Consumer FinSights

Announcements Mark Out a Clearer Path, but MSAs and Gifts Still Require Careful Review Last week, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced significant changes to how it will view the legality of Marketing and Services Agreements (“MSAs”) under the Real Estate Settlement Procedures Act (“RESPA”).  Most strikingly, the Bureau formally rescinded its controversial Compliance Bulletin 2015-05:  RESPA Compliance and Marketing Services Agreements (Oct. 8, 2015) (“2015 MSA Bulletin”).  MSAs historically have been used as a way for settlement service providers to gain access to additional potential customers via paid advertising and marketing services.  But the 2015 Bulletin,…
On July 22, 2020, the Office of the Comptroller of Currency (“OCC”) proposed a new rule in the federal register, concerning when a bank or savings association is a “true lender,” when the loan is sold or assigned to different entities. The comment period for the OCC’s proposed rule ended on September 3, 2020, with mixed results. In its proposed rule, the OCC interpreted the National Bank Act, Federal Reserve Act, Home Owners’ Loan Act and propounded a test to determine when a bank makes a loan and may be considered the true lender in a loan transaction. The OCC…
California’s financial services regulator soon will likely have a new name and a significantly expanded mission after state lawmakers passed legislation on August 31, 2020 that would revamp the agency in the image of the U.S. Consumer Financial Protection Bureau, signaling an increased focus on fintech in particular. In a last-minute push before adjourning for the year, the California legislature sent the California Consumer Financial Protection Law (“CCFPL”) to Governor Gavin Newsom for his approval, which is expected.  The CCFPL would change the name of the state’s current financial services regulator, the Department of Business Oversight (“DBO”), to the…
On July 31, 2020, Varo Money Inc. announced that it was granted a national bank charter by the U.S. Office of the Comptroller of the Currency (OCC).  The charter will allow Varo, a mobile banking fintech, to launch a national bank and offer a range of financial services and products that are backed by the Federal Deposit Insurance Corp (FDIC). The announcement marks a historic moment for fintech companies, as Varo will become the first fintech company to obtain a national bank charter with the OCC. A national banking charter has a strong appeal to fintech companies.  With a charter,…
It did not take long for the Office of the Comptroller of the Currency’s (“OCC”) May 29 Final Rule codifying the valid-when-made principal to face challenges in court. On July 29, the attorneys general for New York, California and Illinois filed suit in the Northern District of California to block the rule, which extended the National Bank Act’s (“NBA”) preemption of state usury laws to any assignee or transferee of a loan originated by a national bank. The OCC issued the rule to reinforce the long-standing doctrine that the terms of a loan as originated by a bank remain…
On July 23, 2020, the New York Department of Financial Services (“DFS”) filed its appellate brief asking the Second Circuit Court of Appeals to uphold the lower court’s decision to block the Office of Comptroller of the Currency’s (“OCC”)’s special purpose national bank charter (“fintech charter”). The DFS initially challenged the OCC’s fintech charter in September 2018 in the Southern District of New York (“SDNY”), weeks after the OCC unveiled the charter for certain non-depository fintech companies under the National Bank Act (“NBA”), allowing them to operate as “special purpose national banks” overseen by the OCC without the burdens of…
This week’s U.S. Supreme Court opinion in Seila Law v. CFPB reached its most widely expected conclusion, ultimately allowing the CFPB to continue to operate. But the opinion also raises questions about previously initiated CFPB enforcement actions, and arguably raises constitutional issues about the many other federal agencies whose leaders are insulated from removal by the President. Download this new McGuireWoods white paper, which addresses those open questions and issues, and the future implications of Seila Law.…
In a landmark case last week, the Supreme Court held in Bostock v. Clayton Co., Ga. that the prohibition on sex-based discrimination in employment is violated when an employee is fired on the basis of homosexuality or transgender status.  This article briefly explains why that decision, based on Title VII of the Civil Rights Act of 1964 (“Title VII”), very likely means that the federal fair lending laws, too, will be read to protect homosexual and transgender individuals — specifically, loan applicants.   The federal fair lending laws are the Equal Credit Opportunity Act (“ECOA”) and the Fair Housing Act (the…
On May 29, 2020, the Office of the Comptroller of the Currency (OCC) issued a long-awaited final rule to clarify and underscore the ‘valid when made’ principle in which the interest rates permissible before a bank transfers a loan continues to be permissible after the transfer to a non-bank. Generally, under the National Bank Act (NBA), national banks chartered by the OCC have the power to make contracts, lend money, and all incidental powers necessary to carry out the business of banking. Regarding interest, the NBA requires a national bank to comply with the interest rate caps of the state…
On April 23, 2020, the Office of the Comptroller of the Currency (“OCC”) filed its opening brief defending its special purpose fintech charter in the U.S. Court of Appeals for the Second Circuit. The special-purpose charter, initially proposed by former Comptroller Thomas Curry in December 2016, would permit vetted non-depository fintech companies to operate under a federal charter overseen by the OCC without the burdens of state-by-state regulation and licensing. However, the program faced criticism and lawsuits from state regulators.   Click here for our prior coverage on this lawsuit. The New York Department of Financial Services (“DFS”) led the challenge…
With the help of McGuireWoods, Funding Circle, the leading online small business loan platform in the United States, joins fintech companies Intuit, PayPal, and Square, to participate in the U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP), which was enacted as part of the CARES Act last month. To recap, the PPP provides aid in the form of potentially forgivable loans to eligible small businesses. The loans may be used to cover qualified payroll costs, rent, utilities, and interest on mortgage and other debt obligations in order to allow borrowers to maintain pre-COVID-19 employment numbers and compensation levels to…
Fintech companies Intuit, PayPal and Square have officially been approved to participate in the U.S. Small Business Administration’s (SBA) $349 billion Paycheck Protection Program (PPP), which was enacted as part of the CARES Act last month. To recap, the PPP provides aid in the form of potentially forgivable loans to eligible small businesses, which loans may be used for payroll and other expenses. These fintech companies are now accepting loan applications.  Other fintech companies, including Funding Circle, are awaiting approval to follow suit. As we reported last week, initially there was uncertainty about whether nonbank fintech companies would be…
The latest regulations coupled with the Treasury Department guidance have left many scratching their heads as to whether fintech companies will be able to provide small business loans under the recently enacted Paycheck Protection Program (PPP), a crucial part of the U.S. legislature’s latest attempts to address the serious economic impacts of the COVID-19 pandemic.  While the landscape is shifting daily, and sometimes hourly, as regulators fight the clock to roll out the program fast enough to help keep many small businesses afloat – regulators should not lose focus on the important role that fintech lenders can play. Given their…
On March 18, 2020, Square Inc., became the first U.S. fintech company to receive conditional approval of an Industrial Loan Company (“ILC”) charter from the Federal Deposit Insurance Corporation (“FDIC”), to pair with its prior charter approval on March 17, 2020 from the Utah Department of Financial Institutions.  It became the first new de novo ILC charter to be approved by the FDIC in over a decade.  This comes just one day after the FDIC codified its approach to managing ILCs generally.  The ILC charter allows non-bank owned companies to provide various deposit and lending services to customers without being…
There are widespread expectations that the Supreme Court, following an oral argument last week, may rule that part of the law that created the CFPB is unconstitutional.  As a result, many business executives, in particular, have been asking their lawyers about the likely impact of such a ruling.  These questions have included ones like:  Could a prior CFPB action, including a settlement punishing the target of an investigation, somehow be annulled and unwound?  And what would need to happen in order to bring a lawsuit (or to take some other action) seeking an annulment like that? These are a valid…
For the first time, a U.S. fintech company is acquiring a regulated U.S. bank, which will give it access to a stable and cheaper source of funding – as well as a national bank charter. On February 18th, LendingClub, one of the largest providers of personal loans in the U.S., announced that it will pay $185 million in cash and stock to acquire Radius Bancorp, an online bank with about $1.4 billion in assets.  The deal will allow LendingClub to offer an array of new products and diversify its revenue stream, by combining one of the leading digital loan providers…