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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

On November 15, the CFPB issued an order requiring an Illinois-based fintech lender to pay $15 million in fines. The order additionally prohibits the company from operating in certain lines of business and requires revision of its executive compensation policies.Continue Reading CFPB Files Action Against Fintech for Allegedly Violating Previous Order, Deceiving Customers, Withdrawing Funds Without Consent

On November 2, the FTC entered into a settlement agreement with a Manhattan-based fintech company for $18 million over alleged deceptively marketed cash advances to consumers and impeding customers’ ability to cancel memberships. The FTC alleged that the fintech company violated the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA).Continue Reading FTC Settles with Fintech for $18M over Deceptive Cash Transfers and Difficult-to-Cancel Memberships

On October 30, the Superior Court of California County of Los Angeles denied the DFPI’s motion for a preliminary injunction to force a Chicago-based fintech company to stop facilitating loans to California borrowers from its bank partner at interest rates above California’s interest rate cap (generally 36% for loans less than $10,000) (we previously discussed this case here and here).Continue Reading California Court Denies DFPI’s Motion for Preliminary Injunction Against Fintech

On October 17, the CFPB took action against a nonbank fintech company for allegedly deceiving consumers about the speed and cost of remittance transfers through its mobile app. The Bureau also alleges that the company illegally forced consumers to waive their legal rights, failed to provide consumers with legally required disclosures and receipts, and failed to properly investigate consumer disputes and errors. The CFPB is ordering the company to refund affected consumers nearly $1.5 million in fees and pay a $1.5 million penalty into the CFPB’s victims relief fund.Continue Reading CFPB Acts Against Fintech Operator of Mobile App for Illegal International Money Transfers

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

Earlier this month, the Colorado legislature voted to approve HB23-1229, which would opt the State out of Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”), a federal law enacted to create competitive equality between state-chartered banks and national banks. Section 521 gives federally insured banks, state credit unions, and state savings institutions the ability to export the interest permitted under their home state laws to borrowers in other states notwithstanding any interest limitations in the borrower’s state.Continue Reading Colorado Approves DIDMCA Opt-Out, Raising Concerns for Consumer Credit Access

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.
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.
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:
Continue Reading CFPB Targets FinTech for Faulty Automated Savings Algorithm