Customer Development
As we approach the close of this “Year That Must Not be Named” (h/t to Ms. J.K. Rowling), I am only too happy to look to the future and offer a few policy predictions of interest to those in the U.S. financial services industry for what we all hope and expect will be a brighter 12 months ahead. So, here are the five for 2021.
TCPA Changes Are Coming ... Finally!
For the past several years, industry has been anxiously waiting for the FCC to clarify one of the most unsettled areas of the now antiquated, nearly three decades old Telephone Consumer Protection Act. Since the FCC’s 2015 broad definition of Automatic Telephone Dialing System (ATDS) was struck down by the DC Court of Appeals, a steady stream of class action lawsuits have resulted in a number of conflicting decisions and a split among the courts. Now, with the U.S. Supreme Court set to rule in Facebook v. Duguid before the end of June 2021, I believe the court will not only provide some clarity on what an ATDS is but, in doing so, will further facilitate the use by banks and other businesses of legitimate, non-marketing automated or prerecorded voice and text messages to the mobile phones of customers who have the provided requisite consent. Oh, and do not forget that the reassigned number database is currently on pace to be operational as early as the middle of next year. If my prediction is on the mark, 2021 should be one where improved customer communications will fuel stronger customer engagement.
New Debt Collection Rules Are Here to Stay
In late October, the CFPB released Part 1 of its long-awaited update to the Fair Debt Collections Practices Act governing third-party collectors. The final rule addresses debt collection communications and interprets and applies prohibitions on harassment or abuse, false or misleading representations, and unfair practices. On December 18, the Bureau issued a Part 2 final rule detailing disclosures for the collection of time-barred debt, changes to the validation notice, and furnisher credit reporting requirements. While there has already been some sharp criticism of the CFPB’s debt collection rulemaking, especially around the call frequency cap and the lack of a ceiling threshold governing email and text communications, it seems unlikely that the rules will be subject to a successful disapproval action under the Congressional Review Act or wholesale replacement rulemaking sought by new leadership at the CFPB. In short, I believe the new debt collection rules will largely remain intact, at least for the foreseeable future.
BSA/AML Reforms Are on their Way - Even With a Looming Presidential Veto
On December 8 and 11, the House and Senate respectively approved the National Defense Authorization Act of 2021 (NDAA) by large bipartisan margins. Even by Washington standards, this bill is massive topping 4,500 pages. The legislation includes nearly 200 pages of the most significant reforms to the Bank Secrecy Act (BSA) and anti-money laundering (AML) laws since the USA PATRIOT Act of 2001. The headliner provision is the creation of a beneficial ownership registry within the Financial Crimes Enforcement Network (FinCEN), requiring millions of U.S. companies and companies doing business in the U.S. to report their beneficial owners to FinCEN. The purpose of the registry is to target anonymous shell companies which have been used heavily by money launderers and terrorists. Other notable BSA/AML reforms contained in the NDAA include: a new whistleblower program to incentivize reporting of BSA/AML violations, significantly increasing penalties for BSA/AML violations for companies as well as individuals, requiring Treasury to conduct a formal review of suspicious activity reporting (SAR) and currency transaction reporting (CTR), creating a pilot program to allow financial institutions to share SARs with foreign affiliates, and mandating a number of studies including those related to artificial intelligence, blockchain and other emerging technologies, and beneficial ownership reporting requirements. President Trump has repeatedly stated that he will veto the NDAA for reasons unrelated to the BSA/AML provisions. The President has until December 23 to take action. Both the House and Senate appear to have more than the two-thirds majority vote required to override his veto. I predict they will. Admittedly, this prediction may come to fruition in the final days of this year though I suspect Congress will address it in early January 2021.
Financial Inclusion Will Be One of the Key Themes in the Financial Services Industry
Creating greater access to financial services and removing barriers that impede participation in the nation’s banking system was an area of emphasis this past year. Regulators launched a series of financial inclusion initiatives including the OCC’s Project REACh aimed, in part, at expanding access to credit for the non-scorable population and NCUA’’s ACCESS which features four pillars focused on credit, education, stability, and support. Banks and trade associations launched financial inclusion projects driving new product innovations designed to increase access to traditional financial services in minority communities. In 2021, regulators, legislators and other stakeholders will continue to explore new ways to facilitate the use of alternative data to enable lenders to gain new insights on credit-ready consumers. There appears to be a growing recognition that financial inclusion efforts can be among the most effective ways to move the credit access needle. With strong momentum building, 2021 has the promise of realizing significant progress in this area.
The AI Policy Discussion Will Be Focused on Governance and Standards Development
Policy leaders have been racing to try to keep up with the fast pace of innovation, especially as it relates to artificial intelligence (AI). The past several years saw regulators standing up offices of innovation and Congress creating task forces to understand and explore the innovations being fueled by the use of AI and an expanding number of fintechs. With the arrival of a new administration, I expect there to be increased attention placed on AI governance and standards development. In policy circles, phrases like “powered by AI” will give way to an emphasis on “responsible AI”, “ethical AI” and “accountable AI.” Focus will be placed on corporate governance as it relates to managing AI development and use. In addition, there is growing acceptance for the development of a strong set of standards governing AI that is designed to be adopted by the public and private sectors. In 2021, look for increased activity (along with more funding for the effort) by the National Institute of Technology Standards.
With the Georgia senate run-off races, the commencement of 117th Congress and the swearing-in of new president just a few weeks away, the new year in the policy world will be frenetic from the outset. Fasten your seat belts, the ride will have its bumps as the deep political divide, new policy threats and the coronavirus pandemic still persist. However, if at least some of my predictions are correct, 2021 is poised to bring about some meaningful and positive developments in Washington for the financial services industry.
