November 26, 2019

Consumer Financial Services Practice Digest

3 min

OCC and FDIC Propose Madden Fix

Federal banking regulators, the OCC and the FDIC, have proposed rules to address uncertainties under the "valid-when-made doctrine" that connects bank lenders and non-bank purchasers/assignees. The proposals would allow non-bank financial companies that purchase or take assignment of loans originated by banks to charge the same interest rate as the banks charged when making the loan. In other words, the question of whether an interest rate is permissible would not be affected by the "sale, assignment, or other transfer of a loan." Notably, the regulators did not address the related issue of whether non-banks should be considered the "true lender" of a loan when they engage in substantial activities related to marketing and origination. The deadline for comments on the OCC's proposal is January 21, 2020. Comments on the FDIC's proposed rule are due 60 days after the date the proposal is published in the Federal Register.

The OCC Fintech Charter Is Down, but Maybe Not Out

The Office of the Comptroller of the Currency (OCC) recently faced another setback in its attempt to issue a special purpose national bank charter tailored to fintech companies (fintech charter). A federal district court in New York held that the OCC does not have the authority to grant charters to companies that do not accept deposits. In May 2019, the court had denied OCC's motion to dismiss, and parties moved to proceed directly to judgment. The OCC has already indicated that it will appeal the decision.

CFPB Seeks to Boost Financial Innovation

The CFPB has finalized three inter-related policies—a Compliance Assistance Sandbox Policy, a revised No-Action Letter Policy, and a Trial Disclosure Program Policy—as well as a state-focused coordination and information sharing initiative. These activities further the efforts initiated by former acting director Mick Mulvaney in the creation of the CFPB Office of Innovation and could provide new considerations for fintechs and other institutions developing new or novel financial products and services, but must be balanced against potential downsides.

Overview of the CFPB's Summer 2019 Supervisory Highlights

Summer may have come and gone, but the Consumer Financial Protection Bureau's (CFPB or Bureau) most recent Supervisory Highlights reveal which consumer credit products the regulator considers to be evergreen examination priorities. The CFPB periodically releases these to help institutions better understand how the Bureau conducts compliance examinations. The latest issue focuses on the areas of automobile loan origination, credit card account management, debt collection, credit furnishing, and mortgage origination.

Operation Full Disclosure, Continued: FTC Releases Disclosure Guides for Influencers

Influencers, if you ever wished you had a handy brochure on how to make proper disclosures in your sponsored posts, you are in luck. On Tuesday, the FTC issued a new guide titled "Disclosures 101 for Social Media Influencers," along with three videos, that lays out the agency's guidelines for when and how influencers should disclose their connection to a brand. The principles are nothing new, but they are explained in a way that is straightforward and user-friendly, complete with hearts and thumbs-up emojis.

Demonstrating a Reasonable Cybersecurity Program Through a Strategic Risk Assessment

The privacy and cybersecurity legal landscape is constantly shifting, but one important principle remains unshaken: the requirement for companies to implement and maintain "reasonable" security programs. At both the federal and state levels (including the soon-to-be enforced California Consumer Privacy Act), companies have long been held to a standard of reasonableness in their protection of personal information and other sensitive data. Under any standard, the foundation of a reasonable security program is a comprehensive risk assessment. We explain the importance of the security risk assessment and how companies can undertake assessments in a defensible, strategic fashion.