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House Financial Services Committee passes bills to enhance sharing of information about bank vendors by regulators; create financial technology task force; amend TILA “points and fees” definition

Yesterday, the three bills described below were passed by the House Financial Services Committee.  The first two bills were passed by unanimous votes and the third bill was passed by a vote of 34-22.

  • The “Bank Service Company Examination Coordination Act of 2017,” (H.R. 3626), which amends the Bank Service Company Act (BSCA) to enhance the ability of state and federal regulators to coordinate examinations and share information about third-party service providers to banks.  The BSCA authorizes a federal banking agency to supervise and regulate the activities of a bank service company with a “principal investor” supervised by the agency and, where a federal banking agency supervises a bank service company’s “principal shareholder or principal member, to authorize any other federal banking agency that supervises any other shareholder or member of the bank service company to examine the bank service company.  In addition, the BSCA authorizes a federal banking agency to supervise and regulate the activities of third-party service providers to a bank it supervises and to initiate enforcement actions against both the bank and its service provider for violations of law, including violations of Section 5 of the FTC Act which prohibits unfair or deceptive acts or practices.  The bill would amend the BSCA to:

    • authorize a state banking agency with supervisory authority over a bank service company’s principal investor to supervise and regulate the activities of the bank service company to the same extent as it can supervise and regulate the principal investor

    • authorize a federal banking agency with supervisory authority over a bank service company’s principal shareholder or principal member to authorize a state banking agency that supervises any other shareholder or member of the service company to examine the bank service company

    • when a state bank is a shareholder or member of a bank service company, require the federal banking agency authorized by the BSCA to supervise the bank service company to “provide reasonable and timely notice to, and consult with” the state banking agency with supervisory authority over the state bank and “to the fullest extent possible, coordinate and avoid duplication of examination activities, reporting requirements, and requests for information”

    • authorize a state banking agency with supervisory authority over a bank to supervise and regulate the activities of third-party service providers to the bank to the same extent as if such activities were performed by the bank itself

    • allow information obtained “pursuant to the regulation and supervision of service providers under [the BSCA] or applicable State law [to] be furnished by and accessible to Federal and State agencies to the same extent that supervisory information concerning depository institutions is authorized to be furnished to and required to be accessible by Federal and State agencies under [the FDIC Act] or State law, as applicable.”

  • The “Financial Technology Protection Act,” (H.R. 5036), would create an “Independent Financial Technology Task Force” to “conduct independent research on terrorist and illicit use of new financial technologies, including digital currencies” and “develop legislative and regulatory proposals to improve counter-terrorist and counter-illicit financing activities.”  The bill designates the Secretary of the Treasury as the head of the task force.  In addition to the Attorney General and other government officials, the members of the task force include “6 individuals appointed by the Secretary of the Treasury to represent the private sector (including the banking industry, nonprofit groups, and think tanks), with at least 1 of such individuals having experience in the Fintech industry.”  The bill would also establish a “FinTech Leadership in Innovation Program” to be funded through fines paid by individuals convicted of having been involved with “terrorist use of digital currencies.”  The bill would authorize the Secretary of the Treasury to make grants “for the development of tools and programs to detect terrorist and illicit use of digital currencies.”

  • The “Mortgage Fairness Act of 2017” (H.R. 2570), would amend the Truth in Lending Act to provide that the direct or indirect compensation paid by a consumer or creditor to a mortgage originator that is part of “points and fees” does not include “compensation taken into account in setting the interest rate and for which there is no separate charge to the consumer.”  It appears that the bill is intended to address situations in which a creditor charges a premium interest rate that the creditor will use to pay compensation to the mortgage originator.

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About this Author

Barbara S. Mishkin, Ballard Spahr, Philadelphia, Deceptive Practices Lawyer, Fair Debt Collection Practices Act, Gramm Leach Bliley
Of Counsel

Barbara Mishkin focuses on consumer compliance and banking law. The federal laws with which Ms. Mishkin has dealt extensively include the Truth in Lending Act, Equal Credit Opportunity Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act, and Gramm-Leach-Bliley Act. She also has significant experience with state usury and lender licensing laws, as well as state laws prohibiting unfair and deceptive acts and practices.

American Bar Association, member, Consumer Financial Services Committee;...

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