power,” meaning that he is able to act without reporting to the president. Because of this, the court confirmed that the president should be able to remove Cordray from his post. Under Trump, the current regulatory system is set to change, and it is poised to do so drastically.
A Fox in the Hen House?
Trump has tapped Gary Cohn as the White House Economic Council Director. Cohn is the former president of Goldman Sachs. As such, his name carries plenty of weight on Wall Street. In speaking of Dodd Frank, he said, “We have the best, most highly capitalized banks in the world, and we should use that to our competitive advantage. But on the flip side, we also have the most highly regulated, overburdened banks in the world.”
Cohn gave television interviews and spoke to newspapers about the onerous regulations. He said, “We’re going to attack all aspects of Dodd Frank. We want banks to be back in the lending business.”
Senator Elizabeth Warren was unable to restrain herself from commenting on Cohn’s involvement. She called for Cohn to recuse himself from anything related directly or indirectly to Goldman Sachs. According to reports, Cohn received a $285 million compensation package when he left the Wall Street firm.
The Administration is Preparing for Big Regulatory Changes
The White House administration claims that big regulatory changes are on the way. While this may be true, The Atlantic reports that instead of the administration enacting a broad repeal, it is taking a measured, piecemeal type approach to dialing back or modifying the previous administration’s legislative provisions. For instance, Trump’s executive order allows the administration to focus on making changes to the FSOC. Cohn stated that the administration is targeting the agency because it failed to build an effective way to help faltering firms without government assistance.
President Trump also wrote that his administration’s new regulations must “restore public accountability.” According to CNN, this is a veiled reference regarding the CFPB. Republicans claim that the agency doesn’t have the proper oversight to continue. Sean Spicer, the current White House press secretary, referred to the CFPB as an “unaccountable and unconstitutional new agency that does not adequately protect consumers.”
The Online Cash Advance Industry Has Been Making its Own Changes
Because the CFPB has targeted the cash advance online industry, these lenders have been making drastic changes to their business models. To stay in business, many of them are moving to installment loans. With Trump enacting executive orders, online cash advance providers may be able to return to their previous way of doing business.
When it comes to taking out a cash advance online, administrative higher-ups may not be aware of the convenience this service provides. Increased regulation against the cash advance online industry means that those who need emergency funds may not be able to gain access to them.
Because the funds provided by an online cash advance are usually available within a day or two, the service is a lifesaver for many.
Trump Made a Promise to Shake Up the Establishment
Trump’s promise to shake up the establishment should have the online cash advance industry feeling more confident about its financial future. However, when considering the recent healthcare debacle, the new White House administration is clearly having trouble bringing its agenda to fruition. If it is able to roll back Dodd Frank and decrease financial regulations, then the online cash lending industry will likely remain intact. To read more about Trump’s plans for the nation’s financial institutions and how it may affect the cash advance online industry, visit the Personal Money Store.