On May 17, the FDIC and the CFPB took parallel actions to combat the misuse of  the name or logo of the FDIC and deceptive representations about deposit insurance.  The FDIC approved a final rule implementing its statutory authority to prohibit any person or organization from making misrepresentations about FDIC deposit insurance or misusing the FDIC’s name or logo.  The CFPB followed suit by releasing Consumer Financial Protection Circular 2022-02 providing that company’s likely violate the CFPA’s prohibition on deception acts or practices if they misuse the name or logo of the FDIC or engage in false advertising or make misrepresentations to consumers about deposit insurance, regardless of whether such conduct (including the misrepresentation of insured status) is engaged in knowingly.
Continue Reading FDIC and CFPB Take Action to Protect Against Misrepresentations about FDIC Insured Status and Misuse of Name and Logo

On April 25, the CFPB announced that it is using its “dormant authority” in order to conduct examinations of nonbanks posing risks to consumers.  The Bureau has direct supervisory authority over banks and credit unions, certain nonbanks, in addition to large depository institutions with more than $10 billion in assets, and their service providers.  With this announcement, the CFPB intends invoke its authority under the Dodd-Frank Act to examine nonbanks “whose activities the CFPB has reasonable cause to determine pose risks to consumers. This authority is not specific to any particular consumer financial product or service.”
Continue Reading FinTechs in Crosshairs as CFPB Invokes Dormant Authority to Examine Nonbanks

On April 7, the FDIC issued a Financial Institution Letter (FIL-16-2022) calling on all FDIC-supervised intuitions that intend to engage in, or that are currently engaged in, any activities involving or related to crypto assets to notify the FDIC.
Continue Reading FDIC Warns Insured Institutions Engaging in Crypto Activities About Risks

On April 8, the acting comptroller of the currency, Michael J. Hsu, discussed many aspects of stablecoins (we previously discussed the President’s Working Group report on stablecoins and Hsu’s comments here). In his speech at the Georgetown University Law Center, Hsu remarked that stablecoins are a “hot topic” among policymakers and posed three considerations that speak to the architecture of stablecoins.
Continue Reading Acting Comptroller Discusses Architecture of Stablecoins

On March 7, a Chicago-based FinTech company  filed a Complaint for Declaratory and Injunctive Relief in Los Angeles County Superior Court against the Commissioner of the California Department of Financial Protection and Innovation (DFPI), Clothilde Hewlett.
Continue Reading Fintech Flips Script, Sues California Regulator Over 36% Rate Cap Law

On February 8, the U.S. District Court for the Northern District of California ruled against three states – California, Illinois, and New York – challenging the OCC’s rule on the “valid when made” doctrine.  In 2020, the OCC issued a final rule codifying the “valid when made” principle by clarifying that the determination of whether interest on a loan is permissible is determined when the loan is made and that a bank’s transfer of a loan to a third party does not impact the validity or enforceability of that interest.
Continue Reading OCC Prevails in Challenge to “Valid When Made” Rule

On February 8, the District of Columbia attorney general announced a settlement with a FinTech company for alleged violations of the District of Columbia Consumer Protection Procedures Act (CPPA) by marketing high-costs loans carrying interest rates exceeding D.C.’s interest rate caps. The complaint, filed in June 2020, alleged that the company offered two loan products to D.C. residents with APRs ranging from 99 to 251 percent, exceeding D.C.’s rate cap limit of  24 percent.
Continue Reading DC OAG Reaches $4 Million Settlement with FinTech Over Claims of Predatory Lending

On November 3, Acting Comptroller of the Currency, Michael J. Hsu, remarked at the BritishAmerican Business Transatlantic Finance Forum 2021-2022 Executive Roundtable about the regulation of stablecoins and other crypto-assets (we discussed Hsu’s previous remarks on crypto trends and risks in earlier Consumer Finance & FinTech Blog posts here, here, and here). In his remarks, Hsu emphasized the following:

Continue Reading OCC: Bank Regulation Would Mitigate Crypto Risk

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

On November 3, Acting Comptroller of the Currency, Michael J. Hsu, remarked at the American Fintech Council’s Fintech Policy Summit 2021 about the growth in the digitalization of banking including the trend and attendant risks associated with keeping cryptocurrency outside of the bank regulatory system (we discussed Hsu’s previous remarks on crypto trends and risks in an earlier Consumer Finance & FinTech Blog post here).  Hsu noted that the cryptocurrency space includes “synthetic banking providers” (SBPs) who “operate out of the reach of bank regulators and free of bank rules.”  Hsu explained that “[m]any of these universal crypto firms hold themselves out as regulated.  But this is a half-truth.”  Hsu also argued that the “rebundling” of banking activities of taking deposits, making loans and facilitating payments by fintechs and the fragmented supervision of universal crypto firms pose significant risks to consumers, businesses, and financial stability.

Continue Reading OCC Calls for Regulation of Crypto Banking

Last week, the CFPB issued a series of orders to collect information on the business practices of six large technology companies operating payments systems.  The Bureau claims that the information will help better understand how these firms use personal payments data and manage data access to users so the Bureau can ensure adequate consumer protection.  The orders were issued pursuant to Section 1022(c)(4) of the CFPA, which authorizes the CFPB to order participants in the payments market to turn over information to help the Bureau monitor for risks to consumers and to publish aggregated findings that are in the public interest.  The CFPB notes that the development of new products and business models to meet consumer demands for online commerce and electronic payments during the pandemic “present new risks to consumers and to a fair, transparent, and competitive marketplace.”

Continue Reading CFPB to Tech Companies: Submit Payment System Information