Weekly RoundUp
April 14, 2023

FDIC Publishes Consumer Compliance Supervisory Highlights

In this Weekly Roundup Issue. The Federal Deposit Insurance Corporation (FDIC) published its Consumer Compliance Supervisory Highlights; and the Consumer Financial Protection Bureau (CFPB) issued its final rule requiring data collection on small business loans and issued guidance to address abusive conduct in consumer financial markets. These and other developments are discussed in more detail below.

Regulatory Developments

FDIC Publishes Consumer Compliance Supervisory Highlights

On April 5, the FDIC published its latest edition of Consumer Compliance Supervisory Highlights (the Highlights). This edition of the Highlights includes:

  • A description of the most frequently cited violations and other consumer compliance examination observations;
  • Information on regulatory developments;
  • A summary of consumer compliance resources and information available to financial institutions; and
  • An overview of consumer complaint trends.

Bank Failure Knowledge Center FAQ Update: FDIC Coverage for SVB Deposits

In light of the evolving situation with Silicon Valley Bank (SVB), we added a section to our bank failures FAQ addressing the following questions:

  • I had deposits at SVB that were assumed by First Citizens. Are my deposits fully insured?
  • I had deposits at SVB’s Cayman Islands branch. Are my deposits FDIC-insured?
Click here for answers. Check out our Bank Failure Knowledge Center for more information and updates on bank failure developments.

CFPB Issues Final Rule Requiring Data Collection on Small Business Loans

On March 30, the CFPB issued a final rule amending Regulation B and requiring lenders making over 100 covered small business loans (e.g., closed-end loans, lines of credit, business credit cards, online credit products, merchant cash advances) per year to collect and report information about small business credit applications they receive, including geographic and demographic data, lending decisions, and the price of credit. The rule defines a small business as one with gross revenue under $5 million in its last fiscal year. Lenders that originate at least 2,500 small business loans annually must collect data starting October 1, 2024; lenders that originate at least 500 loans annually must collect data starting April 1, 2025; and lenders that originate at least 100 loans annually must collect data starting January 1, 2026. The CFPB intends to issue a supplementary proposal that, if finalized, would provide additional implementation time for small business lenders that have demonstrated high levels of success in serving their local communities.

The CFPB issued an accompanying policy statement, explaining that its supervisory and enforcement activities in connection with this rule will be focused on ensuring that lenders do not discourage small business loan applicants from providing responsive data (e.g., demographic information about ownership). Additional resources for lenders include an executive summary and fact sheet about the rule, plain language resources, and an online filing instructions guide which will be updated to include additional resources in the coming months. Lenders may sign up to receive updates and ask technical and compliance questions about the final rule by emailing SBLHelp@cfpb.gov.

CFPB Issues Guidance to Address Abusive Conduct in Consumer Financial Markets

On April 3, following on policy statements on unfair and deceptive practices issued previously by the Federal Trade Commission, the CFPB issued a policy statement summarizing the meaning of the statutory prohibition on abusive conduct and over a decade of precedent to provide an analytical framework to help federal and state enforcers identify when companies engage in abusive conduct. The statement provides that abusive conduct generally includes: (1) obscuring important features of a product or service, or (2) leveraging circumstances (e.g., gaps in understanding, unequal bargaining power, consumer reliance) to take unreasonable advantage. The statement also identifies the use of dark patterns, set-up-to-fail business models, profiteering off captive customers, and kickbacks and self-dealing as potentially abusive. The policy statement does not impose any new legal requirements and is open to public comment until July 3, 2023.

“Congress made an important judgment about the types of conduct that should not be allowed to fester, and it is incumbent upon the CFPB, federal agencies, and the states to ensure that our markets reward fair dealing, rather than abuse.”

~ Rohit Chopra, Director, CFPB

Bank Officer and Director Enforcement Exposures In the Wake of Silicon Valley Bank

The recent and sudden failures of Silicon Valley Bank and Signature Bank, and the threat of other bank failures, have led to intense public focus on what caused these banks to run into trouble, who is to blame, and what should be done about it.

Read more about this topic in a recent client alert.

SEC to Impose Significant New Privacy and Cybersecurity Rules for BDs, RIAs, TAs, and Mutual Funds

The SEC continues its overhaul of cybersecurity, cyber incident reporting, and privacy controls and requirements for industry registrants, their services providers, and corporate America generally.

Read more about these new requirements in a recent client alert.

FINRA Re-Proposes Work-From-Home Supervisory Locations

Firms would be able to treat private residences as non-branch offices instead of OSJs under certain circumstances. The Financial Industry Regulatory Authority (FINRA) hopes to align its supervisory rules with current work-from-home practices.

Read more about this proposed rule in a recent client alert.

Second Circuit Rules CFPB Constitutionally Funded, Creates Circuit Split

On March 23, a three-judge panel of the Second Circuit unanimously ruled that the Consumer Financial Protection Bureau’s (CFPB) funding structure is constitutional, creating a circuit split between the Second Circuit and the Fifth Circuit on the issue. CFPB v. Law Offices of Crystal Moroney, P.C., No. 20-3471 (decided March 23, 2023) (Opinion). The panel’s opinion is timely, as the U.S. Supreme Court last month agreed to hear the agency’s appeal of the Fifth Circuit decision on the same issue.

Read more about this update in more detail on Goodwin’s Consumer Finance Insights blog.

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Samantha M. Kirby
William McCurdy

Josh Burlingham
Serene Qandil