June 04, 2021

Consumer Financial Services Practice Digest

3 min

Legal and Regulatory Developments

CFPB Fair Lending Activities and Report to Congress

As the CFPB continues to ramp up its fair lending investigations and enforcement highlighted by Acting Director David Uejio, a recent GAO report has flagged areas for improvement in the Bureau's fair lending practices and organization structures. The GAO's criticisms stem from the 2018 reorganization of the CFPB's fair lending activities, and the GAO notes that decisions related to the reorganization "(i) restricted the ability of the agency to evaluate its progress in these areas and (ii) reduced the agency's transparency to Congress and the public with respect to its fair lending efforts." In response to the report, the GAO noted that the CFPB agreed to evaluate the impact of its 2018 reorganization.

Education Department Brings in Richard Cordray

The Department of Education has brought on former CFPB Director Richard Cordray as the Chief Operating Officer of the Office of Federal Student Aid. Mr. Cordray previously served as the CFPB's Director as well as the Attorney General of Ohio. In this role, he will be responsible for overseeing the $1.6 trillion portfolio of loans and student financial assistance programs authorized under Title IV of the Higher Education Act of 1965.

AI in Financial Services: Federal Banking Agencies Request Input Regarding Use of Models for Compliance with BSA/AML and OFAC Requirements

The federal banking agencies have maintained a focus on the use of artificial intelligence (AI) and management of AI models. While a previous RFI sought information regarding the use of AI by financial services businesses and its effect on various consumer protection issues, the most recent Request for Information examines the use of AI to support compliance. The regulators, including the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, and the National Credit Union Administration (NCUA), in conjunction with the Financial Crimes Enforcement Network (FinCEN), seek information from financial institutions and from the public regarding the use of models, including those incorporating AI as part of measures taken to comply with the Bank Secrecy Act / Anti-Money Laundering (BSA/AML) and Office of Foreign Assets Control (OFAC) requirements.

Federal Reserve Dives Deep into Central Bank Digital Currencies

Federal Reserve Board (FRB) Chair Jerome H. Powell announced on Thursday May 20, 2021, the Federal Reserve plans to publish a discussion paper this summer that will explore the possibility of issuing a U.S. central bank digital currency (CBDC).

According to Powell in a video message, the Federal Reserve has been carefully monitoring recent technological advances that are driving rapid changes regarding payment methods, and has been exploring ways to refine the FRB's role as a core payment services provider and as the issuing authority for U.S. currency.