Keeping Up with Compliance: June 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

• Open banking compliance: We will see a shift in Fintech to ensure data can be properly provided to meet the requirements of Dodd-Frank 1033. Agile cloud-based companies will get the biggest win, as they enable compliance for providers of financial services, while leveraging open-banking data to mitigate fraud and offer more personalized products.
• Scalable security: Financial data breaches are on the rise. The associated liability will drive a greater focus on data security and secure development in Fintech. Banks and other financial services providers will focus more heavily on scalable security when vetting Fintech partners.
• Financial identity: Interesting technology and data collaborations are starting to emerge, hinting that the next focus in financial convenience will be consumer identity. Comprehensive financial identification will enable instant approval for financial services, better fraud detection, and set-it-and-forget-it options that will optimize credit rewards and make routine financial choices.

Compliance feature spotlight

As the system of record for lending and credit, LoanPro is built on an accurate, reliable ledger. LoanPro’s sophisticated calculator ensures correct lending calculations, even in the unlikely edge cases. The LoanPro ledger records a full account history that includes both an audit trail, which shows, action by action, what changes were made, and a daily snapshot of each loan, lease, and line of credit showing how key numbers like balance and interest accrual have changed day by day. This feature empowers providers of loans and credit to clearly show how, when, and why an account has changed, taking the stress out of examinations and audits.

Compliance actions & changes in the industry

CFPB?

• CFPB issued a warning against deception by financial institutions in their use of contract fine print.
• CFPB proposed a bill to remove medical reports from most credit reports with hopes of prohibiting lenders from making lending decisions based on medical information.?
• CFPB outlined the requirements to become a “a recognized industry standard setting body” as they accelerate the push to open banking in the US.?
• ?CFPB issued an interpretive rule classifying "buy now, pay later" (BNPL) lenders as credit card providers, subjecting them to additional regulations. Read our blog post on how LoanPro helps fintechs meet reg Z requirements.
• CFPB extended the compliance deadlines associated with the small business data collection rule by 290 days. Lenders that originate the highest number of small business loans (2,500 or more) must begin collecting data by July 18, 2025.?

Regulatory

• AI mortgage startup, LoanSnap, is facing at least seven lawsuits from creditors after raising $100m in capital.?
• Evolve Bancorp Inc. and Evolve Bank & Trust, a partner to Synapse, is hit by the Federal Reserve Board “for deficiencies in the bank's anti-money laundering, risk management, and consumer compliance programs.”
• The FDIC has approved a final rule to enhance resolution planning for insured depository institutions (IDIs) with at least $50 billion in total assets.?
• Thread Bank, a popular partner bank, received an enforcement action from the FDIC, making it? the fourth partner bank associated with the fintech Unit to receive an enforcement action.??

Fintech news

• U.S Bank launched a national marketing campaign leveraging AI to create avatars based on their core target audiences for creative strategies and executions.?
• Walmart and Capital One officially announce the end of their consumer card partnership agreement.?
• Synapse saga: Former FDIC chair and Synapse trustee, Jelena McWilliams, reported an $85M gap in what end users are actually owed. The source of this shortfall is currently unknown.??
• Capital One, Stripe and Adyen are teaming up to reduce fraud with a data share program that will speed up the authorization process for transactions.?
• BNPL provider, Affirm, now offers two new 30-day payment plans.
• Plaid launched their Consumer Report tool—”a new solution that brings businesses real-time, actionable cash flow data along with credit risk insights” through their credit reporting agency.?
• The Federal Reserve Board issued an enforcement action against Evolve Bancorp, Inc. and Evolve Bank & Trust of West Memphis, Arkansas, for deficiencies in their anti-money laundering, risk management, and consumer compliance programs. According to Alex Johnson’s FinTech Takes, this has been an issue for quite some time.?
• The Pennsylvania House of Representatives is considering a bill that would prohibit interchange, or “swipe”, fees from applying to sales tax when merchants accept credit or debit card payments. Illinois passed similar legislation this month, barring the application of interchange fees to excise taxes. About a dozen other states are considering similar bills.?
• Evolve Bank confirmed that data was stolen in a ransomware attack on their systems.

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