The Federal Deposit Insurance Corporation (FDIC) has issued a “Request for Information and Comment on Digital Assets” (RFI) to learn more about the “novel and unique considerations related to digital assets….[g]iven that banks are increasingly exploring the emerging digital asset ecosystem.” A key theme of the RFI is the development of a framework to promote “responsible innovation.” Comments are due by July 16, 2021.Read More
The office of the Comptroller of the Currency (OCC) issued an Advance Notice of Proposed Rulemaking (ANPR) on June 3, 2020, focusing on digital banking activities. Typically such ANPRs are a precursor to new federal regulation; following collection of data from the industry and other interested parties, the OCC may propose new regulations by issuing a Notice of Proposed Rulemaking within 6-12 months. Responses to the ANPR are due on August 3, 2020.Read More
On May 29, 2020, the Office of the Comptroller of the Currency (“OCC”) issued a final rule (https://www.occ.gov/news-issuances/federal-register/2020/nr-occ-2020-71a.pdf) to clarify that, when a federal or state-chartered savings association transfers a loan portfolio, interest permissible on the loans before the transfer continues to be permissible after the transfer. In this way, the OCC hopes to resolve the uncertainty created by the Madden v. Midland Funding, LLC decision (“Madden”).Read More
On December 12, 2019, the Federal Deposit Insurance Corporation (“FDIC”) released a Notice of Proposed Rulemaking (“NPR”) to amend the brokered deposit regulation. While the proposed regulation will not eliminate the restrictions or remove all burdens from those institutions that accept brokered deposits, the NPR indicates that the FDIC has recognized that changes in technology call for changes in regulation. As a result, banks working with innovative prepaid payments companies to provide financial services might get some brokered deposit relief.Read More
Over the last two days, the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”) (together, the “Agencies”) each issued a proposed rule (collectively, the “Proposed Rules”) that would codify the Agencies’ position that the interest on a loan originated on a bank, if permissible when the loan was made, will continue to be a permissible and an enforceable term of the loan following the sale, assignment, or transfer of the loan. This is known as the “valid-when-made” doctrine.Read More
By Sean Mahoney
Following up on its recent Supervisory Insights article on marketplace lending and Advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations, the FDIC on July 31, 2016 released its proposed Examination Guidance for Third-Party Lending. If nothing else, this series of recent developments demonstrates the FDIC’s concern with the role of banks in marketplace lending. Unlike the prior two releases, the July proposed guidance is subject to public comment, with a comment period expiring October 27, 2016.
All three issuances share a common set of fundamental concerns. These include concerns that (a) a bank may rely on a marketplace lending platform to an unjustified extent; (b) the marketplace lending activity may not fit within a bank’s corporate strategy; (c) that lending through a marketplace platform may not be consistent with the bank’s underwriting standards; (d) that the bank may not adequately assure that the activity is being conducted in accordance with applicable law; and (e) that the bank may not otherwise adequately manage risks inherent in the activity. The Proposed Guidance goes a few steps further by requiring that banks that engage in marketplace lending activities have specific, detailed policies and procedures addressing a set of prescribed parameters. Further the Proposed Guidance would mandate that contracts between a bank and marketplace lending platform provide the bank with, among other things, (i) the right to mandate that the platform adopt policies and procedures governing any activity outsourced to the platform, and (ii) rights to performance data, audits and funding information.
While the Proposed Guidance will only apply to state-chartered, FDIC-insured banks that are not members of the Federal Reserve System, it could have far-reaching effects given the increased prevalence of state-chartered banks of all types in marketplace lending. Moreover, the Proposed Guidance may strain the tension between financial innovation and comprehensive regulatory oversight inherent in much of FinTech.