December 2023

Consumer Financial Services Practice Digest

5 min

Consumer Financial Services Outlook 2024

January 16, 2024 | Webinar

Join us for our annual Consumer Financial Services Outlook webinar. Venable attorneys will review the current state of federal and state consumer financial protection law and policy and outline what you and your company need to know about what's ahead in 2024. The speakers will share their experiences from the front lines and offer strategies to help you navigate the evolving legal and regulatory landscape.

Legal and Regulatory Developments

CFPB Key Regulatory Initiatives Targeted for 2024

The CFPB's latest regulatory agenda signals that the Bureau expects final rules on several key regulatory initiatives to move forward in the next several months. The rulemakings include: credit card penalty fees, registry of supervised nonbanks that use form contracts that seek to waive or limit consumer rights, and registry of public enforcement orders.

Data Breach Notice Requirement Added to Safeguards Rule for Non-bank Financial Institutions

Starting May 13, 2024, nonbank financial institutions must comply with a new data breach disclosure requirement, as per the Federal Trade Commission's (FTC) updated Gramm-Leach-Bliley Safeguards Rule. Institutions will be obliged to notify the FTC of security breaches affecting at least 500 consumers within 30 days of discovery.

FCC Adopts Rule Closing the Lead Generator Loophole

The FCC adopted a revised rule to restrict forms of lead generation involving texts and calls to consumers on December 13, 2023. The revised rule implementing the Telephone Consumer Protection Act (TCPA) will require one-to-one consent for certain types of regulated calls and texts—so-called robotexts and robocalls. The new rule will take effect 12 months after publication in the Federal Register, or 30 days after announcement in the Federal Register of the Paperwork Reduction Act approval of the restrictions on information collection prescribed by this new rule, whichever is later, around January 2025.

OCC's Latest Guidance on Buy Now, Pay Later Products Signals Increasing Federal Oversight

Consumer use of "buy now, pay later" (BNPL) products and programs has proliferated over the last few years. While federal oversight has not been extensive to date, new guidance from the Office of the Comptroller of the Currency (OCC) likely signals heightened attention and may be the precursor to more enforcement or supervisory developments. In addition to the OCC, the CFPB has been examining BNPL products over the last few years and is continuing to examine the applicability of consumer financial laws to BNPL products.

CFPB Proposes “Larger Participant” Rule to Supervise General-Use Digital Consumer Payment Applications

The Consumer Financial Protection Bureau (CFPB) proposed a rule to define a market for general-use digital consumer payment applications. Larger participants, with at least 5 million consumer payment transactions annually, would be subject to CFPB supervision, affecting digital asset companies, merchants, and nonbank service providers.

Uninsured Deposits and the FDIC Final Rule for Special Assessments on Banks

The FDIC introduces a final rule, effective April 1, 2024, imposing a special assessment on banks, recovering $16.3 billion for losses tied to guaranteeing uninsured deposits in two failed banks from March 2023. No banks with assets under $5 billion are affected.

CFPB and FTC Announce New Efforts to Fight Alleged “Junk Fees”

The CFPB mandates large banks and credit unions provide customer information like balances and transaction history for free. Aligned with the Biden administration's anti-"junk fees" efforts, the advisory opinion emphasizes fee-free and timely responses to consumer requests, outlining violations and conditions.

Tinker, Tailor, Banker, FSOC Designation: New Guidance for Bank-like Regulation and Supervision of Non-Banks

Since the 2023 spring bank failures, federal banking agencies are revising significant regulations, including climate-risk stress testing, community investments, and corporate governance, affecting banks with over $100 billion in total assets. The Financial Stability Oversight Council (FSOC) now focuses on non-banks' risks to financial stability, issuing interpretive guidance for Federal Reserve supervision. The FSOC may designate entities or activities based on potential risks, with no cost-benefit analysis, emphasizing vulnerabilities and channels of financial instability transmission.

Harder, Better, Faster, Stronger: The New Interagency Rule for the Community Reinvestment Act

Federal banking agencies (Federal Reserve, OCC, FDIC) revamped Community Reinvestment Act (CRA) regulations after five years. The new framework introduces four tests based on bank size, emphasizing increased CRA investments and lending. The complex rule affects bank structures, powers, and procedural options, particularly for community banks.

Stressed Out—Final Interagency Guidance on Climate Risk Management for Large Banks

Federal banking agencies released final guidance on climate-related financial risks for large banks after 2023 spring failures. Non-prescriptive, it emphasizes data quality, climate stress tests, and governance for banks with $100 billion+ in assets. No specific disclosures or net-zero targets are mandated.

One Size Fits All: The FDIC’s Proposed Corporate Governance and Risk Management Guidelines

The FDIC proposes corporate governance and risk management guidelines for banks with $10 billion+ in assets, responding to 2023 failures. The rule, influenced by OCC guidelines, emphasizes board responsibilities, diversity considerations, and self-reporting of violations.,/p>

Reminder: New York’s Credit Card Reward and Loyalty Program Law Is Now in Effect

New York's General Business Law Section 520-e mandates notice to credit card holders within 45 days of any modification, cancellation, or termination of reward programs as of December 10, 2023. The law lacks a formal enforcement mechanism but allows actions by private plaintiffs or the state attorney general with potential penalties up to $5,000 per violation. Companies running loyalty programs should stay vigilant for similar legislation in other states.

What the Proposed Resolution Plan Rule Means for Smaller Banks

The FDIC proposes a resolution planning rule affecting smaller banks, covering those with $50-100 billion in total assets. While not mandating full plans, the rule demands substantial compliance, impacting approximately 15 banks and involving extensive submissions every two years.