Climate change and income inequality
Progressives are eager for financial regulators to use disclosure rules to promote more sustainable practices by corporations on the issues of climate change and economic and racial inequality.
Acting Chairwoman Allison Herren Lee said last Wednesday that she has directed the agency’s division of corporation finance to review whether public companies are adequately disclosing climate-related risks under guidance issued in 2010, and to prepare to update SEC policy on climate disclosures.
Expect senators to press Gensler on what sort of disclosure rules on climate change and other governance issues he thinks will be adequate to protect investors and the the broader financial system.
CFPB’s enforcement muscle
The CFPB has been gearing up to take a much more aggressive approach to overseeing mortgage lenders, student loan servicers and other financial institutions, even before Chopra’s confirmation. Last month, Acting Director David Uejio published a blog announcing the “new priorities and focus” of the agency, which include actions to help consumers who are suffering from the economic impact of COVID-19.
“I am concerned…that companies are failing to properly administer relief” as mandated by legislation, he wrote , including requirements that mortgage servicers offer distressed borrowers forbearance options. He also expressed concern over banks that garnished stimulus payments in order to cover bank fees or other debts.
Oversight of industry actions on this front could be a preview of the CFPB’s willingness to engage enforcement actions after four years when the agency declined to engage in what critics called “regulation by enforcement.” Chopra’s testimony could provide a window for investors to learn how aggressive the CFPB will be in this regard.
Student loans and mortgage-lending rules
“Chopra was the CFPB’s first student loan ombudsman and the office’s first three annual reports under Chopra all focused on servicing issues in the private-education loan industry,” wrote Edwin Groshans of Height LLC in a Monday note to clients, adding that he expects that a combination of Chopra’s background and push by Senate Democrats to cancel student-loan debt to make this a key topic to watch on Tuesday.
“We expect the CFPB to pursue enforcement actions against [student-loan] servicers that did not disclose all payment options to borrowers,” Groshans wrote, noting that investors in servicers including Navient Corp. /zigman2/quotes/204528402/composite NAVI +1.05% , SLM Corp /zigman2/quotes/205828282/composite SLM +0.87% . and Nelnet Inc. should pay special attention to the proceedings.