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?

In Johnston v. Midland Credit Mgmt., No. 16-437, 2017 U.S. Dist. LEXIS 10610 (W.D. Mich. Jan. 26, 2017), the court recently dismissed a class action complaint alleging a violation of the Fair Debt Collection Practices Act (“FDCPA”) for lack of Article III standing. Johnston is notable as the first FDCPA claim dismissed for lack of Article III standing in the Sixth Circuit. In addition, Johnston provides an interesting case study regarding some of the issues that may need to be considered prior to filing a motion premised on lack of Article III standing.
Continue Reading A Case Study – Some Things to Consider When Challenging a Putative Consumer Class Action in Federal Court for Lack of Article III Standing

The House Financial Services Committee’s previous passage of the Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs” Act (“CHOICE Act”) provides a roadmap to potential financial regulatory reform early during the Trump administration, including reform of the Dodd-Frank Act’s and BASEL III’s bank capital requirements. House Committee on Financial Services Chairman Jeb Hensarling (R-TX-5) has indicated a desire to introduce a “2.0” version of the bill early in 2017 when the new Congress convenes.
Continue Reading Dodd-Frank Reform: BASEL III and Capital Requirements