KT Fintech Blog

The KT Fintech Blog provides insights into how the emergence of fintech is fundamentally changing virtually every aspect of the financial services landscape and how traditional businesses navigate this rapidly evolving industry.

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Posted on Wednesday, January 17 2018 at 12:00 pm by -

CFPB Acting Director Mulvaney Announces Call for Public Input Regarding CFPB Functions

By Eamonn Moran

On January 17, the Consumer Financial Protection Bureau (CFPB or Bureau) announced that it is soliciting public input “to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.”  During the coming weeks, the CFPB will be publishing in the Federal Register a series of Requests for Information (RFIs) seeking comment on the Bureau’s enforcement, supervision, rulemaking, market monitoring, and education activities.  According to the CFPB, these RFIs “will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities”

“In this New Year, and under new leadership, it is natural for the Bureau to critically examine its policies and practices to ensure they align with the Bureau’s statutory mandate. Moving forward, the Bureau will consistently seek out constructive feedback and welcome ideas for improvement,” stated CFPB Acting Director Mick Mulvaney. “Much can be done to facilitate greater consumer choice and efficient markets, while vigorously enforcing consumer financial law in a way that guarantees due process. I look forward to receiving public comments in response to this call for evidence and encourage all interested parties to participate.”

The CFPB states that its first RFI will seek public comment on Civil Investigative Demands (CIDs), which are issued during an enforcement investigation, and that comments received in response to this RFI will help the Bureau evaluate existing CID processes and procedures, and to determine whether any changes are warranted. 

This announcement follows a series of actions taken by the CFPB in recent weeks that demonstrate the influence of the new leadership.  When Mulvaney assumed the role of acting director after Thanksgiving, he imposed a temporary hiring freeze and a freeze on all new regulations and guidance for 30 days, along with a separate freeze on civil penalty payments.  On January 16, the CFPB announced that it intends to engage in a rulemaking process for purposes of reconsideration of the Payday Rule, which was finalized in October 2017.  In a similar fashion, the CFPB announced last month that it intends to engage in a rulemaking to reconsider various aspects of the 2015 Home Mortgage Disclosure Act (HMDA) rule such as the institutional and transactional coverage tests and the rule’s discretionary data points.  We also expect the CFPB to issue a final rule amending certain aspects of its 2016 rule governing prepaid accounts soon.

Stay tuned for further updates and developments!

Posted on Thursday, January 11 2018 at 8:21 am by -

Federal Judge, for Second Time, Rules in Favor of Trump Appointee to Lead the CFPB

by Eamonn K. Moran    

On January 10, United States District Judge Timothy Kelly, a Trump administration appointee, refused for the second time to block the Trump administration’s appointment of Office of Management and Budget (OMB) Director Mick Mulvaney as the acting director of the Consumer Financial Protection Bureau (CFPB).

As we reported previously, Judge Kelly had earlier rejected CFPB Deputy Director Leandra English’s request for a temporary restraining order to prevent the administration from appointing an acting director.   In this new decision to deny English’s request for a preliminary injunction, Judge Kelly reiterated his belief that the Federal Vacancies Reform Act (FVRA) empowers the president to appoint a federal official already confirmed by the Senate to step in as the CFPB’s acting director.

“Whether English or Mulvaney is entitled to be acting director, the CFPB remains part of the Federal Reserve System.  Its new director, once appointed by the president and confirmed by the Senate, will have for-cause removal protections (subject to the outcome of pending litigation about the constitutionality of those protections),” Judge Kelly wrote. “The CFPB will continue to receive funding from the Federal Reserve, instead of Congress. And the bar on other executive branch officers exercising control over the CFPB’s communications with Congress about potential legislation will remain in place.”  Kelly again supported the Justice Department’s view that the FVRA authorizes the president to pick an acting CFPB director.

English is “not likely to succeed on the merits of her claims, nor is she likely to suffer irreparable harm absent the injunctive relief sought,” according to Judge Kelly. “Moreover, the balance of the equities and the public interest also weigh against granting the relief.  Therefore, English has not met the exacting standard to obtain a preliminary injunction.”

This decision will inevitably be appealed, leading to the United States Court of Appeals for the District of Columbia Circuit having a chance to weigh in on this issue.

Posted on Friday, December 22 2017 at 7:36 am by -

3 Key Developments: Fintech & Banking 2017: Further Exploration of Bank Charters for Fintech Companies

by Eamonn Moran

One year ago, the Office of the Comptroller of the Currency (OCC) decided to move forward with considering applications from financial technology (fintech) companies to become special purpose national banks. In early 2017, the OCC provided additional guidance on evaluating special purpose national bank charter applications from fintech companies that engage in the business of banking a nd highlighted unique factors that the agency will consider in evaluating a fintech company application. In July, then Acting Comptroller of the Currency Keith A. Noreika stated that the OCC had not determined if it will actually accept or act upon applications from nondepository fintech companies for SPNB charters, and it had not received, nor is it evaluating, any such applications from nondepository fintech companies. Noreika noted, however, that the OCC will continue to hold discussions with interested companies while the agency evaluates its options.

Key Developments since our last update:

  • On December 12, the United States District Court for the Southern District of New York dismissed the lawsuit filed by the New York Department of Financial Services (NYSDFS) challenging the OCC’s authority to grant SPNB charters to nondepository fintech companies. The district court found that the NYSDFS’s claims were based on the premise that the OCC had reached a decision on whether it would issue SPNB charters to fintech companies, but that the NYSDFS had failed to show that the OCC had reached such a decision. With respect to Article III standing, the district court concluded that the injuries that the NYSDFS alleged would result from the charter decision “would only become sufficiently imminent to confer standing once the OCC makes a final determination that it will i ssue SPNB charters to fintech companies.” Without a charter decision, the district court concluded that NYSDFS’s “purported injuries are too future-oriented and speculative to constitute an injury in fact.” The district court also concluded that NYSDFS’s claims were neither constitutionally nor prudentially ripe.
  • In April 2017, another lawsuit was filed by the Conference of State Bank Supervisors (CSBS) in the District Court for the District of Columbia challenging the OCC’s ability to create a SPNB charter for fintech companies. On December 5, the case was reassigned to Judge Dabney L. Friedrich. The OCC’s motion to dismiss in that case remains pending.
  • Joseph Otting, the new Comptroller of the Comptroller who was sworn into office on November 27, has not yet taken a public position on the SPNB charter proposal.