payday loan pen and paperOn October 5, 2017, the Consumer Financial Protection Bureau (“CFPB”) released its nearly 1,700-page final rule for short-term loans (“Payday Lending Rule”). Notably, almost simultaneously with the CFPB’s announced Payday Lending Rule, the Office of the Comptroller of the Currency (“OCC”) rescinded its longstanding Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products (“DAP Guidance”), theoretically opening the door for banks to offer short-term credit products to customers with less regulatory burden.

When will the Payday Lending Rule become effective?

While certain provisions of the Payday Lending Rule relating to the registration of information systems will become effective 60 days after the Payday Lending Rule is published in the Federal Register, the rest of the Payday Lending Rule will become effective 21 months after publication in the Federal Register. Consequently, the Payday Lending Rule will not become effective until sometime during the summer of 2019. Given that the term of the current CFPB Director expires in mid-2018, and will presumably be replaced by a director less hostile to the payday loan industry, some industry commentators speculate that the Payday Lending Rule, at least in its present form, may never become effective. Continue Reading The CFPB’s Payday Lending Rule: An Opportunity in Disguise?

Here are our observations on the 2018 OCC Bank Supervision Operating Plan:

– Cybersecurity is a top priority.

– Credit underwriting, as always.

– BSA is frequently mentioned.

– Business model sustainability and change management are emphasizing the M in CAMELS.

– Fair lending is far down the list.

Click here for the OCC press release.

On September 14, 2017, the Consumer Financial Protection Bureau (the “CFPB”) issued its first no-action letter (the “No-Action Letter”) concerning the operations of Upstart Network, Inc. (“Upstart”), a FinTech lender that utilizes alternative data in assessing the creditworthiness of prospective customers. While Upstart’s No-Action Letter has narrow applicability, it may serve as a tool for other FinTech lenders in implementing innovative products and services and establishing relationships with banks.

Background

The financial services industry is changing. With innovative technology and business models, FinTech companies have brought an interesting and complex issue center stage. Namely, how will the CFPB seek to regulate these FinTech companies and their innovative operations within the context of rigid consumer financial protection laws. Although the answer is not yet clear, it appears that the CFPB is trying to better understand how FinTech companies operate.

In October 2016, the CFPB issued its final No-Action Letter Policy (the “NAL Policy”). The NAL Policy permits institutions to submit a request to the CFPB to issue a statement that the CFPB has no present intention to recommend initiation of an enforcement or supervisory action against the applicant with respect to a particular product or service’s compliance with specifically identified regulatory requirements. For example, an applicant may seek to obtain assurance from the CFPB that the applicant’s form disclosure otherwise complies with the Truth in Lending Act and Regulation Z. Continue Reading CFPB’s First No-Action Letter: FinTech Lenders and Banks Take Note

On March 15, 2017, the Office of the Comptroller of the Currency (the “OCC”) published for comment a draft supplement to the OCC’s existing Comptroller’s Licensing Manual providing detail on how the OCC will evaluate national bank charter applications from financial technology (‘FinTech”) companies that engage in the business of banking, other than accepting deposits. In so doing, the OCC has moved one step closer to making its FinTech bank charter a reality. Below we provide a summary of the proposed OCC guidelines for accepting and approving a FinTech charter (the “FinTech Guidelines”).

Who may apply for a special purpose national bank charter?

The OCC has authority to grant charters for national banks and federal savings associations. That authority extends to the granting of charters for special purpose national banks (“SPNB”). SPNBs may limit their activities to fiduciary activities or to any other activities within the business of banking. However, with respect to the SPNB charter for FinTech companies, the OCC states that it will only accept applications from FinTech companies engaged in either (i) paying checks or (ii) lending money. Continue Reading The OCC Speaks: How FinTech Applications Will Be Reviewed

On July 10, 2017, the Consumer Financial Protection Bureau (the “CFPB”) finalized its proposed arbitration rule that will prohibit providers of certain consumer financial products and services from requiring a consumer to utilize mandatory pre-dispute arbitration in lieu of a consumer filing or participating in a class action (“Arbitration Rule”). In other words, no longer may covered entities require a consumer to use arbitration in lieu of class action participation. This Arbitration Rule will likely have far ranging consequences for covered providers, including mandatory updates to consumer agreements, likely increases to legal and compliance costs and increased operational risks in new consumer products.

Background

Congress directed the CFPB to study pre-dispute arbitration agreements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Dodd-Frank Act”). The Dodd-Frank Act also authorized the CFPB, after completing the study, to issue regulations restricting or prohibiting the use of arbitration agreements if the CFPB found that such rules would be in the public interest and for the protection of consumers. In 2015, the CFPB published and delivered to Congress a study of arbitration. On May 24, 2016, the CFPB proposed the Arbitration Rule with a request for comment. Since May 2016 the CFPB has been silent, leading many in the financial services industry to believe that, with the change in administration, the CFPB had abandoned the Arbitration Rule. In finalizing the Arbitration Rule, the CFPB has answered the industry’s long outstanding question. Would the CFPB be more moderate in its approach in issuing regulation that drastically impacts financial services providers? The industry has its answer. The CFPB has answered in the negative. Continue Reading Another Day, Another Regulation: A Summary and Description of the CFPB’s Arbitration Rule