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On October 30, two leading fintech industry trade associations submitted comments (see comment letters here and here) in response to a joint Request for Information (RFI) issued by the Office of the Comptroller of the Currency (OCC), the Federal Reserve System (Fed), and the Federal Deposit Insurance Corporation (FDIC) (collectively, the “Agencies”) (see here for our previous discussion on the RFI). The RFI seeks input on the nature of bank-fintech arrangements, effective risk management practices, and the implications of such arrangements, including whether enhancements to existing supervisory guidance may be helpful in addressing associated risks. The comment period concluded on October 30.

Continue Reading Fintech Industry Trade Associations Respond to Federal Regulators’ Joint RFI on Bank-Fintech Partnerships
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On May 16, the Maryland Office of Financial Regulation (“OFR”) announced a settlement with a Missouri-based bank and its fintech partners for engaging in unlicensed lending, credit repair, and debt collection activities. 

In the OFR’s January 2021 Charge Letter, the agency alleged that the bank and its fintech partners violated Maryland law by its failure to hold a lending, debt collection, and credit repair license. According to the OFR, the bank offered in-store retail credit financing as well as store-branded credit cards to Maryland consumers. 

Continue Reading Maryland Banking Regulator Settles with Bank/Fintech Partnership For Unlicensed Lending, Credit Repair, and Debt Collection Activities
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In the FDIC’s latest monthly update on enforcement decisions and orders, the agency published recent consent orders it entered against both a New York-based and an Ohio-based bank, the latest in the agency’s series of enforcement actions against bank-fintech partnerships. The orders did not impose any fines or civil penalties but require corrective actions by the banks and their boards.

Continue Reading FDIC Issues Orders Against Two More Banks Over Fintech Partnerships
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On January 29, a Missouri-based bank and its Kansas-based fintech loan servicer filed a joint motion to dismiss a purported class action filed against them alleging violations of the Georgia Installment Loan Act (GILA) and state RICO law, arising out of a consumer installment loan. 

Continue Reading Bank Partnership Moves to Dismiss Class Action Asserting Violations of Georgia Rate Cap Law
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On January 25, the FTC announced that it was issuing Section 6(b) orders against five Big Tech companies requiring them to provide information regarding recent investments and partnerships involving generative artificial intelligence (AI) companies and major cloud service providers.

Continue Reading FTC Opens Inquiry Into Generative AI Investments and Partnerships
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On November 21, a Washington-based bank confirmed through a public filing that it entered into a consent order with the FDIC alleging that the bank engaged in unsafe or unsound banking practices, primarily related to products offered through a fintech partner. In particular, the FDIC determined that in connection with the bank’s relationship with the fintech, the bank engaged in, among other things, deceptive and unfair acts and practices in or affecting commerce by making implied claims that credit products with non-optional debt cancellation features were unemployment insurance, approving consumers who did not qualify for the debt cancellation feature, and misrepresenting the fees and benefits for those products.

Continue Reading FDIC Issues Order Against Bank Over Fintech Partnership
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The Federal Reserve Board recently issued two Supervision and Regulation Letters that provide guidance on the agency’s supervision of novel activities and the process such as fintech partnerships, crypto-related activities, and activities using distributed ledger or blockchain technology. 

Continue Reading Federal Reserve Issues Guidance on Supervision of “Novel Activities” by Banks, Impacts Bank-Fintech Partnerships
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In December, a Utah-based bank and its service provider entered into an assurance of discontinuance with the Iowa Attorney General and the Iowa Division of Banking, settling an investigation into allegedly usurious installment loans that the bank made to Iowa consumers. The Iowa AG alleges that, between March 2020 and April 2022, the bank made more than 1,600 installment loans to Iowa residents that imposed excessive finance charges in violation of state and federal law. Some of these loans, according to the Iowa AG, carried interest rates of nearly 200 percent, far in excess of the maximum allowable finance charge of 21 percent under the Iowa Consumer Credit Code and the limits established by Section 521 of the federal Depository Institutions and Deregulation Monetary Control Act.

Continue Reading Iowa AG Usury Investigation into Bank Partnership Ends in Settlement

On September 7, Acting Comptroller of the Currency, Michael Hsu, discussed the long-term threats to trust in banking in remarks at the TCH + BPI Annual Conference. Hsu provided updates on key priorities at the OCC, including the impact of “fintechs and big techs” over their digitalization of banking through the advancement of crypto (we discussed Hsu’s previous remarks on crypto here and here). Hsu highlighted the OCC’s position of a “careful and cautious” approach to crypto. In doing so, he referred to Interpretive Letter 1179, which clarifies that national banks and federal savings associations should not engage in certain crypto activities unless they are able to “demonstrate, to the satisfaction of its supervisory office, that [they have] controls in place to conduct the activity in a safe and sound manner” (we discussed Letter 1179 in a previous blog post here). Hsu noted that the federally regulated banking system has been largely unaffected by the collapse of several crypto platforms because, at least in part, of the OCC’s careful and cautious approach.

Continue Reading OCC Highlights Focus on Crypto and Bank-FinTech Partnerships, Anticipates Stricter Scrutiny Going Forward

Building on his remarks to the Blockchain Association and the American Fintech Council earlier this month, the Acting Comptroller of the Currency, Michael J. Hsu, issued a statement on November 16 before the Federal Reserve Bank of Philadelphia Fifth Annual Fintech Conference (we discussed Hsu’s previous remarks in an earlier Consumer Finance & FinTech Blog post here).  As in his prior statement, Hsu points to concerns that the rapidly growing FinTech industry and crypto firms, which currently sit outside of the so-called bank regulatory perimeter, ought to be proactively regulated and supervised in order to avert another 2008-like financial crisis.  In particular, Hsu calls for the regulation of non-banks and fintechs that “provide seemingly the full suite of banking and investment services—including in cryptocurrencies—with the convenience of tech.”  Hsu states that “[t]hese fintechs are reassembling the three legs of banking [by taking deposits, making loans, and facilitating payments] synthetically, outside of the bank regulatory perimeter” or what he refers to as “synthetic banking.”

Continue Reading OCC: Modernize the Bank Regulatory Perimeter on Bank-Fintech Partnerships