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Jacqueline advises financial institutions, non-depository lenders, money transmitters, mobile wallet providers, credit card clients, payment processors, and technology companies in compliance and regulatory matters with a particular focus on e-commerce, consumer protection and privacy and data security issues.

NetSpend Corporation (NetSpend) recently agreed to settle with the Federal Trade Commission (FTC) regarding allegations that NetSpend deceived consumers about certain aspects of NetSpend’s reloadable prepaid cards. NetSpend will pay $40 million in restitution to customers and $13 million to the FTC under the enforcement order. Providers of consumer financial products and services—not just prepaid card providers—should carefully review the FTC’s allegations. The allegations provide insights on practices the FTC perceives to be deceptive, and how to avoid engaging in them. Continue Reading Federal Trade Commission Action Against NetSpend Has Relevance Beyond the Prepaid Card Industry

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

This month marks the one-year anniversary of the Financial Crimes Enforcement Network (FinCEN)’s long-awaited beneficial ownership rule, which imposes certain Customer Identification Program (CIP) requirements under the Bank Secrecy Act (BSA). FinCEN proposed the rule in 2014 and finalized it in May 2016. FinCEN has also issued Frequently Asked Questions Regarding Customer Due Diligence Requirements for Financial Institutions, which provides guidance in understanding and implementing the new rule. All financial institutions subject to the rule must begin complying with it no later than May 11, 2018.

The rule will impose new compliance obligations on federally regulated banks, federally insured credit unions, mutual funds, brokers or dealers in securities, futures commission merchants, and introducing brokers in commodities. Continue Reading Key Steps in One-Year Countdown to Compliance with FinCEN’s Beneficial Ownership Rule

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

As political developments affecting the federal regulatory landscape continue, one key area that consumer financial services practitioners will want to monitor is the future of nonbank small-dollar lending regulation and enforcement. The Consumer Financial Protection Bureau (CFPB) has altered the small-dollar landscape in recent years, taking what was chiefly a state-regulated activity and making it a federal priority. The CFPB has taken enforcement actions against small-dollar lenders and proposed the first federal regulation expressly covering small-dollar lending. Continue Reading The CFPB and Small-Dollar Lending: Where Do We Go from Here?

As financial services innovators and financial technology (“FinTech”) have expanded over the last several years, a point of industry consensus is that the U.S. regulatory landscape in particular is challenging to, and in some cases poses a barrier to, innovation and new competition within the FinTech arena. Critics of the U.S. regulatory regime point to a confusing web of multiple federal functional regulators and state money transmission regulators. The sheer number of potential laws, rules, regulations and regulatory entities that can be involved in regulating a particular FinTech startup based upon the product and services provided are subject to increased scrutiny and criticism from the FinTech industry. Continue Reading U.S. FinTech Regulatory Landscape for 2017