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Coauthored by Dykema Summer Associate Shaun Sullivan-Towler.

For financial institutions interested in banking state-legal marijuana businesses, 2018 has been a rollercoaster. In January, Attorney General Jeff Sessions rescinded the Obama-era policy of lenient federal enforcement, creating new confusion for banks and credit unions about the future of marijuana-related banking. Many feared that the Financial Crimes Enforcement Network (FinCEN) would withdraw or amend its guidance as well, thereby eliminating the only federal guidance directed to financial institutions on banking marijuana businesses. But FinCEN has since been clear that its guidance remains in place and announced that, as of March 31, 2018, a total of 411 banks and credit unions now provide services to marijuana-related businesses, up from 365 a year ago. Continue Reading The STATES Act, Rooted in Federalism, Would Address Systemic Risk in Cannabis-Related Banking

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Not long ago, financial technology (FinTech) startups were all seeking to disrupt the market for financial services and compete directly with financial institutions (FIs) for customers. But as these startups have grown into more mature companies, cooperation with FIs has come to replace disruption for many FinTech firms. These companies have realized that FIs can help scale their technology to larger bases of potential users, and can also help FinTechs raise capital by showing strong partnerships and FI distribution channels.

In turn, FIs now recognize that FinTech firms offer more than competition, representing potentially valuable partnerships with better technology and an improved user experience. By collaborating with FinTechs, FIs can improve product offerings and increase efficiency, all without the FIs committing significant resources to create new solutions themselves. Continue Reading Access vs. Security: Takeaways For U.S. Financial Institutions from the European PSD2 Open API Framework

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Amid the uncertainty over the future of the CFPB, another continuing question is whether state consumer protection authorities will act to fill gaps left by the CFPB’s inaction. State attorneys general have tools available to pursue financial services practices that they believe harm consumers, and some have announced intentions to do so. But to date, the states have not initiated a flurry of suits regarding consumer financial protection.

Under the leadership of purported Acting Director Mick Mulvaney, the CFPB has curtailed investigative and enforcement activities, which states could take as a cue to step in. In fact, Mulvaney seemingly exhorted states to do so, as in a speech to the National Association of Attorneys General where he said that the CFPB would look to states for “a lot more leadership when it comes to enforcement.” Continue Reading Cutback of CFPB Activities Invites State Authorities to Act — But Will They?

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As federal legislation abridging the Dodd-Frank Act remains in play, comparably radical changes to federal financial supervision could come without any need for Congressional action. This could happen through federal banking agencies’ modifications to the regulations they issue, and how they choose, or decline, to enforce them. This could effect sweeping changes to the current framework—or even dismantle it altogether.

While the latter possibility may sound extreme, the Consumer Financial Protection Bureau (CFPB) is in the process of reevaluating essentially every aspect of what the agency does. This initiative is taking place under the leadership of Mick Mulvaney, a longtime adversary of the CFPB and one of the two people currently claiming the right to be known as Acting CFPB Director. (The other, Leandra English, appointed to that role by outgoing Director Richard Cordray, is continuing to pursue her lawsuit. The latest oral argument in the case is scheduled for this Thursday, April 12 in the US Court of Appeals for the DC Circuit.) Continue Reading CFPB Requests for Public Comments Foreshadow Possible Large-Scale Changes

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It has been almost easy to forget that the PHH v. CFPB case started life as an appeal of an enforcement action taken by the Consumer Financial Protection Bureau (CFPB) for purported violations of the Real Estate Settlement Procedures Act (RESPA).  Technical RESPA issues quickly took a back seat in public discourse to the juicier issue in the case—whether the structure of the CFPB itself was unconstitutional. (Among the factors heightening the drama was the fact that, post-election, the new leadership at the Department of Justice reversed the Obama-era course in the litigation, directing its lawyers to argue against the CFPB and contend that the CFPB was unconstitutional.)

In the latest turn in the case, in a January 31 opinion, the US Court of Appeals for the DC Circuit brought the RESPA issues back to the fore — ironically, in an opinion that does not substantively discuss the RESPA issues.  Continue Reading Latest PHH v. CFPB Ruling Brings RESPA and CFPB Enforcement Approaches Back in Focus

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2018 has a tough act to follow, after a 2017 full of momentous developments—starting with a new Administration and wrapping up with a showdown over the right to serve as Acting Director of the Consumer Financial Protection Bureau (CFPB) (a fight that continues as of this writing, as discussed below).

But 2018 is unlikely to be a quiet year. In addition to developments in the CFPB leadership battle and other litigation, the year is expected to bring developments such as effective and compliance dates for major regulations on data protection, Bank Secrecy Act/anti-money-laundering (BSA/AML), mortgage servicing, and other topics, and could bring changes in supervisory focus at multiple federal agencies.  Continue Reading Fasten Your Seatbelts: Are You Ready for Another Eventful Year?

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The state-legal marijuana sector operates in a largely cash-based economy—only about 400 banks and credit unions in the U.S. actively provide financial services to this sector—because marijuana remains illegal under federal law, despite the increasing number of states acting to legalize medical and/or recreational use. There is no carveout for state-legal activity and no safe harbor for financial institutions to serve customers engaged in such activity.

Until last week, though, banks and credit unions wanting to work with this sector could rely to some degree on guidance from the U.S. Department of Justice (DOJ) and from the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Now, with the DOJ guidance withdrawn and the fate of the FinCEN guidance in question, the future of marijuana banking faces even more uncertainty. Continue Reading The Challenges of Marijuana Banking Just Got Even More Challenging

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It has been a tumultuous few days for the Consumer Financial Protection Bureau (CFPB), with dueling acting directors and emergency hearings. But while Office of Management and Budget (OMB) Director Mick Mulvaney is now officially the acting director of the CFPB—at least as of this writing—the story does not end there. Many questions remain to be answered regarding the legal framework governing the CFPB’s leadership structure, the future of the CFPB under a permanent director nominated by President Donald Trump, and the prospects for federal and state regulation of consumer financial matters. Continue Reading While CFPB Leadership Fight Continues, Broader Questions Remain About Future of Consumer Financial Regulation

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The Consumer Financial Protection Bureau (CFPB)’s long-anticipated rulemaking on small-dollar lending took a surprising turn. The version of the CFPB’s small-dollar regulation proposed in 2016 would have covered a wide array of small consumer loans, and was further accompanied by a request for information on additional small-dollar products and practices not covered by the proposal, all of which implied that the CFPB had a far-reaching agenda for regulating small-dollar consumer credit and, as a first salvo, would fire off a sweepingly broad small-dollar regulation. But that is not what has happened so far. Rather, the final rule, announced on October 5, is narrowly drawn and centers on more limited, specific types of short-term payday loans. Continue Reading What Does the CFPB’s Payday Rule Mean for the Future of Small-Dollar Lending?

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Vice President Mike Pence cast a tie-breaking vote in the U.S. Senate on the evening of October 24, 2017 to overturn the arbitration rules proposed in July by the Consumer Finance Protection Bureau. The House of Representatives had already voted in late July to repeal the arbitration rule under the Congressional Review Act. President Donald Trump has indicated that he will sign the resolution shortly, applauding Congress for “standing up for everyday consumers and community banks and credit unions, instead of the trial lawyers, who would have benefited the most from the CFPB’s uninformed and ineffective policy.”   Senator Elizabeth Warren, who had led opposition to the repeal resolution, called the move “a giant wet kiss to Wall Street.” Continue Reading In Case You Missed It: Senate Moves to Overturn CFPB Arbitration Rule