Legal and Regulatory Developments
FBO Accounts: What Banks and Fintechs Need to Know
One of the biggest challenges for fintechs is ensuring that their services comply with federal and state money transmission laws. For example, a fintech operating as a payment facilitator faces significant money transmission risk when settling funds to its sub-merchants through the payment facilitator's own bank account. Likewise, a fintech that facilitates bill payment services or loan disbursements may trigger money transmission risks if the fintech receives and transmits any funds as part of the service.
CFPB Proposes Nonbank Registry of Financial Law Violations; Potential for "Scarlet Letter"
The CFPB unveiled a far-reaching proposal to require certain nonbank financial firms to register with the CFPB on December 13, 2022, which is meant to enhance market monitoring and risk-based supervision efforts. The deadline for submitting comments is 60 days after publication in the Federal Register.
The registry is the CFPB's latest effort targeting nonbank providers of financial products and services "to track and mitigate the risks posed by repeat offenders, while also being able to monitor all lawbreakers subject to agency and court orders," in an online and public registry.
Payment Processors: Are You Prepared to Uncover "Dark Patterns"?
Risk management personnel who underwrite e-commerce merchants should have some basic understanding of the types of online merchant marketing and sales practices that are deceptive and misleading. More than a decade of law enforcement actions by the FTC and the CFPB against payment processors that failed to act on red flags—high chargebacks, consumer complaints, shell companies with straw owners, and other evidence of consumer harm—provide a catalog of merchant activities that regulators do not want processors to support.
Federal Appeals Court Finds CFPB Unconstitutionally Funded, Structured
The Consumer Financial Protection Bureau has once again been found to be unconstitutionally structured. The ruling is a win for CFPB critics and calls into question most actions taken by the agency.
The Future of the CFPB Post-Appeals Court Decision
The Consumer Financial Protection Bureau has once again been found to be unconstitutionally structured. The U.S. Court of Appeals for the Fifth Circuit ruling is a win for CFPB critics and calls into question most actions taken by the agency, as they pertain to its funding mechanism. This webinar featured a deeper dive into the implications of the CFPB ruling and its impact on consumer financial services providers.
CFPB Weighs in on Data Security; Will Firms with Poor Security Be in the Crosshairs?
In the late summer, the CFPB issued a circular that concluded in no uncertain terms that insufficient data protection or information security could be considered an unfair practice under the Consumer Financial Protection Act. The CFPB specifically called out the need to implement specific "cost-efficient measures to protect consumer data": multi-factor authentication, password management, and timely software updates. Lawyers from Venable's Financial Services Group and cybersecurity experts from the firm's Cybersecurity Risk Management Group discussed the impact of this circular and provided a primer on data security measures companies that collect and use consumer data should adopt or enhance.