Weekly Wrap Up

July 29, 2022

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra participated in interviews with the American Banker and the Associated Press, covering topics such as overdraft fees, the agency’s enforcement posture, the application of Regulation E to payments applications, its investigation of large technology companies, data privacy concerns, the Federal Deposit Insurance Corporation (FDIC) Board controversy involving former Chair McWilliams, the qualified mortgage rule, use of machine learning in financial services, how the current economic cycle might affect consumers, and fraud and scams involving cryptocurrency.  

The Financial Stability Oversight Council (FSOC) met to discuss updates from its staff-level Climate-related Financial Risk Committee, including progress on implementing recommendations from its climate report last year; an update on its report on digital assets that it will issue in early Fall 2022; and its staff-level Hedge Fund Working Group on developing a risk-monitoring framework. The Office of Financial Research (OFR) also presented on its work to collect data on non-centrally cleared bilateral repo transactions.  

The House Committee on Financial Services announced it will continue discussions on its bipartisan stablecoin legislation through the August recess. For more information, see our memo

Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam discussed the CFTC’s readiness to oversee digital asset cash markets directly and its approach to digital asset-related market regulation thus far. In discussing the CFTC’s ability to oversee digital asset markets, he said, “[a]ll of this suggests that, as with any trading market, the digital asset market would benefit from uniform imposition of requirements focused on ensuring certain core principles, including market integrity, customer protection, and market stability.” He also announced the evolution of LabCFTC from the agency’s fintech hub to the newly established Office of Technology Innovation (OTI).  

Senator Kyrsten Sinema (D-AZ) and Senate Banking Committee Ranking Member Pat Toomey (R-PA) introduced the S. 4608Virtual Currency Tax Fairness Act to create a tax exemption for small personal transactions of goods and services purchased with cryptocurrency. The bill is the Senate companion to Rep. Susan Delbene (D-WA) and Congressional Blockchain Caucus co-Chair David Schweikert (R-AZ)’s bill that was introduced in February. 

The Department of Justice (DOJ) announced Michael Alan Stollery, CEO and Founder of Titanium Blockchain Infrastructure Services pleaded guilty to one count of securities fraud for his role in a fraudulent scheme involving the company’s initial coin offering that raised $21 million from investors in the United States and overseas.

The CFPB ordered Hyundai to pay $19 million for furnishing inaccurate information to credit reporting companies, including inaccurately reporting that consumers were delinquent on loans or leases.

The CFPB and DOJ ordered Trident Mortgage Company to pay more than $22 million for redlining majority-minority neighborhoods through its marketing, sales, and hiring actions in the greater Philadelphia area. The settlement is the first government resolution involving illegal redlining by a nonbank mortgage lender. 

House Financial Services Committee Ranking Member Patrick McHenry (R-NC), Subcommittee Ranking Member on Consumer Protection and Financial Institutions Blaine Luetkemeyer (R-MO), and Subcommittee Ranking Member on Oversight and Investigations Tom Emmer (R-MN) sent a letter to CFPB Director Chopra regarding the agency’s interpretive rule that expands the authority of states to pursue and enforce violations of federal consumer protection law under the Consumer Financial Protection Act. The letter states that “[w]hile Congress intended for the CFPB to enforce federal consumer financial laws and protect consumers in the marketplace, it did not intend for the CFPB to intimidate companies by conspiring with state agencies to pursue duplicative enforcement actions.”

Senate Banking Committee Chair Sherrod Brown sent letters to Alphabet and Google CEO Sundar Pichai and Apple CEO Tim Cook requesting information about the companies’ mobile application safeguards with respect to fake cryptocurrency apps that have scammed hundreds of investors who have lost more than $42 million. 

Senate Banking Committee Ranking Member Pat Toomey (R-PA) sent a letter to SEC Chair Gary Gensler, arguing that the agency’s “regulation-by-enforcement” approach has been ineffective in protecting consumers and has chilled financial innovation. The letter also states that the approach has contributed to financial losses for consumers.

Sen. Dick Durban (D-IL) and Sen. Roger Marshall (R-KS) introduced the Credit Card Competition Act of 2022, which would require banks with more than $100 billion in assets that issue Visa and Mastercard credit cards to add a second payment card routing option to cards to lower merchants’ card-processing costs. 

The OFR published a fact sheet on its climate data and analytics hub, a pilot between the OFR, Federal Reserve Board, and the Federal Reserve Bank of New York to provide FSOC member agencies with access to public climate and financial data and analysis and high-performance computing tools in a secure environment.  

The Office of the State Treasurer of West Virginia published a list of Restricted Financial Institutions, deeming BlackRock, Goldman Sachs, JP Morgan Chase, Morgan Stanley, and Wells Fargo ineligible for state banking contracts following their boycotts of fossil fuel companies.

The Federal Reserve Board and FDIC issued a letter to cryptocurrency exchange Voyager Digital, demanding that it cease and desist from making false or misleading representations regarding deposit insurance status and to take immediate action to correct prior statements. The FDIC also published a fact sheet on what the public needs to know about FDIC deposit insurance and cryptocurrency companies. 

The SEC charged JP Morgan Securities, UBS Financial Services, and TradeStation Securities separately for deficiencies in their programs between January 2017 and October 2019 to prevent customer identity theft. The SEC’s orders find that each firm violated Rule 201 of Regulation S-ID. Without admitting or denying the SEC’s findings, each firm agreed to cease and desist from future violations of the charged provision, to be censured, and to pay the following penalties: JP Morgan Securities: $1.2 million, UBS Financial Services: $925,000, and TradeStation Securities: $425,000.

Democrat members of the Senate Banking Committee, including Chair Sherrod Brown (D-OH), sent a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, asking to expand the agency’s definition of “fraudulent fund transfers” facilitated through instant payment services such as peer-to-peer (P2P) payments companies. 

Treasury Under Secretary for Domestic Finance Nellie Liang said at a conference that stablecoin legislation would allow banks and nonbanks to issue stablecoins and later added that stablecoin issuers should still be bank affiliates as a supervision measure for monitoring the institution’s health and management. She also said that a federal payments overseer could simplify the regulatory framework for stablecoins because they could regulate the network of issuers and wallets for payment risks.

Need to catch up on what happened last week? Check out our July 22 newsletter here