Challenges, Opportunities & Best Practices for Government Affairs in Financial Services

Government affairs teams in the financial services sector face a unique set of challenges: the sheer volume of issues to track, the rapidly-changing nature of the industry, and the lingering effects of COVID-19 regulations and policies to combat.

Whether in real estate, consumer finance, banking, or insurance, government affairs professionals in the financial services industry must be nimble and can’t afford to miss any legislation, regulation, or headline from the local to the global level. Here are some of the challenges the financial services industry is facing, best practices from government affairs experts in the sector, and how to keep track of your most pressing issues.

Challenges in the Financial Services Industry

The increasing need to strengthen cybersecurity, changing (or slow to change) regulations after the pandemic, and rising inflation costs create plenty of difficulties for the financial services industry. Here are a few of the prevalent challenges government affairs professionals in this field are addressing and their best practices for managing them.

Financial Protections for Consumers Ending

During the pandemic, consumer protections limited how financial services institutions could operate, allowing people to continue managing their finances during a crisis. These included forbearance on mortgages and business loans, which are now coming to an end post-pandemic.

“Now we’re dealing with higher interest rates, folks rolling into a potentially larger amount of debt that’s due, and how they handle that,” says Wendell Robinson, senior director of government affairs at Rocket Companies. With rising inflation, it’s not as simple as repackaging consumers’ debt at a lower interest rate. “The government is trying to limit what we can do in terms of getting paid for the things that are due,” Robinson says, meaning financial services organizations are keeping a close eye on legislation as they seek to return to normalcy.

The pandemic is a stressor to government affairs professionals in the financial services sector, FiscalNote’s survey revealed — 73 percent said COVID-19 and the pandemic’s implications continue to increase their workplace stress.

The effects of COVID-19-era legislation will continue to be felt through this year, says Patricia Shermot, director of government affairs at Visions Federal Credit Union. Her organization is working with its members to do loan modifications and one-on-one meetings to maintain relationships and develop a plan that works for the clients. “We’re catering to them and meeting them where they are,” she says.

Despite these challenges, the pandemic also showed many organizations how to maneuver and remain flexible in a crisis. “We’ve been utilizing the realities of different crises as a lever to help us improve what we do in our industry,” Robinson says. “We were able to do that with COVID-19 — we looked at this as an opportunity to improve outdated regulations and policies that shouldn’t be in place.”

Cybersecurity

Cybersecurity and data privacy is an ongoing issue in the financial services industry that has been brought even more to the fore with the Russia-Ukraine war and concerns about cyber attacks.

The issue of cybersecurity has long been pressing for the industry, Robinson says, but he has to convince elected officials that “a piece of paper is much more open to fraud than a digital record is.” In the financial services industry, there are ample tools for online security protocols so that typically, when there is a security issue, it’s because “a human being did something wrong, not because the system itself failed,” he explains.

While tight security measures are in place, the industry continues to be concerned with having the right tools to protect consumers and educate them and elected officials on cybersecurity. Security in this sector is only improving, and the shift to remote work during the pandemic was a good stress test. “Most financial services workers were working remotely during the pandemic, and we didn’t see a lot of security breaches taking place,” Robinson points out. “You would think that would be a good opportunity for fraudsters to take advantage, but in the mortgage industry, we didn’t see that.”

Getting Legislators on the Same Page

Since many financial services organizations are regulated at the state level, government affairs professionals have the challenge of getting jurisdictions on the same page when dealing with regulatory affairs. This will become even more true in the coming years, as 77 percent of government affairs professionals in financial services expect state government to shape the landscape for the industry over the next five years, FiscalNote’s survey found.

Especially through the pandemic, regulations needed to change rapidly, and the financial services industry worked together with the states to modify rules so they could continue to operate. For example, prior to the pandemic, “If a client called one of my mortgage bankers at 10 p.m., that banker would not be able to answer their questions — it was against the law for them to answer unless they were sitting at a desk in their office,” Robinson says. During the pandemic, sitting at a desk in an office was no longer realistic, but since many regulations are created at a state level, it was hard to get consensus across the board.

The industry worked together to help regulators realize that this rule, among others, needed to change, and a number of emergency orders were issued to allow for remote work in the financial services industry. “That translated into improving regulations at the state level and to have a number of state legislative bills to support the allowance for remote work moving forward,” Robinson says.

Attracting & Retaining Talent

The “great resignation” over the last year (roughly 47.4 million people voluntarily left their jobs in 2021, according to CNN) has left a big talent gap in many industries, and financial services is no exception. “Lots of people are leaving their positions and there’s a war for talent going on right now, specifically tech talent,” says Robinson.

In order to combat this, financial services organizations are reexamining their employee benefits and policies to make positions attractive to top candidates. The ability to work remotely is one that many potential employees look for, according to Buffer’s State of Remote Work survey, so organizations have created hybrid and remote positions to meet this demand.

“We’re realizing an expanded workforce doesn’t necessarily have to live near one of our offices — they can participate in the work environment remotely,” Shermot says. FiscalNote’s State of Government Affairs report found that 54 percent of financial services professionals work fully remote, while 31 percent have a hybrid work environment.

No matter what benefits a company offers to its employees, listening to their needs and remaining open to feedback is critical. An annual employee engagement survey has allowed Visions Federal Credit Union to assess whether employees are satisfied and what their needs are, helping the organization retain talent. “We listened to employees through the pandemic and helped them navigate their needs,” Shermot says. “They, in turn, did that for our members.”

Issues to Monitor in the Financial Services Industry

With so many issues at the state and federal levels, here are a few that financial service professionals are keeping an eye on this year.

Robocalls

There is a lot of concern around the use of robocalls to connect with consumer clients, but there’s a broad definition of what a robocall is — in some states, a telephone call initiated by an electronic device without a dialing mechanism is considered a robocall, Robinson says.

This legislation does not acknowledge that many financial services professionals use their computers or mobile phones to call clients and don’t dial the number manually. “We have to have a more narrow focus on how we approach robocalls,” Robinson says.

Bad actors have found ways to get around legislation and regulation that deters robocalls and states are starting to crack down again on this issue. The concern for financial services is that “the government will overreach in how they attempt to remedy the problem without being fully informed of the ramifications,” Robinson says.

That’s why a lot of government affairs professionals must educate lawmakers on their businesses and how legislation impacts them. “Sometimes a well-intentioned elected official is writing a piece of legislation without considering the businesses that are impacted, even though they’re not the focus of the legislation,” Robinson says.

Since financial services is not the focus of robocall legislation, many consumer-facing industries don’t see the legislation or realize it will affect them until it’s too late, which is why tracking and being aware of these issues ahead of time is critical.

Overdraft Legislation

Government affairs professionals in the financial services industry are keeping an eye on upcoming legislation concerning overdraft fees introduced by Congresswoman Carolyn B. Maloney. The Overdraft Protection Act of 2021 seeks to ensure overdraft fees are “reasonable and proportional” to the cost of processing the transactions, limit the number of fees an institution can charge to one per month and six per year, and require that consumers opt-in to overdraft programs rather than being automatically enrolled.

Many financial services organizations are watching this legislation, as it could impact their overdraft fee policies, how much they can charge, and how often.

Environmental and Social Governance (ESG)

Across almost every industry, a company’s ESG performance can attract investors and customers alike. Financial services is recognizing trends in ESG and creating their ESG strategy — but in a fast-paced industry with constantly evolving issues to monitor, it’s a challenge to add in, Robinson says.

“A lot of companies are still getting their hands around ESG,” Robinson says. “We have the policy and advocacy pieces in place, but they haven’t had ESG at the focus.” While ESG takes a futuristic, zoomed-out approach, financial services is typically very focused on current matters with time constraints, making it a challenge to incorporate into an organization’s strategy.

But not only is ESG a framework that financial institutions and investors have to report on, but it is also on the radar of employees, regulators, and everyone involved in the ecosystem. Consumers and employees increasingly view ESG as a priority, with 76 percent saying they will stop buying from companies that treat the environment or its employees poorly, according to a PWC study.

Regulations are also driving the need for ESG strategy and reporting. The U.S. Securities and Exchange Commission just announced a new proposal on climate disclosure that mandates robust climate-related reporting, meaning ESG will continue to be pushed to the forefront for financial services organizations in the coming years.

How to Keep Track of Legislation in Financial Services

With a high volume of legislation and regulation at all levels of government, changes that affect the financial services industry can prove difficult to monitor. FiscalNote’s legislative tracking solutions can provide policy information at the global, federal, state, and local levels when you need it, so you can craft and execute a successful government affairs strategy that keeps your team and wider organization in the know.

“Hundreds of thousands of pieces of legislation got filed at the state level this year — you need a tool to help you sort through all that,” Robinson says. His team uses FiscalNote to track legislation and follow important keywords, along with using state-based consultants.

The majority of financial services organizations are currently following 10 to 20 public policy issues, and 77 percent said that number has increased since last year, according to a FiscalNote survey. The majority of financial services respondents (52 percent) said their biggest challenge at work is the volume of issues they need to monitor.

Shermot’s team takes advantage of FiscalNote’s powerful suite of tools including CQ and VoterVoice to create monthly reports of the federal and state issues they are monitoring. Her team relies on the tool’s advanced analytics to forecast a bill’s likelihood of passage and determine which issues need their attention.