The U.S. Department of the Treasury’s recent report evaluating economic opportunities presented by nonbank financial institution and fintech company innovations includes a detailed account of current data aggregation activities in the financial services marketplace and provides policy recommendations that shed light on the federal government’s current views on data aggregation. (See our legal alert and blog posts (here and here) for a discussion of other portions of the Treasury’s report.)  In seeking to harness the potential benefits that can come from data aggregation, the Treasury report firmly supports the inclusion of these market participants.

Following are key takeaways from the Treasury’s report with respect to data aggregation practices and regulatory issues.

  • BCFP and private sector should develop consumer disclosure best practices. The Treasury suggests that the Bureau of Consumer Financial Protection (BCFP) should develop, either with the private sector or pursuant to its rulemaking authority, consumer-facing disclosures that are “plain language, readily accessible, readable through the preferred device used by consumers to access services… so that consumers can give informed and affirmative consent regarding to whom they are granting access, what data is being accessed and shared, and for what purpose,” and to opt-out of such sharing.
  • APIs provide advantages and should be supported. The report raises a number of issues with screen scraping while promoting the benefits of application programming interfaces (APIs) “that allow for the inclusion of robust security features, greater transparency and access controls for consumers, improved data accuracy, and more predictable and manageable information technology costs.”  Following is a graphic from the report identifying the similarities and differences between bilateral/partnered API and open API arrangements.  It highlights how APIs can remove the need for fintech apps (users of aggregated data) and data aggregators to access consumers’ bank account login credentials and, therefore, supports Treasury’s suggestion that the private sector and financial regulators should work to implement API solutions that “address data sharing, [data normalization,] security, and liability [and should support] efforts to mitigate implementation costs for community banks and smaller financial services companies with more limited resources to invest in technology.”

  • Clarifying applicability of third-party oversight guidance to data aggregators. The report states that there is some ambiguity regarding when third-party oversight guidance issued by federal banking regulators applies to data aggregator relationships, noting that data aggregators entering into “an API agreement with a bank [] may become subject to third-party guidance because of the contractual relationship, which can increase compliance costs.”  The Treasury suggests that federal banking regulators take action to resolve this ambiguity.
  • Third-party data aggregators should be treated as “consumers.”  Section 1033 of the Dodd-Frank Act provides “consumers” a right to access certain account information electronically upon request.  Treasury recommends that this section be interpreted so that “third parties properly authorized by consumers, including data aggregators and consumer fintech application providers, fall within the definition of ‘consumer’… for the purpose of obtaining access to financial account and transaction data.”
  • Data security addressed by GLBA Safeguards Rule. The report assumes that “data aggregators and consumer fintech application providers are subject to the Gramm-Leach-Bliley Act (GLBA)” and that “the Safeguards Rule appropriately addresses” data security concerns with data aggregation activities.  To the extent additional regulatory or legislative measures are considered to address data aggregation data security issues, the Treasury suggests that such activities occur at the federal level rather than the state level to ensure uniformity.
  • Other financial regulators should support data aggregation. The report suggests that regulators in addition to the BCFP should take steps to enhance data aggregation activities, including the Securities and Exchange Commission, the Financial Industry Regulatory Authority, Department of Labor, and state insurance regulators.

On September 20, 2018, from 12 p.m. to 1 p.m. ET, Ballard Spahr will conduct a webinar, “More Than Just Fintech: What Are the Important Takeaways for All Consumer Financial Services Providers from Treasury’s Sweeping Report?”  A link to register is available here.




Resolving an ambiguity in the California Finance Lender’s Law (CFLL), the California Supreme Court unanimously held that borrowers may use the unconscionability doctrine to challenge the interest rate on consumer loans of $2,500 or more, despite the fact that the CFLL has deregulated interest rates on such loans.  Although unconscionability claims of this nature will be difficult to prosecute, the decision creates heightened risk for nonbank consumer lenders doing business in California, particularly when lending at high rates.  Furthermore, because the decision could be followed in other states or applied in other contexts, such as small business lending, it also could impact loans made under other statutes that have deregulated interest rates, as opposed to statutes that affirmatively authorize interest rates established by contract.

In addition to copycat lawsuits by private plaintiffs alleging their interest rates are unconscionable, high-rate lenders could even face enforcement actions challenging their rates.  In California, it is possible that the state’s Attorney General, local prosecutors, or the California Department of Business Oversight (which has regulatory and supervisory jurisdiction over CFLL licensees) will pile on.

On October 16, 2018, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar, “The Sky is Not The Limit: California Supreme Court Re-Regulates Deregulated Interest Rates.”  The webinar registration form is available here.

See our legal alert for a fuller discussion of the California Supreme Court’s decision.



A new bulletin issued by the Office of the Comptroller of the Currency (OCC), Bulletin 2018-23, makes slight, but significant, changes to OCC policy regarding when evidence of illegal or discriminatory credit practices could result in a downgrade to a national bank’s Community Reinvestment Act (CRA) examination rating.  The bulletin clarifies that, contrary to another OCC bulletin issued in late 2017, there are still circumstances that could justify a downgrade of two CRA rating levels.

On October 12, 2017, the OCC, under Acting Comptroller Keith Noreika, issued revised Policies and Procedures Manual (PPM) 5000-43 to clarify the relationship between evidence of illegal credit practices and an institution’s CRA rating.  PPM 5000-43 provided two principles to guide the OCC’s CRA rating determination.  First, the OCC would require a logical nexus between the evidence of illegal or discriminatory credit practices and the CRA rating. The OCC said that it would consider lowering a rating where the evidence of illegal activities “directly relates” to an institution’s CRA lending activities (as opposed to other activities).  The second principle committed the OCC to giving an institution full consideration for all remedial actions taken.

Bulletin 2018-23, issued by Comptroller Joseph Otting, changes the OCC’s approach to the first principle provided by PPM 5000-43.  With respect to the activities that can impact a bank’s CRA rating, the OCC clarified that “[g]enerally, the OCC considers lowering the composite or component performance test rating of a bank only if the evidence of discriminatory or illegal credit practices directly relates to the institution’s CRA lending activities” (emphasis added).  The addition of the word “only” may strengthen the OCC’s commitment to limit rating impacts to situations where illegal activities directly relate to CRA lending.  However, the use of “generally” could still provide examiners with flexibility.

Most significantly, Bulletin 2018-23 reverses the OCC’s prior statement that such an impact would only result in one rating-level downgrade.  The OCC deleted a footnote from PPM 5000-43 that clearly stated that the OCC’s policy is not to downgrade ratings by more than one level and added a new sentence to the primary text.  The new sentence says “the OCC’s general policy is to downgrade the rating by only one rating level unless such illegal practices are found to be particularly egregious.”  It remains to be seen how the OCC will define “particularly egregious” practices.

These changes come in the wake of several other CRA developments this year.  In April 2018, the Treasury Department released an extensive list of recommendations to modernize the CRAAs we commented at the time, implementation of those recommendations would require rulemakings by the banking agencies, including the OCC, the Federal Reserve, and the Federal Deposit Insurance Corporation.

The OCC also issued OCC Bulletin 2018-17 in June 2018.  Most notably, this bulletin changed the timing of CRA examinations.  In a letter to Comptroller Otting dated July 24, 2018, several U.S. Senators criticized these changes and claimed that the OCC had effectively undermined the CRA’s effectiveness by lengthening the examination schedule for some large banks and delaying the impact of a CFPB fair lending investigation until a subsequent CRA examination takes place (instead of delaying the conclusion of a CRA examination while a fair lending investigation is pending).

These developments and the OCC’s policy changes indicate that 2018 will continue to be an impactful year for the CRA as it relates to national banks.



A portion of the Treasury’s report entitled “A Financial System That Creates Economic Opportunities, Nonbank Financials, Fintech, and Innovation” focuses on the mortgage industry.  A detailed discussion of the Treasury’s mortgage-related findings and recommendations is available here.

We have previously blogged about the portion of the Treasury report that focuses on payments and have published a legal alert that discusses other portions of the report.

On September 20, 2018, from 12 p.m. to 1 p.m. ET, Ballard Spahr will conduct a webinar, “More Than Just Fintech: What Are the Important Takeaways for All Consumer Financial Services Providers from Treasury’s Sweeping Report?”  A link to register is available here.


Significant changes to Connecticut’s licensing laws for consumer financial services providers will take effect on October 1, 2018.  In addition to changes impacting mortgage-related licensees (e.g. mortgage lenders, originators and brokers), Public Act 18-173 revises or creates new licensing requirements for many providers including small loan lenders, sales finance companies, money transmitters, check cashers, debt adjustors, debt negotiators, collection agencies, student loan servicers, and mortgage servicers.

New requirements include requirements (1) for licensees to clearly display their unique identifier, including on internet websites and in all audio solicitations, and (2) for licensees to conduct activities subject to licensure from a U.S. office.

Of particular note is a new requirement (which appears to be unprecedented), for sales finance companies to acquire and maintain information about the ethnicity, race, and sex of applicants for motor vehicle retail installment contracts.  A licensee will be required to submit the demographic records collected between October 1, 2018 and June 30, 2019 to the Connecticut Banking Department by July 1, 2019.

We understand that representatives of the Banking Department will be meeting with an industry group this week to discuss the Equal Credit Opportunity Act issues presented by this requirement and that the Department hopes to provide guidance soon.  (The new requirement presents an apparent conflict with the Regulation B proscription against a non-mortgage creditor inquiring about the race, ethnicity or gender of an applicant.   See 12 C.F.R. § 1002.5(b) (“A creditor shall not inquire about the race, color, religion, national origin, or sex of an applicant or any other person in connection with a credit transaction, except as provided in paragraphs (b)(1) [relating to self-testing that complies with Sections 1002.15 of Regulation B] and (b)(2) of this section [authorizing only an optional request to designate a title on an application form such as Ms., Miss, Mr. or Mrs.])

For more information on the provisions of Public Act 18-173, click here.



In response to reports that Acting CFPB Director Mick Mulvaney intends to dispense with routine supervisory examinations of creditors for violations of the Military Lending Act (MLA), Senate Democrats sent a joint letter addressed to Mulvaney in his capacity as Director of the Office of Management and Budget—urging him to reconsider.

The letter, signed by all 49 Democratic Senators, takes the position that the CFPB has statutory authority to conduct examinations for MLA compliance:

We write regarding reports that the Consumer Financial Protection Bureau (CFPB) will no longer protect servicemembers and their families by including the Military Lending Act (MLA) as part of the CFPB’s routine lender examinations due to a purported lack of authority.  These reports are puzzling because the CFPB already possesses the authority to enforce the MLA and examine many types of lenders for the purposes of “detecting and assessing risks to consumers and to markets for consumer financial products and services.”

The apparent statutory basis for this view is the quoted language above, which is from Section 1024(b)(C) of the Dodd-Frank Act (12 U.S.C. § 5514 – Supervision of nondepository covered persons). Reading Section 1024(b) in its entirely, we think the interpretation set forth in the senators’ letter misreads the scope of supervisory authority authorized by Dodd-Frank:

(1) IN GENERAL.—The Bureau shall require reports and conduct examinations on a periodic basis of persons described in subsection (a)(1) for purposes of—
(A) assessing compliance with the requirements of Federal consumer financial law;
(B) obtaining information about the activities and compliance systems or procedures of such
person; and
(C) detecting and assessing risks to consumers and to markets for consumer financial
products and services.
(emphasis added)

Rather, we believe subpart (C) must be read within the context of (A), which uses the defined term “Federal consumer financial law,” thereby limiting the scope of statutes under which the CFPB has supervisory authority. As we previously wrote, the MLA is not a “Federal consumer financial law” under Dodd-Frank. To read (C) as a standalone authorization for the CFPB to conduct MLA examinations is to infer that the CFPB has statutory authority for proactive oversight relating to any number of federal statutes that could plausibly affect “consumers and markets for consumer financial products and services.” Likewise, if (C) is indeed as broad as the senators are implying, (A) would be superfluous, since (C) would offer a sufficient grant of authority to cover supervision under any “Federal consumer financial law,” as well as under any other law deemed relevant to “detecting and assessing” the risks outlined in (C).

The CFPB’s ongoing approach to the Servicemembers Civil Relief Act (SCRA) is instructive here. Like the MLA, the SCRA is not a Federal consumer financial law, even though it has direct bearing on various “consumer financial products and services,” including personal loans, motor vehicle loans and mortgage loans. However, the CFPB has not published any general SCRA examination procedures, and we are likewise not aware of general SCRA-related supervisory activity on the part of the CFPB.

RD Legal Funding has submitted a letter to Judge Preska indicating that it does not oppose her entry of a Rule 54(b) judgment to allow the CFPB to appeal her June 21 constitutionality ruling to the Second Circuit but renews its request that the proceeding be stayed during the pendency of any appeal.

RD Legal’s letter responds to the CFPB’s August 10 letter to Judge Preska indicating that it plans to file a motion for entry of a judgment pursuant to Rule 54(b).  RD Legal asserts that “implicit in the CFPB’s request…is the understanding that the NYAG’s claims should be stayed during the pendency of the appeal.”

In addition to asking Judge Preska to stay the proceeding, RD Legal asks her, if she enters a judgment against the CFPB pursuant to Rule 54(b), to certify the remainder of her June 21 order for interlocutory appeal under 12 U.S.C. Section 1292(b).  According to RD Legal, “[a]ll aspects of the Court’s constitutionality ruling, including its ruling permitting the NYAG to proceed under the stricken provisions of Title X, should be addressed in one proceeding.”  The “remainder” of Judge Preska’s June 21 order would also include her ruling that the NYAG could proceed with its state law claims against RD Legal.  (While the CFPB would have a right to appeal a judgment entered pursuant to Rule 54(b), if Judge Preska were to certify the remainder of her June 21 order for interlocutory appeal as requested by RD Legal, the Second Circuit would need to agree to hear RD Legal’s interlocutory appeal.)

The NYAG has submitted a letter to Judge Preska in which it challenges RD Legal’s argument that her dismissal of the CFPB from the case and striking of Dodd-Frank Title X necessitates her dismissal of the NYAG’s CFPA claims against RD Legal.  The letter also sets forth the NYAG’s opposition to Judge Preska’s issuance of a stay of the proceeding if she enters a Rule 54(b) judgment against the CFPB.



According to media sources, the Senate Banking Committee has rescheduled a vote on President Trump’s nomination of Kathy Kraninger to serve as CFPB Director for August 23.

There is little doubt that the Committee will approve Ms. Kraninger.  It remains unclear, however, whether and when the full Senate will consider her nomination.  We continue to believe that it is unlikely that the full Senate will consider her nomination before the mid-term elections.


The Senate Committee on Commerce, Science, and Transportation has scheduled a hearing for tomorrow, August 16, titled “Oversight of the Federal Communications Commission.”  The Committee’s website indicates that the hearing will examine policy issues before the FCC and review the FCC’s ongoing duties and activities.

The witnesses scheduled to appear are the four sitting FCC Commissioners (Chairman Pai and Commissioners O’Reilly, Carr, and Rosenworcel).  The FCC’s response to the D.C. Circuit’s ACA International decision, particularly with regard to the TCPA robocall prohibition, is expected to be a significant focus of the hearing.


The New York Attorney General has submitted a letter to Judge Preska that responds to RD Legal Funding’s letter asking her to dismiss all of the NYAG’s federal and state claims.

In its letter, RD Legal Funding asserted that the NYAG’s federal claims should be dismissed because they are brought pursuant to Dodd-Frank Section 1042, which authorizes state attorneys general to file civil actions in federal court to enforce the provisions of the CFPA, and Judge Preska struck all of Title X in its entirety in her June 21 decision, including Section 1042.  In addition to asking the court to dismiss the NYAG’s federal claims with prejudice, RD Legal Funding asked the court to dismiss the NYAG’s state law claims without prejudice to their being refiled in state court.

The NYAG, in its letter to Judge Preska, takes the position that her “termination of the CFPB [from the case] does not necessitate the invalidity of the prohibited conduct provisions of the CFPA or the NYAG’s enforcement authority.”  The NYAG appears to argue that in striking Title X, Judge Preska was only “striking down the CFPB” because of its unconstitutional structure and left in place the CFPA’s substantive provisions (e.g. its UDAAP prohibition) and the right of state AGs to bring CFPA claims.

The NYAG also argues that even if the court were to reverse itself and hold that the NYAG cannot bring CFPA claims, the court would still have subject matter jurisdiction “based upon the embedded federal questions in the NYAG’s state law claims.” According to the NYAG, the embedded federal issue is whether the transactions that RD Legal Funding entered into with consumers entitled to benefits under the September 11th Victim Compensation Fund of 2001 were void under the federal Anti-Assignment Act and therefore loans subject to New York usury law.  (We previously observed that the court, after concluding that the assignments before it were void, leaped to the conclusion that, as a result, the transactions were necessarily disguised loans.  The basis for this conclusion was never articulated by the court.  Just because the underlying transactions are problematic does not mean that they meet the New York definition of usurious loans.)

Finally, the NYAG argues that even if the court finds there is no basis for original jurisdiction over the NYAG’s federal or state law claims, it should nevertheless use its discretion to decide the NYAG’s state law claims because “[b]alancing judicial economy, convenience, fairness, and comity argues for retaining jurisdiction of the state law claims.”  The NYAG asserts that dismissal of its state law claims “would require the NYAG to refile in state court and would unnecessarily delay the proceedings, to the detriment of the consumers harmed by RD Legal, particularly those in poor health.”  The NYAG also points to the district court’s familiarity with the issues in the case and observes that “the state laws at issue are not novel and thus concerns of comity are not implicated.”

The NYAG takes no position in its letter as to whether the court should enter judgment against the CFPB pursuant to Rule 54(b) of the Federal Rules of Civil Procedure so the CFPB can file an immediate appeal with the Second Circuit of Judge Preska’s constitutionality ruling.  However, the NYAG restates its opposition to the court’s issuance of a stay of the proceeding if it enters a Rule 54(b) judgment. The CFPB has sent a letter to Judge Preska indicating that it plans to file a motion for entry of a judgment pursuant to Rule 54(b).