May 29, 2020

Consumer Financial Services Practice Digest

5 min

Federal Banking Agencies and CFPB Clear Path for Banks to Make Small-Dollar Loans in Response to COVID-19

The federal financial regulatory agencies are pulling every possible lever to coax, incentivize, and allow banks to find new ways to help consumers and businesses that are facing financial distress due to COVID‑19. The agencies—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau—previously issued in March a high-level joint statement that generally encouraged depository institutions to make responsible small-dollar loans.

CFPB NAL and Policy Guidance Address Innovation and Compliance in Mortgage Servicing

The Consumer Financial Protection Bureau (CFPB) has taken several steps to address innovation and compliance in mortgage servicing by issuing a No-Action Letter Template related to online loss mitigation platforms and Policy Guidance regarding mortgage servicing transfers.

Where's the FTC Headed? FTC Commissioners Call for Rulemaking Amid ECOA Settlement Approval

Last week, the FTC put an end to a New York auto dealer's discriminatory lending practices as the FTC brought its first Equal Credit Opportunity Act ("ECOA") case in over ten years. Notably, two Commissioners are now calling for new rules to help further fight deception in the auto finance market. According to both Commissioners, this was the FTC's first case alleging ECOA violations since the passage of the Dodd-Frank Act, which was signed into law July 21, 2010. ECOA prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, or age, or because someone gets public assistance.

SEC and DOJ Bring FCPA Enforcement to Consumer Lending

On May 7, World Acceptance Corp., a consumer lender based in Greenville, South Carolina, announced that it had set aside $21.7 million in anticipation of resolving an ongoing Foreign Corrupt Practices Act (FCPA) investigation by the Securities and Exchange Commission (SEC) in connection with its former business operations in Mexico. The investigation, which World Acceptance Corp. disclosed in January, is focused on the legality of certain payments related to consumer loans, as well as the classification of compensation for certain employees under both the FCPA and local law. The Department of Justice (DOJ) investigation into World Acceptance Corp. is ongoing.

Warning: Communications with Hong Kong and China May Be, Literally, "Off the Hook"

Companies that must communicate with those in Hong Kong or mainland China—including vendors, suppliers, or manufacturers—take notice. You are facing a new U.S. government initiative that, if implemented, would seriously complicate the ability to engage in business with these jurisdictions. At best, the initiative will complicate and increase the cost of doing business with China-based businesses. At worst, it could cut off internet use between the U.S. and these places altogether. Here is what is happening.

Latest FTC Payment Processing Case Results in $40 Million Proposed Judgment and ISO Oversight Requirements

First Data Merchant Services, LLC (First Data), and its former executive, Chi "Vincent" Ko, will pay $40.2 million to settle Federal Trade Commission (FTC) charges that they ignored obvious warning signs of fraud and processed transactions for an array of scams that caused tens of millions of dollars in harm to consumers.

Minimizing Risk in Payment Facilitation with Compliance Management

In our first article in this series on payment facilitation, we highlighted five key areas that a software company needs to address before incorporating card payments into its existing suite of software products and services. In this article we take a deeper dive into the first of those areas, the need to set up a legal, regulatory, and card brand compliance program. Payment facilitation, like merchant acquiring generally, is subject to various federal and state laws, regulations, and card brand requirements, in addition to compliance requirements pushed down by contract through the sponsor bank relationship.

FCRA and HIPAA Concerns in Insurtech Underwriting

While fintech companies have received considerable attention in recent years for using advanced data analytics techniques to improve and streamline credit underwriting, insurtech companies have also been active in improving their industry's underwriting methods. These businesses work with traditional insurers to improve risk assessment and pricing through automation, predictive analytics, and big data. However, insurtechs engaged in developing underwriting products should be aware of the compliance risks that may arise when receiving, combining, and evaluating personal and health-related information about individuals and providing reports, scores, and other guidance based on that information. In this article, we discuss two major federal laws governing these activities, the Fair Credit Reporting Act (FCRA) and the Health Insurance Portability and Accountability Act (HIPAA).

Roundtable on Lending Regulatory & Enforcement Developments

Jonathan L. Pompan, co-chair of Venable's Consumer Financial Services Practice Group, participated in the webinar, "Roundtable on Lending Regulatory & Enforcement Developments," hosted by OLA. In this excerpt, Jonathan provides an update on the current regulatory and litigation environment at the Federal Trade Commission.

Hot Topics in Financial Services Advertising and Marketing: COVID-19, Financial Services, and More - An ACC Legal Quick Hit

Financial services advertising and marketing occurs in an increasingly regulated and evolving legal landscape. This quick hit with attorneys from Venable LLP explores the latest legal trends and developments in financial services advertising and marketing.

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