How the CBA Is Navigating Washington's Shifting Political Landscape

Speakers: Jim Marous & Lindsey Johnson

[Music Playing]

Jim Marous (00:11):

Hello everyone, thank you for being at our live podcast, it's always interesting. Last year we did our first live podcast here and we interviewed six individuals from the banking industry. They brought new insights, we had great dialogue, very informal.

Jim Marous (00:30):

Everybody before they show up for these things wants to know what's the script so I can get ready. We basically don't share scripts, we kind of shared ideas because the last thing we want them to do is over prepare because scripted answers aren't what you're here for.

Jim Marous (00:45):

I thank you for being here. I also want to thank Naehas for sponsoring the podcast series, they're very generous in making it so we can do this. So, I thank you, I hope we bring it all for you today. And I want to introduce our next guest, the President and CEO of the Consumers Banking Association, Lindsey Johnson. So, where do we start?

Lindsey Johnson (01:09):

Where do we start? So, where do we start?

Jim Marous (01:10):

I don't know if I can bring anything new to the table because you're in the press all the time and not bad and I'm not too sure if you always think it's always good because you have a lot of moving parts. For those who may not be aware, give us a little bit about your background and what got you to where you are today at the CBA.

Lindsey Johnson (01:33):

Sure so, thank you. Thank you for having me. Thanks for the conversation. We had a conversation earlier and it's always fun just to kind of nerd out on some of these issues with you, always appreciate the chance to do it.

Lindsey Johnson (01:45):

So, I've always kind of been at the nexus of financial services and policy, and so have been at a Federal Home Bank, and I'm sure every one of you know what the Federal Bank is. There were 12 at the time, there are now fewer.

Lindsey Johnson (01:58):

I was at the Atlanta Bank and then had the chance to go to Capitol Hill and work on senate banking and senate banking issues. Went to PWC and then kind of took a little bit of a leap of faith and started a trade association in mortgage finance and spent some time there before coming to my favorite job, which is Consumer Bankers Association.

Lindsey Johnson (02:20):

And I am sure that we have a number of members here in the room, I'll just give you a little bit of a one-minute spiel on CBA. So, CBA is the only trade association exclusively focused on consumer retail lending.

Lindsey Johnson (02:36):

And if it touches a consumer, whether it's credit card or home equity or auto or card or risk, CBA aims to be the lead voice. Our members for the most part are over 10 billion in assets and so those two things being over 10 billion in assets and being focused on consumer retail issues kind of make us the lead voice on CFPB issues.

Jim Marous (02:58):

So, with that as a background, you joined CBA how many years ago now?

Lindsey Johnson (03:04):

Two and a half.

Jim Marous (03:05):

Okay, so it's been a while. Post-COVID, in the middle of financial crisis but we have a completely different environment right now. If anything else, it's transitory, you don't know exactly what's going to come up the next day, it's not just a political issue, it's just overall the industry itself is moving so fast. What is the biggest challenge you face today at the CBA?

Lindsey Johnson (03:32):

Well, so first of all, I mean, you're right, the noise is sort of at this level that we haven't seen, and boring banking is gone, we haven't seen it since the financial crisis. I think the biggest challenges that I see are, we have so much attention from regulators, so much undue attention.

Lindsey Johnson (03:55):

If you can write a rule, if you can write a regulation that is common sense, is addressing a market failure, is addressing a consumer harm, absolutely it needs to be written. But what we've seen over and over again is just a lot of redundancy, a lot of rulemaking that doesn't truly actually have the outcome in mind before it's written.

Lindsey Johnson (04:17):

Or in the last several years, we've seen politics drive rulemaking, and we can get into that, but I think you've seen probably over the last four years, the industry find its voice like we haven't in quite some time and so we can get into that too.

Jim Marous (04:33):

Well, it's interesting because with every new change comes both sides of the story. We talked about earlier that something that looks relatively simple on the outset or good news limiting let's say interest rates on credit cards or limiting NSF fees may look good to the lay consumer, but there's all kinds of elements that underlie that it's your job to help your members communicate that to the public in a nuanced way because there's all kinds of policy decisions in that and regulatory and compliance issues.

Jim Marous (05:11):

How do you deal with that? I mean, when something comes up, either one of those, how do you work with your members, but how do you also become a voice of the industry so that you can get the message out that basically impacts every one of the people in the room, no matter if they're above 10 billion or not?

Lindsey Johnson (05:27):

So, I think the first and foremost thing is we're for consumer protection. I mean, this industry adheres to the highest standard of regulation, of consumer protection, of data privacy, of every standard, essentially after fair lending laws, we are for consumer protection. What's troubling though is that especially over the last four years where we did see political campaign polling actually driving some of the rulemaking around junk fees in particular.

Lindsey Johnson (05:55):

So, credit card late fees is a great example where you've got this rule that comes out following this announcement of junk fees and even the CFPB at the time admitted that 74% of consumers who paid their cards on time would see their costs go up. So, we peeled that back a little bit and we said, "Look, that's 50% of subprime borrowers who pay their bills on time are going to see their costs go up."

Lindsey Johnson (06:20):

So, so much of it, and it's not a bumper sticker, it's not junk fees, it’s the bumper sticker, but it's peeling it back and saying, "We're going to focus on the consumer," and if this truly is better for the consumer, then banks will adapt, if this truly is about consumer protection, banks will figure it out. But if we find that our consumers are going to be worse off, they're going to have less access to credit, then that's going to be something that we're going to work to address.

Lindsey Johnson (06:44):

In the case of credit card late fees, we went through the normal channels, you submitted comment letter, again, if many of you are part of our membership you know this process and there's other trade associations that you may have worked with as well but you submitted comment letter and I joke but it’s actually true.

Lindsey Johnson (07:00):

Submitting a comment letter over the last four years was like going to marriage counseling when your partner sort of picked out another spouse, it really wasn't doing a whole lot, they landed exactly where they had started. So, you kind of take it and you say, "Okay, our avenues for having our voice heard are no longer there."

Lindsey Johnson (07:17):

So, we actually did join a lawsuit against the CFPB on that rule. It's tied up in litigation right now, we actually see it being pulled back and there were a number of other lawsuits. That's not something that the industry has historically done, that was the first time that CBA has sued our prudential regulators ever and so, it's not a comfortable place, we don't anticipate it going forward, but it was necessary.

Jim Marous (07:40):

But it's interesting because there's so much social media around everything going on. Everything's being politicized, even if it's a somewhat non-political issue, there's dynamics of the different organizations that you have to work with that have a vested interest in certain things that you also have to represent the banking industry and the consumer.

Jim Marous (08:02):

As an industry overall, the financial institutions have always provided the leeway to say, "We have the customer's interest in mind," but now there's more scrutiny on what does that really mean, and do they really have the customers interests in mind or is it bottom line?

Jim Marous (08:21):

I mean, I'll argue the fact that today with data and insight and the way people are using even AI, there's more AI being used to streamline back office and save money than it is to make the consumer's experience better. That may be a little bit, I'm glad I'm saying it, not you, but the bottom line is, I don't see nearly as much momentum in the customer experience.

Jim Marous (08:43):

While there's a lot of talk, how do you work with other financial institutions to say, "We've got to get better than on this in an area such as data and insight, which by itself is a lightning rod for how much data is too much data, how much insight is too much insight?"

Lindsey Johnson (08:59):

Well, so a couple of things I'm going to peel back, it’s a multifaceted question, so I'm going to pull it back a little bit. So, overdraft is a great example where you did see the industry because of technology, because of a number of innovations led by the industry without the government, without regulators ever taking any steps whatsoever, the industry cut overdraft revenue in half.

Lindsey Johnson (09:20):

And that was really led by large banks because they could utilize that technology, many banks did it different ways. Some offered same day grace periods, 24-hour grace periods, the minis amounts. They looked at their customers, how did they use overdraft and they innovated. And so, they made that product more consumer friendly. So, that, again, all happened without regulatory intervention.

Lindsey Johnson (09:43):

I think when we think about consumer data and insights, again, it has to be in best interest of the consumer. So, to your point about the bottom line, it will hopefully benefit banks' bottom line, but the stickiness to that consumer, the experiences that that consumer receives, because they have those real-time insights and they're getting much more out of their experience with their bank, is that is the holy grail.

Lindsey Johnson (10:07):

And so, when we're talking about credit cards, for example, that's a great place where you see credit underwriting and AI and other technologies that is a very good place for that technology. You can underwrite more consumers, you can do it more efficiently, you can do it more effectively and hopefully bring more consumers into the banking system.

Lindsey Johnson (10:28):

Credit cards are the number one way that people have access to banking so it is about financial inclusion. Once they're in now, and this is really where I think we have so much work to do, and just a lot of really good promise out there.

Lindsey Johnson (10:43):

Once they're in, how do we improve their financial lives? How do we give them financial tools? And banks are doing this every single day. How do we help them understand how to manage their finances? How do we preemptively say, "Hey, it looks like you are going to have a small dollar loan need or you're going to have another product need.” How do we anticipate that and help drive that? Those are the conversations we're having right now.

Lindsey Johnson (11:07):

And part of it on the AI front is how do we make sure that regulators appropriately use the tools that are in place. So, model risk management that exists today is a fantastic tool. Banks adhere to it, it is effective for AI, it's effective for generative AI, non-banks don't. So, if we want to have a conversation about regulation of AI, let's start there.

Jim Marous (11:33):

So, you just mentioned the non-banks don't. How do you level the playing field or how do you work towards leveling the playing field, which may not be regulating down the fintechs, but opening the doors for traditional financial institution?

Jim Marous (11:50):

Because you have this whole paradox of risk reward of being able to say, "Okay, we say we want to do better for the consumer," but that's going to mean that financial institutions happen to open up their risk mindsets a little bit and not clamp down to the point that they're only looking at a loan.

Jim Marous (12:06):

So, how do you work at building the playing field? Not because you look back again, four, eight, you pick 12, we'll just take four. Why would we take four-year increments? But on the whole issue of we got to stop the fintechs from doing X to now really more likely saying we have to open the doors to allow the banks to do Y, how are you doing that right now?

Lindsey Johnson (12:31):

So, I think there's a couple of different things that we are communicating. One, our job is to make the regulatory and the operating environment better for our banks to be able to go out and do what they do. On the regulatory front and really just on the competition front, I think banks are welcoming the competition from a lot of fintech players.

Lindsey Johnson (12:50):

It is pushing us to be better, it is helping us see opportunity, they're nimble, they can execute these things. I also think that fintechs, especially over the last three years, have realized the benefits of having a bank partner, a bank partner that is not the tiny institution, the bank partner that has the wherewithal because third-party risk management has come under scrutiny, I don't think that that piece is going to let up.

Lindsey Johnson (13:15):

What I think that banks will continue to have problems with, and we should, is if you want to compete, compete, but if you're going to compete just solely on a regulatory arbitrage play, that's going to be a problem. And I think that we're going to have, and we are having more success explaining why that shouldn't be allowed.

Lindsey Johnson (13:33):

So, one great example, and I hate to pick on them but Chime is a great example. Where you've got Chime making close to $2 billion of revenue on debit interchange where banks have been completely knee capped and federal government, the Federal Reserve came in and set prices for banks on debit interchange.

Lindsey Johnson (13:52):

Why? If it's good for the goose, it should be good for the gander, the same thing for consumer protection. Consumers should not have to guess if they've got the same consumer protections depending on who and where they're getting their financial services from.

Lindsey Johnson (14:08):

So, our approach is like activity, like regulation, and if you want to bring down regulation on banks, we're probably all for it. But like I said, I mean there are a lot of good consumer protections that the banks adhere to that, it should just be extended to non-banks, it shouldn't even be a question. So, that's one of the things I think we're really thinking about.

Lindsey Johnson (14:29):

I do think we're going to see an evolution though. You've got folks like Miki Bowman in and this is the unfortunate thing, you talked about four-year increments. So, Trump 1.0, you had regulators with innovation sandboxes, you had fintech partnerships that were encouraged, Biden's administration came in and really started to crack down on that maybe because there was such an explosion over the last four years and it's just-

Jim Marous (14:53):

There's a lot that going on in the outside world too that made it so that people were losing their houses, all things were happening because of COVID, and people were very scared more than anything else.

Lindsey Johnson (15:03):

Yes. So, you had this explosion of lenders out to the regulatory purview and I think that regulators are also waking up to the message that we've been saying. We kept saying, "If you regulate so heavy handed in the banking space, that landing will move, it will migrate." So, you saw mortgage, especially through the pandemic, you saw mortgage transition to non-banks. They actually had the vast majority, it's kind of even down now but they had the vast majority of lending in that space.

Lindsey Johnson (15:29):

Personal lending, auto is moving, you just see business line after business line because of regulation that shouldn't exist. I do think that we're going to see a more open regulatory regime to seeing if we can have common sense regulations and try to apply those across the board.

Jim Marous (15:49):

So, you just had your annual event, big event, CBA live, I believe. What was the biggest concern that you heard at your event?

Lindsey Johnson (16:01):

It was kind of an interesting time as you can imagine. We're like a hundred days with this new administration and there's just a ton of focus on what are we going to see with this new administration. And I wish that I could tell our members like, "Look, you've got day jobs, you can stop worrying about what's happening in DC," but obviously that is not true, we've all seen just whiplash over the last 12 years or so.

Lindsey Johnson (16:27):

So, I think one of the biggest things is just what can we expect? The thing that we are focused in on is trying to leverage and identify those opportunities through the chaos and I think on the regulatory side, that's where we anticipate we're going to see some relief.

Lindsey Johnson (16:42):

We think that there's going to be an intense focus on pulling back regulation, but we went from overregulation and that conversation to a conversation about whether we were going to have certain regulators at all, including the CFPB, so that's been intense change that everybody's trying to work through.

Jim Marous (17:01):

And the uncertainty about you kind of referenced it that the thing that people were afraid of was not knowing what they should be afraid of, which again, gets into the whole use of data and AI to build resilience within your organization.

Jim Marous (17:14):

I think one major problem with, I'll say number 11, bank down in as far as size, is not using the data analytics, digital transformation mentality to say, "How do we prepare ourselves for what we don't know about?" We kind of seen the worst of many worlds.

Jim Marous (17:35):

In the last five years, we've seen COVID, we thought that was the end of the world, I don't mean that literally, but bottom line is organizations got a government regulation on a Thursday, had to implement it on a Monday, and they did it with nobody at work.

Jim Marous (17:47):

They did it digitally and didn't even know how to make decisions. And yet if you were to sit there and say, "Okay, could we think we could change X, Y, or Z in a five-day period?" Every bank would say, "There's no way we found a way to do it," so, that issues out the window. We then got into the financial uncertainty and complete change of interest rate environment and fintechs going out of business, things of this nature, which created an anxiety.

Jim Marous (18:16):

But I think we have to look at an industry that really has to use data and AI, not just to satisfy the customer, not just to drop costs, but to make it so that you're more prepared for shifts that will happen instantaneously in many cases without any warning.

Jim Marous (18:31):

I mean, you had your event and nobody knew what was going to happen the next day. I'm sure some people were staying up all night going, "Okay, when's it going to hit us?" How do you prepare, Lindsey Johnson prepare and your organization prepare by helping your organizations prepare?

Lindsey Johnson (18:49):

So, it's a great conversation that we had actually at our event and with our board and we talk about with our members. We've got 15 committees, again, these are typically the heads of the different product lines at the banks and we anticipate.

Lindsey Johnson (19:02):

And so, some of the largest institutions, as you all know, they've got stress tests but if you talk to a lot of the biggest banks, they'll say, "Look, we're doing that plus, plus, plus, we are working to anticipate every scenario. We are working to really understand what is our downside risk, we're also working to understand where are opportunities."

Lindsey Johnson (19:22):

And I think that the technology that you're talking about with AI and generative AI can help every institution really identify where are the risk and where are the opportunities. And so, for us, we were preparing for the opportunities as much as the risk.

Lindsey Johnson (19:36):

For over a year, our team was really planning for the outcome of the election, either side. January comes, the president's not in office yet, he comes in end of January, we release a white paper and we say, "Here's everything that should be done." And from our vantage point related to CFPB, because there's overreach, there were advisory opinions, they should have written a rule and you saw the administration be very open to that. So, find the opportunities and then understand the downside risk.

Lindsey Johnson (20:07):

If you didn't know that the president was going to focus on tariffs coming into this election, then you were under a rock because he has been very clear that that was his intention. I can't say whether it's going to be good or bad, I don't know how far it's going to go, but clearly this is something that we all knew was coming. So, we were preparing for that, we were talking about it, what's the impact of it going to be other-

Jim Marous (20:29):

Where's it going to land?

Lindsey Johnson (20:31):

Where's it going to land? That's exactly right. Other conversations, kind of political conversations about de banking and other issues, we have to anticipate those issues, we have to talk about those issues as an industry.

Lindsey Johnson (20:42):

We have to explain where we think the greatest de banking is happening, which in our strong view based on the data is because regulation continues to push products and services further and further away from consumers. So, anticipating those opportunities but also understanding the risks that come along with them was something that we were very apt to do.

Jim Marous (21:06):

So, also your event, what was the enthusiasm about, what were people talking about on the deposits? I guess there's no event that's all doom and gloom. In fact, usually they are an upbeat thing. What was the upbeat message this year?

Lindsey Johnson (21:22):

Look, again, I think that banks have found their voice. I think that we are back in this place where we understand that to win in this market, to win in this environment, you got to cut through the noise, you got to focus on where you have the right to win, that was a conversation.

Lindsey Johnson (21:37):

We actually had the CEO of Plaid, the CEO of the Consumer Bank for Bank of America, Holly O'Neill and then our chair who is the head of the consumer Bank for Citizens, Brendan Coughlin on the stage talking about weird-

Jim Marous (21:49):

What a great group. I'm sorry, I know all three of them, really cool.

Lindsey Johnson (21:54):

And each of them has a very different view about where they have the right to win and that's a great conversation to have and you should be asking that. And especially within this group, when you're talking about marketing and thinking about your consumer and where your bank is headed, where do you have the right to win and how are you positioning your bank to get there?

Lindsey Johnson (22:12):

That is a conversation I think people were really excited to have because that's an opportunity that I think everybody is sort of eyeing is, look, we've had the conversation about fintech versus bank and now we're in this new part of that conversation.

Lindsey Johnson (22:28):

We've had these conversations about regulation and about overregulation, now we're in a new part of that conversation. We're coming out of COVID, like there's just a little bit of a fresh start for this industry that I think people are trying to identify their opportunities and really season those opportunities in this moment.

Jim Marous (22:47):

The industry knows what the opportunity is. The industry knows that they have the opportunity to have a voice. However, we have seen in the past, and my entire career, which is a whole lot longer than … there's some people that weren't born at the beginning of my career. The reality is the ability to talk about what's good and what's the possibility are and deploying against that and actually doing it are sometimes miles apart.

Jim Marous (23:15):

How would you recommend organizations get unstuck and actually take advantage of the opportunities that are there and the ability to deploy against those opportunities as opposed to talking about those opportunities. As I said, AI and data is being used more and more to save money and that's one way to revenue but the other side is the part that really impacts the consumer who you're looking out for.

Jim Marous (23:42):

How do we do that? How do we get unstuck? How do you as an organization push if needed to get unstuck? Because you're looking out for the banks, but you're also having to look out for the consumer.

Lindsey Johnson (23:54):

No, it's exactly right. And I think if you are not deep in that conversation already, you're so far behind, not to scare you. But I mean, you think about Bank of America uses millions of data points every single day to improve the consumer experience and so, they are moving in that direction of anticipating the consumers needs.

Lindsey Johnson (24:15):

We do think about and you have talked about this in terms of just making banks move into that risk and I think that there is more openness to it. My job is to create a regulatory environment that allows for that in a safe and a prudent way but when we talk about leveraging data, well first of all, you've got to have the tech stack, you've got to have all the technology and the ability to actually leverage and use it.

Lindsey Johnson (24:41):

And so, it's not just small banks, when you hear even the biggest banks talk about that transformation and what it was like, and you watch banks like Capital One who went through a transformation not that long ago, around 2020 where they're moving from 103 tons of metal, literally moving through copper and metal to go to the cloud. That is an enormous transformation that took a lot of guts to get there.

Jim Marous (25:09):

A company that legendarily had more data than any of the big banks because they were in the credit card space where you had every transaction.

Lindsey Johnson (25:17):

And they know that that is the gold mine, they understand that that is how they're going to really tap into the consumer experience that is going to drive their business for years to come. And so, they had to take that chance, they had to take that risk.

Lindsey Johson (25:29):

Jamie Dimon was just talking about it. If you read a shareholder letter and his leadership speech, he talked about whether they were going to go to cloud and that he had some concerns initially about it. I think it's okay to have those concerns initially but then recognize quickly this is what's going to take us to the next place.

Lindsey Johnson (25:49):

So, banks are doing that actively. If you can join conversations with your peers, again, CBA has the heads of the different AI groups within some of the largest banks that get together and they talk about, "Here's the best use cases, here's the risk we've seen, here's the regulatory concerns that we've got and here's what we would like to see, the outcomes we'd like to see," so that we can be the voice and then go drive those regulatory outcomes to set that environment for them to do what they need to do.

Lindsey Johnson (26:18):

But again, if you're not moving, I think that that is probably the biggest concern, really understanding where are you right now? Do you have the data? Is it clean, is it usable? And then do you have the ability to actually leverage it.

Jim Marous (26:33):

And remembering that we have partners that we didn't have five years ago. 150 of them on our showroom floor right now that will help you make — we talked about this earlier, help make your data usable. You don't have to do yourself if you're using data as your excuse for not moving forward, you're missing the boat because there's 150 people out there that will help you at least solve for the problem you want to take care of within the data room.

Jim Marous (26:57):

As you mentioned, you served financial institutions that I would imagine this room the majority are not at the 10 billion plus. How does what you do have a trick of down effect on the beneficiary level to the smaller financial institutions? How do they benefit from what you're standing up for the larger banks for?

Lindsey Johnson (27:17):

Again, this is another conversation point that has shifted so it's no longer big versus small, at least not from a CBA perspective. And I think-

Jim Marous (27:25):

Not from an innovation perspective as we’re seeing.

Lindsey Johnson (27:27):

Not from an innovation perspective. I mean, so well let's take reg AI, where it was applied to 10 billion and above. If you were a smaller issuer in that marketplace, and pretty much everybody is, because everybody was using debit interchange, smaller issuers also saw their debit interchange revenue decline by almost a third.

Lindsey Johnson (27:47):

I mean, it is remarkable how that trickledown effect, that pressure, that competitive pressure to offer the same services to be as competitive impact smaller institutions as well.

Lindsey Johnson (27:59):

We think about things like third-party risk management, and this is an area where I think that there is an ability for us to actually change the outcome, for us to actually drive some positive change.

Lindsey Johnson (28:10):

Right now, third-party risk management is very unwieldy. So, whether we're talking about AI providers or any of the fintech providers that are out in your hallway that have services that are available to the group in this room that make smaller institutions in particular more competitive, more digital, more able to meet their consumers needs, we need to figure out how to make TPRM less unwieldy.

Lindsey Johnson (28:35):

It is very complicated. Can we do TPRM as a service? I don't know, but I think it's something we should look at. In Europe, I think regulators have taken a little bit more of a hands-on approach. In some ways that's good, in some ways that's bad, but in the U.S. it's up entirely to the bank to essentially be a regulator of their vendor. Well, if you're working with AWS, that's going to be tough to get your arms around that.

Lindsey Johnson (28:59):

So, is there an ability for the regulator to come in and say, "Look, let's share insights across bank, bank of Jim and Bank of Lindsey can share insights. You're using the same vendor; how can we do that in a safe way?"

Lindsey Johnson (29:09):

So, just a lot of things that I think we could do from a very practical standpoint that would make it more efficient and effective for small lenders in particular to benefit from some of these regulatory changes.

Jim Marous (29:21):

So, you look at AI and you look at data and insight, you just mentioned the ability to transfer information back and forth. How do you see that landing? Because it's going to have to land pretty quickly. How do you see that landing with regard to not just open banking regulations but the whole world, maybe Agentic AI type format?

Jim Marous (29:41):

How do you see it landing when you have small … Sathish in the previous interview said, "I'm worried about the 25-person shop that can make it, make banking as easy and as good as Ally in about six months. And I have to always worry about that creation being out there. So, I got to stay ahead of that."

Jim Marous (30:02):

How do you see this landing with regard to the ability to share data, the ability to make it so our data becomes more powerful? We already see Amazon doing it, heck, we see the pizza shop in the corner use it when we call up and they say, "Do you want the same thing you ordered last time?" Consumers want it. They want to be safe, but they want the benefits of data. How do you see this landing in the near term?

Lindsey Johnson (30:27):

Well, you hit the nail on the head in terms of the consumers are demanding it, so it's not an option anymore. And they've had that ubiquitous experience in their phone since 2008 and you had 2 million apps that have been proliferated on a phone, on an iPhone, and then you've got the secondary apps-

Jim Marous (30:45):

Talking to each other in some cases.

Lindsey Johnson (30:47):

Talking to each other and secondary apps that if you think back to Uber's initial days, they were leveraging the data in the technology of Google Maps and of payment systems setting underneath it. It was an open architecture. Can you imagine if we had that in banking? There's all kinds of issues now. So, while it sounds really, really good on the one hand, let's just think about the instances where it could go really bad.

Lindsey Johnson (31:14):

So the instances where it could go really bad, Pokémon Go, anybody who was familiar with Pokémon Go, I had a colleague walk me through this because Lea … actually talked about this in one of her speeches several years ago that when Pokémon Go was released, the parent company that stood behind it actually used an outdated version of Google's API and it exposed consumer's information, their email and a lot of information that the consumer really hadn't permissioned. It was a big, big deal that didn't stop half a billion consumers from downloading it.

Lindsey Johnson (31:47):

So, think about that on the scale within our industry, we can't have those issues, we can't have those mistakes. Banks are held to such a higher standard from a data privacy perspective, from FIKRA perspective, if we're talking about AI and credit decisioning from every perspective, we're going to be held to a higher standard that can't happen in our space. So, when we think-

Jim Marous (32:09):

But it can't hold us back either. I mean, it's a dynamic, it's a seesaw because on one hand we have the standards we have to live to, on the other hand, the consumers saying, half of them say, "I need all those standards." The other half are going, "Come on, don't make it so damn difficult."

Lindsey Johnson (32:30):

All those disclosures you got to work through and everything else. But look, I think on the open banking question, the industry is moving to open banking. We've been moving to open banking in this new kind of ecosystem for quite some time. The average consumer has around five fintech apps on their phone.

Lindsey Johnson (32:48):

That’s incredible, thinking about just five or six years ago that simply was not the case. So, we're moving in that direction and banks are moving to a more open architecture. Anyway, what's troublesome though is that the CFPB and their rule, and it's been challenged in court, we were not part of that challenge, but it has been challenged in court is-

Jim Marous (33:09):

You watched it closely.

Lindsey Johnson (33:10):

We watched it real close, let me tell you. They are moving to force it into a European style of open banking. And if you're going to go in that direction, which we have questions about, do they even have the authority? I would argue strongly they don't. But if they do and again, you can be pro-open banking and still not like this rule, if they did have that authority, they should have at least fixed the problems in the market. That's what a regulator does.

Lindsey Johnson (33:37):

So, stop screen scraping, hold other players to a higher data privacy standard. And at a minimum, if you're not going to do that, make sure that the liability doesn't come back on the banks. Because right now you all will be open to tons, pretty much endless fintech and others who want your consumer's data that you have to permission, you have to give it.

Lindsey Johnson (33:59):

And yet if there was something that went wrong with that consumer's data, you're going to be on the hook for it. We just don't think that's right. So, I don't know what's going to happen with this rule, a lot of questions. I do think that we're moving into this system of more open banking. I think that that's happening on its own.

Lindsey Johnson (34:19):

I guess, my request would be for the administration as they think about this, to maybe take the approach that they're taking on 1071, the 1071 rulemaking, which is small business data lending, I'm sure you all know. And they're going to say, "Look, we're not going to throw the entire thing out. It was required by Congress, but we're going to fix it. We're going to scale back the number of data fields in 1071."

Lindsey Johnson (34:39):

For 1033, they could address some of these problems or they could scrap it and they could just stick to the letter of the law, which says the letter of the law and Dodd-Frank says, the consumer has the right to their own financial data, says nothing about APIs and permissioning and all these other things.

Lindsey Johnson (34:55):

The consumer has the right to their financial data and every bank should believe that that is the right thing and I believe that we do believe that that's the right thing. So, again, I think we're moving in this direction, I hope that there's some regulatory parameters that make sense and that address the problems in the marketplace and don't exacerbate the problems that are already there.

Jim Marous (35:16):

So, we have different levels of spokespeople out there. We have the CBA, we have the CFPB, we have the Fed, we have all these organizations which say that are out there for the consumer, they want the banking industry to be fruitful and beneficial. How do you, how do others really make it so that these organizations try to come together before everything goes public?

Jim Marous (35:43):

It seems like … and mind you, you had an administration change, there's all kinds of other dynamics, but how do we make it so that the consumer doesn't get confused by the noise, where it seems like everybody's at each other's throats at times when they're all truthfully working towards the same end goal in context. How do we do that?

Jim Marous (36:03):

I know that and I give you the option to back out of that. I didn't mean to hit you with that, but on the other hand, I'm just talking from a concern. I'm not talking from a banking industry person because I don't have a vested interest except this event. How do we try to deal with that?

Lindsey Johnson (36:19):

Well, I can tell you from our bank's perspective, we are not only working to get the rules, the most honors rules that we believe hurt consumers. So, we believe in our heart of hearts because the data shows that consumers were going to lose out on the overdraft rule, they simply were.

Lindsey Johnson (36:36):

We believe and we know that consumers were going to lose out on the credit card late fee rule. So, we worked, and we actually just had the overdraft rule undone. We believe that the credit card rule would be undone in litigation, we're going to work every single one of those rules so that's the immediate thing that we're focused on. But our-

Jim Marous (36:53):

It wasn't going to help the consumer anyway.

Lindsey Johnson (36:56):

No, it was going to hurt them, for sure. Banks will have to pull those services back. So, we do believe that there is an opportunity though beyond those immediate changes to get permanent change. So, to your point, how do we get people in the room? How do we take politics out of regulation where it never should have been? And I think that we actually have an opportunity to do that so some of it's going to be noisy-

Jim Marous (37:20):

Sometimes disrupts and worse organic.

Lindsey Johnson (37:23):

But understanding that banks, again, from a CPB perspective, I don't believe the CFPB is going to go anywhere. They were created by Congress unless congress decides to undo them, which will not happen. Banks are going to be regulated by the CFPB. So, from our perspective, the CFPB is the only one that at least has supervision of non-banks. So, let's fix the CFPB, let's right size the CFPB, let's get them focused in the right way.

[Music Playing]

Jim Marous (37:50):

Everybody's on the same page.

Lindsey Johnson (37:52):

Let's get regulators in the room. We're not ever going to agree on everything, we understand that but if we all have the interest to the consumer, if we all actually do cost benefit analysis for the consumer, then I think most of these issues will get resolved well before it ever gets into the public.

Jim Marous (38:09):

Great answer. Because you've seen me before, we've talked before. I believe that you got to bring compliance within the bank, you got to bring compliance and legal into the equation earlier rather than later because it's just going to create confusion and disruption if you wait too long.

Jim Marous (38:25):

That was exactly the way you answered it, saying that "Let's get these voices together before we go public without anything." We have the same overall agenda. We may just have different paths to take. Lindsey, it is always a treat talking to you. I can't believe we had two in one day, but that was kind of cool. We did different angles on the same theme.

Jim Marous (38:46):

I appreciate everything you're doing with the CBA. I think everybody, if they don't already pay attention to what the CBA is doing, it is not just for the big banks, even though that's who you represent, it is for the consumer, it's for the banking industry and there's great intent and I appreciate what you're doing.

Lindsey Johnson (39:01):

Thank you.

Jim Marous (39:02):

Thank you.