Keeping Up with Compliance: September 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.

Compliance actions & changes in the industry

September saw several compliance actions taken by the CFPB and other agencies.?

CFPB

• The CFPB has proposed banning Navient from servicing federal student loans and ordering a $120 million payment for widespread abuses, including misleading borrowers and steering them into costly repayment options.
• The CFPB has sued Horizon Card Services and CEO Robert Kane for deceiving consumers into costly memberships for a limited-use credit card with high fees and difficult cancellation processes.
• An annual report by the CFPB highlights financial challenges for servicemembers and veterans , especially with student loans and transcript withholdings as well as an increase in scams targeting older veterans.??
• JPMorgan Chase’s strained relationship with regulators intensifies as the CFPB investigates its handling of Zelle prompting the bank to consider litigation amid a trend of banks resisting oversight.?

Regulatory

• The FDIC introduced a proposed rule to strengthen oversight of fintech accounts held by banks to prevent another Synapse failure. This proposal would require banks to closely monitor accounts managed by fintech partners to ensure customer access to funds in case of a fintech failure.?
• Regulators are escalating their focus on the risks of bank relationships with fintechs and other third parties. The Federal Reserve, FDIC, and Office of the Comptroller issued a joint statement noting potential risks with those partnerships, and requested information about how banks are working with third parties to deliver bank services.
• The FTC is issuing over $2.6 million in refunds to consumers misled by FloatMe , an online cash advance provider that made false claims of "free money," charged fees, and discriminated against some applicants.

Fintech news

Here are the highlights from fintech news in September.

• JPMorgan Chase is negotiating to take over Apple’s credit card program from Goldman Sachs, but pricing and terms are still under discussion, with a deal potentially months away.
• Five Star Bank announced it will exit BaaS , a decision driven by regulatory changes and heightened scrutiny, putting more focus and responsibility on bank partners.
• Brex launched an embedded payments solution called, “Brex Embedded” for B2B software vendors. This solution allows businesses to integrate Brex virtual cards into their platforms.
• Galileo launched a new secured credit offering to help underbanked consumers. The “Secured Credit ” solution simplifies the credit-building process by allowing users to manage both debit and credit accounts from a single balance.
• Tech giants like Amazon and Google focus on smoother, easier payments . Leveraging their partners, the two companies are inserting themselves into the payments space intending to be more involved in the day-to-day lives of their customers.?
• Fiserv and Wells Fargo are ending their joint venture on April 1, resulting in a $600 million impairment charge for Fiserv.
• DailyPay is set to launch its earned wage access services in the U.K. in October to accommodate its multinational clients, as the company seeks to expand internationally amid growing regulation and competition in the U.S. market.
• Oracle launched a financial crime and compliance management service to help banks and fintechs identify potential compliance issues and reduce costs.?

Insights

The following insights shed light on the trends and developments shaping fintech.

• As the influence of fintech grows, fraud prevention is becoming more sophisticated, moving beyond traditional methods like passwords and simple identity checks. The future lies in financial identification, which will leverage a combination of transaction histories, borrowing practices, account balances, and other financial behaviors to create a unique, verifiable consumer identity. This approach goes beyond static data, like Social Security numbers or credit scores, and instead focuses on real-time financial behavior. Ultimately, this behavior-based identity will be very difficult to fake, and will allow companies to make smarter lending and underwriting decisions.
• Fintech currently plays an enabling role for non-financial services companies, primarily helping them operate more efficiently. Beyond improving operational efficiency, fintech solutions are now helping companies find trends, identify customer needs, and personalize product offerings. By turning raw data into actionable intelligence, fintech is guiding companies on how to optimize their offerings, target customers more effectively, and ultimately increase profitability.?
• There are huge opportunities for fintech partnerships. While some partnerships have shown where things can go wrong, we are likely to see a growing emphasis on system interoperability. As fintechs learn to work better together on a technical level, we can expect next-generation services, new market opportunities, and a vastly improved customer experience.

Compliance feature spotlight

• In a recent blog post, we talked about the Fair Credit Billing Act (FCBA) and how LoanPro helps credit providers stay compliant. It’s a big regulation with a lot of parts, but just about all of them can be handled with automations or our guided UI tools.

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