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Elizabeth Anne Khalil is a Member in Dykema's Government Policy Practice Group and Regulated Industries Department. She focuses her practice on all aspects of financial institution regulation, with a particular emphasis on compliance matters.

On May 24, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in the case of PHH vs. CFPB. The case, arising out of a CFPB enforcement action under the Real Estate Settlement Procedures Act (RESPA), also addresses the fundamental issue of whether the CFPB’s leadership structure is permissible under the Constitution.   

The en banc consideration of the case followed the opinion of a three-judge panel of the D.C. Circuit that found the Bureau’s structure unconstitutional because it features a single director who is not removable at will by the President. While other federal agencies are led by a single person—including a fellow financial regulator, the Office of the Comptroller of the Currency (OCC)—the court dismissed the similarity in a footnote, distinguishing the OCC structure in noting that the authorizing statutory language is not identical.  Continue Reading En Banc Oral Argument in PHH vs. CFPB Case Continues the CFPB Saga, Pits Federal Government Against Itself

On May 10, 2017, the Consumer Financial Protection Bureau (CFPB) announced steps toward issuing regulations to impose data reporting requirements on the small business lending industry, a rulemaking required under the Dodd-Frank Act of 2010. To help it draft a proposed rule, the CFPB requested public feedback through a Request for Information (RFI) Regarding the Small Business Lending Market. At the same time, the CFPB released a white paper, Key Dimensions of the Small Business Lending Landscape, discussing the data currently available regarding small business lending. Continue Reading CFPB Asks for Input on Small Business Lending Data Collection; Agency Sees Small Business As Fair Lending Priority

As the battle over the Office of the Comptroller of the Currency (OCC)’s proposed financial technology (“fintech”) charter continues, investors in fintech companies should consider what it would mean for their business strategies if fintech companies actually did become banks. From an investor’s perspective, is there upside or downside to a fintech company becoming a bank?

Potentially, both.

First, there are advantages to status as a bank. In particular, it could liberate fintech companies from certain onerous state-by-state requirements, such as licensing requirements and interest rate limits. Especially for fintech companies whose businesses center on money transmission or consumer lending—activities that are particularly affected by these state laws—this could be a huge advantage.   Continue Reading What Investors in Fintech Companies Need to Know About ‘Fintech Banks’

Does a national bank have to take deposits in order to be a national bank?

That question is at the center of a federal lawsuit filed April 26 against the Office of the Comptroller of the Currency (OCC) by the Conference of State Bank Supervisors (CSBS), the nationwide organization of state financial regulators. The action, filed in U.S. District Court for the District of Columbia, aims to block the OCC’s ability to offer its proposed national bank charter for non-deposit-taking financial technology (“fintech”) companies. CSBS alleges, among other things, that the OCC’s statutory authority allows it to charter only banks that engage in the traditional banking activity of taking deposits, and that any authority to charter non-deposit-taking national banks is limited to such banks specifically authorized by Congress. Continue Reading States’ Lawsuit Over OCC Authority to Create New Charter Creates Bumps in the Road for Fintech Firms

Since the expiration in April of Thomas J. Curry’s term as Comptroller of the Currency, it has remained unclear who would be tapped to replace him. Until today.

The Office of the Comptroller of the Currency (OCC) has announced that Comptroller Curry will step down for good on May 5 and be replaced temporarily by Keith Noreika. Noreika will serve as Acting Comptroller of the Currency for an undetermined period of time. It is unclear whether Noreika, or someone else, will eventually be nominated for the permanent position as Comptroller. Continue Reading Acting Comptroller of the Currency Appointed; Long-Term Outlook for OCC Leadership Remains Unclear

The Consumer Financial Protection Bureau (CFPB)’s long-delayed prepaid card rule has been delayed once again—and further delays may lie ahead, as the CFPB considers whether to make additional changes. The additional time gives prepaid providers and other stakeholders another bite at the apple to advocate for changes to this regulation.

On April 20, the CFPB issued a final rule officially delaying the prepaid rule’s effective date by six months, to April 1, 2018, after proposing that delay in light of calls from the industry for the need for more time to implement compliance. Along with announcing the delay, the CFPB stated that it also has “decided to revisit at least two substantive issues in the prepaid accounts rule through a separate notice and comment rulemaking process. We expect to release that proposal in the coming weeks.” Those two issues are “the linking of credit cards to digital wallets that are capable of storing funds” and “error resolution and limitations on liability for prepaid accounts that cannot be registered, have not yet been registered, or for which consumers have attempted but have not successfully completed the registration process.” Continue Reading The CFPB’s Prepaid Rule: Yet Another Delay Brings a New Opportunity to Shape the Course

As President Donald J. Trump continues to make nominations for Cabinet, judicial, and agency posts, curiously little focus has fallen on who will be chosen to head one key financial regulator.

While last week, the confirmation hearings of Supreme Court nominee Neil M. Gorsuch were being live-streamed, and while the fate of the Consumer Financial Protection Bureau (CFPB) and its Director, Richard Cordray, continues to make headlines as the PHH Corp. v. CFPB case unfolds, and the nomination—and ultimate confirmation over vehement Democratic opposition—of Steven T. Mnuchin as Secretary of the Treasury drew attention, the question of who will lead the Office of the Comptroller of the Currency (OCC) remains a mystery. Continue Reading The Nomination Everyone Should Be Talking About

For nonbank providers of consumer financial services, one of the most challenging parts of doing business is the need to comply with the laws of multiple states. Entities like money transmitters and consumer lenders typically must obtain licenses in the states in which they do business, and comply with an array of varying state laws. And for entities that are online or mobile in nature, the “states in which they do business” can mean all fifty states—plus the District of Columbia and U.S. territories. This has been the source of many operational challenges and frustrations for fintech companies and startups in recent years. Continue Reading OCC’s Fintech Charter Proposal: The End of State Licensing As We Know It? Comments Due April 14

As long as nonbank small-dollar lending faces additional regulation and regulatory scrutiny, as we have previously discussed, the role of small-dollar loans made by traditional depository institutions should not be ignored.

To date, bank and credit union loans make up a tiny fraction of the small-dollar market, but that could change. This is a particular possibility if the nonbank portion of the market is negatively affected – through, for instance, lenders exiting the market or the enactment of laws further restricting the types of loans nonbanks can make – or if federal regulators incentivize their supervised institutions to make such loans, whether through positive Community Reinvestment Act (CRA) consideration or assurances that fair lending and other supervisory expectations can be satisfied. Continue Reading Competition for Nonbank Small-Dollar Lending?

As discussed in our previous post, the Consumer Financial Protection Bureau (CFPB) has proposed a regulation that would impose numerous requirements regarding small-dollar lending. Unquestionably, that rule would be significant because it would establish a nationwide, federal standard for covered small-dollar loans, and lenders could not circumvent the rule’s requirements by choosing which state or states to operate in. But a CFPB rule also would not displace the role of the states. State regulators would continue to be able to license and supervise small-dollar lenders, and would be able to maintain their own laws, including those more protective of consumers and not inconsistent with the CFPB rule. State authorities would also continue to investigate and prosecute small-dollar lenders for unlicensed activity and other activity alleged to violate state law. Continue Reading The Enduring Role of the States and Cities in Small-Dollar Lending