Page 12 - 4Q 2016 Reporter

The State of Compliance

Under Trump

by Victoria E. Stephen, Associate General Counsel for Compliance Alliance
ABOUT THE AUTHOR: Victoria E. Stephen serves as Associate General Counsel for Compliance Alliance. While
receiving her Bachelor of Business Administration in Banking Finance from the McCombs School of Business, Victoria
worked in both deposit and lending services. She continued her interest in financial services at the University of Texas
Victoria E. School of Law by focusing on secured transactions, taxation, contracts, and corporate governance. Victoria has
since worked in corporate tax law, mergers and acquisitions, and performed legal research on a range of regulatory
Stephen issues. As one of our hotline advisors, Victoria helps Compliance Alliance members with a variety of compliance and
regulatory questions.

The short answer is: nobody knows. What we do President for cause. As expected, the CFPB has
know, though, is that compliance certainly isn’t going filed an appeal for rehearing, so it’s less likely the
anywhere tomorrow. With regard to the financial administration will make a big move on this until the
services sector, the Trump campaign widely focused case is resolved. Indirectly, Trump could focus on
on increased economic growth and lending through underfunding the Bureau to temper its aggressive
deregulation. While it has yet to detail exactly how enforcement agenda.
it will go about that, it has generally criticized and Glass-Steagall Act
vowed to reform several key players.
Dodd-Frank Act In a less expected move, the Trump campaign
suggested it would work toward reinstating Glass-
We should start with the sweeping regulatory Steagall. If you don’t recall what that is, you’re
reform that is the Dodd-Frank Act. Despite pledging not alone. The Glass-Steagall Act was legislation
to “dismantle” the 2,300-page law, President-elect implemented back in 1933 in response to the Great
Trump is unlikely to be wholly successful in doing so. Depression in an effort to separate commercial and
The administration would face opposition not only investment banks. It was effectively repealed in
from congressional Democrats, but likely also from 1999, which some credit as the cause of the ensuing
some Republicans. The implementation of the Act financial crisis in 2008. It’s unclear whether the
since 2010 has been an expensive and burdensome push for “a 21st century Glass-Steagall” has any
task to say the least, but the time and money have legs, or whether the Trump camp was ever even
largely been spent at this point, and even those serious about it to begin with, but it is sure to be a
who initially opposed it are not all eager to destroy tremendous compliance hurdle if any version of the
the work of the past six years. A complete repeal prior law ends up being revived.
is unlikely, and even partial repeal would require
Those who say compliance is going away under
regulatory amendments that themselves would
a Trump presidency could not be further from the
require renewed compliance efforts. mark. Unwinding the existing mass of regulation
Consumer Financial will only task compliance departments with new
Protection Bureau requirements to interpret and implement. Any
regulatory reform that does come about would not be
Part of Dodd-Frank was the creation of the immediate and it’s questionable how much could be
Consumer Financial Protection Bureau (CFPB) reversed in four years. Even if federal enforcement
which, as we know all too well, is the independent of current regulation were diminished, private
government agency tasked with protecting litigation still exists and would be apt to increase
consumers from abusive banking practices. The as a result. Finally, deregulation generally means
main reason Trump is unlikely to directly interfere less government backing, so rather than relaxing,
with the CFPB anytime soon is the PHH Corporation compliance focus should be shifting from conforming
v. CFPB case that’s currently pending rehearing. to regulation to independent de-risking. In sum, the
In October of last year, the D.C. Court of Appeals uncertainty of the current regulatory environment is
ruled in part that the structure of the CFPB violates likely to bring the role of compliance to the forefront
Article II of the Constitution because it provides for rather than diminish it.
a single director that may only be removed by the

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Fourth Quarter 2016 IllInoIs RepoRteR