October 18, 2021

Volume XI, Number 291

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October 18, 2021

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CFPB Opts Not to Take Action Against Banking App

Ahead of an upcoming merger between a digital banking platform and a special purpose acquisition company, both parties disclosed in a regulatory filing last week that the platform received a Civil Investigative Demand (“CID”) in June 2020 related to its “cash paycheck advance business in compliance with the prohibition against UDAAPs, the EFTA, and, to the extent it applies, the Truth in Lending Act.”  According to the filing, the platform provided the CFPB with all information and documents required by the CID, and on September 27, 2021, the CFPB staff notified us that it currently did not intend to recommend that the CFPB take any enforcement action.

Putting It Into Practice:  While this news did not garner headlines since last week, it is an important reminder that the CFPB and other regulators are monitoring the cash advance space for activities that may run afoul of consumer protection laws (we 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 proceed with a public enforcement action should not be viewed as an indication that the earned wage access model was acceptable this case.  Rather, the CFPB generally does not provide its reasoning for not recommending enforcement actions at the conclusion of investigations.  That said, nonbanks, including FinTechs that offer consumer lending products, should consistently revisit their lending practices in order keep from attracting attention from regulators and lawmakers.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 286
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
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