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Top Story Compliance Related

11/04/2021

Hsu discusses 'regulatory perimeter'

Yesterday, Acting Comptroller of the Currency Michael J. Hsu discussed clarifying and modernizing the bank regulatory perimeter at the American Fintech Council’s Fintech Policy Summit 2021. He described recent trends toward digitalization of banking and financial innovation, which have been accelerated by the COVID-19 pandemic. Several years of projected growth in digitalization took place in a matter of quarters. For instance, digital payments transactions increased by 27 percent, from $4.1 trillion to $5.2 trillion, from 2019 to 2020. Similarly, the total market value of cryptocurrencies has grown to approximately $2.5 trillion from $200 billion in 2019. Consumers and businesses experienced greater convenience, expanded capabilities, and an increase in opportunities, all as a result of financial innovation.

However, said Hsu, "these trends are being driven by firms that are not subject to bank rules and do not have the same controls as banks. In regulatory-speak, they sit outside of the so-called bank regulatory perimeter. The full implications of this will likely only become apparent over time. While the convenience and benefits of rapid innovation can be enjoyed immediately, the risks and harms to consumers and businesses of engaging in financial activities with fewer controls tend to emerge only later. He pointed to the apparent success of fintech companies in facilitating expanded access to PPP loans, and recent evidence of higher rates of customer dissatisfaction and of fraud with fintech-facilitated PPP loans versus those run through traditional banks. He also described the rapid growth in users and total market value in the cryptocurrency space, matched by growth in cryptocurrency scams and consumer complaints. He said "'Move fast and break things' is a common mantra in tech. In the financial services context, it is important to remember that those 'things' are people and their money."

Hsu added, "Increasingly, the three cornerstones of banking—taking deposits, making loans, and facilitating payments—are being reassembled functionally and digitally outside of the bank regulatory perimeter by certain firms... [and] these 'synthetic banking providers' (SBPs) operate out of the reach of bank regulators and free of bank rules, such as capital requirements, bank consumer protection laws, and the Community Reinvestment Act. History and research warn us that unregulated banking ends badly. Indeed, the origins of the OCC, Federal Reserve, and FDIC, as well as of many state banking agencies, can be traced back to financial panics and destabilizing runs resulting from unregulated or poorly regulated banking."

Hsu then suggested "we need to remove the disparity between the rights and responsibilities of banks and those of synthetic banking providers by holding SBPs to banking standards."

11/04/2021

FTC publishes policy on negative option marketing

The Federal Trade Commission has published [86 FR 60822] in this morning's Federal Register a policy statement to provide guidance regarding its enforcement of various statutes and FTC regulations addressing negative option marketing and operating. The Statement is intended to assist the business community and practitioners by providing specific guidance on the Commission's interpretation of existing law as it applies to negative option practices. It may also assist the courts in developing an appropriate framework for interpreting and applying the various statutes and regulations addressing negative option marketing.

Negative option offers come in a variety of forms, but all share a central feature: Each contains a term or condition under which the seller may interpret a consumer's silence or failure to take affirmative action to reject a good or service or to cancel the agreement as acceptance or continuing acceptance of the offer. Such offers are often involved in consumer claims of unauthorized credit card or debit card charges.

11/04/2021

IRS reminder on special tax deduction for charitable donations

The IRS has posted a reminder that a special tax provision will allow more Americans to easily deduct up to $600 in donations to qualifying charities on their 2021 federal income tax return. Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But a temporary law change now permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations.

Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify. Under this provision, individual tax filers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns. NOTE: Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with their volunteer services to a qualifying charitable organization. Cash contributions don't include the value of volunteer services, securities, household items or other property.

11/04/2021

FDIC releases 65 CRA evaluations

The FDIC has released a list of 65 institutions examined for compliance with the Community Reinvestment Act whose evaluations have recently been made public. Of those listed, one was determined to be in Substantial Noncompliance, two received ratings of Outstanding, and 62 received Satisfactory ratings.

We congratulate the two banks that received the Outstanding evaluation ratings:

11/03/2021

OCC CRA evaluations released

The OCC has released a list of national banks and savings associations recently evaluated for compliance with the Community Reinvestment Act whose evaluation reports were made public in October 2021.

Of the 15 evaluations made public last month, 9 are rated satisfactory, 5 are rated outstanding, and one is rated Substantial Noncompliance. We congratulate these five banks who received the outstanding ratings:

11/03/2021

CFPB: More credit report disputes in Black and Hispanic neighborhoods

The Consumer Financial Protection Bureau on Tuesday announced its release of research finding that consumers in majority Black and Hispanic neighborhoods, as well as younger consumers and those with low credit scores, are far more likely to have disputes appear on their credit reports. The new research is a part of a series of reports focusing on trends in the consumer financial marketplace, and uses data on auto loan, student loan, and credit card accounts opened between 2012 and 2019.

The report shows that majority Black and Hispanic neighborhoods continue to face significant challenges with credit records. In nearly every credit category reviewed, consumers residing in majority Black areas were more than twice as likely to have disputes appear on their credit reports compared to consumers residing in majority white areas. For auto loans, consumers in majority Black areas were more than three times as likely to have disputes appear on their credit reports (0.8% of accounts with disputes in majority white census tracts compared to 2.8% of accounts in majority Black census tracts).

The CFPB is committed to further researching the root causes of credit information disputes, as well as investigating the reasons for the demographic disparities found in the report.

Related link

11/03/2021

FTC returns nearly $60 million to Amazon drivers

On Tuesday, the Federal Trade Commission announced it had sent almost $60 million in checks and PayPal payments to drivers who had their tips illegally taken by Amazon.

From late 2016 through August 2019, Amazon had asked customers placing orders with Amazon Prime Now or AmazonFresh services how much they wanted to tip the courier, and told customers that "100 percent of the tips are passed on to your courier." But, according to the FTC's February 2, 2021 press release, Amazon pocketed much of those tips.

The FTC has sent over 139,000 checks and 1,620 PayPal payments totaling $59,600,593 to Amazon Flex drivers who had $5 or more taken from them. The largest payment is $28,255, and the average is $422.

11/02/2021

New CFPB guide for family members of elders

The CFPB has issued a new guide, Preventing elder financial abuse: Guide for family and friends of people living in nursing homes and assisted living communities.

The guide walks through four steps to fighting elder financial abuse: Prevent, Recognize, Record, and Report. It lists red flags to watch for, shares some common scenarios, and includes resources that can be used to help loved ones.

The Bureau also released a quick reference handout on reporting elder financial abuse.

11/01/2021

CFPB leadership changes announced

The Consumer Financial Protection Bureau has announced two leadership changes within the Bureau:

  • Lorelei Salas will be joining the CFPB as Assistant Director for Supervision Policy and will also serve as the Acting Assistant Director for Supervision Examinations.
  • Eric Halperin has joined the CFPB as Assistant Director for the Office of Enforcement.

11/01/2021

California based Ponzi scheme managers charged

The Securities and Exchange Commission has announced that it has charged BNZ, a Newport Beach, California-based company, and its co-founders and co-managers Brett Barber and Louis Zimmerle, for fraudulently raising $13.5 million from more than 100 retail investors.

According to the SEC's complaint, filed on October 28, 2021, since June 2019, BNZ, Barber, and Zimmerle have raised $13.5 million from retail investors by telling them BNZ was in the business of making investments in real estate and alternative investments and promising to pay investors significant returns, generally 10% per year. The complaint alleges that the defendants used only $6.4 million of the $13.5 million raised from investors to invest in real estate and alternative investments, and those investments generated just $300,000 in profits.

Despite generating minimal profits, the defendants allegedly paid investors returns of at least $1.7 million using funds raised from other investors in Ponzi-like fashion, and transferred over $1.6 million to Barber through his company, Guaranteed Income Solutions Inc., and over $700,000 to Zimmerle. The defendants are alleged to have made false and misleading statements to investors regarding, among other things, the source of the payment of the investor returns. In addition, Barber allegedly misled investors by touting his education in finance and his investment experience without also disclosing that he had been barred by the Financial Industry Regulatory Authority from affiliating with any member firm.

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