CFPB chooses not to take action against the banking application | Sheppard Mullin Richter & Hampton LLP


Ahead of an upcoming merger between a digital banking platform and a special-purpose acquisition company, both sides revealed in a regulatory filing last week that the platform had received a civil investigation request (“CID “) In June 2020 related to its” cash paycheck advance business. ” in accordance with the prohibition of UDAAPs, EFTA and, as far as it applies, the truth of lending law. According to the file, the platform provided the CFPB with all the information and documents required by the CID, and on September 27, 2021, CFPB staff informed us that they currently did not intend to recommend the CFPB to take coercive measures.

Put into practice : While this news has not made headlines since last week, it is an important reminder that the CFPB and other regulators are monitoring the cash advance space for activities that are likely to go. against consumer protection laws (we have discussed cash advance products in previous Consumer Finance & Fintech blog posts here and here). Industry participants should also note that the CFPB’s decision to close its investigation and not initiate public enforcement action should not be taken as an indication that the model of access to earned wages was acceptable in this regard. case. On the contrary, the CFPB generally does not provide its reasoning for not recommending enforcement measures at the end of the investigations.

Similarly, in an interesting development from yesterday, the National Consumer Law Center (NCLC) along with 96 consumer, labor, civil rights, legal services, faith, community and finance and academics, submitted a letter of comment to CFPB’s new director, Rohit. Chopra, specifically asking it to eliminate or significantly revise the 2020 Earned Wage Access Advisory Notice and Compliance Assistance Sandbox (CAS) Approval Order. At the heart of the NCLC’s concerns was that EWAs should be treated as consumer loans with the appropriate regulatory safeguards to avoid placing consumers in an extensive cycle of repeated borrowing and indebtedness. The letter also targeted other emerging products such as revenue sharing and certain point-of-sale financing arrangements to pretend not to be credited or covered by credit laws. In fact, the letter commends the CFPB for its recent enforcement action against a revenue sharing provider.

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