Latest / Market Pulse / What Lenders Need to Know About a Fast-Changing Regulatory Landscape
Transcript
- Jesse Hardin (00:00): Welcome to the Market Pulse Podcast. I'm your host, Jesse Hardin, a senior advisor and economist with Equifax Advisors. As a group, we identify economic considerations and leverage data and analytics to translate into industry insights and recommendations. Our goal is to support our clients during economic uncertainty, while uncovering growth opportunities in consumer and commercial markets throughout the customer lifecycle. We have a lot of listeners, and for those of you who have listened to our podcast before, we typically have our advisor team on. But we're gonna do something a little bit different this time. We have a very special guest for this podcast, but before I do, let's do a quick economic overview with our friends at Moody's Analytics. Justin Begley (00:46): Last week's data revealed that the US economy is under greater stress than previously thought. When the Bureau of Labor Statistics delivered a harsh reality check with its preliminary benchmark revisions to payroll employment, the agency expects to revise total payrolls down by over 900,000 jobs in the 12 months through March, 2025. This is the largest downward revision in more than a decade, and if spread across the revision period, it would reduce average monthly job growth from about 147,000 to just 71,000. The estimated downward revision adds evidence to anecdotes of increasing layoffs within certain industries and a near economy-wide hiring freeze outside of healthcare. In August three month, average job growth collapsed from 111,000 in March two, 29,000 in August. Now, revisions were nearly universally negative across industries, but there were, they were particularly pronounced in the services sector, only transportation and warehousing, and also utilities received small upward revisions. Justin Begley (01:50): Meanwhile, inflation came in hotter than expected. In August, the consumer price index rose 0.4%, bringing the year ago rate to 2.9%, up from 2.7% in July. And the acceleration was driven largely by broad based tariff pressures with the price index for the basket of tariff sensitive goods constructed by Moody's Analytics. Climbing 0.6% energy also contributed to inflation, as prices rose about 0.7% on the month, and consumers are souring on the economy as tariff driven inflation pressures mounts. Consumer confidence measured by the University of Michigan survey deteriorated further in its September and remains near historic lows as inflation expectations increased. Still some consumers, particularly the well-to-do, continue to spend perhaps an expectation of further tariff related price hikes. Total sales rose 0.6% in August, following a similar increase in the prior month. Autos in the retail sales categories were mostly a, a, a drag on total sales, but if we exclude vehicles, sales rose by 0.7% on the month, and despite a solid uptick, though the trend in sales this year remains relatively modest with most or even some of the nominal increase in sales due to price increases. Jesse Hardin (03:13): Thanks for that update, Justin. There's been no shortage of changes in Washington since the new administration took office and the regulatory landscape is shifting quickly. A good example might be at the CFPV, we've seen leadership turnover, budget adjustments, and we're seeing a reshaping of priorities, particularly around enforcement and mortgage servicing rules. To help us make sense of what all this means in practice, I'm joined today by an exciting guest and an expert who's been following these developments closely. Stephanie Gunselman leads Equifax's Federal Government relations department. Stephanie advises the company's business units on policy changes and advocates for the company's interest in Congress. Stephanie has extensive experience navigating a wide range of policy issues on topics including financial services, social services, and government budgeting. She joined Equifax in 2016, and we're excited to talk with you today. Stephanie, for our listeners, Stephanie spends a lot of time in Washington dc but we won't hold that against her. Stephanie Gunselman (04:13): Thanks for having me on the podcast, Jesse. I'm really happy to chat with you today. Jesse Hardin (04:18): Yeah, that's great. So how much time do you actually spend in Washington? Stephanie Gunselman (04:22): Well, this year, Jesse, I, I'd say it's a little bit more than in other years. I've been up probably every week that we're in session in Congress. So it's been a lot of miles. Jesse Hardin (04:33): Oh, yeah, I I can only imagine a lot of fun things to do, I guess when you're working, you don't get to do those though, huh? Stephanie Gunselman (04:39): Exactly, exactly. Jesse Hardin (04:41): Yeah. Well, that's great. So I, I thought at a high level maybe we would start with, you know, looking at the big picture and how would you describe the current state of both legislative and regulatory activity in the lending industry? Are there really like any major trends shaping policy right now? Stephanie Gunselman (05:01): Well, you know, we're about eight months into President Trump's second term, and while a lot has already happened, we are still really in a phase of unwinding of policies from the previous administrations. So this has really been done through both legislative efforts and then a reduction of regulatory action at the agency level. Jesse Hardin (05:23): Yeah, I could see that the, the life cycle of, of that just as as, as kind of a, maybe a long process, but then it shifts quite a bit. How is that unpredictability then in DC affecting legislative efforts? Stephanie Gunselman (05:37): The unpredictability is keeping us lobbyists and policy advisors on our toes. This, this element of unpredictability and some apparently spontaneous aspects of policy changes is, is a little bit difficult to, to ma manage. However, Congress has really remained focused on the issues and their policy agenda. So working with the members and committees on policy issues really hasn't changed all that much. Jesse Hardin (06:09): Yeah, that's interesting. I know you know, from an economic standpoint, at least a macroeconomic standpoint, we're talking about a lot of uncertainty. So we've seen a lot of unpredictability as well. When you think of trade policy or even some of the, just some of the new policies that have come forth, it's you know, certainly hard to, you have to keep, you have to keep very close to the data, that's for sure. That's right. So what are the mo most significant legislative priorities for Congress, you think, for the remainder of the year and maybe thoughts on the coming year? Stephanie Gunselman (06:39): Well, the two items at the top of the agenda right now include the National Defense Authorization Act, or NDAA, and this is must pass legislation to fund defense initiatives because this is legislation that is guaranteed to move each year. Lawmakers often attach what we call policy riders that could have an impact on a variety of industries, but including financial services. So just one example in the senate's version of the bill that's, that's moving right now, there is an amendment that would expand free credit monitoring to all members of the armed forces. Today, the law requires free credit monitoring to active duty service members. So that's just one example. In addition to the NDAA, the most heated discussions are really about government funding. As of today, Congress has about two weeks and two days before the next fiscal year start, but Congress has yet to pass all of the 12 appropriations bills that are necessary to keep the government fully operating. Stephanie Gunselman (07:50): So there are a few possible outcomes. In my opinion, the most likely scenarios are either a short-term continuing resolution, maybe through Thanksgiving, or there's a potential of a government shutdown. So healthcare funding is one of the big topics that is a sticking point. But there are several other issues that need to be worked out. Among, among the members of Congress, there's also some discussion of a Reconciliation 2.0. So you may recall that earlier in the summer there, a reconciliation bill was, was passed. And I, I think we'll get into that a little later, but those talks really don't seem to be progressing great right now. Now this can all change on a moment's notice but that's another big policy item that's up for discussion. Jesse Hardin (08:42): Yeah, I, I think I saw some stories yesterday about some of the reconciliation it sounds like, but is that something we really, are we really do we focus on that now or is that something that we focus on at 1159 on the, the night before? It seems like that always happens really late in the process. Stephanie Gunselman (08:59): Yeah, there's nothing like a deadline to, to spur activity. Right. So yeah, Jesse Hardin (09:04): The political environment suggests potential legislative gridlock really pushes the president, I think, to use more executive action. How do you see that as an impact to key financial regulations? Stephanie Gunselman (09:16): Just for some context here, president Trump has signed nearly 200 executive orders so far this year. So compare that, that to the first year of, say, president Biden's term in which he signed 77 executive orders. So these numbers are notable, but what is most interesting is that the executive actions and these executive orders are, are just kind of setting the tone. So take for example, the executive order on artificial intelligence. That executive order established a process for a plan to be developed to ensure the US' continued dominance in ai. So this plan that was required out of the executive order was actually released in July, and now the plan tells the agencies what types of regulatory actions and initiatives need to, to be developed from here on out. So even with executive action, it takes time to develop the programs or the necessary regulatory frameworks and we'll, we'll continue to see that develop over the remainder of this administration. Jesse Hardin (10:23): Gotcha. And I wanna stay on that for a second. So, you know, it seems like there, there has been, and, and I have no data to back this up, but it seems like there has been more issuance of executive water over the last, at least the last couple of presidents. Does that create a danger just in terms of the, the, the path of legislation and it seems more executive orders kind of drive policy at least for a couple of years, and then those get backed out and we see new policies come through from, from the president, you know, from whatever presidents in in the office. Is that, you know, do you see that as a danger potentially? Stephanie Gunselman (11:03): I wouldn't call it a danger, Jesse. I'd say again, it's really about setting the tone of policy for an administration and the details are really le left to the regulatory agencies to to be worked out. So I don't know that it's a danger. I think it is a way for an administration to make its its point of view and its policy agenda clear, and then a, allow the details to be worked out through, we'll call it normal process through regulation or other agency types of actions. Jesse Hardin (11:40): Okay. Yeah, that makes sense. Alright. So hard one here, or at least a hard one in my opinion, 'cause it's always one that stumps me. Can you explain the budget reconciliation process and then the implications that it has for financial policy? Stephanie Gunselman (11:54): So a reconciliation bill is a tool that makes it easier to move legislation, particularly in the Senate. So for almost all policy bills, the Senate needs 60 votes to advance it. So with the reconciliation process, a simple majority vote is required. The kicker here is that every policy in the reconciliation bill must affect spending or revenue. So there is something known as the bird rule, and it's used to remove extraneous provisions. So the reconciliation process was most recently used usher through extensions of the 2017 tax cuts, and then to set forth some of the major domestic policy priorities of the president in terms of financial policy. They weren't really extensive in this reconciliation bill, and that's primarily because most of the financial policy we we're discussing would not impact taxes spending or revenue, and thus wouldn't meet the standards of that bird rule. So one provision that was included was a reduction in the funding transfer cap for the CFPB. The reconciliation bill reduced the funding transfer cap from 12% to 6.5% of the federal reserve's inflation adjusted 2009 profits. So I know that's a mouthful, but just to give some context here, in fiscal year 24, the cap was set at $785.4 million and the CFPB requested about 729.4 million. So we're gonna see a pretty big change in those numbers for FY 26 and beyond. Jesse Hardin (13:40): So let's stay then on that trend again for a minute. Maybe we'll talk a little bit about some of the gov government specific agencies. We've heard a lot about the CFPB, I know you just mentioned it. What are some of the key regulatory updates and leadership changes at the CFPB? Stephanie Gunselman (13:56): It's actually great timing for this question. The CFPB has reiterated its intent to focus its supervision and enforcement efforts on what they're referring to as pressing threats to consumers. So the most recent regulatory agenda actually included about 24 items on the CFPB list. Many of those were part of earlier agendas but 24 is a lot. So I'm just gonna highlight two, one, the CFP B for the first time proposed to establish a standard definition of risks to consumers with regard to the offering or provision of consumer financial products or services. So the proposed definition would consist of a conduct that per presents a high likelihood of significant harm to consumers that is directly connected to a consumer financial product or service. So that ties right into what the CFPB has been saying about focusing on, on efforts that are pressing threats to consumers. Stephanie Gunselman (15:07): So the CFPB notes that this would prevent the CFPB from spending its supervisory resources on issues that are speculative in likelihood or trivial in impact. The comment period on, on this actually ends in a couple of weeks on September 25th. Another one to highlight, and I'm sure we've all heard and followed this to some extent, is the 10 33 or open banking rule. So in conjunction with litigation, the CFPB has begun the process to reconsider the 10 33 rule. Just recently, the CFPB released an advanced notice of proposed rulemaking, which has about 36 questions related to personal financial data rights. The comment period on this one ends on October 21st, 2025. So those are a couple of the policy items in regard to leadership. A permanent director has not been named. So Russ Vote remains the acting director. He serves both as director of the Office of Management and Budget, as well as the acting director of the CFPB. And, and vote has been in this role since February. Jesse Hardin (16:20): Yeah, that's interesting information. Let me stay on that for just a second. From a policy standpoint, do you ever see where lenders start a process that's at least been a rule or at least rule making within the CFPB and they, they, they've gone down the road and so they want to just continue with that rule versus trying to understand the impact and then, and then back out a rule at the, at the request at least of the agency. Stephanie Gunselman (16:46): Well, this isn't the first time this has happened. This is somewhat a common occurrence among administration changes. So I think, we'll, for the 10 33 example, we'll likely see some changes to the policy, but perhaps it's not a wholesale rewrite. So some of the things that companies and, and lenders and others were doing to prepare for compliance with the 10 33 rule might actually still apply to the next version of the rule. So I don't think all, yeah, okay, work is, is lost. I, I guess, but, you know, that remains to be seen as this continues to play out. Jesse Hardin (17:29): So I think it might be appropriate to next delve into areas that impact CRAs and more importantly, customers that work directly with crass. For our listeners who have a hard track of keeping up with acronyms, and I count myself among them, A CRA is a credit reported agency. In essence, it's just the credit bureaus. And, and so Stephanie, what specific policies should businesses watch regarding reporting and lending practices? Stephanie Gunselman (17:56): Well, I, I noted the provision and the National Defense Authorization Act earlier, but some other bills to watch include legislation that would update the CFBs consumer complaint portal with the goal of reducing fraudulent use of the portal and to allow financial institutions to close duplicate, or fraudulent complaints. The bill would also change the information that is made publicly available, that the draft version of this bill was actually part of a hearing over the summer, and there is potential for this to move later on this fall. So that's a big one to, to keep an eye on. Jesse Hardin (18:37): Okay. And then two more that I think I've, I've read a lot about, maybe talk a little bit about recent rulings related to medical debt and then open banking. Stephanie Gunselman (18:46): Sure. In July, a federal judge vacated the CFP B'S 2025 rule that would've prohibited the use of medical debt information and credit underwriting and prevented medical debt from being included on consumer reports. So as of today, there is no federal regulation that requires the removal of medical debt from consumer reports. However, states have continued to pass their own laws, and those are not affected by this ruling. This is still important, however, because of the precedent that CFPB rule would have had, it would've set the stage that the CFPB or some other regulator would have the ability to d determine what can or cannot be on a consumer credit file. So this is a big decision out of federal court in Texas on the open banking side of things, as we just discussed, the CFPB is in its early stages of reconsidering the rule. So we can really expect an ongoing dialogue regarding open banking framework and the US including a discussion of things like data privacy, the ability to recover the cost, data security requirements, and the overall scope of the rule itself. Jesse Hardin (20:09): And you really just, you, you really just drilled right into my next question. How about data privacy? Can you talk a little bit about legislation there from both the federal and state level? Stephanie Gunselman (20:18): So, at the federal level, reaching agreement on a comprehensive data privacy regulatory structure has remained out of reach. There has been a renewed effort this year, and congressional staff have actually begun to reach out to the public to gather information and suggestions on how to develop a national policy that both protects consumers and ensures that the US is competitive in the global economy. I don't think it's likely that federal data privacy legislation will pass in 2025, but we do anticipate that the conversations will continue over the next several months, and perhaps Congress is getting closer to reaching an agreement on a federal law here. Meanwhile, states have continued to path their own data privacy frameworks. We have about 19 states or so that have comprehensive privacy laws on the books. We're beginning to actually see data privacy legislation intertwined with legislation on artificial intelligence in the states. I think that trend's likely to continue, and it's certainly something to watch. Jesse Hardin (21:30): And then maybe to round out this section can you talk about growing trends regarding data broker transparency and then consumer data deletion? Stephanie Gunselman (21:40): These are efforts that are, as you, as you noted, they're picking up some steam. There is a lot of activity in the states right now on these topics of, of data brokers and data deletion in the states. A lot of the policy we're seeing are requirements to register to establish public databases. And in states like California, Vermont, Texas, and Oregon, they're really at the forefront on this topic. The goal is to ensure transparency for consumers on how their data is being used and by whom. But there really isn't a uniform definition of data broker across the states. So there may be differences in things like registrations. California has gone further and established a mechanism for consumers to delete their data through a single source data broker legislation, including a delete mechanism. It's also been introduced in Congress for probably the past three congressional sessions, but it hasn't advanced. So this is another topic that we are watching along with the data privacy legislation, and, and there is potential that those two could be combined in Congress. Jesse Hardin (23:04): So I'm gonna switch gears on you and and, and switch to something that I think a lot of our listeners are really interested about, and, and I call it technology, maybe not so much technology, but at least new trends within the industry. And so before we talk about ai, which no surprise that's that's what I think everybody wants to get to, I wanted to talk to you a little bit about the buy now pay later industry. How are regulations revolving buy now, pay later? Moving? Stephanie Gunselman (23:32): Well, Jesse, if I had to predict, I don't think buy now pay later regulations will advance in the near term at the federal level. In fact, the CFPB has indicated that it will not pursue the establishment of a regulatory framework on buy now pay later, at least in the near term in the states. New York has actually begun to implement its buy now pay later law. So the New York DFS has started the regulatory process by releasing a voluntary request for information over the summer. This is an indication that it's working on the required regulations development has actually recently issued a request for information trying to understand the impact of buy now pay later on a consumer's ability to repay mortgage debt. I believe HUD received about 41 comments on this RFI. So agencies are thinking about it, but I don't think there will be any formal regulation anytime soon. Jesse Hardin (24:44): Maybe back to that question that I asked before, but is there a chance that a state law becomes sort of like the defacto law of the land if if there is no federal policy put in place? Stephanie Gunselman (24:56): There is the potential. But I think as we have seen with data privacy, you other states like to make their own laws and put their own unique spin on things. So having a one state law becoming the nationwide standard, i, I don't think that would last very long. Jesse Hardin (25:17): Gotcha. So let's talk let's talk ai. I, I know I'm excited about that. Can you elaborate a little bit then on the potential impact that you see AI having in the lending industry really related regulation? Any current trends that we're seeing in AI governance for data and or privacy legislation that you'd wanna call out? Stephanie Gunselman (25:41): The thing I would watch is President Trump's AI action plan that I mentioned earlier, right? The details of the action plan are still being released by the many agencies tasked with some part of the plan. But the goal is crystal clear. The US must be a global leader in ai, and the, the government will support AI innovation and deter overregulation of ai. So similar to some of those data privacy efforts, one of the most common components of AI policy is transparency. Policymakers want to ensure that consumers understand when AI is used and how it may impact a decision or outcome in legislation. This can take the form of notification to consumers impact assessments, or sometimes we see liability provisions, Jesse Hardin (26:37): And I'm gonna go out on a limb and, and make a prediction, which is that I, I think we're gonna see an AI podcast coming up, at least as it relates to regulation. I can only imagine there's so many uses of ai right now and where they're going in the future. I I, I think we could probably dedicate another hour just to that alone. Stephanie Gunselman (26:57): Absolutely. Jesse Hardin (26:58): So Stephanie, I know you keep tabs on legislation that impacts our customers and, and our, our own business for that matter. Let's take a look at some specific pending legislation. We'll call it the lightning round, if you will, and hit some of these quickly. And then after that, I have a really important question for you. So we'll we'll hit that. So really question one then. What is the current policy environment on housing and mortgage? Stephanie Gunselman (27:25): There have been some exciting developments on housing availability and affordability over the summer. The Senate Banking Committee, advanced bipartisan legislation by unanimous vote. This legislation would do numerous things, including supporting certain financial literacy efforts, increasing housing and opportunity zones, supporting investment on housing and community development projects, expanding access to manufactured housing, and the list goes on. This could generate greater access to affordable housing across the nation. This could generate greater access to affordable housing across the nation. So this bill could move to the senate floor later this year. And I know that the house is also planning to work on housing reform later on this fall. Jesse Hardin (28:19): So it sounds like that's timely as well with the announcements that we've seen with the president looking at potential emergency action on hou on housing Jesse Hardin (28:31): Right. So how are the recent challenges affecting the Corporate Transparency Act implementation Stephanie Gunselman (28:39): For those who haven't been following closely? The Corporate Transparency Act is a 2021 law that required the filing of beneficial ownership information to Fen. It was intended to prevent individuals with malicious intent to hide or benefit from the ownership of US entities to facilitate illegal operations. The implementation of the Corporate Transparency Act has been a bit of a rollercoaster with lawsuits and changes to reporting requirements. So it's really been tough to keep track of what's going on. In March of this year, the Treasury Department announced that it would not enforce any penalties or fines associated with beneficial ownership reporting for US citizens or domestic reporting companies. The treasury actually intro introduced an interim final rule to narrow the scope to foreign reporting companies. So the laws certainly changed since it, since its enactment. Jesse Hardin (29:42): And how about the current status then, of the small business data collection requirements under 10 71? Stephanie Gunselman (29:48): This is a similar situation. So the 10 71 rule was finalized in 2023, and it would require financial institutions to report information from loan applications submitted by small businesses in June. The CFPB filed notice that it was extending the compliance deadline for one year. Given the ongoing litigation, this litigation has stayed the rule and the compliance deadline. So the CFPB indicated that it planned to initiate a new 10 71 rule, and we expect to see a new rule released later on this year. There have been some congressional efforts to repe the rule altogether, but for now, the rules compliance dates are delayed and we anticipate a new rulemaking. Jesse Hardin (30:41): What about the likelihood of the keep call centers in America Act passing? Stephanie Gunselman (30:46): This bill is intended to encourage businesses to maintain US-based call centers. It establishes a list of companies using offshore call centers and eliminates or limits certain federal benefits. Given the environment, it's difficult to predict the likelihood of this passing, but I don't see it moving this year. Additionally, this would have widespread ramifications and create difficulties for businesses in nearly every sector. Jesse Hardin (31:17): All right. In the last one in the lighting round let's discuss a little bit of the ending scam Credit Repair act. What would that bill do? Stephanie Gunselman (31:25): This bill seeks to address practices of some companies that charge consumers before making any improvements to credit scores. And it also prevents credit repair organizations from jamming financial institutions and credit reporting agencies with duplicative requests. The bill was referred to committees, but no further action has taken place. Jesse Hardin (31:51): Got it. And I know we could go on a lot longer of all the legislation that's, that's out there, but I wanna make sure we get to the important question that I mentioned throughout this podcast. We've covered a lot of ground I think on industry and general legislative agendas. I wanna reverse the roles on you now. So imagine you are in the shoes of our listener, maybe a lender in one of the industries that we talked about. What one or two things are you thinking about right now related to regulation and legislation today? And then what one or two things are you thinking about tomorrow? And I left tomorrow? A little vague. That could be next month, next year, next five years. Stephanie Gunselman (32:34): Wow. This is a tough one, but I'd have to say, if I put myself in the position of many of our listeners, I would focus on policies regulating data in any way. I've continued to watch the reconsideration of the 10 33 open banking regulations and the 10 71 small BA business data collection issue, both now and even longer term, I'm paying close attention to AI policy. This could add new requirements for an already heavily regulated industry like financial services and coordination and consistency with the current regulatory structure will be so important as we continue to consider the use of AI and how we do business and, and how we as a consumer reporting agency also operate. Jesse Hardin (33:27): Yeah, you have to make a promise to me that you'll come back on and we can talk AI policy. I, I think that's a fascinating area. Stephanie Gunselman (33:33): Yeah, let's do it. Jesse Hardin (33:35): Sounds good. And with that, I think we're gonna call this a podcast. I want to thank Stephanie for coming on. This was a long time in the making. I had a lot of fun. Hopefully our listeners love the content. And like I said, Stephanie, I hope to have you back on really soon. And to our listeners, thank you. I hope you enjoyed today's topic. As a reminder, your feedback is important to us, and it's critical to conversations like the one we had today. If you have questions or suggestions for future podcasts, please reach out to us at Risk advisors@equifax.com. We look forward to hearing from you.