The Roundup: Final Rule on Fake Reviews, Increased Fintech Regulation, and Industrial Bank Rule Changes
Welcome to the PerformLine Regulatory Compliance Roundup, home of the latest news, articles, and reports from our industry, curated for you. Let’s get into it.
In this edition: The CFPB comments on the request for information on uses, opportunities, and risks of artificial intelligence in the financial services sector, the FTC announces a final rule banning fake reviews and testimonials, banks want more fintechs regulated under the CFPB open banking rule, the FDIC is seeking comments on industrial bank rule changes, and reporting on contract for deed lending.
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CFPB Comment on Request for Information on Uses, Opportunities, and Risks of Artificial Intelligence in the Financial Services Sector
In a recent comment, the CFPB emphasized the need for artificial intelligence (AI) in the financial services sector to adhere to existing consumer protection laws, with no exceptions for new technologies. The Bureau says it is committed to preventing unlawful practices such as discrimination and regulatory arbitrage, ensuring that AI innovation fosters fair competition and benefits consumers.
FTC Announces Final Rule Banning Fake Reviews and Testimonials
The FTC has announced a final rule banning fake reviews and testimonials in advertising. This rule prohibits businesses from creating, buying, or using fake consumer or celebrity reviews and suppressing negative reviews. It also targets the misuse of fake social media indicators like bots or fake followers. The rule aims to protect consumers and promote fair competition by deterring deceptive practices in the marketplace. It will take effect 60 days after its publication in the Federal Register.
Significant Stat: $10 Million: The amount that the FTC has fined two car repair companies for deceptive and misleading advertising and telemarketing activities. Read more
Banks Want More Fintechs Regulated Under CFPB Open Banking Rule
Banks are advocating for more stringent regulations on fintechs under the CFPB’s upcoming open banking rule, citing concerns over security risks and liability. They argue that nonbank fintechs and data aggregators should be brought under CFPB supervision to ensure a level playing field and protect consumer data. Banks also request a longer compliance timeline and clearer guidelines on liability to mitigate potential disruptions and technological burdens, particularly for smaller institutions. The rule is part of a broader effort to enhance consumer control over personal financial data.
FDIC Seeking Comments on Industrial Bank Rule Changes
The FDIC is seeking public comments on proposed changes to its rules governing the parent companies of industrial banks and industrial loan companies. The proposed amendments aim to enhance the FDIC’s supervision, mitigate risks to the Deposit Insurance Fund, and ensure transparency for market participants. Key changes include expanding the rule’s scope to cover new types of transactions and providing the FDIC with broader regulatory authority. Public comments are due within 60 days of the rule’s publication in the Federal Register.
Report on Contract for Deed Lending
The CFPB’s recent report highlights concerns with contract for deed lending, a form of seller financing where the seller retains the legal title until the buyer completes payments. The report reveals that these contracts, often targeted at low-income and minority communities, can lead to substandard housing, inflated home prices, and limited access to traditional mortgage credit. The CFPB calls attention to the risks and potential for exploitation inherent in these arrangements, urging for increased oversight and protections.
