May 20, 2025
Navigating Populism and Deregulation: What Finance & Accounting Teams Need to Know
Credit card issuers are operating in a political environment defined by contradiction—where populist sentiment is rising, but regulatory pressures are easing.
This Q&A with John Costa, SVP at Cardworks, explores how finance and accounting leaders are adapting to the shifting landscape, recalibrating risk strategies, and preparing for what may come next.
One of the most notable characteristics of the current political climate is the ideological tension between regulatory easing and populist policies. How is the current push-pull between regulatory rollback and populist policies shaping the way credit card finance & accounting teams approach compliance and risk management?
In general, regulatory easing (reduced compliance complexity, relaxation of capital rules, fewer restrictions on bank fees, etc.) has a connotation of being anti-consumer or anti-populist. In the years following the 2008 Financial Crisis, the reflexive regulatory posture was “pro-cyclical.” The prevailing view was that extreme bank policies led to the 2008 recession and that the only thing preventing banks from falling back into extreme risk taking and “predatory” lending was rigorous banking regulators (particularly, the CFPB). From this perspective, increased regulatory restrictions are viewed as a necessary populist safeguard.
Under the current political climate, the same sentiment (populism) is very much in evidence, but the regulatory approach is virtually opposite. No one is expecting the CARD act to disappear, but the defeat of recent regulatory initiatives (such as the proposed reduction in late fee charges) suggests threats to the credit card business that were on the horizon are much less certain now.
Whereas the previous regulatory position was that only regulators’ actions could protect consumers, the current posture views increased banking competition as the better way to create consumer benefit. Accordingly, the CFPB has retracted numerous guidance documents and has dropped many of the enforcement actions that were pending. Perhaps the macro change that best exemplifies this dynamic is the receptivity of the FDIC to new bank formation. In particular, the ability of non-bank FinTech lenders to now seek a banking charter is a regulatory “easing” that can increase consumer choice.
Accounting and finance teams have shown great dexterity in adapting to the new environment. Many credit card issuers, for example, had readied changes to cardholder agreements in anticipation of the late fee cap becoming a reality. Issuers must be current on changes in sentiment and must continually update contingency plans. While this isn’t anything new, the uncertainty of regulatory direction makes this more important than ever.
Do you think these dueling influences signal a broader shift in regulatory sentiment that finance and accounting leaders should consider when forecasting future constraints?
Yes, the populist tendencies on both the left and right side of our politics suggest that regulatory easing needs to have a pro-consumer benefit as one of the intended outcomes. This is not the contradiction that it might at first appear.
The conventional wisdom that what is good for banks (or bank investors more specifically) is bad for consumers leads to paternalistic regulations which inhibit new market entrants. Incumbents with significant market share often embrace regulatory complexity as a barrier to new competitors.
Of course, forecasting future constraints is a fraught exercise. Accounting and finance professionals can likely expect a period of less regulatory volatility which should translate to less compliance anxiety. If this environment persists for the duration of President Trump’s term, we might expect to see an improvement in non-interest expense for banks. Any expense reduction can allow a bank to reallocate resources to growth. For credit card issuers, marketing spend is one of the few controllable variable costs; marketing can be scaled up or scaled back depending on many factors such as credit risk outlook, cost of funds, other non-interest expense functions.
What are some of the other key trends we should be watching?
On the legal front, there are several state attorneys general that have been challenging some of the state bank charter rights, particularly interest rate “exportation” under the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). Such challenges to rate exportation are still a bit abstract, but finance and accounting leaders need to keep aware of these development which could have far ranging consequences.
From an M&A perspective, banking regulators are now more receptive to bank M&A activity, but there is still a strong populist voice in the current administration challenging large bank mergers, at least at the outset (e.g., consider the change in sentiment of the Capital One – Discover merger from the initial announcement to recent comments). Regarding portfolio M&A, the FASB seems ready to correct the “double counting” of the CECL adjustment for the purchase of “good enough” (i.e., not impaired) loans.
