The Roundup: Regulators on Bank-Fintech Risks, Credit Card Reward Programs, and Preparing for Rate 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: Regulators outline risks that third-party services pose to banks, FTC issues orders to companies seeking information on surveillance pricing, CFPB to distribute $8M to consumers harmed by payday loan company, career-training company ordered to pay $43.5M, credit card reward programs under scrutiny, BNPL regulation debate heats up as comment period closes, and how to be prepared for the next rate change.

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Regulators Outline Risks that Third-Party Servicers Pose to Banks

Federal banking regulators have issued a joint statement highlighting the significant risks that third-party servicers pose to banks. The Federal Reserve, FDIC, and OCC emphasize that while these servicers offer benefits, they also introduce operational, compliance, and reputational risks. The regulators urge banks to adopt robust risk management practices and oversight for third-party relationships, including thorough due diligence, appropriate contract provisions, and continuous monitoring of third-party activities. 

FTC Issues Orders to Eight Companies Seeking Information on Surveillance Pricing

The FTC has issued orders to eight companies seeking detailed information on their use of surveillance and data collection practices in pricing decisions. These orders aim to investigate how these companies utilize consumer data, including personal and behavioral information, to set and adjust prices. The inquiry is part of the FTC’s broader effort to understand the impact of data-driven pricing strategies on competition and consumer protection, ensuring that such practices are transparent and do not harm consumers. The findings will inform potential regulatory actions to address any identified issues.

CFPB to Distribute Over $8 Million to Consumers Harmed by Payday Loan Company

The CFPB announced it will distribute over $8 million to consumers harmed by a payday loan company following a settlement for the company’s deceptive practices, including misrepresenting the costs of check-cashing services and overcharging customers. These unlawful actions misled consumers about fees and resulted in them paying more than disclosed.

Significant Stat: $43.5 Million: The total penalty that an online healthcare career-training company is ordered to pay by the FTC for using deceptive advertising to lure servicemembers and their spouses. Read more

Credit Card Rewards Programs Under Administrative and Legislative Scrutiny

Credit card rewards programs are increasingly coming under scrutiny by the CFPB and other regulatory bodies. In May, the CFPB published a report expressing concerns that consumers are not receiving promised credit card rewards and that program administrators distort the true costs of credit cards, causing confusion and harming competition. This follows recent CFPB actions and publications on financial market issues. Concurrently, the CFPB and DOT held a hearing on consumer complaints about travel-specific credit card rewards. Additionally, new legislation in New York mandates notice and a grace period for reward redemption before changes to program terms, though ambiguities in the law present compliance challenges for the industry.

BNPL Regulation Debate Heats Up as Comment Period Closes

As the comment period for proposed Buy Now, Pay Later (BNPL) regulations closes, the debate over how to effectively regulate the industry intensifies. Stakeholders, including consumer advocates, industry players, and policymakers, have submitted feedback on the Consumer Financial Protection Bureau’s (CFPB) proposals aimed at increasing transparency and consumer protection in the BNPL sector. Key concerns include ensuring fair lending practices, preventing consumer debt accumulation, and maintaining the accessibility of BNPL services. The CFPB will now review the comments to refine the regulations, balancing consumer protection with the benefits of BNPL services.

Are You Ready for the Next Rate Change? PerformLine Can Help 

PerformLine’s automated compliance solutions can help financial institutions navigate the complexities of interest rate changes. With fluctuating rates posing challenges for maintaining accurate rates and ensuring up-to-date disclosures, automated tools provide a streamlined approach to monitor, adjust, and report interest rate changes in real-time. These solutions enhance accuracy, reduce the risk of non-compliance, and improve operational efficiency by automating the tracking and implementation of regulatory requirements, ultimately allowing financial institutions to adapt swiftly to market conditions while maintaining compliance.