Regulatory, Enforcement and Litigation Insights on Consumer Financial and Fintech Issues
On December 30, 2020, the Consumer Financial Protection Bureau (“CFPB”) granted approval to Payactiv, Inc. (“Payactiv”) to offer its earned wage access (“EWA”) program under the CFPB’s Policy on the Compliance Assistance Sandbox, among the first approvals under the CFPB’s regulatory sandbox.
In its approval order, the CFPB granted approval to various aspects of Payactiv’s EWA program and grants Payactiv a safe harbor from liability under the Truth in Lending Act (“TILA”) and Regulation Z.
In an earlier article, we provided an overview of the Consumer Financial Protection Bureau’s (“CFPB”) earned wage access (“EWA”) advisory opinion. In the opinion, the CFPB identified seven requirements for a “Covered EWA Program,” i.e., an EWA program that would “not involve the offering or extension of ‘credit’” under the Truth In Lending Act (“TILA”) and its Regulation Z.
On December 3, 2020, the SEC announced that FinHub (the Strategic Hub for Innovation and Financial Technology) was being upgraded to an independent office. Acknowledging the importance of the all things fintech (emerging technologies and innovation in financial services), the SEC stated that creating a stand-alone office:
“[S]trengthens the SEC’s ability to continue fostering innovation in emerging technologies in our markets consistent with investor protection. The office will continue to lead the agency’s work to identify and analyze emerging financial technologies affecting the future of the securities industry, and engage with market participants, as technologies develop.”
Continue Reading SEC Takes Another Step to Prioritize Fintech Innovation
As we previously explained, the Consumer Financial Protection Bureau’s (“CFPB”) recently finalized Advisory Opinion Policy allows any person or entity to request an advisory opinion from the agency. When the CFPB finalized that Policy on November 30, 2020, it concurrently issued its first two advisory opinions: one addressing earned wage access (“EWA”) programs, and one concerning private education loan products. This article specifically comments on the important EWA advisory opinion.
EWA programs generally allow employees to access wages they have already worked for and accrued, but have not yet been paid. In its EWA advisory opinion, the CFPB stated that EWA programs incorporating several specific features do “not involve the offering or extension of ‘credit,’” and thus, do not fall under the purview of Regulation Z, which implements the Truth In Lending Act (“TILA”).
The Consumer Financial Protection Bureau (“CFPB”) announced in March 2020 that it would develop a new advisory opinion program under which it would publish in the Federal Register responses to questions seeking clarification of ambiguities in federal consumer financial law. On November 30, 2020, the CFPB issued a final Advisory Opinion Policy (“AO Policy”) setting forth specific procedures for its Advisory Opinion Program.
Opinions issued under the AO Policy will be interpretive rules under the Administrative Procedure Act that respond to a specific need for clarity on a statutory or regulatory interpretive question. See 5 U.S.C. § 553(b). Each advisory opinion will include a summary of the material facts or covered products, and the CFPB’s legal analysis of the issue. The CFPB expects that its advisory opinions will apply not only to the requestor, but also “to similarly situated parties to the extent that their situations conform to the summary of material facts or coverage in the advisory opinion.”
The recent final rule (the “Rule”) implementing the Fair Debt Collection Practices Act (“FDCPA”) only directly governs parties defined as “debt collectors” by the FDCPA, principally meaning those who collect delinquent debt for others.[1] However, this Rule from the Consumer Financial Protection Bureau, accompanied by a 560-page Preamble, will also likely influence the collection activities of “creditors” — i.e., those collectors that fall outside that “debt collector” definition — in various ways.[2] The Rule also will affect how creditors should work with the debt collectors they hire. In this Alert, we focus specifically on these different impacts of the Rule on creditors. The Rule will take effect one year from the date it is published in the Federal Register.
Continue Reading What Creditors Need to Know About the Final Debt Collection Rule
On October 27, the North American Securities Administrators Association[1] held its 2020 symposium on Fintech and Cybersecurity. A key theme of the symposium was the impact that the pandemic has had on fintech, cybersecurity, and regulating the financial markets – given that regulators and securities industry professionals are largely working from home. The panelists also discussed new technological innovations that are likely to impact both the fintech industry and cybersecurity.
Continue Reading 2020 NASAA Fintech and Cyber Security Symposium – A Download of Key Comments
On October 27, 2020, the Office of the Comptroller of the Currency (OCC) issued its final rule setting the test for determining who the ‘true lender’ is in a loan transaction, including in the context of a lending partnership between a federally-chartered bank and a non-bank third party. The final rule adopts the two-pronged test set forth in the OCC’s proposed ‘true lender’ rule issued in July of this year – a bank is the ‘true lender’ if, as of the date of origination, the bank (1) is “named as the lender in the loan agreement,” or (2) “funds the loan.” The rule further clarified that if one bank funds the loan but another bank is named as the lender in the loan agreement, the bank identified in the loan agreement will be considered the ‘true lender’ of the loan. That clarification is consistent with the fundamental rule of the Truth-in-Lending Act, which always makes the party on the loan agreement the “creditor” on that loan.
Last week, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced significant changes to how it will view the legality of Marketing and Services Agreements (“MSAs”) under the Real Estate Settlement Procedures Act (“RESPA”). Most strikingly, the Bureau formally rescinded its controversial Compliance Bulletin 2015-05: RESPA Compliance and Marketing Services Agreements (Oct. 8, 2015) (“2015 MSA Bulletin”). MSAs historically have been used as a way for settlement service providers to gain access to additional potential customers via paid advertising and marketing services. But the 2015 Bulletin, issued after a string of Bureau RESPA enforcement actions, expressed the view that virtually all MSAs should be scrutinized and pose a high risk of violating RESPA’s prohibitions on paid referrals and/or the splitting of unearned fees.[1]
In addition to rescinding the prior guidance, the Bureau last week also released a slew of new “Frequently Asked Questions” (“FAQs”) on the legality of MSAs, gifts and promotional activities, and other RESPA matters. In all, the Bureau’s actions last week on MSAs in particular amount to a further repudiation of aggressive RESPA interpretations that the agency advanced during the last decade.
On July 22, 2020, the Office of the Comptroller of Currency (“OCC”) proposed a new rule in the federal register, concerning when a bank or savings association is a “true lender,” when the loan is sold or assigned to different entities. The comment period for the OCC’s proposed rule ended on September 3, 2020, with mixed results.
Continue Reading OCC’s Attempt at Clarifying “True Lender” Principle Met with Mixed Results
