Weekly Fintech Focus

  • The FTC issues a staff perspective summary of video game loot boxes and microtransactions.
  • FinCEN releases a statement on its approach to compliance and enforcement actions for violations to the BSA.
  • CFPB extends comment period for RFI on credit discrimination to December 1, 2020.

FTC Issues Staff Perspective on In-Game Loot Boxes and Microtransactions

If you’re like us, you thought you spent a lot of time on your phone during your commute, and then you had to work from home and well…it turns out you’ve added quite a few gaming apps during this quarantine. During this pandemic, gaming has grown even faster, and with it comes increased play time for gamers and previously non-games alike. Today games on your console or on your phone are more immersive than ever creating worlds that players can build. One way to build those worlds, including obtaining game play enhancements like a new item for your character, is through a loot box. A loot box is a microtransaction in a video game in which you can purchase a reward that includes an in-game item assigned at random.

Many games include microtransactions, in-game currencies, and loot boxes. The Federal Trade Commission (FTC) recently released a staff perspective summary of a workshop the FTC held a year ago about video game payments. The staff perspective provides an overview of the issues discussed at the workshop as well as research in the area. Games are generally designed to make loot boxes desirable and easy to purchase. But, with this comes challenges such as gamer confusion and increased desire to spend more to get better in-game items. These risks are amplified when children are playing games and making loot box purchases.

Although the staff perspective document recognizes that numerous countries have considered regulating loot boxes and microtransactions in video games, the FTC does not yet recommend perspective regulations for these issues. Instead, the FTC notes that the video game industry has taken steps to enhance self-regulation, including through disclosing odds of winning items through loot boxes, and providing additional disclosures at point-of-sale. The FTC staff encourages the video game industry to continue to provide clear and meaningful information to gamers. The FTC will continue its monitoring of the video game industry to prevent unfair and deceptive practices.

FinCEN Statement on Its Approach to Enforcement of the BSA

The Financial Crimes Enforcement Network (FinCEN) released a statement to provide clarity and transparency to its approach when contemplating compliance or enforcement actions against covered financial institutions that violate the Bank Secrecy Act (BSA).

Specifically, the statement describes the actions available for an actual or possible violation of the BSA and the factors, among others, used to determine the appropriate enforcement response when it identifies actual or possible violations. Notably, FinCEN mentions that it “will not treat noncompliance with a standard of conduct announced solely in a guidance document as itself a violation of law.”

A. Actions Available

  1. No Action. FinCEN may close a matter with no action and reopen it if it obtains new material information.
  2. Warning Letter. FinCEN may issue a warning through a supervisory letter or other communication.
  3. Equitable Remedies. FinCEN may seek injunctive or equitable relief to enforce compliance when FinCEN believes a person violated, is violating, or will violate the BSA or any BSA regulation or order.
  4. FinCEN may require both remedial undertakings and civil money penalties.
  5. Civil Money Penalties. FinCEN may assess a civil money penalty.
  6. Criminal Referral. If circumstances warrant, FinCEN may refer a matter to law enforcement agencies for criminal investigation and/or prosecution.

B. Determination Factors

  1. Nature and Seriousness of Violation. Nature and seriousness of the violations, including the extent of possible harm to the public and the amounts involved.
  2. Impact of Violations. Impact or harm of the violations on FinCEN’s mission to safeguard the financial system from illicit use, combat money laundering, and promote national security.
  3. Pervasiveness of Wrongdoing. Pervasiveness of wrongdoing within an entity, including management’s complicity in, condoning or enabling of, or knowledge of the conduct underlying the violations.
  4. History of Violations. History of similar violations, or misconduct in general, including prior criminal, civil, and regulatory enforcement actions.
  5. Financial Gain. Financial gain or other benefit resulting from, or attributable to, the violations.
  6. Remedial Actions Taken. Presence or absence of prompt, effective action to terminate the violations upon discovery, including self-initiated remedial measures.
  7. Timely and Voluntary Disclosure. Timely and voluntary disclosure of the violations to FinCEN.
  8. Quality of Cooperation with FinCEN. Quality and extent of cooperation with FinCEN and other relevant agencies, including as to potential wrongdoing by its directors, officers, employees, agents, and counterparties.
  9. Systemic Nature of Violations. Considerations include, but are not limited to, the number and extent of violations, failure rates (e.g., the number of violations out of total number of transactions), and duration of violations.
  10. Other Agency Actions Taken. FinCEN will consider the amount of any fine, penalty, forfeiture, and/or remedial action ordered by another agency.

CFPB Extends Comment Period on RFI for Credit Discrimination

The Consumer Financial Protection Bureau (CFPB) extended the comment period on its request for information (RFI) on the Equal Credit Opportunity Act (ECOA) and Regulation B to December 1, 2020.

Previously, the CFPB published in the Federal Register an RFI that sought comments and information to identify opportunities to prevent credit discrimination; encourage responsible innovation; promote fair, equitable, and nondiscriminatory access to credit; address potential regulatory uncertainty; and develop viable solutions to regulatory compliance challenges under ECOA and Regulation B.

Responses may be submitted by various channels identified in the extension notice, including by email 2020-RFI-ECOA@cfpb.gov (please reference the Docket No. CFPB-2020-0026).