- Top Lines
U.S. Senators Elizabeth Warren (D-MA), Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and Bernie Sanders (I-VT) sent a letter to the Office of the Comptroller of the Currency (OCC) requesting that Acting Comptroller of the Currency, Michael Hsu, rescind the previously issued cryptocurrency guidance and replace it with more comprehensive guidance, in coordination with other prudential regulators. The lawmakers also asked for details regarding the extent to which banks are currently engaging in crypto-related activities.
“In light of recent turmoil in the crypto market, we are concerned that the OCC’s actions on crypto may have exposed the banking system to unnecessary risk, and ask that you withdraw existing interpretive letters that have permitted banks to engage in certain crypto-related activities,” wrote the lawmakers.
- Weekly Wrap Up
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned virtual currency mixer Tornado Cash, which has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. This includes over $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group that was sanctioned by the U.S. in 2019, in the largest known virtual currency heist to date. Tornado Cash was subsequently used to launder more than $96 million of malicious cyber actors’ funds derived from the June 24, 2022 Harmony Bridge Heist, and at least $7.8 million from the August 2, 2022 Nomad Heist. The action is being taken pursuant to Executive Order (E.O.) 13694, as amended, and follows OFAC’s May 6, 2022 designation of virtual currency mixer Blender.io.
Chairwoman of the House Financial Services Committee Maxine Waters (D-CA) led a letter with 76 Democratic Members of the U.S. House of Representatives to the leaders of the Board of Governors of the Federal Reserve System (Fed), Federal Deposit Insurance Corporation (FDIC), and OCC. The letter urges the regulators to consider carefully the comments they receive from civil rights and community groups as well as other stakeholders to their joint proposed rulemaking to modernize the Community Reinvestment Act (CRA) and work to finalize a strong CRA rule that will put an end to modern-day redlining.
The Consumer Financial Protection Bureau (CFPB) is taking action against Hello Digit, LLC, a financial technology company that used a faulty algorithm that caused overdrafts and overdraft penalties for customers. The order requires Hello Digit to pay redress to its harmed customers. It also fines the company $2.7 million for its actions.
Following recent news that Equifax sent lenders inaccurate credit scores on millions of consumers, potentially resulting in consumer harm, Congresswoman Waters (D-CA), sent a letter to Equifax and a letter to the CEOs of the nation’s largest commercial banks, demanding answers as to how the delivery of erroneous credit scores occurred, the scale of consumers affected, and the steps these institutions are taking to remediate harm to customers and ensure accurate credit reporting moving forward.
The CFPB issued an interpretive rule laying out when digital marketing providers for financial firms must comply with federal consumer financial protection law. Digital marketers that are involved in the identification or selection of prospective customers or the selection or placement of content to affect consumer behavior are typically service providers for purposes of the law. Digital marketers acting as service providers can be held liable by the CFPB or other law enforcers for committing unfair, deceptive, or abusive acts or practices as well as other consumer financial protection violations.
U.S. Secretary of the Treasury Janet Yellen sent a letter to the Commissioner of the Internal Revenue Service (IRS) Charles Rettig in support of funding to the IRS to improve taxpayer service, modernize outdated technological infrastructure, and increase equity in the tax system by enforcing the tax laws against high-earners, large corporations, and complex partnerships who today do not pay what they owe. Secretary Yellen also reaffirmed the Administration’s commitment to not increasing audit rates relative to recent years on Americans making under $400,000 a year, noting that they will actually see a lower likelihood of audit due to improved technology and customer service.
Acting Principal Deputy Assistant Attorney General Johnathan Smith for the Department of Justice’s Civil Rights Division delivered an opening statement at the Convention on the Elimination of Racial Discrimination. Smith discussed the Department’s initiative to combat redlining and lending discrimination, as well as the creation of the Office of Environmental Justice to protect communities that suffer because of pollution and climate change.
The Federal Trade Commission (FTC) published an advisory warning against the use of crypto for schemes and unlawful purposes through utility scams.
CFPB Director Rohit Chopra delivered remarks at the 2022 National Association of Attorneys General Presidential Summit. He stated that “advances in technology should help our economy and society advance, rather than incentivizing a rush to seize our sensitive financial data and to allow tech giants to evade existing laws that other firms must comply with.”
The FTC announced it is exploring rules to crack down on harmful commercial surveillance and lax data security. The FTC’s Advance Notice of Proposed Rulemaking seeks public comment on the harms stemming from commercial surveillance and whether new rules are needed to protect people’s privacy and information.
The FTC announced that it is sending payments totaling more than $9.7 million to 61,990 consumers who were charged hidden fees by LendingClub Corporation. These payments are the result of a claims process conducted by the FTC in February 2022. It is the second distribution of funds in this matter and brings the total amount refunded to consumers to more than $17.6 million.
The CFPB confirmed that financial companies may violate federal consumer financial protection law when they fail to safeguard consumer data. The circular provides guidance to consumer protection enforcers, including examples of when firms can be held liable for lax data security protocols.
Fed Governor Michelle W. Bowman delivered remarks at the 2022 CEO & Senior Management Summit entitled Fighting Inflation in Challenging Times. Bowman discussed bank-crypto activities, the CRA, bank M&A review and its effects on community banks, as well as other macro trends such as rising auto prices.
- ICYMI
U.S. Senators Debbie Stabenow (D-MI), Chairwoman of the Senate Committee on Agriculture, Nutrition, and Forestry, and John Boozman (R-AR), Ranking Member, along with Senators Cory Booker (D-NJ) and John Thune (R-SD) introduced the Digital Commodities Consumer Protection Act of 2022 to give the Commodity Futures Trading Commission (CFTC) new tools and authorities to regulate digital assets that are commodities. The bill expands the CFTC’s regulatory authority and would require all “digital commodity platforms” – exchanges – to register with the CFTC. While the bill doesn’t delineate any specific responsibilities for the Securities and Exchange Commission (SEC) — since that is outside the Senate Agriculture Committee’s purview — it includes language that allows the CFTC’s new digital commodities registrants to also register with the SEC.
The CFPB published a report entitled The Convergence of Payments and Commerce: Implications for Consumers.
- Upcoming Hearings & Events
Thursday, September 22 at 8a – Saturday, September 24 at 7p: The 2022 Black Blockchain Summit will be held at Howard University. Tickets can be purchased here.
Tuesday, September 28 – Wednesday, September 29: The OCC announced that it will host virtual Innovation Office Hours to promote responsible innovation in the federal banking system.
Tuesday, October 11 – Wednesday, October 12: DC Fintech Week will be held and is welcoming submissions of 10,000 words or less from experts from the academy, industry, government, and nonprofits that significantly advance academic and policy understandings of the conference’s themes and panels. Papers are due September 1 and can be submitted to dcfintechweekpapers@gmail.com.