Predicting the Financial Services Regulatory Landscape in Light of the GOP Win in 2024

The GOP’s dominance in the 2024 presidential election suggests that financial regulation is likely to experience some shifts in priorities. While Republican administrations traditionally favor a deregulatory approach, recent history shows that major consumer protection or systemic risk violations often draw bipartisan attention and rigorous enforcement. Furthermore, it is worth noting that while Trump’s appointee to the CFPB, Director Kraninger, reduced the severity of enforcement actions, the number of those actions actually increased.

Sustained Enforcement Despite Deregulatory Goals

Historical precedent illustrates that Republican administrations are still prepared to enforce regulations when violations are severe. The continuation of major enforcement actions following Democratic presidencies—such as the Wells Fargo account scandal, the money laundering scandal involving Goldman Sachs, and the Facebook-Cambridge Analytica data privacy breach—demonstrates that significant cases are often immune to partisan shifts in regulatory priorities. Even under Trump’s deregulatory agenda, regulatory agencies like the Department of Justice (DOJ), the Federal Reserve, and the Consumer Financial Protection Bureau (CFPB) imposed significant penalties on major institutions that failed in compliance, data privacy, and consumer protection obligations.

The Potential for Bipartisan Efforts in Key Areas

With financial technology and the complexity of global finance evolving rapidly, bipartisan efforts may continue to address critical areas of regulation, particularly for cases that threaten consumer safety or economic stability. For example, cybersecurity risks, data privacy concerns, and anti-money laundering (AML) compliance are issues that affect both individual consumers and broader financial markets. Many of these topics already attract bipartisan support, as seen with Equifax’s 2019 data breach settlement and Deutsche Bank’s mirror-trading sanctions under the Trump administration. Even a Republican-controlled government may recognize the need to uphold these standards to protect the U.S. economy and mitigate the impact of global risks.

Venture Capital’s Impact: More Risk, More Regulation

Venture capital’s growing role in financial services, particularly through investments in fintech and digital assets, brings both innovation and new complexities to the market. The rapid scaling of VC-backed startups often pushes regulatory boundaries, introducing products like cryptocurrency platforms, decentralized finance (DeFi) applications, and AI-driven lending tools. These innovations present unique challenges, including heightened cybersecurity risks, data privacy concerns, and complex compliance requirements, which add layers of risk to the financial ecosystem.

Regardless of which party is in power, the government often responds to these emerging risks with targeted regulatory measures. For example, the dramatic growth of crypto assets and high-profile failures like FTX have spurred bipartisan support for enhanced oversight of digital assets to protect consumers and prevent financial instability. Similarly, the expansion of AI in lending has raised concerns about discrimination and transparency, prompting calls for more rigorous compliance checks and guidelines.

As VC-backed companies continue to reshape the financial landscape, it’s likely that regulatory responses will follow. Rather than alleviating regulatory burdens, the rise of VC-funded fintech and RegTech companies may actually lead to more targeted regulations aimed at managing new risks and protecting consumers. Thus, even under a GOP administration with a deregulatory stance, the market-driven complexity introduced by VC-backed innovations may prompt bipartisan actions to address the resulting vulnerabilities.

State Regulators Poised to Increase Oversight

If a GOP administration in 2024 leads to a less aggressive stance from federal regulators like the CFPB, state regulators are likely to step in to fill any perceived gaps. State attorneys general and regulatory agencies have increasingly taken the initiative on consumer protection issues, particularly when federal oversight has appeared to wane. A recent example is Pennsylvania Attorney General Michelle Henry’s bipartisan coalition of 26 states urging federal authorities to curb the use of artificial intelligence in marketing calls, reflecting state-level determination to protect consumers from emerging technological risks.

State regulators have demonstrated a growing willingness to address financial risks on their own, and many states are building their regulatory frameworks to oversee high-impact areas like data privacy, anti-predatory lending, and AI applications. With a decentralized approach, states can implement more stringent consumer protections, often surpassing federal standards. This has already been observed in states like New York and California, where regulators have set comprehensive financial and consumer protection standards for issues such as data security and collections.

Conclusion: Persistent Enforcement and Increasing State-Level Oversight

While a GOP administration may prioritize selective deregulation at the federal level, enforcement actions for significant violations are likely to persist, especially in cases involving systemic risks, consumer harm, or severe compliance failures. The rise of complex, VC-backed innovations in fintech and AI-driven financial products introduces new risks, often prompting regulatory responses to ensure market stability and consumer protection. As the landscape of financial services continues to evolve, states will likely play an even larger role in shaping regulatory norms, particularly in response to risks posed by emerging technologies. This shift means that even if federal regulators adopt a lighter touch under a GOP administration, financial institutions and fintech firms will still need to navigate a complex patchwork of state regulations aimed at safeguarding consumer interests and financial stability.

In this landscape, firms should prepare for sustained regulatory scrutiny from multiple fronts, as both market-driven complexities and proactive state oversight contribute to an evolving, intricate regulatory environment.

Clark Hill’s Financial Services Regulatory & Compliance group will continue to follow and monitor this changing regulatory landscape.

Our team helps clients navigate this rapidly evolving regulatory environment. Our exceptional team of lawyers and government and regulatory advisors has extensive experience and knowledge of the laws and regulations governing financial products and services. We can assist clients in developing and implementing compliance programs. For more information, please contact Joann Needleman at jneedleman@clarkhill.com.

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