US banks face tougher Congress scrutiny

Wall Street banks are preparing for heightened scrutiny after Democrats took control of the U.S. Congress, with the new majority set to assume power in January. Executives and analysts expect lawmakers to investigate cost-of-living issues and consumer finance practices, and to summon bank chiefs to testify. Lenders anticipate spending more time responding to congressional staff inquiries and preparing for hearings as investigative teams gain subpoena power.

Attorneys and advisers say many financial services firms have been conducting risk assessments of their dealings with the Trump administration and identifying areas that could draw congressional interest. Some firms are already engaging with senior Democratic lawmakers ahead of the transition. One legal adviser described the period between now and year-end as critical for pre-emptive work, including checking for any pending congressional inquiries that may not have been addressed.

Democrats are widely expected to probe practices that may raise customer costs, including junk fees, predatory lending and mortgages. One banking source said there may also be examinations of whether a pullback on regulation and oversight has hurt customers or weakened lenders. Analysts have flagged potential policy risks such as caps on credit card interest rates, an issue where there is broad bipartisan interest.

Commentary from industry observers suggests that efforts could be made to restore restrictions on banks and revive consumer protection initiatives. Senior Democrats have repeatedly raised concerns about affordability, including housing costs, and have accused the current administration of eroding consumer finance protections. The administration has said it is cutting red tape that has stymied lenders.

Senator Elizabeth Warren, the top Democrat on the Senate Banking Committee and a long-time Wall Street critic, is seen as the frontrunner to chair that panel. Representative Maxine Waters, the top Democrat on the House Financial Services Committee, is viewed as the leading contender to chair that committee. Both have a record of pressing large banks on consumer issues.

When Waters previously ran the House financial services panel, she called the CEOs of the largest banks to testify. Analysts now expect a repeat of those appearances as Democratic control of both chambers increases the odds that bank leaders will be summoned, with their firms subject to more frequent hearings. Analysts also note that with the shift in power, the run of legislation viewed as favorable to banks is likely over.

Despite the prospect of tougher oversight, banks see an opportunity to advance certain policy goals, particularly around financial fraud. Industry participants have been coalescing around pushing tech and social media companies to do more to curb scams that are harming bank customers, including those driven by fast-evolving artificial intelligence. One banking chief executive said tech firms should commit to excluding accounts linked to fraudsters and expressed confidence that this could attract bipartisan support.

Banks are also weighing efforts to have lawmakers review regulations governing wire transfers as part of a broader push on fraud. Some in the industry believe public concern about AI development and related infrastructure, highlighted in the midterm elections, could help advance the fraud agenda in Congress. Overall, banks are preparing to engage early with lawmakers on fraud, credit-card fees, artificial intelligence and consumer protection as the new Congress takes shape.