We are on the cusp of another quadrennial high-stakes drama that we call the US Presidential election. The stakes seem even higher than normal this year, given where the candidates fall on the political spectrum. The Democratic slate includes candidates that are just left of center to extreme left, while the current administration could be tagged as being right of center.
The outcome of this election can be of great import to lending and leasing companies. The current administration has been particularly friendly to businesses in this space, rolling back several, restrictive Obama-era regulations and essentially defanging the CFPB. By contrast, the Democratic candidates, particularly the progressives, seem to view this whole industry as predatory and requiring significant oversight. Private student lenders seem to be in their crosshairs more than any other group. With over a trillion dollars of outstanding student loans, it is a charged topic on the campaign trail. However, there are sharp contrasts in two major views on this topic –
- The progressives want to forgive outstanding student loans.
- The candidates to the right are of the opinion that students and parents are accountable for their financial decision to borrow. They cannot saddle taxpayers with the bill just because they have buyers’ remorse. However, they do want to provide protections against usury and other unscrupulous practices.
There is a whole cottage industry of prognosticators that is handicapping this race. The intent of this blog is not to wade into that debate or predict the outcome of the upcoming election. The intent is to outline the steps that lenders can and should take in the short-term, to prepare themselves for a possible change of administration in December, 2020.
There are three things that all lenders should consider doing in the short-term –
- Compliance – Make sure that you are compliant with the laws in every jurisdiction your service covers. A robust and compliant Loan/Lease management system can help ensure this. Care also needs to be taken to eschew ambiguous or misleading language in marketing of the products.
- Education – Invest in education to ensure that customers are better informed about the products, their options, and the implications of signing on.
- Enhanced Disclosure – In addition to Education, one way to blunt the criticism leveled by the left is to perhaps follow the lead of the healthcare industry and evolve from just reading disclosures to a form of digital informed consent. Disclosures can be long and have arcane language. A digital enhanced disclosure solution can combine targeted education with a comprehension test to ensure the buyer truly understands what they are contracting for with a digital signature and acceptance.
No one can predict how far a new administration might go in redefining the policy landscape for lenders and lessors. However, irrespective of the administration or the prevailing law, the above suggestions would usher in a new standard for responsible lending.
I would love to hear your thoughts on this topic, comments are welcome…