Linda Lacewell has prioritized consumer protection, promoted financial innovation and pushed banks to tackle climate change despite a distant relationship with industry and consumer advocates during her tenure as top financial cop in New York, according to agency observers.
Lacewell, who goes away her post as New York’s superintendent of financial services on Tuesday, took office promising to be a bulwark against the Trump administration’s retreat from consumer protection and climate change policies, as well as a champion of the responsible innovation.
For these purposes, she pursued a pursuit in progress against a rule by the Office of the Comptroller of the Currency that would grant national banking charters to fintech companies, defend New York’s 25% interest rate cap on loans, and push insurers and banks on issues of environment and diversity.
Lacewell’s attention was divided when the coronavirus struck in early 2020 and she was tasked with assisting New York Governor Andrew Cuomo (D) response team. Even before the pandemic, many of those who have dealt with the Department of Financial Services said the agency was not as aggressive or creative as it could have been when it comes to consumer protection, especially when it comes to consumer protection. that concerns FinTech companies and insurance companies.
“She seemed to really want to be innovation-friendly, but because she lacked a solid background in financial services, she seemed to have a hard time making the tough calls,” said Todd Baker, senior business researcher, law and public policy at Richman of Columbia University. Center.
One example is Lacewell’s treatment of early access payroll companies, a growing industry seen as an alternative to payday lending, but a it does not go within existing regulatory frameworks for lending or money transmission. A state investigation in 2019 slowed adoption in New York City, while other states allowed companies to operate after making monitoring agreements with them.
Lacewell also exercised tight control over staff, a hallmark of Cuomo’s outgoing administration. She had limited communications with consumer advocates and the financial services industry, according to people with knowledge of DFS operations under Lacewell.
One of Lacewell’s first actions was to create a set of working groups and advisory boards where DFS staff could speak with industry and consumer advocates from all walks of life. Those working groups limited the amount of direct contact Lacewell had with outside parties, several people said.
“I would say she created a forum for us to be heard, and it was certainly nice to have the audience with her staff. I feel like she could have made her staff more accountable, ”said Kirsten Keefe, senior counsel at the Empire Justice Center, a New York-based public interest legal group and think tank.
Lacewell, appointed by Cuomo in early 2019, is leaving the agency after a report from the state attorney general raised several allegations of sexual harassment against the governor. Lacewell, Cuomo’s former chief of staff and a close confidant, was mentioned as advising Cuomo on several occasions in the report and engaging in efforts to undermine his accusers.
In an Aug. 13 email to DFS staff announcing her resignation, obtained by Bloomberg Law, Lacewell said she was leaving the agency to allow Cuomo’s successor, Lt. Gov. Kathy Hochul (D), to appoint its own superintendent of financial services.
“We only have a moment to tell the difference. I’m proud of the work we’ve done together, ”Lacewell said in the email.
Push the industry
Lacewell, a former Assistant U.S. Attorney for the Eastern District of New York, brought in several other former prosecutors as part of a DFS reorganization and pushed the industry in several areas.
One was cybersecurity, where Lacewell’s predecessor, Maria Vullo, put in place landmark regulations that have become a de facto national standard for banks and other financial companies. When the rules went into effect under Lacewell’s watch, she created a DFS cybersecurity unit that investigated data breaches and focused on compliance and enforcement, according to Brian Mahanna, a WilmerHale partner. who previously served as chief of staff to former New York Attorney General Eric Schneiderman and Barbara Underwood.
“It has been one of their biggest goals,” he said.
The DFS under Lacewell was among the first American regulators to prod banks and other financial companies to integrate climate change into their operational and risk management plans. The state agency was the first American regulator join the Network for Greening the Financial System, a panel of international financial regulators, in September 2019.
Lacewell also pushed the insurance industry to take on climate change into account, making her one of the most aggressive state regulators on the issue.
So far, that push has not resulted in much concrete action, said Robert Hunter, a former Texas insurance commissioner.
“You have to see something happening that actually impacts people rather than talking about it, ultimately,” said Hunter, now director of insurance at the Consumer Federation of America.
In one of Lacewell’s last actions before she left, DFS announced that it expects the companies it regulates favor diversification their boards of directors and senior managers to include more women and people from under-represented communities. The move includes data collection starting later this year.
Lacewell’s DFS also modernized BitLicense, New York’s premier licensing regime for cryptocurrency businesses, making it easier for businesses to obtain conditional licenses and list new digital assets on their platforms.
But the DFS under Lacewell hasn’t taken consumer-focused action like regulators in other states have.
While states like California have ordered auto insurers to reimburse premiums collected during the pandemic when people are not driving, New York has refused to do so, Hunter said.
Baker highlighted Lacewell’s treatment of the Access Earned Wages industry, a collection of fintech companies that partner with employers to give employees quick access to part of their paycheck. .
The DFS responded to reports that some industry practices could work against the state’s 25% interest rate cap by announcing an industry survey in August 2019, but never moved forward with a enforcement measure, Baker said.
California, on the other hand, negotiated agreements with early-pay ISPs that allowed them to continue serving California consumers “while imposing conduct and reporting requirements to facilitate future decisions about regulatory treatment,” Baker said.
Some forms of access to earned wages, particularly payday advance options paid by employers as a benefit to employees, are seen as a more user-friendly alternative to payday loans.
Meanwhile, the market remains somewhat frozen in New York.