Weekly Fintech Focus
- FDIC issues a paper on operational resilience to compile insights from existing regulations, guidance, and best practices.
- CFPB issues a no-action letter for a small-dollar loan product.
- CFPB issues consent order to a bi-weekly payment program that deceptively represented its benefits and fees.
FDIC Issues Operational Resilience Paper
In a new paper (here and here) the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve System (Fed) collect insights from existing regulations, guidance, statements, and industry best practices into one place to help large and complex financial institutions develop a comprehensive approach to operational resilience. The FDIC’s operational resilience paper aims to help firms prepare to face numerous disruptive events, including technology-based failures, cyber incidents, pandemics, and natural disasters. The paper is directed to large firms, but its guidance can be utilized by firms of all sizes.
The paper considers critical operations to be those functions of the firm the failure or discontinuance of which would pose a threat to the financial stability of the U.S., and core business lines to be those of the firm that such failure would result in a material loss of revenue, profit, or franchise value. Most firms already identify their critical operations and core business lines and have prepared recovery or resolution plans to address them. Safety and soundness concerns dictate that a firm be able to identify, respond, and adapt to threats to critical operations and core business lines to continue operating through a disruption.
Firms will likely find this paper helpful as a primer to existing regulations and guidance to shortcut internal conversations about operational resilience to focus on key issues. Review of regulations and guidance is still necessary to build a robust and compliant system to respond to threats.
CFPB Issues No-Action Letter for a Small-Dollar Loan Product
The Consumer Financial Protection Bureau (CFPB) announced its latest no-action letter (NAL) granted to Bank of America for its “Balance Assist” small-dollar loan product. As with all CFPB NALs, this letter is fact-specific and merely assures Bank of America that the CFPB does not intend to make supervisory findings or engage in supervisory or enforcement actions related to the small-dollar loan product. In its application, Bank of America states that its small-dollar loan product includes consumer benefits that are substantially the same as those described in a NAL template issued to the Bank Policy Institute in May 2020, and discussed on our blog here.
The Bank of America application and the CFPB’s NAL are available here
CFPB Issues Consent Order Against a Deceptive Biweekly Payment Plan
On November 2, 2020, the CFPB issued a consent order against SMART Payment Plan, LLC, related to misleading statements in the company’s loan disclosures in violation of the Consumer Financial Protection Act’s prohibition against deceptive acts and practices. The company made auto loans under a plan that deducted payments biweekly from consumer’s bank accounts and then forwarded the payments on a monthly basis to the consumer’s lenders. The company represented that participating in its payment plan would save customers money, but the fees associated with the program were not disclosed and would usually exceed the savings associated with the program.
The consent order requires the company to pay $7.5 million in consumer redress, and this amount is suspended upon the company’s payment of $1.5 million and a $1 civil penalty by December 31, 2020. In addition to these penalties, the company is prohibited from making any misrepresentations about its payment programs and must account for total costs for its payment programs as well as net savings or costs whenever the company makes claims about savings or financial benefits of its programs.