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August 10, 2018

Treasury Recommends Sweeping Regulatory Changes for Consumer Financial Services

Ballard Sparh, LLP--Alan S. Kaplinsky; John L. Culhane, Jr.; James Kim; Scott M. Pearson

A report issued last week by the U.S. Treasury Department recommends sweeping regulatory changes intended to promote innovation in the consumer financial services market, reduce regulatory burdens on consumer financial services providers, and update regulations applicable to various types of consumer lending and related consumer financial products and services.

The report, titled "Nonbank Financials, Fintech, and Innovation," is the fourth in a series of reports issued in response to President Donald J. Trump's Executive Order 13772, which established a set of core principles for regulating the U.S. financial system.

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.

Each set of recommendations made by the Treasury is preceded by an explanation of the current statutory and regulatory framework applying to the subject of the recommendations, and a detailed discussion of the issues sought to be addressed by the recommendations.  Such issues particularly concern those arising from impediments or uncertainties that the current legal framework creates for marketplace developments driven by changes in technology.

The four categories into which the Treasury's recommendations are organized are set forth below. Given the report's length and the wide range of issues covered, we have limited the scope of this alert to several of the Treasury's key recommendations in each category and will publish supplemental discussions of additional recommendations, such as those concerning data aggregation and mortgage lending and servicing.

1. Embracing the efficient and responsible use of consumer financial data and competitive technologies. The recommendations in this category address how regulatory approaches can be adapted to the digitization of communications and changes in the aggregation, sharing, and use of consumer financial data.

The Treasury recommends:

2. Streamlining the regulatory framework to eliminate unnecessary fragmentation and foster new business models that are enabled by innovations in financial technology.

The Treasury recommends:

3. Updating activity-specific regulations that apply to various products and services offered by nonbanks to accommodate technological advances.

The Treasury recommends:

4. Advocating an approach to regulation that facilitates responsible experimentation.

The Treasury recommends:

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products and programs, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

The firm's Marketplace Lending Task Force is nationally recognized for counseling marketplace lending businesses in both the consumer and small business spaces. We offer soup-to-nuts guidance, working with startup alternative lenders, long-established market leaders, banks, institutional investors, and others. We document and advise on the structure and strategy of bank, platform, and investor relationships, assist in concluding account servicing arrangements, provide extensive consumer regulatory advice, documentation, and diligence assistance, and help with state licensing. We are already advising clients on the steps involved in obtaining an SPNB charter.

Copyright © 2018 by Ballard Spahr LLP.

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