On July 13, the Federal Reserve, FDIC, and OCC proposed risk management guidance to help banking organizations manage risks related to third-party relationships, including relationships with vendors, FinTech companies, affiliates, and the banking organizations’ holding companies.  The proposal is based on existing but disparate third-party risk management guidance from the three prudential regulators, and is intended to promote consistency across the banking agencies.  If finalized, it will replace the guidance that each agency has released independently.

Continue Reading Federal Agencies Request Comments on Risk Management Guidance for Third-Party Relationships

On July 12, the CFPB issued a consent order against a FinTech company for facilitating point of sale financing activities without authorization from consumers.  The consent order requires the company to pay up to approximately $9 million in redress to impacted consumers and a $2.5 million civil money penalty.

Continue Reading CFPB Takes Action Against FinTech Company for Originating Unauthorized Loans

On July 1, the Federal Housing Finance Agency (FHFA) released a Policy Statement on its commitment to comprehensive fair lending oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks (collectively, “regulated entities”).  The FHFA addressed its position on:  (i) monitoring and information gathering; (ii) supervisory examinations; and (iii) administrative enforcement related to the Equal Credit Opportunity Act, the Fair Housing Act, and the Federal Housing Enterprises Financial Safety and Soundness Act.  The FHFA added that the statement operates as a “foundation for future interpretations by the agency and its regulated entities.”  Comments on the policy statement are due 60 days after publication in the Federal Register.

Continue Reading FHFA Releases Policy Statement On Fair Lending

On July 6, the CFPB posted a blog titled, “Should you buy now and pay later?” describing how buy now pay later (BNPL) deferred payment options work, and the benefits and risks that come with BNPL.  Generally, if a consumer selects the BNPL option at an online checkout, “the purchase is . . . split into a payment schedule – typically four fixed payments made bi-weekly or monthly until the balance is paid in full.”  The CFPB points out that transaction approval takes minutes, with no interest, finance charges, or hard credit inquiries.

Continue Reading CFPB Blogs About Buy Now Pay Later

At the recent FDIC conference, “Fintech: A Bridge to Economic Inclusion,” FDIC Chairman Jelena McWilliams remarked that while the proportion of U.S. households that were banked in 2019 was 94.6 percent, 7 million households still reported no banking relationship.  She also noted that “the rates for Black and Hispanic households who do not have a checking or savings account at a bank remain substantially higher than the overall ‘unbanked’ rate.”  Referencing her personal challenges in establishing credit as a young immigrant to the United States 30 years ago, McWilliams discussed technology’s role in creating and facilitating a more inclusive financial system through the FDIC’s multi-pronged, novel approach to tackle the issue of financial inclusion, which includes:

Continue Reading FDIC Chairman Discusses FinTech and Bank Innovation

On June 29, the CFPB and the Georgia Attorney General’s Office settled with a debt-relief and credit-repair company and its owners for allegedly deceiving consumers into hiring the company to lower or eliminate credit-card debts and improve consumers’ credit scores.  The complaint alleges that the plaintiffs’ use of telemarketing and direct mail violated the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Consumer Financial Protection Act, and Georgia’s Fair Business Practices Act by, among other things, falsely claiming that:

Continue Reading CFPB and Georgia AG Settle With Debt-Relief Company

On June 29, NYDFS announced that two New York-charted banks engaging in indirect auto lending will pay civil money penalties for violating New York’s fair lending law for engaging in practices that resulted in members of protected classes paying higher interest rates that were not based on creditworthiness.  In particular, NYDFS asserts that the practice of allowing “dealer markup” in setting retail interest rates resulted in statistically significant differences in pricing, disadvantaging Hispanic and African-American consumers, with differences ranging from 20 to 59 basis points.

Continue Reading DFS Settles with Indirect Auto Lenders to Resolve Fair Lending Violations

On June 29, the CFPB released its summer 2021 Supervisory Highlights.  The findings of the report, which cover examinations that generally were completed between January 1, 2020 to December 31, 2020, are issued to “help institutions and the general public better understand how the Bureau examines institutions for compliance with Federal consumer financial law.”

Continue Reading CFPB Issues Summer 2020 Supervisory Highlights

Distressed transactions in bankruptcy court have become big business. Sales under Section 363 of the bankruptcy code provide predictability and reliability (in the form of a court order delivering “free and clear” assets) under even the most turbulent of circumstances. Commonly known simply as “363 sales,” these transactions can provide an opportunistic purchaser with significant upside under the right circumstances. But the truly opportunistic buyer will need to buckle up and be prepared to move with lightning speed in a highly competitive and transparent forum.

Continue Reading Navigating Troubled Company Acquisitions in the Wake of COVID-19

On June 24, the U.S. House of Representatives passed S.J. Res. 15 by a vote of 218-208 to repeal the Office of the Comptroller of the Currency’s (OCC) “True Lender” rule under the Congressional Review Act (CRA).  The OCC published the rule last year to establish a “simple, bright-line test” to determine when a national bank or federal savings association is the true lender. Under the rule, a bank is the true lender and makes a loan if, as of the date of origination, it (i) is named as the lender in the loan agreement or (ii) funds the loan.  Further, the final rule amended the initial proposed rule and added that if, as of the date of origination, one bank is named as the lender in the loan agreement and another bank funds that loan, the bank that is named as the lender in the loan agreement is deemed to have made the loan.  The U.S. Senate passed S.J. Res. 15 last month by vote of 52-47 to invoke the CRA and provide for congressional disapproval and invalidation of the final rule. The repeal now heads to President Biden who is expected to sign it.

Continue Reading House Votes to Repeal OCC True Lender Rule

Though bankruptcy filings are down in 2021, the expiration of the Paycheck Protection Program and reopening of the courts nationwide could lead to a rise in bankruptcy filings with many businesses still struggling to cope with the economic and supply chain aftereffects of the pandemic and consumer purchasing habits.  These bankruptcies, in turn, will have an inevitable ripple effect on creditors and other claimants, whose abilities to collect on claims and exercise rights, are significantly restricted by the automatic stay.  Generally, the automatic stay requires a party seeking relief against a debtor to do so in, and only in, the bankruptcy court, which can provide the relief sought or grant permission to pursue claims and rights in another venue.  For many businesses, considerations regarding the automatic stay end there, believing so long as they were deliberate enough to seek relief in the bankruptcy court, they will not face the potentially harsh consequences of violating the automatic stay.  But, a recent decision in In re Roman Catholic Church of the Archdiocese of Santa Fe serves as the latest reminder that very rarely can one be too careful when seeking relief against a debtor, even in the bankruptcy court itself.

Continue Reading A Bankruptcy Conundrum: When You Must Seek Relief To Seek Relief