Fintech Legal Report – February 2022 | Perkins Coie


Weekly fintech focus

  • CFPB Announces Initiatives to Combat Junk Fees in Consumer Financial Products and Services.
  • CFPB seeks comment on BNPL services.
  • The OCC approves another banking charter for a fintech company.
  • FDIC and FinCEN launch Tech Sprint to address digital identity challenges.

CFPB requests information about consumer financial products or service fees

On January 26, 2022, the Consumer Financial Protection Bureau (CFPB) announced the launch of an initiative to gather information from consumers, academics, attorneys, industry and a variety of other stakeholders about the “exploitant junk fees charged by banks and financial institutions.” to gather companies.” That formal request for information was later followed by a Feb. 2 CFPB blog post inviting stakeholders to participate.

Looking for consumer stories about the impact of “junk fees”

The wide-ranging information request “requests information from the public about how junk fees — exploitative, prejudicial, hidden, or excessive charges — have impacted people’s lives.” The CFPB is “interested in hearing about people’s experiences” (as the blog post she described, “Stories and Insights”) with charges related to her bank, credit union, prepaid or credit card accounts, mortgage, loan, or money transfer, including :

  • Fees for things people thought were covered by the base price of a product or service;
  • Unexpected charges for a product or service;
  • fees that seemed excessive for the alleged service; and
  • Fees for which it was unclear why they were charged.

The CFPB stated that it intends to use the information to create rules, issue industry guidance and pool oversight and enforcement resources related to these charges.

Focus on credit card fees

Recent CFPB releases signal that the credit card industry will be a focus for the junk fee information request. A January 19, 2022 CFPB blog post highlights credit card junk fees, the “billions of dollars in cash advance fees, account transfer fees, foreign exchange fees, and more” levied by credit card companies every year. According to the CFPB, these fees “herd” by usual amounts, suggesting that competition is ineffective in driving down prices, and the CFPB “will consider ways to help consumers reduce these fees, which add to overall costs.” drive credit.”

Industry Perspective

From an industry perspective, this RFI is particularly relevant to companies or segments of the financial services industry that generate revenue from consumer costs that are not included in the upfront price. Such companies should consider possible responses to the RFI, for example to explain practical obstacles to building fees into the upfront prices or to explain the drivers of the costs covered by the post-fees.

CFPB is seeking comment on Buy It Now Pay Later products

On January 24, 2022, the CFPB solicited comments on the CFPB’s investigation into buy-now pay-later (BNPL) providers in the United States. This comes after the CFPB issued a series of orders to five companies that had offered BNPL loans to consumers, inquiring about their size, scope and business practices. These orders aimed to gather information about the benefits and risks of these newly popular loans.

According to the notice, the CFPB “wants to help the Governing Board better understand how consumers interact with BNPL providers and how BNPL business models impact the broader e-commerce and consumer credit marketplaces.” The CFPB invites comments from the public on issues such as consumer experience with BNPL products, merchant experience and ways the BNPL market can be improved. Comments must be received on or before March 25, 2022.

It appears that the CFPB may move closer to regulating this nascent area of ​​BNPL loans, either through direct rulemaking or enforcement action. As such, it may be in the interest of BNPL providers to ensure their compliance programs are in line with consumer protection laws and other regulatory standards.

OCC Approves National Bank Charter for Fintech Companies

The OCC announced on January 18, 2022 that it had accepted Social Finance Inc.’s (SoFi) application to form SoFi Bank, National Association (SoFi Bank, NA) as a national full-service bank headquartered in Cottonwood Heights approved conditions. Utah.

As part of the transaction, SoFi Bank, NA acquired Golden Pacific Bank, National Association, an insured national bank. SoFi will continue to offer a suite of lending and deposit products previously offered by Golden Pacific and now has the national reach to provide a fully digital lending platform to consumers across the country. However, SoFi is not permitted to participate in any crypto-asset activities or services without written permission from the OCC.

The OCC’s press release states that its admission “brings SoFi, a large fintech company, into the Bundesbank’s regulatory perimeter, where it is subject to comprehensive oversight and the full range of banking regulations… Deposit and lending activities are conducted safely and soundly.” , including restricting the bank’s ability to engage in crypto-asset activities.”

The full-service charter path of a national bank, either through the acquisition of an existing financial institution or through a de novo charter, now seems more feasible for fintech companies than the charter approach of a “special purpose national bank”, which appears comparatively less secure.

FDIC and FinCEN launch Digital Identity Tech Sprint

The Federal Deposit Insurance Corporation (FDIC) and the Financial Crimes Enforcement Network (FinCEN) opened the registration period for those interested in participating in their upcoming Digital Identity Tech Sprint. The FDIC Technology Laboratory (FDITECH) and FinCEN are exploring digital proof of identity solutions to enable digital financial services and measure the effectiveness of digital proof of identity for risk assessment purposes. A challenge identified by regulators is to enable dynamic proofs of identity in an environment where there are increasing risks of personal data being compromised, the use of synthetic identities and the existence of many different approaches to proof of identity. Expected results of the Tech Sprint include the development of assessment models for digital proof of identity, insights to improve existing solutions, applications of AI/ML programs to identify suspect identities, and the development of other technical solutions. Registration for the Tech Sprint can be found here and registration closes on February 15, 2022 at 5:00 p.m. ET.

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