Fintech Week in Review: Week of August 9, 2019

U.S. Developments

Federal Reserve to Build Real-Time Payments System

After years of speculation, the Federal Reserve announced this week it will create a real-time payments system, which it expects to be live by 2023 or 2024. The system, the FedNow Service, was announced by Federal Reserve Governor Lael Brainard during a speech at the Federal Reserve Bank of Kansas City. During the announcement, Brainard highlighted the strong support for the project the Federal Reserve received during its public comment period, noting that 90 percent of the comments called for the creation of the system. The system will allow near-instant transfers of funds 24 hours a day, 7 days a week, between depository institutions eligible to hold accounts at Federal Reserve Banks.  Eligible depository institutions will also be able to designate a service provider or agent to submit or receive payment instructions on the institutions’ behalf. The FedNow Service will be designed for payments of $25,000 or less. Continue Reading

Fintech Week in Review: Week of August 2, 2019

U.S. Developments

FinCEN and Others Issue Joint Statement on BSA/AML Examinations

The Financial Crimes Enforcement Network (FinCEN) and several other federal banking regulators, including the Federal Deposit Insurance Corporation, National Credit Union Administration, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve, issued a joint statement on Bank Secrecy Act and Anti-Money Laundering (BSA/AML) examinations of bank compliance programs. The joint statement does not establish new requirements, but rather is an effort to provide additional transparency regarding the risk-based approach these regulators take when conducting their examinations. Continue Reading

Fintech Week in Review: Week of July 26, 2019

U.S. Developments

Regulatory Developments

House Task Force Looks to Allow Alternative Data for Credit Scoring

A newly formed U.S. House of Representatives task force, the Financial Technology Task Force, held a hearing this week to discuss a proposed bill that would allow new types of data to appear on consumer credit reports, including items like rent and phone payments. Proponents of the bill argue that in an era of more people renting, a large population of consumers could have positive payment histories excluded from their credit reports under the existing regulations.

Consumer advocates at the hearing cautioned lawmakers that some lower-income consumers could be hurt by the inclusion of this alternative data, including tenants who withhold rent payments due to substandard living conditions. Continue Reading

Fintech Week in Review: Week of May 24, 2019

FDIC Settles Payday Lending Lawsuit and Issues Summarizing Policy Statement

On May 22, the Federal Deposit Insurance Corporation (“FDIC”) announced that it had resolved the litigation of Advance America et al. v. FDIC et al. in the U.S. District Court for the District of Columbia.  In that case, the plaintiffs alleged that the FDIC and the Office of the Comptroller of the Currency overstepped their regulatory authority in connection with a 2013 initiative by the U.S. Department of Justice known as “Operation Choke Point.”  Under Operation Choke Point, federal regulators investigated banks servicing targeted business sectors, including payday lending.  Advance America Cash Advance and its co-plaintiffs asserted that FDIC officials acted to cut off payday lending businesses’ access to U.S. banks and financial services. Continue Reading

Fintech Week in Review: Week of May 6–10, 2019

CFPB Proposes Changes to Debt Collector Rules

On May 7, 2019, the Consumer Financial Protection Bureau (“CFPB”) detailed a plan to update the Fair Debt Collection Practices Act. The proposed rule would reduce the number of phone calls collectors can make to debtors, while providing clarity as to how collectors can use other communication methods, like email and text messages. The rule would limit the number of calls a collector can make to collect a specific debt to seven per week. Additionally, if a collector engages in a telephonic conversation with the debtor, the collector must wait a week before calling the debtor again. The rule, however, would not limit the number of emails or text messages that a debt collector can send to try and collect on an outstanding debt. The plan would clarify that emails and text messages are governed by the same rules as phone calls, including a bar on contacting consumers before 8AM or after 9PM and contacting consumers at their workplaces in the majority of situations. The proposed rule would also provide sample templates for how collectors could provide required disclosures when making electronic communications. Debtors could opt-out of any of the communication methods under the proposed rule. The proposed rule applies to third-party collectors who are typically either sold the debt from the original creditor or hired by the original creditor to collect on their behalf. The CFPB is inviting public comments on the proposed rule before finalizing any changes to the existing rule. Continue Reading

Fintech Week in Review: Week of April 29 – May 3, 2019

U.S. Developments

Regulatory Updates

OCC Seeks Comments on Proposed Innovation Pilot Program

The Office of the Comptroller of the Currency (“OCC”) is soliciting public comment on its proposed Innovation Pilot Program. Similar to state-level regulatory sandbox models, the proposed program would allow OCC-supervised financial institutions, including those working with third-party vendors, to apply to test pilots of potential products and services and receive early regulatory input from the OCC. Eligible entities may propose a pilot individually or collaborate with multiple banks in a consortium. The OCC will consider proposals at various stages of development, from proof of concept to live testing of pilots. To enter a pilot, an eligible entity will have a preliminary discussion with the OCC about the proposed pilot, and then after the discussion submit an expression of interest (an “EOI”) that addresses the description of the pilot, including a summary of proposed controls and safeguards and the desired OCC engagement. The OCC will then evaluate the pilot to determine if it is a fit for the program. OCC engagement in a pilot will last no less than three months and no greater than 24 months, with the duration subject to a case-by-case determination by the OCC. During the pilot, the entity will be required to submit periodic reports on its progress. The proposed program comes out of the OCC’s existing innovation office, but is separate from its new fintech national bank charter. The OCC’s Chief Innovation Officer, Beth Knickerbocker, has noted that blockchain technology could be an option for these pilot projects, and the OCC is going to consider how it supervises such activity by banks. Continue Reading

Fintech Week in Review: Week of April 8-12, 2019

FinTech Issues Discussed at SEC Speaks Conference

At Practicing Law Institute’s annual SEC Speaks conference, SEC leadership and staff showcased the agency’s 2018 successes and outlined upcoming initiatives. Highlights in the cryptocurrency and FinTech industries included the SEC’s analytical framework for digital assets, published last week by the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub). The SEC also touted cooperation credit given in its recent action against Gladius Network, LLC, which was resolved without penalties after Gladius self-reported and agreed to return ICO funds to investors and register its tokens as securities.

For more information on cryptocurrency, visit our Virtual Currency Report blog.

 

Fintech Week in Review: Week of April 1 – 5

U.S. Developments

Regulatory Updates

New Rules for Prepaid Cards, Digital Wallets, and P2P Transfer Apps Become Effective

As reported in this blog last year, the U.S. Consumer Financial Protection Bureau (“CFPB”) created a final rule implementing the Electronic Fund Transfer Act (“Regulation E”) and the Truth in Lending Act (“Regulation Z”). Originally released in October 2016, with an effective date of October 1, 2017, the final rule was delayed several times and finally became effective on April 1. The rule means that consumer protection measures like those for unauthorized charges and errors that have applied to products such as debit cards in the past will now apply to prepaid cards, digital wallets (e.g., Google Wallet), and person-to-person payment applications (e.g., Venmo and PayPal). Notable exclusions to the new rule include gift cards and applications like Apple Pay that do not store any value. Many providers now covered by the law have already adjusted their product offerings and terms of service to prepare for the new rule. Frequent delays in the effective date and numerous opportunities to make changes to the final rule have resulted in these platforms being subject to an increasingly complex regulatory framework. Continue Reading

FinTech Regulatory Week in Review: Week of March 11 – 15

Regulatory

Fed Board Delays New Same Day ACH Processing Window Until March 2021

The effective date of the new same-day Automated Clearing House (“ACH”) processing window (which would expand the end-of-day deadline to originate same-day transactions by two hours to 4:45 p.m. ET (1:45 p.m. PT)) has been deferred by six months to March 19, 2021.  The Federal Reserve Board of Governors (the “Fed Board”) has informed the national administrator of the ACH network (the “NACHA”) that the Fed Board currently cannot commit to change the Federal Reserve services necessary to enable the new window by June 30, 2019 (the deadline that was agreed upon per Supplement #1-2018 to the NACHA Operating Rules provided for in the rule). Continue Reading

ISDA Publishes Guidelines for Smart Derivatives Contracts

The International Swaps and Derivatives Association (ISDA) has published the first in a series of guidelines for what it colloquially refers to as “smart derivatives contracts” (the Guidelines).* A smart derivatives contract is a derivative that incorporates software code to automate aspects of the derivative transaction and operates on a distributed ledger, such as a blockchain. This series of papers is intended to “provide high-level guidance on the legal documentation and framework that currently governs derivatives trading, and to point out certain issues that may need to be considered by technology developers when introducing technology into that framework.” Read the full post on our sister blog, Derivatives and Repo Report.

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