Four key impacts Biden's victory may have on banking

With a projected victory in Pennsylvania on Saturday, Joseph R. Biden Jr. became the US president-elect, The New York Times reports. However, Republicans appear poised to maintain control of the Senate and made gains in the House of Representatives. Below we examine a few impacts that President-elect Biden's victory—and the divided government over which he will preside—are likely to have on the banking industry:

• New leadership for the CFPB. A June 2020 Supreme Court ruling granted the president power to remove the director of the bureau at will. A Biden administration will likely replace the current Consumer Financial Protection Bureau (CFPB) director, Kathy Kraninger, with a director whose vision includes greater regulatory oversight of financial institutions. Though Senate Republicans will have a say in who the new appointee is—nominees have to be confirmed by the Senate, where Republicans will likely continue to hold the majority—this will still be a big departure from the Trump administration under which the CFPB has scaled back enforcement efforts and repealed select Obama-era regulations.
• Increased likelihood of a moderate stimulus package. If no stimulus bill is passed during Congress's lame duck session, stimulus discussions between the Biden administration and the House—which is almost certain to remain under Democratic control—will likely have fewer sticking points than between the currently Democratic House and Republican administration. However, a consensus will still need to be reached between the two parties due to the Republican-led Senate, meaning that the total amount of any stimulus measures is likely to be lower than if final election results lead to unified control of the government.
• More small business aid in the vein of the Paycheck Protection Program (PPP). Among the economic recovery strategies outlined on President-elect Biden's campaign website is a call to repurpose the more than $100 billion that remained in the coffers of the PPP at the time of its expiry on August 8 to help small businesses. Whether this would be through a program exactly like the PPP or not is unclear, but it would likely mean that banks would need to be prepared to disburse further small business relief funds while simultaneously helping business clients with forgiveness applications for their existing PPP loans—a process that many have found confusing.
• A potential movement by regulatory bodies on overdraft fees. Overdraft fees are the most complained-about bank practice at the CFPB, averaging $33.47 per overdraft transaction, but they're a major revenue stream for banks: Overdraft fees brought in $11 billion annually in 2019 for banks with over $1 billion in assets, a $130 million increase from the year before, FDIC data shows. This represented 5% of noninterest income at banks. Democrats like Senator Cory Booker (D-NJ) have proposed changes to overdraft policies in recent years—including capping fee amounts or giving customers the option to pay them over time—and the CFPB under a Biden administration may well choose to take action to curb the impact of these fees.