Archive: May 1, 2017

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U.S. Government Accountability Office Issues Long-Awaited Report on Fintech Industry
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CFPB Finalizes Extension of Prepaid Account Rule Effective Date

U.S. Government Accountability Office Issues Long-Awaited Report on Fintech Industry

By Judith Rinearson and Eric A. Love

The U.S. GAO has issued a long-awaited report on the fintech industry, which focuses on the regulation of marketplace lenders, mobile payments, digital wealth management platforms and distributed ledger technology (“DLT” – often referred to as blockchain). For each of these fintech industry “subsectors,” the GAO report details the nature of the subsector and how it operates, as well as its potential benefits and risks.  Moreover, the GAO report addresses industry trends, regulation and oversight for each subsector.

Marketplace lenders.  The GAO report indicates that marketplace lenders may provide expanded and quick access to credit at lower cost than banks, although the report also notes risks related to loan term transparency and certain protections for small business borrowers.   Read More

CFPB Finalizes Extension of Prepaid Account Rule Effective Date

By Judith Rinearson and Eric A. Love

 On April 20, the CFPB issued a final rule to delay for six months the October 1, 2017 effective date of its comprehensive Final Rule amending Regulation E and Regulation Z as applied to prepaid accounts. The Final Rule will now become effective on April 1, 2018.

In announcing the delay, the CFPB indicated that it has decided to “revisit at least two substantive issues” in the Final Rule through a separate rulemaking process. Based on CFPB Director Richard Cordray’s recent testimony before the House Financial Services Committee, the two substantive issues most likely relate to: (1) the Final Rule’s applicability to “the linking of credit cards to digital wallets that are capable of storing funds,” and (2) error resolution for unregistered prepaid cards.  The CFPB can be expected to issue a proposal on these issues “in the coming weeks.”

Notably, the CFPB’s action could help to address concerns raised by Congressional Republicans about the scope of the Final Rule and its potential impact on industry participants and consumers, thus complicating ongoing efforts in Congress to repeal the Final Rule using the Congressional Review Act (CRA). In order to repeal the Final Rule utilizing the CRA, Congress would be required to pass a repeal bill by May 9, 2017.

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