The Consumer Financial Protection Bureau (“CFPB”) recently issued its first letter pursuant to a no-action letter policy launched in February 2016. The CFPB developed the policy to encourage innovation in the fintech marketplace by creating a testing ground for new technologies and consumer lending methods, particularly where the applicability or impact of existing regulations is uncertain. To take advantage of the policy, a company must submit an application describing the product, method, or service at issue and identify the specific rules and regulations for which the company seeks guidance. If the application is approved, a no-action letter is issued indicating that the CFPB “has no present intention to recommend initiation of an enforcement or supervisory action” against the applicant with respect to the specific product, method, or service and regulatory concerns covered by the company’s application.
By Soyong Cho
Yesterday, the FDIC hosted a day-long Economic Inclusion Summit that brought together stakeholders in private industry, the government, and non-profit organizations to discuss strategies to expand credit to under-served communities. Speakers stressed the need to understand the personal and financial challenges facing low- and moderate-income (“LMI”) populations in order to more effectively design products and marketing channels to reach LMI communities. Leveraging big data and technology were identified as key factors to reducing costs and profitably serving LMI customers.
Banks are of course rated on their outreach initiatives to under-served communities under the Community Reinvestment Act (“CRA”), but profitably expanding their customer base is also good business. The FDIC’s Summit serves as a reminder of the established programs, partnerships, and networks that exist to assist banks to meet their CRA obligations. However, it is also a good reminder that banks must be sensitive to the regulatory compliance and other risks attendant with marketing to and servicing LMI communities in particular, as even the best intentions can be undermined by flawed implementation or unclear regulatory guidance. Among others, UDAAP, fair lending, and privacy issues should be considered in all phases of product development and delivery. In the coming months, K&L Gates will be hosting a series of webinars focused on the nuts and bolts of consumer protection compliance.
New York partners Anthony Nolan and Judith Rinearson will be speaking in a Strafford live webinar on “New Special Purpose National Bank Charter for FinTech Companies: Evaluating the Benefits and Regulatory Pitfalls on Thursday, March 16 2017 at 1:00pm-2:30pm EDT. This will focus on a recent proposal by the United States Office of the Comptroller of the Currency (OCC) to consider granting special purpose national bank charters to FinTech companies that are engaged in fiduciary activities or in activities that include receiving deposits, paying checks, or lending money. The special purpose charter offers the benefits of federal preemption and some state licensing requirements. However, there are regulatory and supervisory burdens that must be carefully considered such as activity limitations, BSA/AML requirements and minimum capital and liquidity requirements.
The panel will provide an overview of the OCC’s proposal for special purpose national bank charters for FinTech companies and the potential regulatory pitfalls that FinTech companies must consider. The program will address the OCC’s chartering process and the supervisory, financial and operational conditions that would apply. It will review these and other key issues:
- Benefits of special purpose national bank charters for FinTech companies;
- Regulatory pitfalls of special purpose national bank charters for FinTech companies;
- The OCC’s chartering process and the supervisory, financial and operational conditions that would apply;
- Positions of other relevant US bank regulatory agencies;
- Implications for the future development of the Fintech industry in the United States.
For more information or to register click here.
On December 2, 2016, the Office of the Comptroller of the Currency (“OCC”) announced its plans to move forward with a proposal to consider applications from financial technology (“fintech”) companies to receive charters as special purpose national banks. The OCC simultaneously released a white paper detailing the program. The OCC is seeking comments on its proposal, including responses to 13 specific questions listed in the paper. The announcement is potentially significant for the fintech sector, but questions remain as to whether a special bank charter would represent a fundamental change or merely an incremental enhancement. The comment period ends on January 15, 2017.
To read the full alert, click here.
In the days following the U.S. federal elections that resulted in the election of Donald Trump as President and Republican control of the 115th Congress, FinTech companies, banks, and other financial institutions are increasingly asking whether they still need to worry about compliance with the landmark Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), Consumer Financial Protection Bureau (“CFPB”) regulatory actions, and other financial services regulations.
It is true that there will likely be some significant regulatory changes, but it is a little too early for industry participants to pop the champagne corks.
To see are our thoughts about some of the top issues impacting FinTech companies, banks and other financial institutions, click here.
K&L Gates will be co-hosting an event with the Silicon Vikings in San Francisco on Tuesday November 1st. This will be a panel session with presenting companies including: Checkbook, bitwage, StratiFi and Qwil. An event not to be missed.
The panel will include:
- Sanjiv Das, Professor of Finance, Santa Clara University
- Jacob Sisk, VP Payments & Data Science, CapitalOne
- Tyler He, Business Development, Tencent
- Moderator & Event Chair: Shikhar Das, Assistera
Details of the event:
- Date/time: Tuesday, November 1st, 6.00 pm – 8.30 pm
- Location: K&L Gates, 4 Embarcadero Center, Suite 1200, San Francisco, CA 94103 (google maps)
- Register: Click here for more details or to register to attend
For any queries, please contact K&L Gates partner, Lars Johansson.
Please join us for a webinar on the Consumer Financial Protection Bureau’s (“CFPB”) final rule (the “Rule”) on prepaid accounts.
The webinar will:
• Review the Final Rule in detail.
• Note industry responses to the Rule.
• Make projections regarding its short and long term impacts.
Linda C. Odom, Partner, K&L Gates
Judith E. Rinearson, Partner, K&L Gates
Jennifer L. Crowder, Counsel, K&L Gates
Eric A. Love, Law Clerk, K&L Gates
Ernest L. Simons, Associate, K&L Gates
Tyler Kirk, Associate, K&L Gates
To register, click here. Log-in instructions will be sent via email the day before the webinar. You must register to receive the log-in instructions.
By: Sean P. Mahoney
Bank regulators are paying more attention to the role of banks in the prepaid card industry as evidenced by their new guidance on the applicability of know your customer requirements and proposed regulations on record-keeping with respect to master deposit accounts for prepaid cards and other products utilizing “pass-through” deposit insurance.
The tragic terrorist shootings in San Bernardino on December 2, 2015 shed light on serious risks associated with online marketplace lending. The attackers obtained $28,500 from an online marketplace lender under a pretext, but then allegedly used the funds to reimburse their arms dealer. This apparent link between the money lent and the mass murders led public officials to re-examine the risks associated with this new and increasingly popular method of lending.
Online marketplace lending represents a chance for investors to realize greater returns and for borrowers to refinance expensive debt and pay less interest, as technology and peer-to-peer matching/evaluation greatly reduces the overhead of the business model. Given both the widespread interest in and the potential for the misuse of such online lending platforms, federal and state lawmakers and regulators are increasing scrutiny of the industry.