New York’s top bank regulator pledges focus on ‘kitchen table issues’

Adrienne Harris, the recently confirmed head of the New York State Department of Financial Services, says she’s focusing the agency’s enforcement work far more on “kitchen table issues” than was previously the case.

The agency will still penalize big banks when they run afoul of regulations, Harris said at an event Monday, but it’s also focusing on issues that grab fewer headlines but nonetheless have a big impact on people’s pocketbooks.

Last month, for example, the New York regulator reached a $10 million settlement with a life insurance company. And on Monday it announced an emergency action that will prevent a large hike in fees for consumers who use check-cashing services.

Check-cashing companies in New York are allowed to increase their fees each year to adjust to inflation, but the state agency said Monday it is reviewing that methodology for the first time in its history, and keeping check cashers’ maximum fees at last year’s levels in the meantime.

The move will prevent a significant fee hike for customers, given that U.S. inflation hit 7.5% last month.

“We’re going to ask hard questions and really make sure that the financial system is working for the people that it’s intended to serve,” Harris said at a Brookings Institution event, one of her first appearances since the state Senate confirmed her last month.

Harris, who is the first Black woman to lead the New York agency, said she wants to bring a new perspective and to help fix longstanding racial and economic disparities that got exacerbated during the pandemic.

She said her mission as DFS superintendent is to ensure the financial system is “fairer for everyone and more sustainable.”

Harris, who was the agency’s acting head before her confirmation, was nominated for the post in August by New York Gov. Kathy Hochul, a Democrat. The agency's previous head, Linda Lacewell, stepped down in August, part of the fallout from former Democratic Gov. Andrew Cuomo's sexual harassment scandal.

Harris, a former economic advisor to President Barack Obama, has continued her predecessor’s work on reducing the risks that climate change poses to the financial system. In November, the DFS created a new division that focuses solely on climate risks. The agency has already issued guidance on climate risks for the insurers it regulates, and it plans to release similar guidance for banks later this year.

While the DFS aims to play a leading role on climate risk, the agency has also been coordinating with other regulators to ensure it is not “completely disjointed from what’s happening” in other states, at the federal level or internationally, Harris said.

During Lacewell’s tenure, the DFS joined the international Network for Greening the Financial System, which consists of central banks and regulators in various countries. The Federal Reserve and Office of the Comptroller of the Currency are also now members, and Federal Deposit Insurance Corp. Acting Chair Martin Gruenberg said last week the agency will look to join the group.

Last February, the New York State DFS prodded banks and credit unions to finance renewable energy projects in low-income communities, telling them that they can get credit under the state’s Community Reinvestment Act for such actions.

Also last year, New York lawmakers expanded the scope of the state’s CRA to include nonbank mortgage lenders, whose share of the home loan market has expanded dramatically since the 2008 financial crisis.

“Now we can hold these nonbank lenders to the same fair lending standards that we hold banks to, which I think is a huge, huge advancement,” Harris said Monday.

The New York agency is also focusing on improving diversity at financial institutions, both across company ranks and at the top levels of management. The focus is “more than just about headcount,” Harris said, highlighting the importance of diversity in positions that manage business lines or work on emerging technologies such as the use of algorithms in lending.

In July, the New York State DFS surveyed the companies it regulates about the diversity of their boards and senior leadership, and it plans to publish aggregate results this year.

“This is just our first step,” Harris said. “And there will be much more to come after we’ve collected and published this data.”