Insights Past Issues

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 June 11, the Online Lending Policy Institute hosted a conversation covering the expansive advance notice of proposed rulemaking in the fintech space.

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.

On May 5, federal banking regulators adopted an interim final rule that neutralizes the liquidity coverage ratio impact for banks participating in the Federal Reserve’s Money Market Mutual Fund Liquidity Facility and the Paycheck Protection Program Liquidity Facility.

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 2019 update of Chapman's book, "The Regulation of Marketplace Lending: A Summary of the Principal Issues," addresses the latest true lender developments, the OCC charter for fintech companies, CFPB changes and how they may affect regulatory priorities and enforcement, the roles of banks in marketplace lending, and servicing and collection issues.

This article outlines the features of proposals to adjust the applicability of certain capital and liquidity tests and certain enhanced prudential standards for bank holding companies.

The state of Colorado initiated two lawsuits against online lending platforms. The suits alleged that the platforms had violated the state’s Uniform Consumer Credit Code by charging interest and some fees in excess of those allowed under Colorado law and that the consumer loan agreements utilized a non-Colorado governing law provision, also in violation of the law.

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.

On August 22, the three federal banking agencies issued an interim final rule implementing the May 2018 banking law’s requirement that investment grade, liquid and readily marketable municipal obligations be treated as Level 2B “high quality liquid assets” under the liquidity coverage ratio 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 April 19, the House Financial Services Committee posted a “discussion draft” of a revised version of the CHOICE Act. The discussion draft contains most of the provisions in last year’s bill with a number of important changes.

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 

With Republicans retaining control of both chambers of Congress and Donald Trump elected President, the prospects for financial regulatory reform have changed. Many observers point to the Financial CHOICE Act as the best indication of Republican Congressional aspirations for such reform. 

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

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.

This article discussed leveraged lending guidelines, unitranche facilities and the risks associated with unitranche facilities, including with respect to “agreements among lenders” as illustrated by the recent case of In re Radio Shack Corporation.

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.

Pratt's Privacy & Cybersecurity Law Report republished a special edition of Chapman's To the Point! newsletter. 

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.

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.

The Banking Law Journal republished a Chapman Client Alert.

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. 

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:

• 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

In September 2014, the U.S. banking agencies adopted final rules implementing a liquidity coverage ratio requirement that will test a bank's ability to withstand "liquidity stress periods." In collaboration with the Structured Finance Industry Group (SFIG), Chapman attorneys authored a guide summarizing elements of the final rule that have the greatest impact on the securitization market. 

On September 3, 2014, the US banking agencies adopted final rules implementing a liquidity coverage ratio (LCR) requirement that will test a bank's ability to withstand liquidity stress periods. The specific objective of the LCR rules is to ensure that a bank has enough high quality liquid assets (referred to as HQLA) that can be immediately converted into cash to meet its liquidity needs for a 30-day stress period.