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CFPB investigates employer-driven debt and the sale of workers’ personal data
On March 9, the CFPB published findings from a recent roundtable event where worker organizations and labor unions shared their members’ financial hardships and challenges. According to the Bureau’s blog post, more workers are reporting that they are responsible for paying for employer-mandated training and equipment, causing workers to owe significant debt to their employers or third-party debt collectors and making it difficult for them to change jobs. The Bureau stated it will continue to analyze information about employer-driven debt and employer/third-party collection efforts to best determine how to address consumer harm and any potential violations of federal consumer financial law, and will participate in the Truck Leasing Task Force with the Departments of Transportation and Labor to investigate predatory financial arrangements.
Organizations also reported concerns related to surveillance technology and the sale of personal data, including how information is being “compiled and used for decision-making that may impact workers’ financial well-being far beyond their current employers.” One participant explained that workers may not be aware that tools designed to track hours worked across different platforms also have the capability to track them outside of working hours and are selling access to their data to financial institutions, insurers, and other employers. The Bureau also heard from participants about data firms that are collecting and selling workers’ data that “may not be following the appropriate protocols for privacy and transparency.” The Bureau emphasized that it will “closely monitor and better understand this emerging market along with our federal partners and assess where provisions of the Fair Credit Reporting Act and other consumer protection laws may protect workers.”
FTC settles with online stock trading site
On March 8, the FTC announced a proposed settlement with an online stock trading site and its operators (collectively, “defendants”) for allegedly using earnings claims to mislead consumers into signing up for services, which led them into long-term subscription plans. The FTC filed a complaint in 2020 as part of an initiative called “Operation Income Illusion,” which encompasses more than 50 enforcement actions against alleged scams targeting consumers with false promises of income and financial independence (covered by InfoBytes here). According to the complaint, the defendants allegedly violated the FTC Act, among other laws, by falsely marketing investment-related services by claiming that “consumers who purchase [the defendants'] services will earn or are likely to earn substantial income.” Additionally, according to the press release, the defendants featured testimonials from purported customers claiming they made “[$]6500.00 in 20 minutes” and “$500 in 15 min[utes],” and allegedly attempted to profit off the Covid-19 pandemic, with a “guru” claiming that he could “rack up nearly $500K in profits by trading stocks related to the COVID-19 pandemic.” Under the terms of the stipulated final order, the defendants, among other requirements: (i) must pay a fine of over $2.4 million to the FTC: (ii) are prohibited from making claims regarding potential earnings without having written evidence that those claims are typical for consumers; and (iii) are prohibited from making claims misrepresenting that purchasers can be successful in trading regardless of their experience, the amount of capital they have to invest, or the amount of time they spend trading.
Biden calls for coordinated approach to digital asset innovation
On March 9, President Biden issued an Executive Order (E.O.) on digital assets outlining the first “whole-of-government” strategy to coordinate a comprehensive approach for ensuring responsible innovation in digital assets policy. (See also White House fact sheet here.) The White House highlighted that “non-state issued digital assets reached a combined market capitalization of $3 trillion” last November (up from $14 billion five years ago) and noted that many countries are currently exploring, or in certain cases introducing, central bank digital currencies (CBDC). The Executive Order on Ensuring Responsible Development of Digital Assets stressed that “we must take strong steps to reduce the risks that digital assets could pose to consumers, investors, and business protections,” and mitigate “illicit finance and national security risks posed by misuse of digital assets,” including money laundering, cybercrime and ransomware, terrorism and proliferation financing, and sanctions evasion. The E.O. cautioned that future digital assets systems must also promote high standards for transparency, privacy, and security.
The E.O. outlined several principal policy objectives, including that:
- Federal agencies are directed to coordinate policy recommendations to address the growth in the digital asset sector.
- Federal agencies are directed to explore the need for a potential U.S. CBDC. Treasury, along with heads of other relevant agencies, are ordered to submit “a report on the future of money and payment systems, including the conditions that drive broad adoption of digital assets; the extent to which technological innovation may influence these outcomes; and the implications for the United States financial system, the modernization of and changes to payment systems, economic growth, financial inclusion, and national security.” The Federal Reserve Board is also encouraged to continue researching, developing, and assessing efforts for a CBDC, including developing a broad government action plan for a potential launch. The E.O. also directed an assessment of whether legislative changes would be necessary in order to issue a CBDC.
- The Secretary of the Treasury will work with relevant agencies to produce a report on the future of money and payment systems, which will include implications for economic growth, financial growth and inclusion, national security, and the extent to which technological innovation may influence these areas. The approach to digital asset innovation must also address the risk of disparate impact, the E.O. stressed, adding that any approach should ensure equitable access to safe and affordable financial services.
- The Attorney General, FTC, and CFPB are “encouraged to consider what, if any, effects the growth of digital assets could have on competition policy.” The agencies are also “encouraged to consider the extent to which privacy or consumer protection measures within their respective jurisdictions may be used to protect users of digital assets and whether additional measures may be needed.” Additional federal agencies are also encouraged to consider the need for investor and market protections.
- The Financial Stability Oversight Council and Treasury are directed to identify and mitigate systemic financial risks posed by digital assets and develop policy recommendations to fill any regulatory gaps.
- Federal agencies are directed to work with allies and partners to ensure international frameworks, capabilities, and partnerships are aligned and responsive to risks posed by the illicit use of digital assets. Agencies should also explore “the extent to which technological innovation may impact such activities,” and explore “opportunities to mitigate these risks through regulation, supervision, public‑private engagement, oversight, and law enforcement.”
- Federal agencies are directed to establish a framework for interagency international engagement with foreign counterparts to adopt global principles and standards for how digital assets are used and transacted, and to promote digital asset and CBDC technology development.
CFPB Director Rohit Chopra and Treasury Secretary Janet Yellen issued statements following Biden’s announcement. “Today’s Executive Order recognizes that the dramatic growth in digital asset markets has created profound implications for financial stability, consumer protection, national security, and energy demand,” Chopra said. “The [CFPB] is committed to working to promote competition and innovation, while also reducing the risks that digital assets could pose to our safety and security. We must make sure Americans in all financial markets are protected against errors, theft, or fraud.” Yellen stated that in addition to partnering with interagency colleagues to produce a report on the future of money and payment systems, Treasury will also work with international partners to promote robust cross-border standards and a level playing field. “As we take on this important work, we’ll be guided by consumer and investor protection groups, market participants, and other leading experts. Treasury will work to promote a fairer, more inclusive, and more efficient financial system, while building on our ongoing work to counter illicit finance, and prevent risks to financial stability and national security,” she said.
Treasury also recently announced that the Financial Literacy and Education Commission (led by Yellen and Chopra and comprised of the heads of 21 federal agencies and entities, including the OCC, Fed, FDIC, SEC, FTC, and HUD, among others) is forming a new subgroup on digital asset financial education to analyze the impact of digital assets on consumer and investor protections. “History has shown that, without adequate safeguards, forms of private money have the potential to pose risks to consumers and the financial system,” U.S. Under Secretary of the Treasury for Domestic Finance Nellie Liang said.
OCC updates Large Bank Supervision booklet
On March 8, the OCC updated the Large Bank Supervision booklet of the Comptroller’s Handbook, which is used by OCC examiners during the examination and supervision of midsize and large national banks and federal savings associations, foreign-owned U.S. branches and agencies, and international operations of midsize and large banks. The updated booklet rescinds the 2019 version and includes a revised core assessment, “which will be effective for core assessment summaries using financial information as of March 31, 2022.” Among other things, the revised booklet (i) clarifies expectations related to the preparation and documentation of a bank’s core assessment summary; (ii) combines core assessment and risk assessment system information into the “Core Assessment” section; (iii) updates core assessment factors and subfactors; (iv) clarifies the difference between an annual core assessment summary and quarterly supervision updates; (v) updates supervisory activity types to include “focused review,” consistent with OCC current practices; and (vi) includes additional consistency and clarity updates.
Biden announces National Consumer Protection Week
On March 4, President Biden proclaimed March 6 - 12, 2022, as National Consumer Protection Week. According to the press release, Biden called on government officials, industry leaders, and advocates in the U.S. to share information on consumer protection and to provide citizens with information about their rights as consumers. He noted that during the week, “we recommit ourselves to those basic rights, to protecting consumers, to raising awareness about bad actors and deceptive practices in the marketplace, and to empowering people to make informed financial decisions so that our economy works for everyone.”
Powell presents Monetary Policy Report to Senate Banking Committee
On March 3, Federal Reserve Chairman Jerome Powell spoke before the Senate Banking, Housing, and Urban Affairs Committee to discuss current monetary policy and to share the Federal Reserve’s semiannual Monetary Policy Report. In his testimony, Powell started by sharing that he will “review the current economic situation” in Ukraine before adjusting monetary policy. Turning to the current economic situation and outlook, he noted that economic activity has increased at a robust five and a half percent pace over the last year, which “reflect[s] progress on vaccinations and the reopening of the economy, fiscal and monetary policy support, and the healthy financial positions of households and businesses.” He called the labor market “extremely tight,” noting that payroll employment increased by 6.7 million in 2021, and observed that “job gains were robust in January.” He also pointed to the unemployment rate decreasing substantially over the past year and standing at four percent in January, “reaching the median of Federal Open Market Committee (FOMC) participants’ estimates of its longer-run normal level.” With respect to monetary policy, Powell expressed that the Fed expects “inflation to decline over the course of the year as supply constraints ease and demand moderates because of the waning effects of fiscal support and the removal of monetary policy accommodation,” and that the agency will use “policy tools as appropriate to prevent higher inflation from becoming entrenched while promoting a sustainable expansion and a strong labor market.”
OCC’s Hsu discusses climate financial risk management, diversity and inclusion
On March 7, acting Comptroller of the Currency Michael J. Hsu spoke before the Institute of International Bankers Annual Washington Conference to discuss climate-related financial risk and diversity and inclusion in the banking industry. In his remarks, Hsu described the agency as “laser-focused on the safety and soundness aspects of climate change risks.” Specifically, he noted that the OCC is concentrating on “large banks’ climate risk management capabilities: identifying, measuring, monitoring and mitigating climate-related exposures and risks.” He stated that “[w]eaknesses in risk management could adversely affect a bank’s safety and soundness, as well as the overall financial system.” Hsu also stressed the importance of cyber defense, saying “[h]eightened vigilance is clearly warranted.”
Hsu further discussed draft principles, which were released in December 2021, and are intended to support the identification and management of climate-related financial risks at OCC-regulated institutions with over $100 billion in total consolidated assets. (Covered by InfoBytes here). He noted that the principles will be finalized later this year when more detailed guidance will be developed in collaboration with the Federal Reserve Board and FDIC. After “an appropriate transition period,” Hsu noted that an assessment of large banks’ climate risk management capabilities would begin. He also noted that for midsize and community banks, it will be a number of years before OCC examiners conduct climate risk management examinations and suggested to bankers to use time “wisely.”
At the end of his remarks, Hsu compared “diversity and inclusion” to “safety and soundness,” in that it should be treated as a single idea, and without it, “diversity over time becomes a box to be checked, not a state to strive for or a value to be upheld.”
FTC, DOJ reach $1.5 million settlement with weight-loss companies
On March 4, the FTC and DOJ announced a $1.5 million settlement with an international weight loss service organization and its subsidiary (collectively, “defendants”) accused of allegedly using unfair and deceptive practices to obtain personal information of underage users without parental consent. As previously covered by InfoBytes, the agencies claimed that the defendants violated the Children’s Online Privacy Protection Act (COPPA) and Section 5 of the FTC Act by collecting and keeping personal information from children under 13 without providing notice to or obtaining consent from their parents. The agencies’ settlement announcement stated that the defendants’ signup process originally “encouraged younger users to falsely claim they were over the age of 13, despite text indicating that children under 13 must sign up through a parent,” and that even after the signup process was revised, the defendants allegedly “failed to provide a mechanism to ensure that those who choose the parent signup option were indeed parents and not a child trying to bypass the age restriction.” Additionally, the defendants allegedly violated COPPA’s data retention provisions “by retaining children’s personal information indefinitely and only deleting it when requested by a parent.”
Under the terms of the settlement, unless verified parent consent has been subsequently obtained, the defendants are required to refrain from disclosing, using, or benefiting from previously collected personal information that did not comply with COPPA’s parental notice and consent requirements, and must destroy all previously collected personal information, as well as any affected work product that used illegally collected data. The settlement also orders the defendants to pay a $1.5 million civil penalty.
Biden to streamline medical debt forgiveness for veterans
On March 1, President Biden announced that veterans will be able to apply for medical debt forgiveness under a new streamlined process in 90 to 120 days. According to the White House press release, the current process for veterans who are entitled to medical debt forgiveness is complicated, confusing, and time consuming, and may deter veterans from applying for relief. To streamline the medical debt forgiveness request process, the Department of Veterans Affairs (VA) will provide an online option for veterans and set a simple income threshold for receiving relief. The announcement follows a final rule issued by the VA last month, which amended its regulations around the conditions by which VA benefits debts or medical debts are reported to consumer reporting agencies (CRAs), and created a methodology for determining a minimum threshold for debts reported to the CRAs. (Covered by InfoBytes here.)
OCC appoints deputy comptroller and chief accountant
On March 4, the OCC announced that Amanda Freedle will serve as Deputy Comptroller and Chief Accountant starting on March 28. Previously, Ms. Freedle served as a Senior Accounting Policy Advisor at the OCC’s Office of the Chief Accountant, where she provided accounting support for large bank examination teams. She also served as a member of the OCC’s National Retail Risk Committee and most recently held the position of Deputy Chief Accountant, serving as a key advisor to the Acting Deputy Comptroller and Chief Accountant. According to the OCC, as the Deputy Comptroller and Chief Accountant, “Ms. Freedle will lead the OCC's efforts for bank accounting and financial reporting, providing accounting counsel to examiners, the banking industry, and the accounting profession.”