Agency Rule-Making & Guidance

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On June 6, the FDIC, FRB & OCC issued final interagency guidance intended to assist their respective supervised banking organizations in identifying and managing risks associated with third-party relationships and in complying with applicable laws and regulations. The final guidance replaces and supersedes each agency’s existing third-party guidance “and promotes consistency in the agencies’ supervisory approaches toward third-party risk management,” and incorporates changes based on comments on the proposed guidance from July 2021 (see our previous blog post on the proposed guidance here). The prior sets of guidance from each of the agencies the final guidance rescinds and replaces includes the FDIC’s FIL-44-2008, FRB’s SR Letter 13-19 and CA Letter 13-21, and OCC’s Bulletins 2013-29, 2020-10. The final guidance is effective immediately.…

Continue Reading FDIC, FRB & OCC Issue Final Guidance on Risk Management for Third-Party Relationships

On June 6, the CFPB released a new report related to the adoption of chatbots by financial institutions, including those with advanced technology such as generative chatbots and others marketed as “artificial intelligence.” “In 2022, over 98 million users (approximately 37% of the U.S. population) engaged with a bank’s chatbot. This number is projected to grow to 110.9 million users by 2026.” According to the CFPB, “financial institutions have begun experimenting with generative machine learning and other underlying technologies such as neural networks and natural language processing to automatically create chat responses using text and voices.” Chatbots are intended, in part, to help institutions reduce the costs of customer service agents. …

Continue Reading CFPB Warns of Risks Related to AI Chatbots in Banking

On June 1, the CFPB published an issue spotlight and a consumer advisory detailing the risks associated with storing funds on digital payment apps, particularly in the event of a platform’s financial distress. Specifically, the issue spotlight presented the following findings with respect to consumer funds stored on payment apps:…

Continue Reading CFPB Highlights Risks of Storing Funds in Digital Payment Apps

The FTC’s Safeguards Rule compliance deadline is right around the corner – June 9. The Safeguards Rule requires non-banking financial institutions to develop, implement, and maintain a comprehensive security program to keep their customers’ information safe (we discussed the Safeguards Rule in a previous blog post here).…

Continue Reading Reminder: The FTC “Safeguards Rule” Compliance Date is June 9

On May 10, the CFPB announced the release Circular 2023-02 to confirm that reopening closed accounts may violate federal law. Based on its review of consumer complaints, the CFPB observed that after customers closed their bank accounts, some accounts were reopened without customer consent and then assessed overdraft/nonsufficient funds fees and monthly maintenance fees. The Bureau warned that such practices may violate the CFPA’s prohibition on unfair acts or practices. “When a bank unilaterally chooses to open an account in someone’s name after they have already closed it, this is a fake account,” CFPB Director Rohit Chopra said in the announcement. “The CFPB is acting on all fronts to halt the harvesting of illegal junk fees.”…

Continue Reading New CFPB Circular: Reopening Closed Accounts May Violate CFPA 

On April 26, 2023, the CFPB issued an advisory opinion, which reiterated that the FDCPA and Regulation F prohibit certain debt collectors from suing to collect on debt or threatening to foreclose on homes with mortgages past the statute of limitations, or “time-barred” debt. Such guidance is a result of actions by certain debt collectors to foreclose on silent second mortgages, referred to as “zombie mortgages,” that consumers thought had been satisfied and that are likely not enforceable in court.…

Continue Reading CFPB Issues Guidance to Protect Homeowners from Zombie Mortgages

On April 14, the CFPB filed a statement of interest in a case currently pending before the United States District Court for the Southern District of Florida in an attempt “to help protect consumers from discriminatory targeting.” In a press release announcing the filing of the statement of interest, the CFPB explained that “discriminatory targeting” is the act of directing predatory or otherwise harmful products or practices at certain groups, neighborhoods, or parts of a community.…

Continue Reading CFPB Statement of Interest Highlights Focus on Discriminatory Access to Credit

On March 8, the CFPB released a special edition of its Supervisory Highlights reporting on unlawful junk fees that were uncovered in a variety of servicing markets, including bank account deposits, auto loan servicing, mortgage loan servicing, payday lending, and student loan servicing during examinations between July 1, 2022, and February 1, 2023. Specific discoveries during such time period include:…

Continue Reading Junk Fees Continue to be Focus of CFPB, Biden Administration

On April 4, CFPB Director Rohit Chopra delivered remarks at the International Association of Privacy Professionals’ Global Policy Summit on the importance of reigning in repeat violators of consumer finance and privacy laws. According to the Director, the CFPB is to enhance penalties against repeat offenders of consumer protection laws. Such penalties could involve a broader range of agency remedies, including naming executives in enforcement actions and placing meaningful limitations on future business practices, in addition to simple fines.…

Continue Reading CFPB Director Elevates Priorities for Data Privacy & Repeat Offenders

On April 3, the CFPB issued a policy statement explaining the legal prohibition on “abusive” conduct in consumer financial markets provided in the Consumer Financial Protection Act (CFPA) and provided a summary past enforcement where these provisions have been applied.…

Continue Reading CFPB Issues Guidance on “Abusive” Conduct in Financial Markets