Compliance, Regulatory and Payments

On January 23, 2025, the Supreme Court granted a stay of the District Court’s nationwide injunction pending any further appeals. However, a different judge in the same District Court recently issued an order in a separate case (Smith v. U.S. Department of Treasury) which enjoined FinCEN from enforcing the CTA against the plaintiffs in the case and, notably, stayed the effective date of the BOI reporting rules.

As reported in our recent series of Client Alerts, on December 3, 2024, the U.S. District Court for the Eastern District of Texas (the “District Court”) issued a nationwide preliminary injunction that temporarily blocked enforcement of the Corporate Transparency Act (“CTA”) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network’s (“FinCEN”) related beneficial ownership information (“BOI”) reporting rules. On December 23, 2024, the Fifth Circuit Court of Appeals (the “Court of Appeals”) granted the government’s motion to stay the District Court’s preliminary injunction pending its appeal of that injunction order. As a result of the Court of Appeal’s ruling, FinCEN extended the reporting deadline to January 13, 2025. 

As previously noted in our Client Alert, on December 3, 2024, the U.S. District Court for the Eastern District of Texas (the “District Court”) issued a nationwide preliminary injunction that temporarily blocked enforcement of the Corporate Transparency Act (“CTA”) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (“FinCEN”) related beneficial ownership information (“BOI”) reporting rules, and as noted in our most recent Client Alert, the government filed an emergency motion with the Fifth Circuit Court of Appeals (the “Court of Appeals”) to stay the District Court’s preliminary injunction pending its appeal of that injunction order.  

As discussed in our previous Client Alerts on December 9 and December 13, on December 3, 2024, the U.S. District Court for the Eastern District of Texas (the “District Court”) issued a nationwide preliminary injunction that temporarily blocks enforcement of the Corporate Transparency Act (“CTA”) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (“FinCEN”) related beneficial ownership information (“BOI”) reporting rules.

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that temporarily blocks enforcement of the Corporate Transparency Act (“CTA”) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (“FinCEN”) related beneficial ownership information (“BOI”) reporting rules. On December 12, 2024, the government filed a motion to stay the preliminary injunction pending its appeal.

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that temporarily blocks enforcement of the Corporate Transparency Act (“CTA”) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (“FinCEN”) related beneficial ownership information (“BOI”) reporting rules.

Chapman wrote the book on the marketplace lending regulatory landscape that the entire industry has come to rely upon. First published in 2013, the 2024 update covers a vast array of topics affecting the marketplace lending industry.

Amidst an ever-changing US regulatory landscape, Israeli fintechs need to carefully consider their licensing obligations when offering their products to US consumers. Chapman partner Tobias Moon provides perspective on regulatory considerations associated with the credit products Israeli fintech companies are offering to US-based consumers in the US-Israel Legal Review, published by Israel Desks.

In its 2024 Supervisory Priorities, the NCUA set out examination priorities based on activities that pose the highest risk to federally insured credit union members (referred to as “credit unions”) and that are responsive to the continuous stream of challenges facing credit unions in this current market. It should come as no surprise to anyone that liquidity risk is once again an examination priority for 2024, as the economic environment continues to be uncertain. This all follows on the heels of the Addendum to the Interagency Policy Statement on Funding and Liquidity Risk Management: Importance of Contingency Funding Plans issued in July 2023 (the “Addendum”), highlighting the importance of contingency funding plans as a crucial component of managing funding and liquidity risk. 

The Corporate Transparency Act (CTA) went into effect January 1, 2024. Under the CTA, all newly created entities are now required to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) within 90 days of formation, unless an entity qualifies under one of 23 exemptions. That means, unless an exemption applies, any newly formed LLC, limited partnership, corporation, statutory trust, or other organization that is created by filing with a secretary of state has an additional federal filing requirement. All existing entities formed prior to January 1, 2024, that do not qualify for an exemption have until the end of 2024 to file a Report.

On June 5, 2023, the Governor of Colorado signed into law House Bill 23-1229 which contains a purported “opt out” of federal preemption made available to state chartered, FDIC insured institutions.  It appears aimed at least in part to online lenders making loans to Colorado residents. Whether this action will trigger additional states to attempt a similar move or whether this legislation is even valid will likely end up in litigation, teeing up another potential battle on federal preemption vs. states rights and likely leaving Colorado borrowers in limbo for some time to come. Of note, this law does not become effective until July 1, 2024.

A recent federal district court decision out of Massachusetts found that a bank was the true lender on a loan subsequently transferred to a trust consisting of student loans. Robinson and Spears v. Nat’l. Collegiate Student Loan Trust 2006-2, 2021 WL 1293707, Case No. 20-cv-10203 ADB (D. Mass. April 7, 2021).

In the past few days, two courts have actions that are of significance to marketplace lenders and their funding sources. 

In 2015, the Second Circuit Court of Appeals issued an opinion finding that, under the doctrine of federal preemption, a non-bank assignee of a bank loan could not charge and collect the rates and fees that the bank could charge and was therefore subject to state law usury limits.

The Office of the Comptroller of the Currency recently issued its final rule codifying as a regulation that the interest charged on loans that is permissible before the loan is transferred remains in effect after the loan is transferred.

The parties to the closely watched litigation by the Attorney General of Colorado as Administrator of the Colorado Uniform Consumer Credit Code against two marketplace lending platforms have agreed to settle the litigation.

The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation have been quite active in issuing or proposing new regulations and initiatives focused on financial technology and innovation in financial services.

On May 29, the Office of the Comptroller of the Currency issued its final rule codifying as a regulation that the interest charged on loans that is permissible before the loan is transferred remains in effect after the loan is transferred.

H.R. 748 better known as the CARES Act or more informally as the $2 trillion stimulus bill signed by President Trump on March 27, 2020, contains one important provision for all consumer lenders and another two provisions related to federally-backed mortgage loans.

The California Consumer Privacy Act of 2018 went into effect on January 1, 2020 and imposes extensive disclosure and record-keeping requirements on businesses that handle personal information.

On September 30, the Governor of California signed into law Senate Bill No. 1235, which amends the California Financing Law (previously known as the Finance Lenders Law) to impose new disclosure requirements on licensed commercial lenders and brokers including for online lending programs doing business in California.

A recent decision from the U.S. Court of Appeals for the Third Circuit has created a circuit split in how the federal circuit courts have interpreted the statute of limitations as it applies to the Fair Debt Collection Practices Act.

More than a year after the Consumer Finance Protection Bureau submitted a proposed rule to limit consumer financial services contract arbitration clauses, the CFPB sounded the death knell on July 10, 2017, when it released its long-awaited final rule.

The May 2015 decision of the U.S. Court of Appeals for the Second Circuit in Madden v. Midland Funding, LLC sent shockwaves through the marketplace lending industry, and nearly two years later the questions generated by this case remain largely unanswered. These questions have been further complicated by the long-awaited remand decision from the U.S. District Court for the Southern District of New York.

On February 27, the U.S. District Court for the Southern District of New York issued its long-awaited remand decision in Madden v. Midland Funding, LLC. 

The Supplemental Examination Procedures for Risk Management of Third-Party Relationships issued by the Office of the Comptroller of the Currency on January 24 establish detailed compliance obligations for relationships with third-party service providers.

In this edition: 

• Mortgage Servicing Foreclosure Practices
• OCC Semiannual Risk Perspective 

Considering the flurry of activity in the fintech arena, is there a place for banks and, if so, what role can banks play? Given that marketplace lending is the most developed form of fintech today, it can be analyzed to see how banks do play important roles and employ different strategies dealing with this emerging market segment.

On Friday, Comptroller of the Currency Thomas Curry announced that the Office of the Comptroller of the Currency will issue limited-purpose bank charters to qualified fintech companies.

In this edition:

• Deposit Insurance Determination Rule
• FFIEC Revises Its Consumer Compliance Rating System
• Servicemembers

On October 11, the U.S. Court of Appeals for the D.C. Circuit issued an important decision involving the Consumer Financial Protection Bureau. Not only did the Court find that the agency’s structure was unconstitutional, it also ruled that the CFPB violated due process, and is subject to the statutes of limitations embodied in the laws it seeks to enforce. 

A recent decision of the Maryland Court of Appeals could require marketplace lenders and others who arrange for federal or state banks to fund consumer loans to consumers residing in Maryland to obtain licenses as “credit services businesses” and could prohibit them from arranging those loans at interest rates exceeding the applicable Maryland usury caps.

In this edition:

• NACHA Operating Rules — New Unauthorized Entry Fee
• Customer Due Diligence — Beneficial Ownership Rule
• Limited English Language Proficiency Customers

On May 10, 2016 the U.S. Department of the Treasury published a white paper entitled “Opportunities and Challenges in Online Marketplace Lending.” The White Paper follows the “Request for Information” which the Department published in July 2015 to solicit public input on various topics concerning marketplace lending.

In this edition:

• Recent Action by the OCC of Special Concern for Directors, Senior Managers, and Compliance Officers
• FDIC Provides Additional Guidance on Corporate Governance

In this edition:

• Use of Property Evaluations
• A Bank Customer’s Guide to Cybersecurity
• Certain Prepaid Cardholders Treated as Customers for CIP Requirements 

On Friday, March 18, 2016, the United States Supreme Court issued a call for the views of the Solicitor General of the United States before it decides whether to hear an appeal from a Second Circuit Court of Appeals decision rendered last May in the case of Madden v. Midland Funding, LLC.

On March 7, the CFPB announced that it is accepting consumer complaints about online marketplace lenders, giving consumers “a greater voice in these markets and a place to turn to when they encounter problems.” The CFPB also issued a bulletin to provide consumers with information on marketplace lending.

In this edition:

• Standards for Safeguarding Customer Financial Information
• HIPAA Data Breach Notification Deadline — February 29, 2016
• CFPB Issues Additional Guidance on Furnisher Obligations under Regulation V
• Court Denies Motion to Dismiss Complaint Against Compliance Officer for Bank Secrecy Act Violations

Law360 republished a Chapman Client Alert.

A recent decision of the U.S. District Court for the Eastern District of Pennsylvania has highlighted once again the regulatory risks that the so-called “true lender” doctrine can create for internet-based lenders who partner with banks to establish exemptions from applicable state consumer protection laws.

A recent decision of the Maryland Court of Special Appeals could impact marketplace and other lenders who arrange for federal or state banks to fund consumer loans in Maryland at rates in excess of the applicable Maryland usury caps. 

In this edition:

• CFPB Guidance on Private Mortgage Insurance Cancellation
• FDIC Announces Settlement with Credit Card Issuer Related to the Sale of Add-On Products 
• Servicemember Updates
• Eleventh Circuit Rules on Applicability of FDCPA to Bank

The Banking Law Journal republished a Chapman Client Alert.

In the case of Madden v. Midland Funding, LLC, the Second Circuit narrowly interpreted the scope of federal preemption of state usury laws under the National Bank Act as such laws apply to certain non‑bank loan assignees.

In this edition:

• Telephone Consumer Protection Act Declaratory Ruling
• CFPB First Monthly Complaint Report
• Treasury Department Inquires about Marketplace Lending

In this edition:

• Servicemembers Update
• CFPB Consumer Complaint Narratives
• Private Student Loans and Cosigners

In this edition:

• U.S. Supreme Court Will Not Hear CashCall Case – Uncertainty for Marketplace Lenders?
• FinCEN Current Priorities
• Guidance on Youth Savings Programs
• Overdraft Update – CFPB Enforcement Action

In this edition:

• Student Loan Servicing—Unfair or Deceptive Acts or Practices
• OCC Revises Its Truth in Lending Handbook
• FFIEC Releases Revised BSA/AML Examination Manual
• NACHA Same-Day ACH Processing Proposal

Certain compliance issues related to a bank’s use of social media data in its business are identified in this briefing for consideration and potential action.

The Consumer Financial Protection Bureau has issued its 800+ page proposed rule (with commentary) on prepaid cards.

The Consumer Financial Protection Bureau has issued a proposed rule that would bring prepaid products under the Electronic Fund Transfer Act and make the protections currently afforded to credit cardholders under Regulation Z applicable when credit features are obtained in connection with a prepaid account.