September 6, 2023

The Board of Governors of the Federal Reserve (FRB) published a working paper entitled “FinTech and Banks: Strategic Partnerships That Circumvent State Usury Laws.” The working paper investigates the role of interest rate regulation of consumer credit and institutional risk segmentation in fintech lenders’ efforts to solicit new customers in the personal loan market. The report finds that strategic partnerships between fintech companies and specialist banks target marginal-risk, near-prime, and low-prime consumers for credit card and other debt consolidation loans, allowing fintech lenders to take advantage of federal preemptions from state rate ceilings to lend profitably to higher-risk consumers in states with low rate ceilings to compete in these markets.

The Federal Deposit Insurance Corporation (FDIC) announced the start of a marketing process for the approximately $33 billion Commercial Real Estate (CRE) loan portfolio retained in receivership following the failure of Signature Bank, New York, New York.

The FDIC gave a “needs to improve” Community Reinvestment Act (CRA) grade to fintech bank WEX Bank. Although the bank initially received a satisfactory rating, the FDIC found that the firm engaged in illegal credit practices, violating Section 5 of the Federal Trade Commission (FTC) Act, which resulted in a downgrade to “need to improve.”

The Consumer Financial Protection Bureau (CFPB) published a blog about student loan cancellation and payment reduction options as student loan payments are expected to resume in October for the first time since March 2020.

The Securities and Exchange Commission (SEC) approved an amendment to the National Market System (NMS) plan that governs the Consolidated Audit Trail (CAT) to adopt a revised funding model to establish a fee schedule for CAT fees. CAT funding will be split between self-regulatory organizations, the broker-dealer for the buyer in a trade, and the broker-dealer for the seller in the trade.

The Financial Industry Regulatory Authority (FINRA) published a podcast discussing the role of FINRA’s Crypto Asset Investigations team. In the podcast, leaders of the team stated that broker-dealers should make sure they are thoroughly reviewing their representatives’ digital asset activity. 

Senator Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, took to the Senate floor to speak in support of the nominations of The Honorable Philip Nathan Jefferson, of North Carolina, to be Vice Chairman of the Board of Governors of the Federal Reserve System, the Honorable Lisa DeNell Cook, of Michigan, to be a Member of the Board of Governors of the Federal Reserve System, and the Honorable Adriana Debora Kugler, of Maryland, to be a Member of the Board of Governors of the Federal Reserve System. 

The Board of Governors of the Federal Reserve System (FRB), Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) invited public comment on proposed guidance regarding long-term debt and resolution plans for domestic and foreign triennial full filers (FDIC and FRB only). The long-term debt proposal would require large banks with total assets of $100 billion or more to maintain a layer of long-term debt, which would improve financial stability by increasing the resolvability and resiliency of such institutions. The resolution plan proposal would generally apply to bank holding companies and foreign banking organizations with more than $250 billion in total assets but that are not the largest and most complex companies, which are already subject to guidance on resolution planning. The guidance would address the specific characteristics of, and risks posed by, this group of companies. The FDIC’s Board of Directors discussed the proposed guidance during an open session on Tuesday, August 29. Meeting materials relative to the Board’s actions and a recording of the meeting are available here

Comments on the proposals are due by November 30. 

Long-term Debt Proposal Board Memo

Long-term Debt Proposal Fact Sheet

Resolution Plan Proposal Board Memo

Resolution Plan Proposal Fact Sheet

FRB Governor Michelle Bowman issued a statement expressing significant concerns with both proposals.

FRB Governor Christopher Waller issued a statement expressing concern with the long-term debt proposal.  

FDIC Chair Gruenberg issued a statement supporting the long-term debt proposal and a statement supporting the resolution plans for insured depository institutions.

FDIC Vice Chairman Travis Hill issued a statement supporting the long-term debt proposal. He also issued a statement supporting the high-level objectives of resolution planning for large insured depository institutions but said he planned to vote against the proposed amendments. In a separate statement, he said he was voting against the proposed guidance for domestic and foreign triennial filers. 

FDIC Director Jonathan McKernan issued a statement supporting the proposed guidance for resolution plan submissions of triennial full filers. He also issued a separate statement saying he did not support the proposal based on the FDIC’s statutory authorities with respect to submission requirements for certain insured depository institutions. Director McKernan also issued a statement supporting generally the long-term debt proposal. 

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, a member of the FDIC Board of Directors, issued a statement drawing attention to areas where the FRB, FDIC, and OCC must consider carefully in the proposals. 

Acting Comptroller Michael Hsu issued a statement supporting the resolution plan proposal and a statement supporting the long-term debt proposal.

Need to catch up on what happened last week? Check out our Midweek Update here