April 17, 2025 • 40 mins
The CFPB is at a crossroads. With leadership changes and a shifting political climate, what’s next for consumer protection? We break down the agency’s bold moves on open banking, BNPL, and EWA—and what the future holds as new leadership takes the reins. Tune in for a look at the future of financial rulemaking and the impact on consumers.
Hosts:
Rachel Morrissey, Head of Content, Money20/20 US
Ian P. Moloney, SVP, Head of Policy and Regulatory Affairs, American Fintech Council
Guest: Ashwin Vasan, Partner, FS Vector
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Rachel Morrissey (00:04):
Welcome to the Money Pot.
My name is Rachel Morrissey.
I am here as the head ofcontent from Money 2020 US and
we are going to be investigatingsome questions around the CFPB.
Today, we are doing a serieswith the American FinTech
Council where we are looking atall of the goings on in
(00:25):
Washington and what we'reanticipating in the regulatory
year to come, and as part ofthat, we have Ian P Maloney.
Ian is the Senior VicePresident and the Head of Policy
and Regulatory Affairs for theAmerican FinTech Council and he
(00:47):
is joining me today as a co-host.
Welcome, ian, how are you doing?
Ian Moloney (00:53):
I'm doing great, rachel.
I'm really excited to talkabout what is probably the
hottest topic, or at least closeto the hottest topic in
financial services.
Rachel Morrissey (01:02):
Yeah, it's hot enough that I'm like, okay,
we're going to handle this andtry not to get our fingers
burned at the same time.
I think that's kind of where weare.
And for our guest today, we'vegot Ashwin Bhasan.
He is the partner at FS Vector.
He has a long history used towork for the CFPB and we love
having Ashwin on our stages.
(01:23):
So, ashwin, it's nice to seeyou today.
Ashwin Vasan (01:26):
Nice to see you too.
It's great to be here, excitedto chat about an ever-changing
situation.
Rachel Morrissey (01:32):
An ever-changing situation.
We're hoping that when wepublish this later this week
it's as evergreen as we can makeit.
You can never seem to tell fromdata.
Ashwin Vasan (01:43):
You know what I can do that quickly?
The CFPB will always be inchaos.
There we go.
We can just publish right now.
Get it on the site.
Rachel Morrissey (01:52):
Here we go.
Ashwin Vasan (01:53):
Podcast over.
Rachel Morrissey (01:54):
There we go, done.
That was the quickest listenwe've had all year.
Ian, I'm going to throw it toyou to kind of kick us off, if
you want to.
Ian Moloney (02:02):
Yeah, well, I mean in the interest of trying to
keep this as evergreen aspossible.
I know you know, ashwin.
For a number of years CFPB hasbeen under significant scrutiny
faced multiple legal legislativechallenges, efforts to end it
or significantly curtail it, andyou know that's setting aside
what's been happening sinceJanuary.
So before we get into thatcurrent situation, I think it
(02:25):
would be really helpful to getyour take on sort of why the
Bureau seems to consistentlyface these efforts to shut it
down or to significantly reformits operations.
Ashwin Vasan (02:38):
You know someone who worked to the inside, you
know much of the activities aremore boring than the sort of
press releases and sort of thekind of narrative and the kind
of public arena is.
So it is always a little bitconfusing, but I think that's
how these things go right.
The stories people tell on theoutside are not always the same
as on the inside.
I think the answer, anne, ispart.
(03:10):
I'd say maybe 20% substantive,but 80% just everyone kind of
dug in their camps, right?
I mean, I think the substantivepart is you know, for better or
for worse, it kind of arose ina Democratic administration
sponsored by Elizabeth Warren.
It was staffed up in that era.
It tends to do more work in aDemocratic administration than
it does in a Republicanadministration and since its
founding and the very idea of ithas always been something that
(03:32):
everyone has had strong feelingsabout the exact nature of the
feelings tend to sort of shift.
I always joke that first time Iwas at the Bureau all of the
hearings were about and theystill say this how it's not
accountable.
And then CELA law, which is aSupreme Court case, allowed the
president to fire the CFPBdirector and appoint whoever
(03:56):
basically they wanted.
And then the second time I wasthere after that court case, all
the concerns were you're toopoliticized.
Well, it's like you can't havethem both right, like either
you're accountable to thepresident, who is a political
actor, or you're not, andsuddenly everyone wanted more
independence.
So you know, it's kind of likethe talking points do sometimes
shift depending on sort of whereit is, and I think, look, I
(04:19):
think the basic is I think oneparty has a more of a regulatory
kind of lens and the other hasa deregulatory lens and the CFPB
structurally can do a lot ofthings pretty quickly with all
of its tools, and I think so asa result you sort of see some of
the hyperbole.
Rachel Morrissey (04:38):
But on the inside.
Ashwin Vasan (04:39):
Look the bulk of the Bureau's work day to day.
I mean, you know it's handlingcomplaints, conducting exams,
most of which remainconfidential, conducting
investigations for sort of badactors in the marketplace, I
mean, and running the placeitself.
I mean, right there you coverprobably 80, 90% of the staff,
(05:00):
and so you know most of the workof the Bureau is a little bit
more mundane than what I thinktends to be the policy related
matters.
Rachel Morrissey (05:09):
Well, let's talk about that a little bit
just to kind of give a sense tothe, to the people listening
about what the actual day to dayfeels like versus all of these
big policy matters, because thebig policy matters are what make
the news, they are what alsodrives the politics and it's
also what we tend to be focusedon at Money 2020.
(05:33):
But if you look at theday-to-day workings of the CFPB,
what would the people at Money2020 not particularly understand
?
Or, even if they understood, itwould not have their focus on?
Ashwin Vasan (05:50):
Yeah, I mean I would focus first on, I think,
supervision and second oncomplaints, right, and I think
the former is probably lessfamiliar to the Money 2020
audience unless they're part ofthe bank, and then the latter is
familiar to everyone.
And both unless they're part ofa bank, and then the latter is
familiar to everyone and bothare kind of designed in a way to
sort of further adherence tothe laws.
(06:11):
The supervisory function is, bydesign, supposed to cover banks
and non-banks.
There's nuances around how thenon-bank side gets expanded, but
the general idea was everyonehas to comply with certain
consumer protection laws.
The Bureau will have anexamination force, go in,
conduct exams confidentially,give feedback on your compliance
(06:34):
around those laws, and for alarge part, that has happened
for the last 15 years.
The Bureau supervises largebanks, it supervises credit
reporting agencies, itsupervises non-bank mortgage
(06:56):
lenders, payday companies,remittance companies and a
number of others.
Now, most large institutionsplaying in consumer financial
services take their consumercompliance obligations much more
serially, simply by thepossibility that they will get
an exam and be reviewed for sortof adherence to those laws and
also like whether or not they'rerunning a good organization to
(07:17):
catch places where they might befalling short and fix them
before they create problems.
So that kind of deterrenceumbrella for the largest
institutions is incrediblypowerful.
It's worth noting.
Even after sort of thepreliminary injunction on Friday
, I still believe as of todayTuesday, I'm not sure exams have
still started up yet.
So we've now been coming up ontwo months without exams in the
(07:39):
marketplace.
That function, I think, isreally kind of a core of the
agency.
And then the second one I justcall out, I think in the kind of
less you know, I thinkenforcement and sort of policy
making tend to get more kind ofspicy.
But the complaint function islike a core core function of the
Bureau as well and was done soby design.
(08:00):
I forget the numbers, but it's.
Millions of Americans now right, have gone onto the portal.
I was part of the team thatsort of stood that up in the
early days.
File a complaint, it getsforwarded to an institution, the
institution has an opportunityto provide relief and, most
importantly, that data isavailable to the public and
internally to the Bureau.
So if you see trending analysison that data, if you see a
certain entity spike up incomplaints, you begin to think,
(08:23):
hey, there might be somethinggoing on there that warrants a
closer look.
And so not only does it providedirect relief to consumers,
which is you can go and find thetestimonials online very
powerful but it also createsagain a kind of a deterrent
umbrella, because everyone knowsthat the Bureau and
stakeholders are watching to seewhich companies get the most
(08:43):
complaints, and again that alsocreates that additional layer of
sort of focus on consumercompliance.
And again, by design, none ofthese things are really
particularly the focus of themortgage lender of 2006, as we
all know, and so I think it's apretty substantial change in
terms of how banks treat theircompliance obligations and as
(09:04):
well as non-banks as well,because, as we know, in the run
up to the crisis, non-banksplayed an important role as well
.
Rachel Morrissey (09:11):
You know it's interesting because you know, in
a weird marriage the CFPB andthe fintech industry both sort
of were born out of the samemelee and have sort of matured
(09:32):
together or not always asfriends, but definitely it's
interesting to me that you arelooking at both an industry
that's basically born out of thesame problems that the CFPB was
trying to address and that oneis.
You know, these two differentapproaches have always been sort
(09:54):
of married and intertwined asfar as the last 15 years have
gone, which is not somethingthat I think most people think
about when they think about thebirth of an agency and the birth
of an industry coming outtogether.
It's not really forefront inthe industry's minds.
(10:17):
Oh, these were born out of thesame instigating circumstances.
Ashwin Vasan (10:23):
Yeah, they grew up together in certain ways, right
, you know, again, I was at theBureau twice 2011 to 16, and
again 2020 to 2023.
I think the first time there,you know, we set up kind of an
innovation office.
We wanted to engage withfintechs, we wanted to
understand the potential tocompetitively disrupt legacy
(10:45):
financial services.
And Rachel, to your point, yeah, like atmospherically, the mood
at that point was still prettystrongly anti-bank.
I'm not even sure it's abated aton, but I think it's still
pretty anti-bank.
Rachel Morrissey (10:57):
On the ground, for sure.
On the ground yeah that's right.
Ashwin Vasan (11:02):
I think what the Bureau had to address this time
and I think did, with varyingsuccess, but it's a long-term
trend regardless isfundamentally for consumers.
Today, the vast, vast majorityof their consumer touchpoints
happen with non-banks, whetherit's larger companies or smaller
fintechs, or larger fintechs,to put it that way, fintechs, to
(11:26):
put it that way.
So, and that you know, we'dalready seen that shift in
mortgage early on and it'salmost entirely complete.
Auto loans have always beenquite diverse in terms of who's
originating them.
Student loans has becomemajority of the government and,
of course, like you know, nowyou have BNPL, you have neobanks
and you have Ardua Jacksons anumber of other products and
services that really consumerstouch.
And if you kind of think abouthow many touch points do
(11:49):
consumers actually have withfinancial institutions, I would
guess that maybe the majoritynow are non-banks, and so the
kind of 2011, 2012 mood like hey, we're seeing change in the
market, we're going to change inhow we oversee, we're going to
change in how we disrupt it Ithink this time back at the
Bureau was a little bit more.
There's some big companies outthere touching a lot of
(12:09):
consumers that need to be partof the level playing field, and
so many of the efforts theBureau took in the last
administration were to reallykind of extend that level
playing field and acknowledgethe pace with which technology
had really changed how consumersget their products and services
.
Now we'll kind of probably getto the future.
(12:29):
Some of that is being unwound,Some of that's being kind of
challenged, Some of thatprobably wasn't nearly as
effectively done as it couldhave been right, and so I think
we're sort of at an inflectionpoint again here in 2025.
Ian Moloney (12:39):
Ashwin, I think about the tools that you'd
mentioned, and the CFPB has aton of tools in its regulatory
toolkit.
So kind of thinking about that,that future a little bit, and
sort of where we've been in theever-changing landscape of
FinTech and ever-changinglandscape of regulation like
which tools do you think aregoing to be most effective and
(13:01):
most used, kind of movingforward.
Ashwin Vasan (13:05):
They all sort of have to work together, right?
I mean, I'm a strong believer.
If you can't tell thatsupervision should be as level
as possible for largerinstitutions, I think you get
the maximum bang for your buckin terms of consumers being able
to access good products.
I think the challenge there isthat the market's changed very
(13:26):
quickly and there are bigsupervisory gaps.
A number of institutions thattouch consumers are simply not
covered and may not be coveredfor a while.
So I think I would start there.
I think enforcement has a reallyimportant role to play as well,
because it's public and so itadds that extra level of
(13:46):
deterrence.
But I think it's probably mosteffective in places where I
think you know whether, withoutgetting into sort of the typical
arguments over regulation byenforcement, I think it's just
important that when you, whenenforcement action is taken,
that the public can reallyunderstand why right, and that
you can kind of explain in plainlanguage what the issue was and
(14:07):
what the wrongdoing was thatkind of led to a public
enforcement action.
So I think that is also part ofit.
You can't have supervisionalone without enforcement,
because the worst issues foundin supervision need to go to
enforcement so that thesupervision itself works,
otherwise you're just guaranteedof always being in a
confidential loop.
Without chartering authority,which the prudential regulators
(14:29):
have they always have thatimplicit oh, we're just going to
pull the charter.
Without that you need anenforcement, active enforcement
tool to create that level ofdeterrence and incentive to kind
of get the exams to beeffective.
And then again, like Imentioned before, those are then
supplemented by sort of thiskind of global intelligence of
the consumer complaint functionwhich most people assume will
(15:09):
lead them nowhere and are quitesurprised when magically they
get a refund or some sort ofrestitution from the company
because the companies know againthat the complaint itself is
something that the Bureau iswatching and they want to stay
out of that public enforcementaction.
So I think those tools all workreally well together, right,
and I think the challengesometimes is just the market
(15:32):
moves so fast that you also haveto make sure that you're
prioritizing the areas that youthink are also those of emerging
risk.
But I think those tools allwork together.
And then on the other sideyou've got the policymaking arm,
which we haven't touched.
But I mean, that's sort ofdifferent and looking longer
term at what those rules of theroad are that you're trying to
enforce.
Ian Moloney (15:51):
That makes a lot of sense and just kind of drilling
in a little bit.
You had mentioned the consumercomplaints database a couple of
times and so you know, I knowthat the current administration
has kind of pulled back from itor tried to pull back from usage
of consumer complaints, andthen the previous administration
seemed to use consumercomplaints quite a bit.
(16:14):
And so do you see any sort ofneed for reform or changes to
how consumer complaints are usedwithin the supervisory function
or within the enforcementfunction?
Ashwin Vasan (16:27):
Yeah, I mean, I think so.
You know the.
It's funny the.
You know, the first time I wasthere, like there was a lot of
oversight and concern simplyabout making the narratives and
the complaints public, because Ithink the talking point then
was that these are unverifiedcomplaints and you know it's
basically kind of like, and Ithink like that is then was that
these are unverified complaintsand you know it's basically
(16:47):
kind of like, and I think likethat is sort of toned down.
I think people have sort ofrealized that, like, if you
start reading these narratives,I mean there, yes, some people
do not have a legal issue andreally are just never going to
be happy for sure, but a lot ofpeople have legitimate questions
about our concerns of how theywere treated and the product and
service and whether it wasmarketing around it or, you know
(17:08):
, getting their fees refunded orgetting their kind of legal
rights vindicated.
So I think there are very realissues all through the complaint
database.
You know, I think one of thechallenges with it, though, is
that, you know, I think, I think, ian, I think, maybe, if I were
to kind of pick something, Ithink there are some times when
I think, even in the Bureau,it's easy to sort of.
(17:29):
You know, when does anecdotesbecome anecdote, become data
kind of situation?
Right, I'm not really sure howyou design guardrails around
that, because sometimes thoseone complaint is a canary in the
coal mine and I think you dowant to investigate.
Um, but I do think, in general,like the, the, the flow of the
information happens so fast thatI think that the, like you,
(17:51):
realistically seeing realbreakages in in trend lines,
should tell you something, aswell as consistently high levels
of complaints that suggest botha broad touch by those
companies and an inability tonot resolve it Right.
And so I think there is sort offor me that's always a North
Star, and in fact, sometimes Ithink even you know, look, this
(18:11):
is a bureau, is an organizationlike all others.
You sort of get a theory andyou want to run it down, but
even then I don't think, likeyou know, I'd love to.
You know, congress, for example,you know, could could use their
oversight hearings to sort oftake their own look at the
consumer complaint database andsay, hey look, we noticed that
these are the top 10 thingsbased on our analysis.
(18:31):
These are the companies thatare complaining about.
What are you doing about that?
I think that's a betteraccountability mechanism to make
sure that, like with thelimited resources that the
Bureau does have, that it'sactually focused on the things
that the public is constantlycomplaining about.
You know, because I think it'svery easy in the moment to you
can sort of again there's no,there's no perfect answer here,
(18:52):
like I don't want to say thatyou should only prioritize on
that.
Internally to the Bureau, theyprioritize on a number of
factors, that being one of them,but I think it's an important
kind of North Star it alwaysdrew back to.
Rachel Morrissey (19:03):
Okay.
So we know that there's justbeen a ton of turmoil around
politically around the CFPBalways, but lately it's really
intensified.
There's been a lot of questionsaround it.
Most people that I talk to inDC are fairly confident it will
(19:25):
just continue to exist in someform.
But we do know that JonathanMcKernan has been nominated.
Has he been confirmed yet forCFPB director?
Yeah, I didn't know that.
It happened last week.
You can tell I'm trying to payattention, but things were
moving really fast and I knowthat we've had a lot of
(19:45):
different things going aroundthe nature of what they think he
or the direction the CFPB isgoing to do.
So I would be curious as toyour take, as to what you're
anticipating from his leadershipat the CFPB and what you think
(20:08):
how these tools are going to beutilized by the next iteration
of the CFPB.
Ashwin Vasan (20:18):
You've asked me to forecast a I am a quarter of
the trump administration.
Rachel Morrissey (20:23):
This is a I am asking you to forecast, but in
the nicest way possible, justjust, just on the so let's,
let's, let's, let's, look I.
Ashwin Vasan (20:36):
So there are a few strands of philosophy or DNA
here to mix metaphors that Ithink will sort of intertwine in
some way to create the Bureauof the next few years.
So I think the first is thatMcKernan, by all accounts, is a
(20:58):
thoughtful person.
He, he's a lawyer, he served onthe fdic board, he served on
senate banking, he's been apolicy analyst, uh, look I.
I think he's going to be keen,to my senses, implement the law.
Uh, that is in title 10.
Uh, my, my sense also is he isprobably, seems, a person who
actually wants to do things, notundo things, and there's a lot
(21:26):
to do at the Bureau.
Even if you are a Republican,right, I think, if you have most
stakeholders, see value in theopen banking 1033 rule.
There's a lot of details aroundit that need to be finalized,
cleaned up, and theimplementation of industry needs
to be sort of supported.
Implementation of industryneeds to be sort of supported.
You know, I think you havecertain statutory mandates
around.
You know 1071 rulemakingobviously being challenged in
(21:47):
court, that small business datacollection, but you can shape it
in a way that you think istruer to the statute and again
get us past that.
You know, and the enumeratedlaws.
You take Reg E, reg Z, look, Imean these are laws that really
haven't changed a lot given thespeed of technical change, and I
think could both benefit fromsort of a comprehensive look
(22:09):
that involves all stakeholdersto sort of make some sort of
changes that may sort of makemore sense for innovations going
forward.
So I mean I haven't done thisexercise, but if I were to say
I'm, you know, a Republicanappointee of the, a Republican
director of the CFPB, I mean Ithink you could very quickly
(22:30):
fill up your dance card rightWith things that are sort of
intended to use the Bureau'stool as Congress Bureau's tools
as Congress wrote them in athoughtful way, and you will
stay busy.
And, by the way, there's plentyof fraudsters and scammers out
there.
You could use the enforcementtool a lot.
You can think about supervisionand again the issue of the
level playing field we talkedabout.
You can stay busy and, I think,get a lot of really good and
(22:52):
important work done, and thereare a lot of rules that don't
make sense and you could alsoremove some of those rules if
you wanted.
So that's that kind of onethread and I think the challenge
is that back to your originalquestion, rachel is that sort of
people's kind of defaultreaction, for the CFPB is very
much now in an extreme camp andI think you know some of that is
(23:15):
just its origin, some of thatis the actions that different
administrations have taken thathave kind of frustrated
different stakeholders and soeveryone's sort of in a camp
right now with the Bureau.
And you know that I thinkprobably shows up most clearly
to current OMB leadership, whoyou know.
I think one will have somelevel of oversight of the Bureau
(23:38):
going forward as well as theadministration generally.
So you know, so I think youhave kind of this, just kind of
for lack of a better word you'vegot a doge and OMB just like
let's just reduce the size of itbecause we're just trying to
cut without thinking about whatit could be done for, what it
could be used for.
So I think you'll have some ofthat show up.
(23:59):
I think that regardless of who'srunning the agency so McKernan
gets confirmed I still thinkthere's going to be a very
strong downsizing push for awhile and I think that's just a
global thing.
We're seeing it acrossgovernment tension with some of
(24:19):
these things because it's hardto do all the stuff you need to
do with that downsizing push.
And just for context foreveryone, I mean Bureau is like
1500 people and like every timeI've been there you're like man
I, you couldn't possibly get thestuff done that you want to get
done because all of the thingswriting a 1033 rule and
enforcement action, going andexamining a big bank for
compliance, like they takeresources and they take you got
to be buttoned up about thethings and so you're really
(24:41):
quite capacity constrained.
So if you're gonna reduce thatcapacity, you're gonna reduce
the output which is odd.
Even if you wanted to beentirely deregulatory, I would
keep the entire output right.
Personally, like if your entiregoal was to sort of really like
reshift all of the prioritiesfor the Bureau, I would keep the
entire capacity of it.
So if you're also going to beshrinking in it, you're
(25:02):
necessarily not going to be ableto deregulate as fast and
you're going to leave sort ofstuck at a sort of higher level
of regulation, which makes nosense to me.
So I think these two things aregoing to be kind of at odds and
I think they're going to.
I don't know how, you know how.
I don't know McKernan, I don'tknow how he will resolve that
tension, but I think it'll be aninteresting thing to watch.
Rachel Morrissey (25:22):
Yeah, it is an interesting paradox, right,
that you might undo your abilityto affect some of the more
lasting changes that you wouldwant by handicapping your
ability to get things done in away that they've been done in
(25:45):
the past.
Ashwin Vasan (25:47):
And the place that is most stark is in rulemaking,
where the last that we werequite active on rulemaking and a
lot of the rules and guidancepeople don't like and they want
them gone.
And yet undoing takes work.
I mean, I think that's the forpeople who haven't spent time in
government.
I think that's the challengingthing doesn't always make sense.
It's like you think if you kindof you can't quite and there are
a lot of reasons why, butespecially on regulations, you
(26:09):
can't just undo them and justsay cancel and that's it and
it's done, it's easy.
And so if you kind of take awaythe people that would actually
do that work, you're kind ofstuck with the regulation you
don't like and I think that'ssort of a very basic point that
I think for those of us who'veworked in these agencies
understand.
And yet I still haven't seenthe administration
operationalize fully around thatinsight, like if they truly do
(26:33):
want to create deregulation ofburdensome regs, level playing
field, more simplicity, a wholebunch of things that could help
across the industry foster aeasier regulatory regime that
allows for innovation andcompetition.
However you want to see it, theactions to demolish the CFP and
dismantle it are literally theopposite of what I would do.
(26:56):
I would actually instead make aplan for what you want to do,
which just hasn't seemed to havehappened yet, and I think
that's the missing piece here.
Rachel Morrissey (27:05):
It's almost like they're starving the other
tools of supervision andenforcement and leaving leaving
that intact and then that's not.
It's not very complete orforward thinking.
It leaves a lot of confusionleft on the table.
That's very interesting.
I hadn't really considered that, but that's actually really
(27:31):
really.
I don't think that's somethingthat everybody has really caught
on to or thinks about whollywhen it comes to how all of
these things work in tandem whenit comes to how all of these
things work in tandem.
Ian Moloney (27:45):
So kind of on that point, rachel, I think you know.
One of the areas that has beenreally intriguing to me is kind
of the rethink that theadministration seems to be
having, not only aroundregulation with, like, the
executive orders, aroundregulatory freezes and things
like that, but also theindependence of, you know,
financial regulators,particularly the CFPB, and so
thinking about sort of thatinterplay with, like, for
(28:06):
example, omb and CFPB you know,if McKiernan comes in and is,
you know, fully, the director,how is that interplay with the
Bureau and OMB going tooperationalize from a regulatory
standpoint?
Ashwin Vasan (28:22):
Yeah, you know, I don't know because it's new and
it's not entirely clear like toget into the weeds of some of it
, like are they going to applycost-benefit analysis?
Are they going to do a review?
Like OMB is quitecapacity-limited, and so so
again back to sort of do youwant to get stuff done?
(28:43):
And remember undoing is doing.
If you want to do a lot ofundoing, you need throughput,
you need capacity and if you'regoing to put a layer on top of
the capacity of the CFB, you'regoing to get a bottleneck and
you're going to undo less as aresult.
You know, I think it depends onhow that layer is also
implemented.
Some of it can be, look, ifthat layer is passing down sort
(29:07):
of high-level principles andpolicy goals from the
administration.
We don't want an overdraft rule.
Well, we don't want changes toReg Z that allow these products
to flourish.
If you set high-level productgoals like that and let the CFPB
do what it needs to do.
By the way, the staff there isready to do any policy direction
(29:28):
.
I think one of the other mythsfloating out here is that the
staff is completely just therelike deep state to drag their
feet on everything which,frankly, I think they were quite
active under Kraninger andthey're active under Rohit and
they're ready to do work as well, then I think you can get great
outcomes.
I think if you layer on sort oflike process that is sort of
grounded in distrust, right,like process that says I'm going
(29:51):
to read every read, nothinggoes out the front door without
nine people signing it and OMB,it's got to go to the White
House, whatever Then you'regoing to slow down your ability
to do work, and so I thinkthat's kind of the trade-off
that I see in terms of thatinterface, in terms of, like,
this kind of independence versusnot independent, and like
(30:12):
sometimes people start arguingover that.
It never made a ton of sense tome For those of you who aren't
sort of steeped in this, whenthe Bureau was created.
It was created very clearly aswell, as an independent agency
with a single director right,and that term of that director
was five years.
And so Rich Cordray, the firstconfirmed director, didn't leave
(30:32):
office until well into thefirst year of the Trump
administration and was doingwork like writing a payday rule
that was clearly against thepolicy preferences of the Trump
administration 1.0.
And so in 2019, I believe therewas a Supreme Court case that
said that structure isunconstitutional.
And, to be fair, that was thecriticism of the Bureau for a
(30:52):
long time that having a singledirector appointed across
administrations, independent andcan't be fired but for a sort
of cause, was not an appropriatestructure for the Constitution.
And I think, with thatrestriction on firing the
director gone, the director ofthe CFPB is now always
effectively going to be alignedwith the administration as a
(31:15):
person that the administrationpicks.
And look, when we came in thesecond time with Director Chopra
, that was the world we lived inand I think there's just a
reality of what do you get forthat?
And I think people who work incompliance and financial
services are frustrated a bit bythe pendulum swing in terms of
(31:35):
policy.
But the reality is you can't befireable by someone at will and
not kind of always be worriedabout making that person or that
group of people happy.
I mean, that's just life right,and so you're just going to get
a CFPB director that is sort oflook, doing the work of the
industry, doing the things thatcome up day to day.
(31:58):
But there's going to be somepart of it and this will be the
controversial part, whether it's20 or 40, whatever percent of
the work of the industry doingthe things that come up day to
day.
But there's going to be somepart of it and this will be the
controversial part, whether it's20 or 40, whatever percent of
the work that is kind of donefor the purpose of the
administration's overall successand that's just.
That's just.
We have to sort of accept thatand it's.
And I don't really, I don'tthink you can have it both ways
right.
You can't have an executivebranch that kind of implements
(32:19):
policy the way they want and atthe same time feel like there's
sort of stability acrossadministrations because there's
nothing.
That's it's all apolitical.
It's very hard to, in my mind,square those two things, but it
does create more volatility forsure.
You know, I think I don't knowhow that gets resolved.
Over time.
Maybe the industry picks upmore in terms of self-governance
(32:42):
in certain ways.
Rachel Morrissey (32:44):
Perhaps, maybe , but I think that there's just
an inevitable, you know, it'sjust a reality, a political
reality that I think everybodyprobably just needs to accept.
I mean, I know that sounds kindof like.
Ashwin Vasan (33:03):
And the courts play a role right, at least they
do for now they play a role insort of tempering that.
So I mean yeah.
Rachel Morrissey (33:09):
I mean there's ways to challenge what they're
doing, like you said, throughthe courts.
So I just think there is apolitical reality that some of
the work of the CFPB ispolitical reality.
That some of the work of theCFPB is, I mean it changes under
the vision of theadministration it's in.
So I think that's just.
I think most people just acceptthat as a given.
Ashwin Vasan (33:34):
But back to and I think that's totally right.
But back to the point that youasked what is the next four
years going to look like.
I think that's the right.
But back to the point that youasked what is the next four
years going to look like.
I think that's the challengeright.
So if you have anadministration that just has
somehow gotten in their headthat all the Bureau does is sort
of go around debanking cryptofounders which is completely not
true Then you say justeliminate it, pull the plug and
(33:54):
voila, all the crypto foundersare not being debanked anymore.
Problem solved.
Obviously, there's like a lotmore complexity behind that and
I think the challenge is youactually having an
administration acting on thatkind of philosophy.
And going back to my biggerpoint, you know, then you're
just hampering yourself, you'rehampering all industry
stakeholders from kind ofworking with the agency
(34:16):
leadership to kind of createpolicies and like approaches to
oversight that benefit theindustry writ large.
I mean that's what we shouldall be trying to do here and I
think like the sort of kind ofjust simply kind of shutting
down kind of energy does notreally quite frustrate that.
And there's a looming thingwhich Ian knows well, which we
(34:36):
haven't come up with.
All of the Bureau's regs areenforceable by state AGs, right,
and so you even see, right, theBureau put out the statement on
Friday saying you know, we'renot going to enforce a component
of the payday rule that wentinto effect and California AG
right away said will be so,expect compliance.
So you know, for all the folksin the audience who are thinking
building FinTechs, you know theBureau's rules, unfair,
(35:04):
deceptive acts and practices,along with Reg E, reg Z, all of
the rules.
You know they're allenforceable by state attorney
generals and so realistically,from a compliance standpoint,
hopefully not a ton changes.
You obviously don't have theenergetic, democratic CFB
enforcing the laws, but you'regoing to have that at the state
level.
And so you know, even if youkind of again pull the plug on
the CFPB, you can't actuallybegin to shape that federal
(35:25):
regulator in a way that works,in a way, and you sort of freeze
everything in a moment in time,which is not a great answer for
a space that's moving asquickly as ours.
Rachel Morrissey (35:35):
Right, and it also emphasizes on the fact that
you know undoing is doing youhave to.
You know undoing is doing youhave to.
You know you can't.
Just you can't just pull theplug on it and think that that's
undoing it, because there thoseare still in place and there's
other actors that can enforce it.
So it's not as simple as justwe won't have it.
Ian Moloney (35:58):
It's just not a real answer it, it's just not a
real answer.
Yeah, and also Rachel, I thinkit exemplifies that markets
function best with subtleexpectations, and also
regulatory activities functionbest when you have a point of
contact or a set of folks thatyou can go to and actually have
real discussions, and socreating an environment where
(36:19):
you have a dearth of both isgoing to be very confusing for
market participants.
Rachel Morrissey (36:25):
I used to think about this and I was like
people would give me overlysimplistic solution.
When I worked in government,people would say, well, just do
this, and it would be this verysimple solution, and I'd be like
, well, that's fine, but nowyou're creating a vacuum over
here, and the one thing thatnever goes unfilled is a vacuum.
You know nature of horse vacuum, and so this idea that you can
(36:51):
just unravel something withoutproperly unraveling it by just
cutting through it, that's notreally any kind of solution that
makes long-term sense.
So I think that's really unlessyou guys have something more to
(37:12):
say, I think that that'sactually kind of where we would
leave this episode.
What do you guys think?
Is there something more you'dlike to add?
No, I mean look.
Ashwin Vasan (37:23):
to end on a positive note, I will say look,
it is still early in theadministration.
That's not a negative, no, it'sstill early in the
administration.
We hope to get a confirmeddirector.
Someone in this seat tends tohelp a lot of this, because when
there's no one in this seatyou've got a lot of people with
opinions on what needs to happen.
And I think hopefully once youget that, and then McKernan can
get some staff in, you can getthe industry engagement and
(37:46):
policy prioritization processthat actually gets some things
done over the next few years.
And again to Ian's pointhopefully they create things
that are not just about swingingthe pendulum but maybe about
creating some stability for thelonger run in important spaces.
Rachel Morrissey (38:02):
Yeah, and once we have a new director in them,
we will be able to kind of havemore of a sense of where we're
actually going, because we'llhave more of a sense of
priorities that that'll be moreobvious to the industry, I think
that's in everyone's bestinterest.
Ashwin Vasan (38:21):
And some of it and back to the previous.
I will guarantee you some ofthe things will sound like.
There will be administrationpriorities, right, and the
question is is it 80% or is it30%?
There'll be something probablyabout debanking and downsizing,
whatever.
But whatever is the flavor ofthe month, the question is
(38:44):
what's the other component?
Is there sort of meaningfulwork on open banking, on
modernizing regs or, you know,monitoring emerging risks to
consumers?
That'll tell you a lot.
Rachel Morrissey (38:54):
Yeah, well that, actually that's an
excellent forecast.
I know that when I asked youthat question you were like, are
you crazy?
But hopefully it wasn't toopainful and it was kind of fun
for us all to kind of look atwhat should or could happen and
(39:15):
what we're hoping for in thenext couple of years.
Ian, anything left to addbefore we close the episode?
Ian Moloney (39:22):
I just think, Ashwin, you gave some really
good points, a really niceforecast, like Rachel said, and
the point around durability inregulation.
That's really important for themarket to function for sure.
Rachel Morrissey (39:36):
Yeah, absolutely.
Thank you guys so much.
Ashwin Vasan (39:40):
Thank you.
Rachel Morrissey (39:40):
Thank you for joining me as a co-host.
Thank you, Ashwin, for joiningme as a guest.
We love this and to all of ourlisteners, thank you so much for
joining us.
Please make sure to leave acomment or a review of this and
tell your friends.
That's the way more people canfind the show and we hope that
(40:02):
with this series with the AFC,has really helped bring you guys
some more understanding andsome depth of understanding to
what we're anticipating is goingto happen in Washington DC this
year.
Have a great day.
Welcome to the Money Pot.
My name is Rachel Morrissey.
I am here as the head ofcontent from Money 2020 US and
we are going to be investigatingsome questions around the CFPB.
Today, we are doing a serieswith the American FinTech
Council where we are looking atall of the goings on in
(00:25):
Washington and what we'reanticipating in the regulatory
year to come, and as part ofthat, we have Ian P Maloney.
Ian is the Senior VicePresident and the Head of Policy
and Regulatory Affairs for theAmerican FinTech Council and he
(00:47):
is joining me today as a co-host.
Welcome, ian, how are you doing?
Ian Moloney (00:53):
I'm doing great, rachel.
I'm really excited to talkabout what is probably the
hottest topic, or at least closeto the hottest topic in
financial services.
Rachel Morrissey (01:02):
Yeah, it's hot enough that I'm like, okay,
we're going to handle this andtry not to get our fingers
burned at the same time.
I think that's kind of where weare.
And for our guest today, we'vegot Ashwin Bhasan.
He is the partner at FS Vector.
He has a long history used towork for the CFPB and we love
having Ashwin on our stages.
(01:23):
So, ashwin, it's nice to seeyou today.
Ashwin Vasan (01:26):
Nice to see you too.
It's great to be here, excitedto chat about an ever-changing
situation.
Rachel Morrissey (01:32):
An ever-changing situation.
We're hoping that when wepublish this later this week
it's as evergreen as we can makeit.
You can never seem to tell fromdata.
Ashwin Vasan (01:43):
You know what I can do that quickly?
The CFPB will always be inchaos.
There we go.
We can just publish right now.
Get it on the site.
Rachel Morrissey (01:52):
Here we go.
Ashwin Vasan (01:53):
Podcast over.
Rachel Morrissey (01:54):
There we go, done.
That was the quickest listenwe've had all year.
Ian, I'm going to throw it toyou to kind of kick us off, if
you want to.
Ian Moloney (02:02):
Yeah, well, I mean in the interest of trying to
keep this as evergreen aspossible.
I know you know, ashwin.
For a number of years CFPB hasbeen under significant scrutiny
faced multiple legal legislativechallenges, efforts to end it
or significantly curtail it, andyou know that's setting aside
what's been happening sinceJanuary.
So before we get into thatcurrent situation, I think it
(02:25):
would be really helpful to getyour take on sort of why the
Bureau seems to consistentlyface these efforts to shut it
down or to significantly reformits operations.
Ashwin Vasan (02:38):
You know someone who worked to the inside, you
know much of the activities aremore boring than the sort of
press releases and sort of thekind of narrative and the kind
of public arena is.
So it is always a little bitconfusing, but I think that's
how these things go right.
The stories people tell on theoutside are not always the same
as on the inside.
I think the answer, anne, ispart.
(03:10):
I'd say maybe 20% substantive,but 80% just everyone kind of
dug in their camps, right?
I mean, I think the substantivepart is you know, for better or
for worse, it kind of arose ina Democratic administration
sponsored by Elizabeth Warren.
It was staffed up in that era.
It tends to do more work in aDemocratic administration than
it does in a Republicanadministration and since its
founding and the very idea of ithas always been something that
(03:32):
everyone has had strong feelingsabout the exact nature of the
feelings tend to sort of shift.
I always joke that first time Iwas at the Bureau all of the
hearings were about and theystill say this how it's not
accountable.
And then CELA law, which is aSupreme Court case, allowed the
president to fire the CFPBdirector and appoint whoever
(03:56):
basically they wanted.
And then the second time I wasthere after that court case, all
the concerns were you're toopoliticized.
Well, it's like you can't havethem both right, like either
you're accountable to thepresident, who is a political
actor, or you're not, andsuddenly everyone wanted more
independence.
So you know, it's kind of likethe talking points do sometimes
shift depending on sort of whereit is, and I think, look, I
(04:19):
think the basic is I think oneparty has a more of a regulatory
kind of lens and the other hasa deregulatory lens and the CFPB
structurally can do a lot ofthings pretty quickly with all
of its tools, and I think so asa result you sort of see some of
the hyperbole.
Rachel Morrissey (04:38):
But on the inside.
Ashwin Vasan (04:39):
Look the bulk of the Bureau's work day to day.
I mean, you know it's handlingcomplaints, conducting exams,
most of which remainconfidential, conducting
investigations for sort of badactors in the marketplace, I
mean, and running the placeitself.
I mean, right there you coverprobably 80, 90% of the staff,
(05:00):
and so you know most of the workof the Bureau is a little bit
more mundane than what I thinktends to be the policy related
matters.
Rachel Morrissey (05:09):
Well, let's talk about that a little bit
just to kind of give a sense tothe, to the people listening
about what the actual day to dayfeels like versus all of these
big policy matters, because thebig policy matters are what make
the news, they are what alsodrives the politics and it's
also what we tend to be focusedon at Money 2020.
(05:33):
But if you look at theday-to-day workings of the CFPB,
what would the people at Money2020 not particularly understand
?
Or, even if they understood, itwould not have their focus on?
Ashwin Vasan (05:50):
Yeah, I mean I would focus first on, I think,
supervision and second oncomplaints, right, and I think
the former is probably lessfamiliar to the Money 2020
audience unless they're part ofthe bank, and then the latter is
familiar to everyone.
And both unless they're part ofa bank, and then the latter is
familiar to everyone and bothare kind of designed in a way to
sort of further adherence tothe laws.
(06:11):
The supervisory function is, bydesign, supposed to cover banks
and non-banks.
There's nuances around how thenon-bank side gets expanded, but
the general idea was everyonehas to comply with certain
consumer protection laws.
The Bureau will have anexamination force, go in,
conduct exams confidentially,give feedback on your compliance
(06:34):
around those laws, and for alarge part, that has happened
for the last 15 years.
The Bureau supervises largebanks, it supervises credit
reporting agencies, itsupervises non-bank mortgage
(06:56):
lenders, payday companies,remittance companies and a
number of others.
Now, most large institutionsplaying in consumer financial
services take their consumercompliance obligations much more
serially, simply by thepossibility that they will get
an exam and be reviewed for sortof adherence to those laws and
also like whether or not they'rerunning a good organization to
(07:17):
catch places where they might befalling short and fix them
before they create problems.
So that kind of deterrenceumbrella for the largest
institutions is incrediblypowerful.
It's worth noting.
Even after sort of thepreliminary injunction on Friday
, I still believe as of todayTuesday, I'm not sure exams have
still started up yet.
So we've now been coming up ontwo months without exams in the
(07:39):
marketplace.
That function, I think, isreally kind of a core of the
agency.
And then the second one I justcall out, I think in the kind of
less you know, I thinkenforcement and sort of policy
making tend to get more kind ofspicy.
But the complaint function islike a core core function of the
Bureau as well and was done soby design.
(08:00):
I forget the numbers, but it's.
Millions of Americans now right, have gone onto the portal.
I was part of the team thatsort of stood that up in the
early days.
File a complaint, it getsforwarded to an institution, the
institution has an opportunityto provide relief and, most
importantly, that data isavailable to the public and
internally to the Bureau.
So if you see trending analysison that data, if you see a
certain entity spike up incomplaints, you begin to think,
(08:23):
hey, there might be somethinggoing on there that warrants a
closer look.
And so not only does it providedirect relief to consumers,
which is you can go and find thetestimonials online very
powerful but it also createsagain a kind of a deterrent
umbrella, because everyone knowsthat the Bureau and
stakeholders are watching to seewhich companies get the most
(08:43):
complaints, and again that alsocreates that additional layer of
sort of focus on consumercompliance.
And again, by design, none ofthese things are really
particularly the focus of themortgage lender of 2006, as we
all know, and so I think it's apretty substantial change in
terms of how banks treat theircompliance obligations and as
(09:04):
well as non-banks as well,because, as we know, in the run
up to the crisis, non-banksplayed an important role as well
.
Rachel Morrissey (09:11):
You know it's interesting because you know, in
a weird marriage the CFPB andthe fintech industry both sort
of were born out of the samemelee and have sort of matured
(09:32):
together or not always asfriends, but definitely it's
interesting to me that you arelooking at both an industry
that's basically born out of thesame problems that the CFPB was
trying to address and that oneis.
You know, these two differentapproaches have always been sort
(09:54):
of married and intertwined asfar as the last 15 years have
gone, which is not somethingthat I think most people think
about when they think about thebirth of an agency and the birth
of an industry coming outtogether.
It's not really forefront inthe industry's minds.
(10:17):
Oh, these were born out of thesame instigating circumstances.
Ashwin Vasan (10:23):
Yeah, they grew up together in certain ways, right
, you know, again, I was at theBureau twice 2011 to 16, and
again 2020 to 2023.
I think the first time there,you know, we set up kind of an
innovation office.
We wanted to engage withfintechs, we wanted to
understand the potential tocompetitively disrupt legacy
(10:45):
financial services.
And Rachel, to your point, yeah, like atmospherically, the mood
at that point was still prettystrongly anti-bank.
I'm not even sure it's abated aton, but I think it's still
pretty anti-bank.
Rachel Morrissey (10:57):
On the ground, for sure.
On the ground yeah that's right.
Ashwin Vasan (11:02):
I think what the Bureau had to address this time
and I think did, with varyingsuccess, but it's a long-term
trend regardless isfundamentally for consumers.
Today, the vast, vast majorityof their consumer touchpoints
happen with non-banks, whetherit's larger companies or smaller
fintechs, or larger fintechs,to put it that way, fintechs, to
(11:26):
put it that way.
So, and that you know, we'dalready seen that shift in
mortgage early on and it'salmost entirely complete.
Auto loans have always beenquite diverse in terms of who's
originating them.
Student loans has becomemajority of the government and,
of course, like you know, nowyou have BNPL, you have neobanks
and you have Ardua Jacksons anumber of other products and
services that really consumerstouch.
And if you kind of think abouthow many touch points do
(11:49):
consumers actually have withfinancial institutions, I would
guess that maybe the majoritynow are non-banks, and so the
kind of 2011, 2012 mood like hey, we're seeing change in the
market, we're going to change inhow we oversee, we're going to
change in how we disrupt it Ithink this time back at the
Bureau was a little bit more.
There's some big companies outthere touching a lot of
(12:09):
consumers that need to be partof the level playing field, and
so many of the efforts theBureau took in the last
administration were to reallykind of extend that level
playing field and acknowledgethe pace with which technology
had really changed how consumersget their products and services
.
Now we'll kind of probably getto the future.
(12:29):
Some of that is being unwound,Some of that's being kind of
challenged, Some of thatprobably wasn't nearly as
effectively done as it couldhave been right, and so I think
we're sort of at an inflectionpoint again here in 2025.
Ian Moloney (12:39):
Ashwin, I think about the tools that you'd
mentioned, and the CFPB has aton of tools in its regulatory
toolkit.
So kind of thinking about that,that future a little bit, and
sort of where we've been in theever-changing landscape of
FinTech and ever-changinglandscape of regulation like
which tools do you think aregoing to be most effective and
(13:01):
most used, kind of movingforward.
Ashwin Vasan (13:05):
They all sort of have to work together, right?
I mean, I'm a strong believer.
If you can't tell thatsupervision should be as level
as possible for largerinstitutions, I think you get
the maximum bang for your buckin terms of consumers being able
to access good products.
I think the challenge there isthat the market's changed very
(13:26):
quickly and there are bigsupervisory gaps.
A number of institutions thattouch consumers are simply not
covered and may not be coveredfor a while.
So I think I would start there.
I think enforcement has a reallyimportant role to play as well,
because it's public and so itadds that extra level of
(13:46):
deterrence.
But I think it's probably mosteffective in places where I
think you know whether, withoutgetting into sort of the typical
arguments over regulation byenforcement, I think it's just
important that when you, whenenforcement action is taken,
that the public can reallyunderstand why right, and that
you can kind of explain in plainlanguage what the issue was and
(14:07):
what the wrongdoing was thatkind of led to a public
enforcement action.
So I think that is also part ofit.
You can't have supervisionalone without enforcement,
because the worst issues foundin supervision need to go to
enforcement so that thesupervision itself works,
otherwise you're just guaranteedof always being in a
confidential loop.
Without chartering authority,which the prudential regulators
(14:29):
have they always have thatimplicit oh, we're just going to
pull the charter.
Without that you need anenforcement, active enforcement
tool to create that level ofdeterrence and incentive to kind
of get the exams to beeffective.
And then again, like Imentioned before, those are then
supplemented by sort of thiskind of global intelligence of
the consumer complaint functionwhich most people assume will
(15:09):
lead them nowhere and are quitesurprised when magically they
get a refund or some sort ofrestitution from the company
because the companies know againthat the complaint itself is
something that the Bureau iswatching and they want to stay
out of that public enforcementaction.
So I think those tools all workreally well together, right,
and I think the challengesometimes is just the market
(15:32):
moves so fast that you also haveto make sure that you're
prioritizing the areas that youthink are also those of emerging
risk.
But I think those tools allwork together.
And then on the other sideyou've got the policymaking arm,
which we haven't touched.
But I mean, that's sort ofdifferent and looking longer
term at what those rules of theroad are that you're trying to
enforce.
Ian Moloney (15:51):
That makes a lot of sense and just kind of drilling
in a little bit.
You had mentioned the consumercomplaints database a couple of
times and so you know, I knowthat the current administration
has kind of pulled back from itor tried to pull back from usage
of consumer complaints, andthen the previous administration
seemed to use consumercomplaints quite a bit.
(16:14):
And so do you see any sort ofneed for reform or changes to
how consumer complaints are usedwithin the supervisory function
or within the enforcementfunction?
Ashwin Vasan (16:27):
Yeah, I mean, I think so.
You know the.
It's funny the.
You know, the first time I wasthere, like there was a lot of
oversight and concern simplyabout making the narratives and
the complaints public, because Ithink the talking point then
was that these are unverifiedcomplaints and you know it's
basically kind of like, and Ithink like that is then was that
these are unverified complaintsand you know it's basically
(16:47):
kind of like, and I think likethat is sort of toned down.
I think people have sort ofrealized that, like, if you
start reading these narratives,I mean there, yes, some people
do not have a legal issue andreally are just never going to
be happy for sure, but a lot ofpeople have legitimate questions
about our concerns of how theywere treated and the product and
service and whether it wasmarketing around it or, you know
(17:08):
, getting their fees refunded orgetting their kind of legal
rights vindicated.
So I think there are very realissues all through the complaint
database.
You know, I think one of thechallenges with it, though, is
that, you know, I think, I think, ian, I think, maybe, if I were
to kind of pick something, Ithink there are some times when
I think, even in the Bureau,it's easy to sort of.
(17:29):
You know, when does anecdotesbecome anecdote, become data
kind of situation?
Right, I'm not really sure howyou design guardrails around
that, because sometimes thoseone complaint is a canary in the
coal mine and I think you dowant to investigate.
Um, but I do think, in general,like the, the, the flow of the
information happens so fast thatI think that the, like you,
(17:51):
realistically seeing realbreakages in in trend lines,
should tell you something, aswell as consistently high levels
of complaints that suggest botha broad touch by those
companies and an inability tonot resolve it Right.
And so I think there is sort offor me that's always a North
Star, and in fact, sometimes Ithink even you know, look, this
(18:11):
is a bureau, is an organizationlike all others.
You sort of get a theory andyou want to run it down, but
even then I don't think, likeyou know, I'd love to.
You know, congress, for example,you know, could could use their
oversight hearings to sort oftake their own look at the
consumer complaint database andsay, hey look, we noticed that
these are the top 10 thingsbased on our analysis.
(18:31):
These are the companies thatare complaining about.
What are you doing about that?
I think that's a betteraccountability mechanism to make
sure that, like with thelimited resources that the
Bureau does have, that it'sactually focused on the things
that the public is constantlycomplaining about.
You know, because I think it'svery easy in the moment to you
can sort of again there's no,there's no perfect answer here,
(18:52):
like I don't want to say thatyou should only prioritize on
that.
Internally to the Bureau, theyprioritize on a number of
factors, that being one of them,but I think it's an important
kind of North Star it alwaysdrew back to.
Rachel Morrissey (19:03):
Okay.
So we know that there's justbeen a ton of turmoil around
politically around the CFPBalways, but lately it's really
intensified.
There's been a lot of questionsaround it.
Most people that I talk to inDC are fairly confident it will
(19:25):
just continue to exist in someform.
But we do know that JonathanMcKernan has been nominated.
Has he been confirmed yet forCFPB director?
Yeah, I didn't know that.
It happened last week.
You can tell I'm trying to payattention, but things were
moving really fast and I knowthat we've had a lot of
(19:45):
different things going aroundthe nature of what they think he
or the direction the CFPB isgoing to do.
So I would be curious as toyour take, as to what you're
anticipating from his leadershipat the CFPB and what you think
(20:08):
how these tools are going to beutilized by the next iteration
of the CFPB.
Ashwin Vasan (20:18):
You've asked me to forecast a I am a quarter of
the trump administration.
Rachel Morrissey (20:23):
This is a I am asking you to forecast, but in
the nicest way possible, justjust, just on the so let's,
let's, let's, let's, look I.
Ashwin Vasan (20:36):
So there are a few strands of philosophy or DNA
here to mix metaphors that Ithink will sort of intertwine in
some way to create the Bureauof the next few years.
So I think the first is thatMcKernan, by all accounts, is a
(20:58):
thoughtful person.
He, he's a lawyer, he served onthe fdic board, he served on
senate banking, he's been apolicy analyst, uh, look I.
I think he's going to be keen,to my senses, implement the law.
Uh, that is in title 10.
Uh, my, my sense also is he isprobably, seems, a person who
actually wants to do things, notundo things, and there's a lot
(21:26):
to do at the Bureau.
Even if you are a Republican,right, I think, if you have most
stakeholders, see value in theopen banking 1033 rule.
There's a lot of details aroundit that need to be finalized,
cleaned up, and theimplementation of industry needs
to be sort of supported.
Implementation of industryneeds to be sort of supported.
You know, I think you havecertain statutory mandates
around.
You know 1071 rulemakingobviously being challenged in
(21:47):
court, that small business datacollection, but you can shape it
in a way that you think istruer to the statute and again
get us past that.
You know, and the enumeratedlaws.
You take Reg E, reg Z, look, Imean these are laws that really
haven't changed a lot given thespeed of technical change, and I
think could both benefit fromsort of a comprehensive look
(22:09):
that involves all stakeholdersto sort of make some sort of
changes that may sort of makemore sense for innovations going
forward.
So I mean I haven't done thisexercise, but if I were to say
I'm, you know, a Republicanappointee of the, a Republican
director of the CFPB, I mean Ithink you could very quickly
(22:30):
fill up your dance card rightWith things that are sort of
intended to use the Bureau'stool as Congress Bureau's tools
as Congress wrote them in athoughtful way, and you will
stay busy.
And, by the way, there's plentyof fraudsters and scammers out
there.
You could use the enforcementtool a lot.
You can think about supervisionand again the issue of the
level playing field we talkedabout.
You can stay busy and, I think,get a lot of really good and
(22:52):
important work done, and thereare a lot of rules that don't
make sense and you could alsoremove some of those rules if
you wanted.
So that's that kind of onethread and I think the challenge
is that back to your originalquestion, rachel is that sort of
people's kind of defaultreaction, for the CFPB is very
much now in an extreme camp andI think you know some of that is
(23:15):
just its origin, some of thatis the actions that different
administrations have taken thathave kind of frustrated
different stakeholders and soeveryone's sort of in a camp
right now with the Bureau.
And you know that I thinkprobably shows up most clearly
to current OMB leadership, whoyou know.
I think one will have somelevel of oversight of the Bureau
(23:38):
going forward as well as theadministration generally.
So you know, so I think youhave kind of this, just kind of
for lack of a better word you'vegot a doge and OMB just like
let's just reduce the size of itbecause we're just trying to
cut without thinking about whatit could be done for, what it
could be used for.
So I think you'll have some ofthat show up.
(23:59):
I think that regardless of who'srunning the agency so McKernan
gets confirmed I still thinkthere's going to be a very
strong downsizing push for awhile and I think that's just a
global thing.
We're seeing it acrossgovernment tension with some of
(24:19):
these things because it's hardto do all the stuff you need to
do with that downsizing push.
And just for context foreveryone, I mean Bureau is like
1500 people and like every timeI've been there you're like man
I, you couldn't possibly get thestuff done that you want to get
done because all of the thingswriting a 1033 rule and
enforcement action, going andexamining a big bank for
compliance, like they takeresources and they take you got
to be buttoned up about thethings and so you're really
(24:41):
quite capacity constrained.
So if you're gonna reduce thatcapacity, you're gonna reduce
the output which is odd.
Even if you wanted to beentirely deregulatory, I would
keep the entire output right.
Personally, like if your entiregoal was to sort of really like
reshift all of the prioritiesfor the Bureau, I would keep the
entire capacity of it.
So if you're also going to beshrinking in it, you're
(25:02):
necessarily not going to be ableto deregulate as fast and
you're going to leave sort ofstuck at a sort of higher level
of regulation, which makes nosense to me.
So I think these two things aregoing to be kind of at odds and
I think they're going to.
I don't know how, you know how.
I don't know McKernan, I don'tknow how he will resolve that
tension, but I think it'll be aninteresting thing to watch.
Rachel Morrissey (25:22):
Yeah, it is an interesting paradox, right,
that you might undo your abilityto affect some of the more
lasting changes that you wouldwant by handicapping your
ability to get things done in away that they've been done in
(25:45):
the past.
Ashwin Vasan (25:47):
And the place that is most stark is in rulemaking,
where the last that we werequite active on rulemaking and a
lot of the rules and guidancepeople don't like and they want
them gone.
And yet undoing takes work.
I mean, I think that's the forpeople who haven't spent time in
government.
I think that's the challengingthing doesn't always make sense.
It's like you think if you kindof you can't quite and there are
a lot of reasons why, butespecially on regulations, you
(26:09):
can't just undo them and justsay cancel and that's it and
it's done, it's easy.
And so if you kind of take awaythe people that would actually
do that work, you're kind ofstuck with the regulation you
don't like and I think that'ssort of a very basic point that
I think for those of us who'veworked in these agencies
understand.
And yet I still haven't seenthe administration
operationalize fully around thatinsight, like if they truly do
(26:33):
want to create deregulation ofburdensome regs, level playing
field, more simplicity, a wholebunch of things that could help
across the industry foster aeasier regulatory regime that
allows for innovation andcompetition.
However you want to see it, theactions to demolish the CFP and
dismantle it are literally theopposite of what I would do.
(26:56):
I would actually instead make aplan for what you want to do,
which just hasn't seemed to havehappened yet, and I think
that's the missing piece here.
Rachel Morrissey (27:05):
It's almost like they're starving the other
tools of supervision andenforcement and leaving leaving
that intact and then that's not.
It's not very complete orforward thinking.
It leaves a lot of confusionleft on the table.
That's very interesting.
I hadn't really considered that, but that's actually really
(27:31):
really.
I don't think that's somethingthat everybody has really caught
on to or thinks about whollywhen it comes to how all of
these things work in tandem whenit comes to how all of these
things work in tandem.
Ian Moloney (27:45):
So kind of on that point, rachel, I think you know.
One of the areas that has beenreally intriguing to me is kind
of the rethink that theadministration seems to be
having, not only aroundregulation with, like, the
executive orders, aroundregulatory freezes and things
like that, but also theindependence of, you know,
financial regulators,particularly the CFPB, and so
thinking about sort of thatinterplay with, like, for
(28:06):
example, omb and CFPB you know,if McKiernan comes in and is,
you know, fully, the director,how is that interplay with the
Bureau and OMB going tooperationalize from a regulatory
standpoint?
Ashwin Vasan (28:22):
Yeah, you know, I don't know because it's new and
it's not entirely clear like toget into the weeds of some of it
, like are they going to applycost-benefit analysis?
Are they going to do a review?
Like OMB is quitecapacity-limited, and so so
again back to sort of do youwant to get stuff done?
(28:43):
And remember undoing is doing.
If you want to do a lot ofundoing, you need throughput,
you need capacity and if you'regoing to put a layer on top of
the capacity of the CFB, you'regoing to get a bottleneck and
you're going to undo less as aresult.
You know, I think it depends onhow that layer is also
implemented.
Some of it can be, look, ifthat layer is passing down sort
(29:07):
of high-level principles andpolicy goals from the
administration.
We don't want an overdraft rule.
Well, we don't want changes toReg Z that allow these products
to flourish.
If you set high-level productgoals like that and let the CFPB
do what it needs to do.
By the way, the staff there isready to do any policy direction
(29:28):
.
I think one of the other mythsfloating out here is that the
staff is completely just therelike deep state to drag their
feet on everything which,frankly, I think they were quite
active under Kraninger andthey're active under Rohit and
they're ready to do work as well, then I think you can get great
outcomes.
I think if you layer on sort oflike process that is sort of
grounded in distrust, right,like process that says I'm going
(29:51):
to read every read, nothinggoes out the front door without
nine people signing it and OMB,it's got to go to the White
House, whatever Then you'regoing to slow down your ability
to do work, and so I thinkthat's kind of the trade-off
that I see in terms of thatinterface, in terms of, like,
this kind of independence versusnot independent, and like
(30:12):
sometimes people start arguingover that.
It never made a ton of sense tome For those of you who aren't
sort of steeped in this, whenthe Bureau was created.
It was created very clearly aswell, as an independent agency
with a single director right,and that term of that director
was five years.
And so Rich Cordray, the firstconfirmed director, didn't leave
(30:32):
office until well into thefirst year of the Trump
administration and was doingwork like writing a payday rule
that was clearly against thepolicy preferences of the Trump
administration 1.0.
And so in 2019, I believe therewas a Supreme Court case that
said that structure isunconstitutional.
And, to be fair, that was thecriticism of the Bureau for a
(30:52):
long time that having a singledirector appointed across
administrations, independent andcan't be fired but for a sort
of cause, was not an appropriatestructure for the Constitution.
And I think, with thatrestriction on firing the
director gone, the director ofthe CFPB is now always
effectively going to be alignedwith the administration as a
(31:15):
person that the administrationpicks.
And look, when we came in thesecond time with Director Chopra
, that was the world we lived inand I think there's just a
reality of what do you get forthat?
And I think people who work incompliance and financial
services are frustrated a bit bythe pendulum swing in terms of
(31:35):
policy.
But the reality is you can't befireable by someone at will and
not kind of always be worriedabout making that person or that
group of people happy.
I mean, that's just life right,and so you're just going to get
a CFPB director that is sort oflook, doing the work of the
industry, doing the things thatcome up day to day.
(31:58):
But there's going to be somepart of it and this will be the
controversial part, whether it's20 or 40, whatever percent of
the work of the industry doingthe things that come up day to
day.
But there's going to be somepart of it and this will be the
controversial part, whether it's20 or 40, whatever percent of
the work that is kind of donefor the purpose of the
administration's overall successand that's just.
That's just.
We have to sort of accept thatand it's.
And I don't really, I don'tthink you can have it both ways
right.
You can't have an executivebranch that kind of implements
(32:19):
policy the way they want and atthe same time feel like there's
sort of stability acrossadministrations because there's
nothing.
That's it's all apolitical.
It's very hard to, in my mind,square those two things, but it
does create more volatility forsure.
You know, I think I don't knowhow that gets resolved.
Over time.
Maybe the industry picks upmore in terms of self-governance
(32:42):
in certain ways.
Rachel Morrissey (32:44):
Perhaps, maybe , but I think that there's just
an inevitable, you know, it'sjust a reality, a political
reality that I think everybodyprobably just needs to accept.
I mean, I know that sounds kindof like.
Ashwin Vasan (33:03):
And the courts play a role right, at least they
do for now they play a role insort of tempering that.
So I mean yeah.
Rachel Morrissey (33:09):
I mean there's ways to challenge what they're
doing, like you said, throughthe courts.
So I just think there is apolitical reality that some of
the work of the CFPB ispolitical reality.
That some of the work of theCFPB is, I mean it changes under
the vision of theadministration it's in.
So I think that's just.
I think most people just acceptthat as a given.
Ashwin Vasan (33:34):
But back to and I think that's totally right.
But back to the point that youasked what is the next four
years going to look like.
I think that's the right.
But back to the point that youasked what is the next four
years going to look like.
I think that's the challengeright.
So if you have anadministration that just has
somehow gotten in their headthat all the Bureau does is sort
of go around debanking cryptofounders which is completely not
true Then you say justeliminate it, pull the plug and
(33:54):
voila, all the crypto foundersare not being debanked anymore.
Problem solved.
Obviously, there's like a lotmore complexity behind that and
I think the challenge is youactually having an
administration acting on thatkind of philosophy.
And going back to my biggerpoint, you know, then you're
just hampering yourself, you'rehampering all industry
stakeholders from kind ofworking with the agency
(34:16):
leadership to kind of createpolicies and like approaches to
oversight that benefit theindustry writ large.
I mean that's what we shouldall be trying to do here and I
think like the sort of kind ofjust simply kind of shutting
down kind of energy does notreally quite frustrate that.
And there's a looming thingwhich Ian knows well, which we
(34:36):
haven't come up with.
All of the Bureau's regs areenforceable by state AGs, right,
and so you even see, right, theBureau put out the statement on
Friday saying you know, we'renot going to enforce a component
of the payday rule that wentinto effect and California AG
right away said will be so,expect compliance.
So you know, for all the folksin the audience who are thinking
building FinTechs, you know theBureau's rules, unfair,
(35:04):
deceptive acts and practices,along with Reg E, reg Z, all of
the rules.
You know they're allenforceable by state attorney
generals and so realistically,from a compliance standpoint,
hopefully not a ton changes.
You obviously don't have theenergetic, democratic CFB
enforcing the laws, but you'regoing to have that at the state
level.
And so you know, even if youkind of again pull the plug on
the CFPB, you can't actuallybegin to shape that federal
(35:25):
regulator in a way that works,in a way, and you sort of freeze
everything in a moment in time,which is not a great answer for
a space that's moving asquickly as ours.
Rachel Morrissey (35:35):
Right, and it also emphasizes on the fact that
you know undoing is doing youhave to.
You know undoing is doing youhave to.
You know you can't.
Just you can't just pull theplug on it and think that that's
undoing it, because there thoseare still in place and there's
other actors that can enforce it.
So it's not as simple as justwe won't have it.
Ian Moloney (35:58):
It's just not a real answer it, it's just not a
real answer.
Yeah, and also Rachel, I thinkit exemplifies that markets
function best with subtleexpectations, and also
regulatory activities functionbest when you have a point of
contact or a set of folks thatyou can go to and actually have
real discussions, and socreating an environment where
(36:19):
you have a dearth of both isgoing to be very confusing for
market participants.
Rachel Morrissey (36:25):
I used to think about this and I was like
people would give me overlysimplistic solution.
When I worked in government,people would say, well, just do
this, and it would be this verysimple solution, and I'd be like
, well, that's fine, but nowyou're creating a vacuum over
here, and the one thing thatnever goes unfilled is a vacuum.
You know nature of horse vacuum, and so this idea that you can
(36:51):
just unravel something withoutproperly unraveling it by just
cutting through it, that's notreally any kind of solution that
makes long-term sense.
So I think that's really unlessyou guys have something more to
(37:12):
say, I think that that'sactually kind of where we would
leave this episode.
What do you guys think?
Is there something more you'dlike to add?
No, I mean look.
Ashwin Vasan (37:23):
to end on a positive note, I will say look,
it is still early in theadministration.
That's not a negative, no, it'sstill early in the
administration.
We hope to get a confirmeddirector.
Someone in this seat tends tohelp a lot of this, because when
there's no one in this seatyou've got a lot of people with
opinions on what needs to happen.
And I think hopefully once youget that, and then McKernan can
get some staff in, you can getthe industry engagement and
(37:46):
policy prioritization processthat actually gets some things
done over the next few years.
And again to Ian's pointhopefully they create things
that are not just about swingingthe pendulum but maybe about
creating some stability for thelonger run in important spaces.
Rachel Morrissey (38:02):
Yeah, and once we have a new director in them,
we will be able to kind of havemore of a sense of where we're
actually going, because we'llhave more of a sense of
priorities that that'll be moreobvious to the industry, I think
that's in everyone's bestinterest.
Ashwin Vasan (38:21):
And some of it and back to the previous.
I will guarantee you some ofthe things will sound like.
There will be administrationpriorities, right, and the
question is is it 80% or is it30%?
There'll be something probablyabout debanking and downsizing,
whatever.
But whatever is the flavor ofthe month, the question is
(38:44):
what's the other component?
Is there sort of meaningfulwork on open banking, on
modernizing regs or, you know,monitoring emerging risks to
consumers?
That'll tell you a lot.
Rachel Morrissey (38:54):
Yeah, well that, actually that's an
excellent forecast.
I know that when I asked youthat question you were like, are
you crazy?
But hopefully it wasn't toopainful and it was kind of fun
for us all to kind of look atwhat should or could happen and
(39:15):
what we're hoping for in thenext couple of years.
Ian, anything left to addbefore we close the episode?
Ian Moloney (39:22):
I just think, Ashwin, you gave some really
good points, a really niceforecast, like Rachel said, and
the point around durability inregulation.
That's really important for themarket to function for sure.
Rachel Morrissey (39:36):
Yeah, absolutely.
Thank you guys so much.
Ashwin Vasan (39:40):
Thank you.
Rachel Morrissey (39:40):
Thank you for joining me as a co-host.
Thank you, Ashwin, for joiningme as a guest.
We love this and to all of ourlisteners, thank you so much for
joining us.
Please make sure to leave acomment or a review of this and
tell your friends.
That's the way more people canfind the show and we hope that
(40:02):
with this series with the AFC,has really helped bring you guys
some more understanding andsome depth of understanding to
what we're anticipating is goingto happen in Washington DC this
year.
Have a great day.
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