Will McKernan Bring a ‘Regulatory Light’ Touch to the CFPB?

This Thursday (Feb. 27), the Senate Committee on Banking, Housing and Urban Affairs is scheduled to hold a hearing on nominees to head a variety of departments — including Jonathan McKernan, who has been tapped as director of the Consumer Financial Protection Bureau (CFPB).

And while the hearing will almost certainly offer up insight and testimony on the future direction of the agency itself, there are some tea leaves to be read at this moment, where the presumptive director might take the CFPB: toward a “regulatory light” future.

There are indications that the rollback has begun, as this past week, under the leadership of acting director Russell Vought, the CFPB filed to drop a lawsuit against SoLo Funds, an online lender. As reported last year, the CFPB sued SoLo, alleging that the firm, alleging the online lending platform used “digital dark patterns” to illegally collect fees from borrowers. The CFPB’s court filing noted that the suit — in an agreement between the plaintiff and the defendant — is dismissed with prejudice, which means it cannot be revived against SoLo.

Vought said on X last weekend that “the CFPB tried to destroy this company, SoLo, which incurred millions in legal fees and had to lay off 30% of its workforce. It was wrong and we dismissed the case. More to come but the weaponization of ‘consumer protection’ must end.”

Signals From the FDIC?

McKernan was nominated on Feb. 11, and would come to the CFPB from a tenure on the Board of Directors of the Federal Deposit Insurance Corp. (FDIC), which ended with his resignation as his term expired just before being nominated as CFPB director.

There are still a number of unknowns, given the fact that, as of earlier this month, after Rohit Chopra was fired as director, all rulemaking had been paused at the CFPB. The freeze has touched on everything from overdraft rules to buy now, pay later innovations. And it may be the case that lawmakers will look to use the Congressional Review Act to rescind rules that were already put into full force by the CFPB tied to those (and a host of other) activities.

And it is with McKernan’s statements while at the FDIC that we might glean some indication of regulatory policy assuming he is confirmed to lead the CFPB.

As has been reported by PYMNTS, in recent weeks, during hearings on Capitol Hill, industry observers and participants have stated that de novo banking processes are stymied by regulations. In his own comments on industrial bank applications (industrial loan charters are among the avenues FinTechs use to become banks), McKernan said that the FDIC “harbored a presumption against deposit insurance and other applications by captive industrial banks.”

In other comments, elsewhere, he wrote in a social media post on financial service in general that, “We should avoid the temptation to pile on yet more prescriptive regulation or otherwise push responsible risk taking out of the banking system.”

In conversation at a FinTech conference last summer, he said that guidance on bank/FinTech partnerships could be activity specific, and added that there is room for “creative disruption” against some of the larger financial institutions.