Keeping Up with Compliance: July 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

• BaaS 2.0: Stripe’s new partnership with Fifth-and-Third may be the foreshadowing of an upscale type of bank partnership between larger banks and more mature Fintechs. This type of partnership limits compliance risk and opens up the potential for increased revenue from a large, existing user base.
• Profitability of financial services: Chase bank has taken a significant step towards using its size and influence to drive more customers to use Chase-branded financial services. BNPL is one of several services that becomes more profitable when the offeror is a beneficiary of the interchange fees associated with repayment. It’s very likely we’ll see other large players follow suit.
• Flexible fintech platforms: The increase in regulatory changes highlighted by regulations for earned wage access, BNPL, and states working to pass their own banking regulations underscores the need for flexibility and connectivity in Fintech platforms. It is imperative for anyone offering financial services to remain agile, with the ability to easily incorporate new, best-in-class solutions.

Compliance feature spotlight

LoanPro’s Activation Requirements feature lets lenders set requirements for loans to ensure things like interest rate, KYC, and loan disclosures have been properly completed and reviewed before the loan is “turned on”. This feature can either provide a warning when things haven’t been done, or can stop the loan onboarding process until everything is complete. This built-in compliance check will increase efficiency, while decreasing the likelihood of compromising compliance measures.

Compliance actions & changes in the industry

CFPB?

• The CFPB proposed new rules to help struggling homeowners pay their mortgage and avoid foreclosure.
• CFPB proposed an interpretative rule stating that EWA products are consumer loans and subject to the Truth in Lending Act.?
• CFPB’s interpretive rule requiring BNPL providers to adhere to Regulation Z is effective July 30th.?

?? Our blog post, To meet Regulation Z requirements, BNPL providers need LoanPro’s modern credit platform, outlines this interpretive rule and illustrates LoanPro’s solution to meet these measures.

Regulatory

• Colorado will challenge a ruling temporarily halting the law preventing loans that exceed state interest rate caps from being issued by fintech companies in partnership with out-of-state banks.?
• Mercury is offboarding? many overseas account holders from risky or sanctioned countries, including Russia and Ukraine. Coverage has ranged from sympathizing with disrupted account holders to criticizing Mercury for deliberating sidestepping regulations.
• Federal bank regulators have released a joint statement, reminding banks of risks associated with third-party deposit arrangements and? requesting? input on managing bank-fintech partnerships.
• Florida filed house bill 989 to provide protections against and a process to redress when citizens are debanked.

Fintech news

• Chase will stop allowing credit cards to be used for third-party BNPL plans, encouraging them to use their own BNPL product, Chase Pay Over Time.?
• Brightfin debuted a financial wellness app tailored towards helping younger consumers.?
• Witnesses in the banking industry told a congressional subcommittee that over restrictive regulations on fintech-bank relationships threaten to stifle innovation, arguing it would ultimately lower efficiency and limit options for consumers.
• Galileo Financial Technologies has begun offering wire transfers to fintechs, allowing recipients to receive their funds the day they are sent.?
• After three years of trying to secure a UK banking license, London-based fintech, Revolut, finally secures one, creating a clearer path towards offering credit products to their customers.?
• Forbright Bank’s Community Reinvestment Act (CRA) compliance score was downgraded by the FDIC due to issues with a third-party fintech relationship that charged users fees violating the CRA. Forbright is repaying the impacted users.
• Fifth Third Bank has been ordered to pay a $20 million fine due to non-compliant auto lending practices. The fine was imposed following an investigation that uncovered several violations of standard lending protocols.?
• Stripe has partnered with Fifth Third Bank to expand their embedded financial services, speculating Stripe’s move away from bank partner Evolve.?

Thanks for reading this month’s edition! Don’t forget to subscribe, and keep your eye out for our August edition.?