September 08, 2020

Consumer Financial Services Practice Digest

4 min

California Mini-CFPB Returns – Heads to Governor's Desk

The California state senate has approved a plan to establish a state consumer financial protection agency (so-called "mini-CFPB")—the Department of Financial Protection and Innovation (DFPI). The DFPI would incorporate many of the mandates and authorities exercised on the federal level by the Consumer Financial Protection Bureau. The bill now heads to the governor's desk.

Charter Fight Flares Up Again Amid OCC's Push for Payments Companies

The Conference of State Bank Supervisors (CSBS) issued a terse, three-sentence warning for the OCC to back off its plan to offer a payments charter. This reaction followed media reports that Acting Comptroller of Currency Brian Brooks is ready to start accepting applications in the next few days.

How did we get here?

Four years ago, the OCC began offering a fintech charter that would authorize fintech companies to make loans or facilitate payments, but not accept deposits, under a national bank charter. None of these charters have been issued, however, because CSBS and New York state each sued the OCC, with the New York decision effectively killing the fintech charter (pending appeal). The charter now being floated by the Acting Comptroller appears to be a payments only version of the fintech charter.

The CFPB's Mid-year Update Emphasizes Addressing Complaints from Small Businesses

The Consumer Financial Protection Bureau (CFPB) has issued its Ombudsman's Office Mid-year Update of the agency's activities for the first six months of FY2020. Through the Mid-year Update, the CFPB has unveiled its plans to conduct post-examination surveys of CFPB-supervised entities. It also highlights the CFPB's efforts to reach a broader spectrum of consumers, including translating its blog posts into other languages and holding cross-Bureau discussions to assist people with disabilities. The CFPB also plans on continuing its Ombudsman Forum program, focusing on the following areas: Connecting In; Engagement; Guidance – Regulations and Compliance; Website and Digital Access; and Coordination with Government Entities.

Sprinting Toward Innovation: CFPB Continues to Introduce Programs to Facilitate Innovation

With the upcoming Tech Sprint and the recent joint virtual Innovation Office Hours, the Consumer Financial Protection Bureau (CFPB or Bureau) continues to implement new programs in an effort to encourage innovation. Both programs are administered by the Bureau's Office of Innovation. In addition to the Tech Sprint and the Virtual Office Hours, the Office of Innovation previously introduced the No-Action Letter Policy, the Compliance Assistance Sandbox, and the Trial Disclosure Sandbox.

FTC Follows up on Enforcement Priorities with Complaint Against Merchant Cash Advance Provider

Following a warning from earlier this year, the FTC recently filed a complaint against a group of corporate and individual defendants for allegedly misleading and deceiving small business "merchant cash advance" (MCA) customers. Structured properly, an MCA product offers an alternative to standard commercial credit under which the MCA provider purchases the right to receive a fixed amount of the customer's receivables to be paid based on a percentage of the customer's daily receipts.

Consumer Lender Enters into FCPA Resolution with the SEC

On August 6, 2020, the Securities and Exchange Commission (SEC) announced that World Acceptance Corp., a South Carolina-based consumer loan company, agreed to pay $21.7 million to resolve charges that it violated the Foreign Corrupt Practices Act (FCPA). As we discussed in our May 7 report that the company was under investigation, this settlement marks one of the first – if not the only – FCPA enforcement action against a consumer lender. Accordingly, any fintech operating internationally should review its operations and policies and procedures to ensure that it has processes in place to minimize the risk of anti-corruption violations.

DOJ Issues First FCPA Advisory Opinion in Six Years: What You Need to Know

On August 14, 2020, the U.S. Department of Justice (DOJ or Department) issued its first Foreign Corrupt Practices Act (FCPA) advisory opinion in nearly six years. The advisory opinion is in response to an inquiry from a multinational U.S. investment advisor that manages private funds serving institutional investors. The request seeks guidance on a proposed payment to a wholly owned subsidiary of a foreign investment bank that, in turn, is indirectly majority owned by a foreign government. The resulting opinion comes roughly a month after DOJ and the U.S. Securities and Exchange Commission (SEC) published the second edition of their joint FCPA Resource Guide, which was initially released in 2012 and has been revised only once in the past five years.

An Overview of the NYC DCA Foreign Language Services Rules

The New York City Department of Consumer Affairs (DCA) has enacted new debt collection rules related to Limited English Proficiency (LEP) consumers. This presentation outlines best practices for operational and legal compliance. Topics include recordkeeping, affirmative acts, disclosures, prohibited practices, and the latest guidance from the DCA.

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