WASHINGTON — US President Joe Biden’s interim financial regulators are using a range of legal tools to quickly unravel contentious measures passed under former President Donald Trump’s administration, focusing on environmental, social and governance (ESG) issues, fair lending, and consumer protection.
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Here are some of the key changes:
Department of labor ESG rules
Last month, the DOL said it would not enforce a pair of highly contentious rules which curbed investments and shareholder votes based on ESG factors.
Trump administration officials had said the rules, which were respectively adopted in November and December, aimed to ensure workers’ savings pots were being responsibly invested in funds that would produce the best returns.
But investor advocates criticized the measures as a misguided attack on ESG investing which actually diminished investor rights.
Consumer financial protection bureau
After having its powers diminished by the Trump administration, the CFPB’s new leadership has been highly active with a number of policy changes in only a matter of weeks.
In March, the consumer watchdog rescinded a January 2020 policy on enforcing the agency’s mandate to pursue “abusive” practices. The new leadership said the policy was “inconsistent” with the CFPB’s duty to protect consumers.
At issue was a clause stating the agency would not seek monetary penalties and disgorgement for certain “abusive acts or practices” because the CFPB’s mandate to pursue “abuse” was inconsistent with state law, and might impede firms from offering lawful products or services beneficial to consumers.
Last month, the agency also strengthened fair lending laws by clarifying that discrimination against Americans based on sexual orientation and gender identity is prohibited under the Equal Credit Opportunity Act (ECOA), which permits regulators to interpret the scope of sex-based discrimination based on legislation introduced after the decade-ago crisis.
The Supreme Court issued a landmark decision in June ruling that the Civil Rights Act’s ban on sex discrimination also encompasses sexual orientation and gender identity discrimination.
The Trump administration’s CFPB had resisted to explicitly clarify the full scope of the law, but had been studying whether the Supreme Court decision should affect its interpretation of the ECOA, lawyers said.
The agency also proposed to delay this month a pair of debt collection rules finalized late last year which consumer groups said would give companies license to bombard Americans with unlimited texts and emails. Analysts said the delay would allow the agency more time to rewrite the measure entirely.
Securities and Exchange Commission
In February, Wall Street’s securities regulator restored the authority to about three dozen senior enforcement officials to independently subpoena companies and individuals for records or testimony.
Under previous SEC Chair Jay Clayton, the agency had stripped that power from enforcement supervisors and allowed only the enforcement division’s co-heads to approve new investigations, saying it would result in more consistent decisions about which tips and complaints justified probes.
SEC Democratic Acting Chair Allison Lee said restoring the enforcement staff’s investigatory powers would allow them to move quickly when signs of fraud or misconduct were detected.
Also in February, Lee said the agency would rescind a 2019 policy that had allowed companies to continue doing business while the SEC investigated misconduct allegations.
The so-called disqualification waivers policy allowed companies to seek a pass from some automatic and potentially devastating penalties, such as being barred from fund raising, while negotiating a settlement.
Corporate lawyers had praised the Trump-era policy, saying it would allow companies to know the full punishment they were agreeing to.
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