Fintech Week in Review: Week of November 22, 2019

The Fed Chairman Comments on Potential for a US-backed Digital Currency

Jerome Powell, Chairman of the Federal Reserve, wrote to Congress this week discussing the merits of implementing a central bank digital currency (CBDC) in the U.S. The letter responds to a number of questions posed by lawmakers regarding the value that a digital currency would provide and implementation challenges that would need to be overcome. Two Congressmen had expressed concern that the U.S. is being left behind in the wake of technological advances.

Chairman Powell indicates that the U.S. is not currently developing a CBDC, but the Fed is monitoring development elsewhere. Chairman Powell noted that some of the motivating factors for a digital currency in foreign countries do not necessarily exist in the U.S. Specifically, the demand for cash in the U.S. “remains robust” and there are fast and reliable digital payment services available that are not available in certain other countries. Continue Reading

Fintech Week in Review: Week of November 15, 2019

By Sam Boro, Nick Lundgren and Sean West on November 22, 2019 Posted in Blockchain, Electronic Payments, Industry Updates

California Prohibits Clinics from Using Deferred Interest Provisions

California signed into law SB-639 that prohibits medical and veterinary clinics and their agents and employees from establishing open-end credits or loans that include deferred interest provisions in an effort to protect patients and pet owners from signing up for certain credit, including credit products that accrue interest during a 0% introductory period. Additionally, clinics and their agents and employees cannot complete any portion of an application for credit or a loan for the patient or arrange for or establish an application that has not been completely filled out by the patient.

Senator Holly Mitchell commented on the new law that she co-authored stating “while third-party financing may have a place when patients need services they can’t immediately afford, products with deferred interest clauses have no place in medical practice.” Continue Reading

Fintech Week in Review: Week of November 1, 2019

By Sam Boro, Nick Lundgren and Sean West on November 7, 2019 Posted in Online Lending, Pre-Paid Rules

House Financial Services Subcommittee Hearing on Discrimination Against LGBTQ+ in Lending and Housing

The House Financial Services Subcommittee on Oversight and Investigations held a hearing this week on the extent and effects of discrimination against persons who identify as lesbian, gay, bisexual, transgender, or queer (LGBTQ+) when seeking housing or credit in the United States. A recording of the hearing has been made available online.

Testimony by Alphonso David, President of the Human Rights Campaign, Harper Jean Tobin, Director of Policy for the National Center for Transgender Equality, and others painted a bleak picture of the economic insecurity confronting LGBTQ+ communities. Their testimony attested to the correlation of lower household incomes to lower utilization of basic banking products, such as checking and savings accounts, LGBTQ+ communities face economic insecurity to a greater degree than their non-LGBTQ+ peers. Witnesses testified that factors contributing to this economic insecurity include lack of universal protection against housing discrimination, lack of equal access to benefits for same-sex partners, and lack of family support.

Fintech Week in Review: Week of October 18, 2019 and Week of October 25, 2019

By Sam Boro, Nick Lundgren and Sean West on October 28, 2019 Posted in Blockchain, CFTC, Online Lending

Federal Judge Rules the OCC Lacks Authority to Issue Fintech Bank Charters

U.S. District Judge Victor Marrero approved a final judgment in favor of the New York Department of Financial Services (NYDFS) that sets aside the Office of the Comptroller of the Currency’s (OCC) special-purpose chartering regulation for certain non-depository fintech applicants seeking a limited-service national bank charter (the Fintech Charter).

The OCC has claimed authority to issue Fintech Charters through (i) its leeway to interpret the term “business of banking” under the National Bank Act; (ii) its authority to issue limited purpose national charters under 5 C.F.R. § 5.20(e)(1)(i); and (iii) its authority to interpret the term “business of banking” in such a way that it can grant a special-purpose banking charter to a company that is engaged in any one of the three core banking functions: receiving deposits, paying checks, or lending money. Given its interpretation of its authority, the OCC did not go through the Administrative Procedure Act (APA) rulemaking process when initiating the Fintech Charter process.

Fintech Week in Review: Week of October 11, 2019

By Sam Boro and Sean West on October 16, 2019 Posted in Blockchain, Digital Assets, Electronic Payments, Industry Updates

OCC to Host Innovation Office Hours During Money20/20

On October 28, 2019, the Office of the Comptroller of the Currency (“OCC”) will hold Innovation Office Hours in Las Vegas, Nevada at The Venetian Hotel during the Money20/20 conference (October 27-30).

During the Innovation Officer Hours, the OCC’s Office of Innovation staff meets one-on-one with fintech firms and other companies that partner with banks to discuss new products or services to facilitate responsible innovation in the federal banking system. You can request an Office Hours session here until October 18, 2019. Continue Reading

Fintech Week in Review: Week of October 4, 2019

By Sam Boro and Nick Lundgren on October 9, 2019 Posted in Blockchain, Digital Assets, Electronic Payments, Industry Updates

Increase to the Management Interlock Threshold Rule Approved

The Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”), and the Federal Deposit Insurance Corporation (“FDIC”) approved a change to the thresholds in the major assets prohibition for management interlocks stated in the Depository Institution Management Interlocks Act (“DIMIA”). Prior to the final rule, the DIMIA prohibited a management official of a depository organization that had total assets exceeding $2.5 billion from simultaneously serving as a management official of an unaffiliated depository organization that had total assets exceeding $1.5 billion (referred to as the “major assets prohibition”). The approved change now increases the respective $2.5 billion and $1.5 billion thresholds to $10 billion each. Continue Reading

Fintech Week in Review: Week of September 27, 2019

By Sam Boro and Nick Lundgren on October 9, 2019 Posted in Blockchain, Digital Assets, Electronic Payments, Industry Updates

CFPB and FTC to Host Credit Reporting Accuracy Workshop

The Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”) recently announced that they will be hosting a public workshop on December 10, 2019 to discuss issues related to the accuracy of credit reports and background screening reports for employment and housing rental purposes. The FTC published a study on accuracy in credit reporting in 2012, the same year the CFPB began supervising large credit reporting agencies (“CRAs”) and furnishers of credit reports. Additionally, a 2015 multi-state settlement required CRAs to follow stricter standards for accuracy in credit reports. The workshop will include numerous stakeholders, including industry representatives, consumer advocates, and regulators. Comments may be submitted to the FTC until January 10, 2020 about topics for discussion during the workshop. If you would like to review any comment with us, please contact Sam Boro (SBoro@perkinscoie.com) or Nick Lundgren (NLundgren@perkinscoie.com). Continue Reading

Fintech Week in Review: Week of September 20, 2019

By Sam Boro and Nick Lundgren on September 24, 2019 Posted in Blockchain, Digital Assets, Electronic Payments, Industry Updates, Marketplace Lending

California Governor to Consider Capping Rate on Finance Lender Loans

The California State Assembly passed Assembly Bill 539, the Fair Access to Credit Act (FACA), with a vote of 61 to 8. FACA prevents licensed finance lenders from charging more than 36% (plus the federal funds rate) on consumer loans between $2,500 and $10,000. Reports from California’s Department of Business Oversight (DBO), as previously discussed here, found that many loans carried triple-digit annualized interest rates and were often issued to repeat, low-income customers.

Among other things, FACA requires lenders to report the borrower’s credit information to a national consumer reporting agency and offer a DBO-approved credit education program while largely prohibiting prepayment penalties. Notably, FACA allows for the collection of an administrative fee under certain conditions in addition to the interest cap. The bill also modifies existing loan term requirements. Now, the Governor must decide whether to sign FACA into law or veto it. Continue Reading

Fintech Week in Review: Week of September 6, 2019

By Sam Boro and Eric Wasik on September 12, 2019 Posted in Digital Assets, Electronic Payments, Industry Updates, Mobile Banking

Domestic

CSBS Suit Challenging OCC Fintech Charter Dismissed

For the second time, a federal judge has dismissed a suit brought by the Conference of State Bank Supervisors (“CSBS”) seeking to block the Office of the Comptroller of the Currency (“OCC”) from offering a national fintech banking charter. Judge Dabney Friedrich of the D.C. Circuit again found that the claims brought by the CSBS are not ripe, given that the no fintech charters have been approved or issued by the OCC, and therefore the CSBS lacks standing to bring the suit.

The New York Department of Financial Services (“NYDFS”), a CSBS member, has brought a separate suit on the matter in the Southern District of New York—and in that case, the judge has found the matter is ripe for adjudication and has allowed that suit to continue. In both suits, the plaintiffs allege the OCC’s fintech charter impinges on state sovereignty and exceeds the OCC’s congressional mandate. Judge Friedrich notes in her opinion that her decision runs counter to the decision in the NYDFS case but disagrees with that decision where it conflicts with the D.C. Circuit’s dismissal of the CSBS case. Continue Reading

Fintech Week in Review: Week of August 30, 2019

By Eric Wasik and Sam Boro on September 9, 2019 Posted in Blockchain, Digital Assets, Electronic Payments, Industry Updates

CFPB fines company for allegedly deceiving customers

The Consumer Financial Protection Bureau (“CFPB”) issued a consent order against a Texas money transmitter who communicated to customers that it would not be responsible for “errors made by banks or payment agents, or for any other reasons out of our control.” The company, Maxitransfers Corporation, focuses its business on providing remittance services to the Latin American community. The consent order notes that remittance transfer providers are responsible for the errors of agents, contrary to Maxitransfer’s disclosures. The order also alleges several other failings, including a failure to create written policies and procedures relating to the Remittance Transfer Rule, a failure to report error investigations, and treat International bill-pay services as remittances. The consent order does not allege any direct consumer harm.

The consent order requires the company to pay a $500,000 fine, maintain proper policies and procedures and a compliance program to ensure compliance with the Remittance Transfer Rule and train its agents, employees, and service providers. Continue Reading