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Financial Services Law Insights and Observations


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  • SEC to host to virtual discussion on raising capital for small businesses

    Federal Issues

    On March 31, the SEC announced that the Office of the Advocate for Small Business Capital Formation will begin hosting a series of virtual discussions, each on “a particular area of the market, incorporating feedback from entrepreneurs, investors, and other market participants.” The first “Online Investment Capital Raising Virtual Coffee Break” will focus on the impact Covid-19 is having on raising capital, and will be held on April 3 at 11 am EDT. Additional information about the event can be found here, and participants can join the event by clicking here.

    Federal Issues SEC Capital Small Business Covid-19

  • California governor extends tax, licensing deadlines

    State Issues

    On March 25, the governor of California issued an executive order intended to provide relief to small businesses. The order provides businesses filing a return of less than $1 million in taxes with a 90-day extension to file first quarter returns and make tax payments. The order also extends by 60 days deadlines for submitting applications, paying fees, and submitting audited financial reports for a number of business licensees, including card rooms and online payer services. The order also suspends the requirements to request and receive the consent of shareholders for shareholder meetings to be held by electronic transmission or by electronic video screen communication.

    State Issues California Small Business Covid-19 Licensing

  • Minnesota issues executive order providing relief to small businesses during Covid-19

    State Issues

    On March 23, the Minnesota governor issued an executive order providing relief to small businesses during the Covid-19 pandemic. The order directs the Department of Employment and Economic Development to develop a forgivable loan program to award grants to nonprofit corporations to fund forgivable loans to small businesses. For a business to participate, it must demonstrate to the lender that it was “directly and adversely affected” by Covid-19. The order provides additional information on the administration and parameters of the loan program, such as reporting requirements for participating lenders and loan forgiveness.

    State Issues Covid-19 Minnesota Small Business

  • Agencies release 2018 CRA data

    Federal Issues

    On December 16, the three federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC) with Community Reinvestment Act (CRA) responsibility—the Federal Reserve Board, the FDIC, and the OCC—announced the release of the 2018 small business, small farm, and community development CRA data. The analysis contains information from 700 lenders about originations and purchases of small loans (loans with original amounts of $1 million or less) in 2018, a 2.2 percent decrease from the 718 lenders that reported data in 2017. According to the analysis, the total number of originated loans increased by approximately 8 percent from 2017, with the dollar amount of originations increasing by roughly 5 percent; however, the analysis notes that the majority of this growth is attributable to one bank’s increase in originations. The analysis further notes that 615 banks reported community development lending activity totaling nearly $103 billion in 2018, an increase from $96 billion in 2017.

    Federal Issues CRA FFIEC OCC FDIC Federal Reserve Small Business Consumer Lending | Consumer Finance

  • CFPB announces regulatory review plan; seeks comment on Overdraft Rule impact on small businesses

    Agency Rule-Making & Guidance

    On May 13, the CFPB announced a plan to review its regulations under Section 610 of the Regulatory Flexibility Act (RFA), which specifies that agencies should review certain rules within 10 years of their publication, consider the rules’ effect on small businesses, and invite public comment on each rule undergoing the review. The announcement notes that RFA requires an agency to consider multiple factors when reviewing a rule, including (i) whether there is a continued need for the rule; (ii) the complexity of the rule; (iii) whether the rule overlaps, duplicates, or conflicts with federal, state, or other rules; and (iv) the degree to which factors, such as technology and economic conditions, have changed the relevant market since the rule was evaluated. Comments will be due within 60 days of the plan’s publication in the Federal Register.

    The CFPB also announced that its first RFA review will be of the 2009 Overdraft Rule (Rule), which was originally issued by the Federal Reserve Board and limits the ability of financial institutions to assess overdraft fees for ATM and one-time debit card transactions that overdraw consumers’ accounts. The Bureau is seeking public comment on the economic impact of the Rule on small entities, including requesting feedback on topics such as (i) the impacts of the reporting, recordkeeping, and other compliance requirements of the Rule; and (ii) how the Bureau could reduce the costs associated with the Rule for small entities. Comments on the economic impact of the Rule will be due within 45 days of publication in the Federal Register.

    Agency Rule-Making & Guidance CFPB Small Business RFI Federal Register Overdraft

  • Congressman releases report on small business fintech lending


    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

  • FTC Announces Weekly Blog on Reasonable Data Security Practices

    Privacy, Cyber Risk & Data Security

    On July 21, the FTC announced a new initiative as part of ongoing efforts to provide guidance to businesses on protecting and securing consumer data. Each Friday, the FTC will post a new blog that will build on the FTC’s Start with Security principles, and will showcase hypothetical examples using material from closed investigations, FTC law enforcement actions, and questions from businesses. The first blog post, “Stick with Security: Insights into FTC Investigations,” highlights practical approaches for businesses to take in securing consumer data based on examples gleaned from FTC complaints and orders. The post also examines emerging themes from closed FTC data security investigations that did not necessarily result in FTC law enforcement.

    Privacy/Cyber Risk & Data Security FTC Small Business

  • FTC to Host Small Business Roundtables Focusing on Cybersecurity

    Privacy, Cyber Risk & Data Security

    On July 20, the FTC announced it will host a series of public roundtables to discuss pressing challenges facing small businesses when protecting the security of their computers and networks. The feedback will be used to assist the FTC and its partners in creating additional cybersecurity education resources. The Engage, Connect, and Protect Initiative: Small Business and Data Security Roundtables are part of Acting FTC Chairman Maureen K. Ohlhausen’s initiative to help small businesses protect against cyberattacks. Earlier this year, Ohlhausen launched a website designed to provide guidance for small businesses on scams and cyberattacks, many of which lack the resources larger companies have to spend on cybersecurity. (See previous InfoBytes post here.)

    The first roundtable will be on July 25 in Portland, Oregon, in partnership with the National Cyber Security Alliance (NCSA), the SBA, and other organizations. On September 6, a second roundtable discussion will convene in Cleveland in collaboration with the SBA and the Council of Smaller Enterprises. The third roundtable in the series, sponsored by the NCSA, will occur later in September in Des Moines, Iowa.

    Privacy/Cyber Risk & Data Security Agency Rule-Making & Guidance FTC Small Business


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