Keeping Up with Compliance: April 2024

Welcome to another issue of LoanPro’s Compliance & Fintech Newsletter, bringing you news from across the industry with a focus on compliance. Expect new editions monthly. Subscribe to the newsletter to make sure you don’t miss an issue.

Insights

• Expansion in regulatory focus. The CFPB is broadening its oversight across loans, bank accounts, or financial services of any kind. Companies should anticipate stricter compliance demands and consider proactive audits to avoid potential penalties.?
• Evolving standards in BaaS. The evolution of banking as a service continues, with a growing emphasis on control, compliance, and data transparency for banks.?
• Financial service reintegration. In response to market shifts, financial services providers are increasingly adopting a modular approach, allowing them to cherry-pick specific services from diverse providers. This strategy not only enhances their offerings but also facilitates the creation of next-generation customer experiences.

Compliance feature spotlight

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Compliance actions & changes in the industry

CFPB

• 2023 saw a 38% increase in credit card complaints , the largest increase among all payment methods, with consumers logging 70,000 complaints to the CFPB (report here ).
• The CFPB is addressing deceptive practices by credit card providers who use ‘bait-and-switch’ card reward programs that may ultimately cost consumers more in fees and interest than the benefits they receive.
• According to a CFPB survey, big banks charge higher credit card APRs than small issuers.
• The CFPB issued an order against BloomTech , a coding bootcamp, for deceiving students about loan costs and inflating graduates’ hiring rates.?
• CFPB and DOT joint hearing is scheduled for May 9, 2024. Rohit Chopra, Pete Buttigieg, and other leaders in the organizations will discuss credit card airline rewards as part of the administration’s “junk fees” agenda.
• Despite the CFPB’s increasing scrutiny over BNPL, J.D Power reports that customer satisfaction for the payment option continues to grow in popularity .
• CFPB discusses the hidden costs of health savings accounts , like maintenance fees, paper statement fees, and switching costs.
• Despite exemptions, small banks still feel the effects of the CFPB overdraft rule as they gear up to make changes in order to compete with larger banks.

Regulatory

• FDIC released its 2023 consumer compliance highlights , listing the top 5 frequently cited regulations during the year—TILA, FDPA, EFTA, TISA, and Section 5 of the FTC Act.
• Synapse officially filed for Chapter 11 bankruptcy and has agreed for their assets to be acquired by instant payments fintech Tabapay.
• Legislation seeks to reform the bank exam process by establishing an appeals process to resolve disagreements between banks and regulators.
• FTC says Aqua Finance misled people about financing for home water treatment systems by providing misleading paperwork that didn’t explain terms well, and pressuring them to sign.

Fintech news

• Credit tightened in Q4 of 2023, but lenders are upbeat about lending prospects in 2024 .
• Fintechs want the CFPB, not states, to rule on regulation of Earned Wage Access as a loan.
• Vermont rules that FlexWage can operate in the state without a lending or money transmitter license.
• PSCU and Co-op credit unions are offering BNPL with a twist . Qualifying purchases can be rolled into installment loans when customers want to repay separate from credit cards.
• Fintech Mercury is planning on crossing over into the B2C space with a new consumer lending product as their B2B business still remains under regulatory scrutiny.?
• Klarna is launching a new card product in the U.S with WebBank as the card issuer.?
• Empower is acquiring consumer credit card and fintech company Petal to expand Empower’s credit card offerings.?
• Visa has officially joined the AWS partner network , which will help streamline cross-border payments.??
• Fintech gaming startup Sanlo plans on launching a new product that helps developers avoid app store fees.?
• Hundreds of regional banks are stressed and may face failure due to commercial real estate loans and losses from high interest rates.
• Stripe decouples embedded financial services from payments as industry shifts to financial services that bring together specific services from best-in-class providers.
• Synapse declares bankruptcy , signs a deal with TabaPay to purchase $9.7 million in assets.
• Simon Taylor says Utah is the past, present, and future of embedded finance , because of favorable laws, available workforce, and an innovation mindset.

Thank you for reading this month's edition of Keeping up with Compliance! Don't forget to subscribe, and keep your eyes peeled for our May issue.?