Weekly Fintech Focus

  • The CFPB settles with two remittance transfer providers for EFTA and remittance transfer rule violations.
  • The CFPB reports early impact of the COVID-19 pandemic on consumer credit.
  • FinCEN releases statement in advance of media outlets intent to publish articles based on unlawfully disclosure SARs.
  • The FTC seeks comments on 5 rules that implement the FCRA.

CFPB Settles With Remittance Transfer Providers for Remittance Transfer Rule Violations

The Consumer Financial Protection Bureau (CFPB) settled with Trans-Fast Remittance LLC and Sigue Corporation, two remittance transfer providers, for violations of the Electronic Fund Transfer Act (EFTA) and the Remittance Transfer Rule (Subpart B of Regulation E), which implements the EFTA.

The CFPB’s investigation of Trans-Fast found that it violated the EFTA and the Remittance Transfer Rule by failing to: adhere to error resolution requirements, properly respond to cancellation requests, and provide refunds, among other things. The CFPB also found that Trans-Fast engaged in deceptive practices by making misleading statements in advertisements regarding the speed of remittance transfers in addition to making misleading statements purporting to limit consumers’ error resolution rights.

Similarly, the CFPB’s investigation of Sigue Corporation found that it violated the EFTA and the Remittance Transfer Rule by failing to refund transaction fees when it did not make funds available by the disclosed date of availability, and when it failed to inform consumers of the remedies available for remittance errors. Additionally, the CFPB found that Sigue failed to report to consumers in writing the results of its investigations into transaction errors or consumers’ rights as required by law.

Trans-Fast’s consent order can be viewed here and requires it to pay a $1.6 million civil money penalty. Sigue Corporation’s consent order can be viewed here and requires it to pay roughly $100,000 in consumer redress and a $300,000 civil money penalty. Both must implement and maintain written policies and procedures designed to ensure compliance with the Remittance Transfer Rule and maintain a compliance-management system that is designed to ensure operations comply with the Remittance Transfer Rule.

CFPB Reports Early Impact of Pandemic on Consumer Credit

The CFPB released a report that examined the early effects of the COVID-19 pandemic on consumer credit. Among other things, the report found that consumers have not experienced significant increases in delinquency or other negative credit outcomes. Surprisingly, this occurred despite the material increase in unemployment that resulted from the pandemic.

While there are positive signs for consumer credit, the report notes that these outcomes may reflect payment assistance provided to American consumers through the CARES Act. Using a nationally representative sample of roughly 5 million de-identified credit records, the report found that new delinquencies fell between March 2020 and June 2020. It also found increases in payment assistance from creditors to borrowers.

Regarding financial institutions, the report found that financial institutions reduced access to credit card debt by (i) closing existing lines of credit, and (ii) halting credit limit increases on open accounts. Additionally, the report noted that credit card balances fell substantially at the start of the pandemic and continued to decline through June 2020.

FinCEN Warns Media Outlets on Use of Unlawfully Disclosed SARs

The Financial Crimes Enforcement Network (FinCEN) released a statement on September 1, 2020, that it is aware of several media outlets that intend to publish articles based on unlawfully disclosed Suspicious Activity Reports (SARs), among other documents, from several years ago.

FinCEN reiterated that the unauthorized disclosure of SARs is a crime that can impact national security, compromise investigations, and threaten the safety and security of those who file such reports.

FinCEN stated that this matter has been referred to the Department of Justice and the Department of the Treasury’s Office of Inspector General.

FTC Seeks Comment on 5 Rules That Implement the FCRA

The Federal Trade Commission (FTC) issued five notices of proposed rulemaking and seeks comments on changes to those five rules that implement the Fair Credit Reporting Act (FCRA). Under the Dodd-Frank Act, the FTC’s rulemaking authority under FCRA was substantially changed, with most FCRA rulemaking authority moved to the CFPB. For the five rules listed here, the FTC’s rulemaking authority limitations apply only to motor vehicle dealers. These notices of proposed rulemaking involve changes to the following current rules:

  1. Address Discrepancy Rule. This rule requires a national consumer reporting agency that receives a request for a consumer report that contains an address that is substantially different from the address on file for the consumer to notify the requester of the existence of the discrepancy.
  2. Affiliate Marketing Rule. This rule gives consumers the right to restrict a person from using certain information obtained from an affiliate to make solicitations to that consumer.
  3. Furnisher Rule. This rule requires furnishers to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information relating to consumers that they furnish to a consumer reporting agency.
  4. Pre-screen Opt-Out Notice Rule. This rule outlines requirements for using consumer report information to make unsolicited credit or insurance offers to consumers.
  5. Risk-Based Pricing Rule. This rule generally requires lenders who use consumer report information to offer less favorable annual percentage rates to consumers to provide consumers with notice of the use of such information.

Comments are due no later than 75 days after the date that such notices are published in the Federal Register.