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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

The U.S. Department of the Treasury recently released a report titled “Assessing Impacts of New Entrant Non-bank Firms on Competition in Consumer Finance Markets,” a product of the Biden administration’s effort to assess competition in different aspects of the economy. The report focuses primarily on FinTechs and other new entrant non-bank firms, including the consequences of their participation with insured depository institutions in core consumer finance markets (e.g., credit, deposits, and payments) and recommendations to enhance oversight of non-bank financial institutions.
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Continue Reading Treasury Report Sets Guidelines For Oversight on FinTech Participation in Core Finance Markets

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

On August 10, the CFPB issued a consent order against a FinTech company for a faulty algorithm utilized in its personal finance management app that caused consumer accounts to overdraft and incur overdraft penalties. According to the CFPB, although the San Francisco-based fintech company promoted the app as a savings tool for consumers, it engaged in deceptive acts or practices in violation of the CFPA by:
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Continue Reading CFPB Targets FinTech for Faulty Automated Savings Algorithm

On June 3, a federal court filing in the Southern District of Florida by an Atlanta-based FinTech company revealed that the small business lender is under DOJ investigation for alleged PPP loan approval practices. According to the FinTech, by August 2020, it processed over $7 billion in PPP loans to at least 300,000 small businesses.
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Continue Reading DOJ Investigating FinTech Over PPP Loans

On May 4, the Connecticut Department of Banking issued a temporary cease and desist order directing a peer-to-peer lending platform that connected borrowers with third-party lenders to cease its lending-related activities on grounds that it was operating as an unlicensed small loan company.  The FinTech company was also cited for operating as an unlicensed consumer collection agency, and for engaging in deceptive acts or practices under consumer protection laws. …
Continue Reading Connecticut Stops FinTech from Unlicensed Lending Activities

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 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