Should Compliance Change in Response to the New Administration?

by Barbara Boccia:

Just because there is a change in the White House, your compliance program should not automatically change. However, as always, you do need to align your program based on regulatory priorities, and also in response to any change in the risk tolerance at your financial institution (FI).

In times like these, it is dangerous to “assume” that you know how regulators under the new administration will govern. After all, we were surprised that the previous Director of the Consumer Financial Protection Bureau (CFPB) Rohit Chopra lasted two weeks in his job before President Trump appointed Treasury Secretary Scott Bessent as Acting Director of the CFPB. Also, don’t assume that all “financial institutions” will be treated the same. There may be policies that impact larger banks differently than community banks, credit unions or fintechs, or favor one type of FI over the other. There may be State regulators and Attorneys General that fill gaps left open by federal laws. The fact is, we just don’t know.

Additionally, be careful not to jump to conclusions. For example, just because legislation may be introduced to amend or change a rule (such as what is happening with regard to Dodd-Frank Act Section 1071 Small Business Data Collection), don’t assume that rule is dead. Yes, perhaps you review your project plan for implementation and consider opportunities to “adjust” big ticket items, however you don’t want to be caught being out of compliance if the legislation is not passed. You will want to remain attentive to regulatory and legislative updates, and act only upon definitive guidance or clearly articulated changes in regulatory priorities or legislative actions.

It's possible, however, that there are people you work with (e.g., the line of business) that may want to act quickly or take bigger risks to take advantage of this time of uncertainty. It’s important to communicate your assessment of risks to executive management and the Board of Directors, and only make adjustments if the risk tolerance at your FI truly changes. Do your best to advocate for a longer-term perspective, knowing that regulatory exams are always a retrospective looking back 2 to 3 years or longer, and things could change dramatically once again in another 2 to 4 years. And as mentioned – also keep an eye on activity by the States.