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Four Democratic members of the California state legislature recently sent a letter to the Federal Deposit Insurance Corporation (FDIC) urging the agency to take action against FDIC-supervised banks that partner with non-bank lenders to originate high-cost installment loans.

Two of the letter’s authors, California Senator Monique Limon and Assemblymember Tim Grayson, were also sponsors of Assembly Bill 539, passed in 2019, which caps the annual interest rate at 36% plus the federal funds rate for consumer loans of at least $2,500 but less than $10,000 made by lenders licensed under the California Financing Law. … Continue Reading

A California Court of Appeal recently found a bank liable to a judgment creditor under California’s Enforcement of Judgments Law for the bank’s registered agent’s mistake in misreading, and subsequently rejecting, a notice of levy.  Although the bank itself did not have knowledge of the mistake, the Court held the bank responsible through principles of agency, rendering the bank liable for amounts that the account holder drained from the account when the levy should have been in effect.… Continue Reading

Marketing by nonbanks of products and services offered with bank partners is coming under increasing scrutiny that focuses on the potential for consumers to be led to believe that the nonbank is a bank, or is FDIC insured.  We discuss recent state and federal regulatory and enforcement developments, including the FDIC’s proposed rule addressing false advertising, misuse of the FDIC logo, and misrepresentation of insured status, and state regulators’ and federal lawmakers’ interest in the issue, and offer takeaways for banks and nonbank partners on what these developments mean for their marketing efforts.… Continue Reading

The Federal Reserve Board has published in the Federal Register a notice of proposed rulemaking with request for comment on a proposal to simplify and increase transparency of its rules for determining control of a banking organization.  The proposal’s comment period closes on July 15, 2019.

The proposed revisions to the Board’s control regulations would significantly expand the number of presumptions used by the Board to determine control and would, in codifying those presumptions, provide transparency to investors (including private equity investors) regarding what types of relationships and what types of activities would constitute control of a financial institution or holding company under the Bank Holding Company Act (the “BHC Act”). … Continue Reading

Director Cordray’s remarks to the Clearing House yesterday should unsettle bankers and payday lenders alike. In his talk, Director Cordray challenged bankers to bow to the inevitable. He suggested that sooner, rather than later, the industry should invest the billions of dollars required to build a payment system with “faster and even real-time payments” where “the interests of consumers remain at the top of [bankers’] minds.”… Continue Reading