On June 9, the California Office of Administrative Law (OAL) approved the Department of Financial Protection and Innovation’s (DFPI) proposed commercial financing disclosure regulations issued pursuant to SB 1235. The regulations will become effective on December 9, 2022, and the final regulatory text can be found here. Continue Reading California Approves Commercial Financing Disclosure Regulations
During times of corporate uncertainty, the company’s message to customers, vendors and employees can either instill confidence or foster anxiety. This holds true more than ever in the digital and social media era. In a chapter 11 scenario, then, engaging with, rather than dodging, press calls may be the preferred approach. This provides the opportunity to craft the message as well as address misinformation from leaks.
Continue Reading Communicating Distress in the Digital Era
As of November 1, 2021, dealers in security-based swaps (“SBS”) whose dealing activity exceeds certain de minimis thresholds (e.g., gross notional amount of $3 billion for credit default SBS, $150 million for other SBS, and $25 million for SBS where the counterparty is a special entity) are required to register with the SEC as a security-based swap dealer (“SBSD”) and to comply with the SEC’s regulations applicable to SBS. Many dealers exceeded these thresholds and filed for registration on or prior to November 1. Other dealers who exceed these thresholds later will be required to register at a future date.
Continue Reading Security-Based Swap Rules for End-Users
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 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 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
On June 15, the Senate swore in President Biden nominee Lina Khan as Chair of the FTC following confirmation by vote of 69-28. Her current term on the Commission will expire on September 25, 2024. Khan noted that she looks forward to working with her colleagues “to protect the public from corporate abuse.” In her role as Chair, Khan replaces former Acting Chair, Rebecca Kelly Slaughter, who served in the role since January 2021. Prior to becoming Chair of the Commission, Khan was an Associate Professor of Law at Columbia Law School. She also previously served as counsel to the U.S. House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law, legal adviser to FTC Commissioner Rohit Chopra, and legal director at the Open Markets Institute. Chopra, who is awaiting Senate confirmation as the Director of the CFPB, remarked in his official statement that the “overwhelming support in the Senate for Lina Khan’s nomination to serve on the [FTC] is a big win for fair competition in our country. There is a growing consensus that the FTC must turn the page on the failed policies spanning multiple administrations. Lina has an extraordinary record of achievement, and she will be instrumental in helping the Commission chart a new course grounded in rigor and reality.”
Continue Reading Lina Khan Sworn in as New FTC Chair
On June 16, the CFPB issued an interpretive rule reversing its prior determination that it lacked authority to examine institutions for compliance with the Military Lending Act (MLA). In 2018, the CFPB discontinued checking for MLA compliance during supervisory examinations on the grounds that Congress had not authorized such examination authority under the Dodd-Frank Act. As a result, the new interpretive rule sets forth the statutory basis to examine institutions that it supervises for MLA compliance as follows:
Continue Reading CFPB to Resume Examinations Under the Military Lending Act
On June 10, the Federal Trade Commission (FTC) filed an amended complaint for civil money penalties and other relief under Section 5 of the FTC Act prohibiting “unfair or deceptive acts or practices” and Section 521 of the Gramm-Leach-Bliley Act (GLBA) prohibiting the use of fraudulent statements to obtain consumer information. Setting aside the substance of the allegations, the amended complaint is informative because while the initial complaint sought consumer redress under Section 13(b) of the FTC Act, the Supreme Court’s recent unanimous decision in AMG Capital Management foreclosed this avenue to consumer redress for the FTC, and thus the amended complaint removes that reference while otherwise replicating the substantive allegations of the initial complaint. Further, in a creative side-step to its Section 13(b) predicament, the FTC claims authority to obtain civil penalties under the GLBA because it empowers the FTC to enforce it “in the same manner and with the same power and authority as the [FTC] has under the Fair Debt Collection Practices Act [FDCPA].” 15 U.S.C. § 6822(a). In 2010, the Dodd-Frank Act amended the FDCPA stating that violations may be enforced “in the same manner as if the violation had been a violation of a Federal Trade Commission trade regulation rule.” 15 U.S.C. § 1692l(a).
Continue Reading FTC Takes Novel Approach to Seek Civil Money Penalties in the Wake of AMG Capital Ruling