Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • House Fintech Task Force holds first hearing

    Fintech

    On June 25, the House Financial Services Committee’s Task Force on Financial Technology held its first-ever hearing, entitled “Overseeing the Fintech Revolution: Domestic and International Perspectives on Fintech Regulation.” As previously covered by InfoBytes, the Committee created the task force to explore the use of alternative data in loan underwriting, payments, big data, and data privacy challenges. The hearing’s witness panel consisted of high-ranking innovation officials across various agencies and associations, including the CFPB, OCC, SEC, CSBS, and the U.K.’s Financial Conduct Authority. Among other things, the hearing discussed whether digital currency is considered a security, the OCC’s special purpose national bank charter, and the U.K.’s regulatory sandbox approach.

    SEC representative, Valerie Szczepanik, stated that she believes the SEC has been “quite clear” with regard to initial coin offerings, noting that “[e]ach digital asset is its own animal. It has to be examined on its facts and circumstances to determine what in fact it is. It could be a security, it could be a commodity, it could be something else. So we stand ready to provide kind of guidance to folks if they want to come and talk to us. We encourage them to come talk to us before they do anything so they can get the benefit of our guidance.”

    While much of the OCC special purpose bank charter discussion focused on a social media’s plan to launch its own virtual currency, CSBS representative, Charles Clark, emphasized that “[s]tate regulators oppose the special purpose charter because it lacks statutory authority” and that it should be up to Congress to decide whether the OCC can regulate non-bank entities. Clark noted that a federal system would create an unlevel playing field compared to a state system where “a small company can enter the system, scale up, and be competitive with an innovative idea.”

    Lastly, the FCA representative, Christopher Woolard, emphasized that fintech firms participating in the country’s sandbox program are “fully regulated” and probably the U.K.’s “most heavily supervised,” noting that the FCA believes “sandbox firms have to work in the real world from day one.” Additionally, Woolard asserted that the sandbox program is making a difference in the market stating that of their 110 tests, 80 percent of the firms that enter the program go on to fully operate in the market. He concluded asserting, “we believe that around millions of consumers have [] access to new products [] geared around better value or greater convenience.”

     

     

    Fintech OCC SEC UK FCA CSBS U.S. House House Financial Services Committee

    Share page with AddThis
  • HUD: DACA recipients not eligible for FHA loans

    Federal Issues

    On June 11, Len Wolfson, the Assistant Secretary for Congressional and Intergovernmental Relations at HUD sent a letter to Representative Pete Aguilar (D-CA) specifying that Deferred Action for Childhood Arrivals (DACA) recipients are not eligible for FHA loans. According to the letter, HUD has not implemented any new policies changes during the current Administration with respect to FHA eligibility requirements for DACA recipients. Wolfson asserts that, “Since at least October 2003, FHA has maintained published policy that non-U.S. citizens without lawful residency ‘are not eligible for FHA-insured loans,’” and determination of immigration status is not the responsibility of HUD. Therefore, Wolfson argues, “because DACA does not confer lawful status, DACA recipients remain ineligible for FHA loans.”   

    Federal Issues Agency Rule-Making & Guidance HUD FHA U.S. House

    Share page with AddThis
  • Democratic Representatives demand rescission of CFPB’s permanent HMDA threshold proposal

    Federal Issues

    On June 11, House Financial Services Committee Chairwoman Maxine Waters and 64 other Democratic House members sent a letter to the CFPB urging rescission of its May proposal to permanently raise the coverage thresholds for collecting and reporting HMDA data and to retire its HMDA Explorer tool. (Covered by InfoBytes here.) In the letter, members argue that recent data “showed widespread discrimination in bank lending” and that redlining continues to be a pervasive problem. They note that HMDA data is an important tool for public officials to understand access to credit in their communities, and that the Bureau’s proposal would exempt “about half of lending institutions from reporting data about closed-end mortgages … [and] sacrifice information that can make a difference in the lives of creditworthy, lower-income consumers.” The members also ask for information regarding the new Federal Financial Institutions Examination Council (FFIEC) query tool that is to be used as a replacement for the HMDA Explorer tool and Public Data Platform API that the Bureau plans to retire, as previously covered by InfoBytes here.

    Federal Issues Agency Rule-Making & Guidance CFPB HMDA FFIEC U.S. House House Financial Services Committee Mortgages

    Share page with AddThis
  • FTC Commissioners discuss state privacy preemption

    Federal Issues

    On May 8, the FTC Commissioners participated in a subcommittee hearing before the House Committee on Energy and Commerce entitled, “Oversight of the Federal Trade Commission: Strengthening Protections for Americans’ Privacy and Data Security.” During the hearing, the Commissioners were questioned about the agency’s privacy and data security enforcement and regulatory activities, including whether they would support preemption of state privacy laws by a federal privacy statute. Using the California Consumer Privacy Act (covered by InfoBytes here) as an example, some Congressmen worried about the prospect of conflicting privacy legislation in other states, creating “confusion and uncertainty in the business community.”

    Split along party lines, Democratic Commissioners expressed caution with federal preemption of state privacy laws; Commissioner Chopra, citing to federal preemption laws leading up to the mortgage crisis, warned of “unintended consequences.” Democratic Commissioner Slaughter recognized the “desire for uniformity, consistency, clarity, and predictability” that a federal law would provide, but noted that the appropriateness of preemption should be based on “whether a federal law meets or exceeds…the level of protections that states can provide and whether it allows them the opportunity to fill any gaps that may remain after a federal law is developed.” Republican Commissioners stressed the importance of having a federal law that would preempt the current “patchwork” of state laws, which Commissioner Phillips argued is “essential” in order to provide businesses clarity and reduced compliance costs, while also providing consumers with more power to understand expectations. FTC Chairman Simons noted that even if federal law preempts state privacy laws, Congress should grant concurrent enforcement authority to the states’ attorneys general.

    The hearing also discussed, among other things, (i) the need for additional resources to increase agency staff focused on privacy issues; (ii) giving the FTC authority to levy civil money penalties, as Section 5 of the FTC act does not allow the Commission to seek civil penalties for first-time privacy violations; and (iii) the need for targeted rule-making authority.

    Federal Issues FTC U.S. House Hearing Privacy/Cyber Risk & Data Security CCPA

    Share page with AddThis
  • Proposed legislation introduced to streamline fintech regulation

    Fintech

    On March 4, proposed legislation, H.R. 1491, was introduced by its co-sponsors in the U.S. House of Representatives to provide federal financial regulatory clarity for fintech startups. According to a press release issued by Congressman David Scott (D-GA), the FINTECH Act of 2019 would: (i) mandate U.S. federal financial regulators harmonize and coordinate conflicting regulations that would cover fintech operations; and (ii) establish a Fintech Council to serve as a “single point of entry” for approving fintech charters before assigning approved fintechs to one or more designated U.S. regulators. The bill's co-sponsors are members of the House of Representatives' Financial Services Committee and co-chair the Fintech and Payments Caucus. 

    Fintech Federal Issues Federal Legislation U.S. House House Financial Services Committee Of Interest to Non-US Persons

    Share page with AddThis
  • House Diversity and Inclusion Subcommittee holds first hearing

    Federal Issues

    On February 27, the newly formed Diversity and Inclusion Subcommittee of the House Financial Services Committee held its first-ever hearing to examine trends in diversity in the financial services industry, including management-level diversity and diversity among potential talent pools. The hearing reviewed the November 2017 GAO Report on “Representation of Minorities and Women in Management and Practices to Promote Diversity, 2007-2015” with the Director of Financial Markets and Community Investment of GAO, David Garcia-Diaz, as its only witness. The hearing focused on the report’s conclusion that in the financial services industry, there were marginal increases in minority representation in management positions while women’s representation remained unchanged from 2007 to 2015. Representatives noted the importance of diversity and inclusion in a financial institution’s work force and requested Garcia-Diaz discuss the best practices to increase employment diversity. Among other things, Garcia-Diaz noted that in order to increase diversity financial institutions should (i) engage in broad-based recruitment; (ii) establish mechanisms to hold managers accountable, such as linking manager compensation to diversity goals; and (iii) use data analysis to assess the diversity in the organization in order to develop an intentional plan to address the issue.

    The committee memorandum is available here.

    Federal Issues U.S. House Diversity and Inclusion Subcommittee Hearing

    Share page with AddThis
  • CFPB asks Congress for clear authority to supervise for MLA compliance

    Federal Issues

    On January 17, the CFPB issued a statement from Bureau Director Kathy Kraninger announcing she has asked Congress to grant the Bureau “clear authority to supervise for compliance with the Military Lending Act (MLA).” The statement expresses Kraninger’s interest in protecting servicemembers and their families and notes the requested authority would complement the Bureau’s MLA enforcement work. The announcement acknowledges the recently introduced House legislation, H.R. 442, which would directly grant the Bureau supervisory authority over the MLA, and also includes suggested draft legislation the Bureau sent to both the U.S. House of Representatives and the U.S. Senate (here and here). The draft legislation would amend the Consumer Financial Protection Act to include a section providing the Bureau “nonexclusive authority to require reports and conduct examinations on a periodic basis” for the purposes of (i) assessing compliance with the MLA; (ii) obtaining information about the compliance systems or procedures associated with the law; and (iii) detecting and assessing associated risks to consumers and to markets.

    As previously covered by InfoBytes, in August 2018, then acting Director Mick Mulvaney internally announced the Bureau would cease supervisory examinations of the MLA, contending the law did not explicitly grant the Bureau the authority to examine financial institutions for compliance. A bipartisan coalition of 33 state Attorneys General wrote to Mulvaney expressing concern over the decision and after her confirmation, a group of 23 House Democrats urged Kraninger to resume the examinations. (Covered by InfoBytes here and here.) 

    The Bureau’s request that Congress grant it authority to examine for compliance with the MLA suggests that it does not intend to do so unless Congress acts. 

    Federal Issues CFPB Succession Military Lending Act Military Lending Supervision U.S. House U.S. Senate

    Share page with AddThis
  • House Democrats urge Kraninger to resume MLA examinations

    Lending

    On December 14, Maxine Waters (D-CA) and 22 other House Democrats issued a letter urging the new CFPB Director, Kathy Kraninger, to resume supervisory examinations of the Military Lending Act (MLA). As previously covered by InfoBytes, according to reports citing “internal agency documents,” the Bureau ceased supervisory examinations of the MLA, contending the law does not authorize the Bureau to examine financial institutions for compliance with the MLA. In response, a bipartisan coalition of 33 state Attorneys General sent a letter to then acting Director, Mick Mulvaney, expressing concern over the decision (covered by InfoBytes here).

    The letter from Waters, who is expected to be the next chair of the House Financial Services Committee, and the other 22 Democratic members of the Committee, argues that “there is no question the [CFPB] has the authority and the responsibility to supervise its regulated entities for compliance with the MLA.” As support, the letter cites to the Bureau’s authority to oversee a “wide range of regulated entities,” the establishment of the Bureau’s Office of Servicemember Affairs, and the 2013 amendments to the MLA, which gave the Bureau the authority to enforce the act. The letter also points to the Bureau’s work obtaining $130 million in relief for servicemembers, veterans, and their families through enforcement actions, as well as the 109 complaints the Bureau has received from military consumers since 2011.

    Lending Military Lending Supervision Military Lending Act Compliance U.S. House House Financial Services Committee CFPB State Attorney General Servicemembers

    Share page with AddThis
  • Buckley Sandler Special Alert: Weathering the coming tide of congressional investigations

    Federal Issues

    The results are in: Party control of the U.S. House of Representatives will change for the third time in 12 years, leaving legions of pundits to speculate about what happens next. Prospects for a fundamental change in the way Congress and Washington operate are dim, particularly given that the U.S. Senate remains under Republican control. With new legislation most likely dead on arrival due to the political stalemate on Capitol Hill, the Democrats’ most reliable opportunity to exert their will is almost certainly through congressional oversight and investigations. The last time the Democrats controlled the House during a Republican presidency, following the 2006 midterms, Rep. Henry Waxman remarked that Congress’s oversight powers are “just as important, if not more important than legislation.”

    While it is tempting to dismiss congressional oversight, and the attendant theatrical hearings and testimony as nothing but sound and fury, the reality for companies, executives, and others under the microscope is far less anodyne. Lack of preparation and ill-conceived strategy in responding to congressional investigations heightens the prospect of reputational harm that, unchecked, will frustrate business goals, damage shareholders, and derail — or end — careers.

    * * *

    Click here to read the full special alert.

    Please join us for a Dec. 5 webcast that will delve deeper into these topics and offer some thoughts on navigating the coming tide of congressional investigations. If you have questions about congressional investigations or other related issues, please visit our Congressional Investigations practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.

    Federal Issues Special Alerts U.S. House U.S. Senate

    Share page with AddThis
  • Congressman releases report on small business fintech lending

    Fintech

    On August 17, Congressman Emanuel Cleaver, II (D-MO) released a report detailing his findings from an investigation into the small business lending practices of fintech companies, concluding that the algorithms used in the application process may not reduce the risk of discrimination. The report notes that one company disclosed utilized a third-party fair lending consulting firm to assist in preventing discrimination, but that some survey responses “lacked key information or were willfully vague” about how the algorithms help avoid income-based and racial bias. The report cites to other criticisms of small business lending in the fintech industry, including (i) the use of forced arbitration clauses; and (ii) utilizing personal credit scores to establish a business’ credit worthiness. In contrast, the report emphasizes that fintech lending “can be potentially advantageous for small businesses looking to get a leg up in a competitive market” and that fintech companies often serve markets traditionally ignored by banks. The report concludes with a list of best practices and principles for fintech companies that will lend to small businesses, such as (i) registering with the CFPB’s complaint database; (ii) replicating TILA disclosures required for consumers; and (iii) securing third party fair-lending audits.

    Fintech U.S. House Fair Lending Small Business

    Share page with AddThis

Pages

Upcoming Events