Regulation
Trump’s Two-For-One Regulation Deal
January 31, 2017Trump’s newest order is that for every new regulation proposed, two must be identified for repeal. If a new regulation goes into effect, the costs must be offset by the repealed regulations. The idea behind it is to strip away costs on small businesses and unburden the system. “There will be regulation, there will be control, but it will be normalized control where you can open your business and expand your business very easily,” Trump said prior to signing the executive order. Watch that below:
Trump later said that “Dodd-Frank is a disaster” and that “We’re going to be doing a big number on Dodd-Frank.”
When he does that “big number,” he should pay close attention to Section 1071 of the law, which many believe the CFPB will try to use to police commercial finance and business-to-business transactions.
Ironically, as Trump works to slash federal rules, states will likely be doing just the opposite. Already in New York, Governor Cuomo’s 309-page budget proposal includes edits to an existing law that would impose strict regulations on all non-bank business finance.
New York’s Proposed Budget Slips In Sweeping Regulation of Non-bank Business Lending and Finance
January 28, 2017In New York, Governor Cuomo’s 309-page budget proposal includes a handful of sentences tucked in towards the end (Part EE) that would revise Section 340 of the state’s banking law. And the implications are broad, given that it calls for any person or entity involved in the soliciting, arranging or facilitation of business and consumer loans or other forms of financing to be licensed in order to engage in such activity. It appears that MCA companies as well as business loan brokers and ISOs would be directly impacted.
If it passes, the regulator tasked with overseeing that would be the New York Department of Financial Services. It would be effective January, 2018.
For consumer loans, it applies to loans $25,000 and under. For business financing, $50,000 and under.
New FCC Chairman Ajit Pai Has Been Critical of Serial TCPA Plaintiffs, Record Shows
January 24, 2017
FCC Commissioner Ajit Pai is the commission’s new chairman, thanks to President Trump. A republican who believes free markets are better for American consumers than highly regulated ones, Pai is likely to offer a sympathetic ear to companies besieged by serial TCPA plaintiffs, a problem that has reached epidemic proportions in the small business finance industry.
In 2015, when the FCC announced a broader definition of an autodialer under the TCPA, Pai strongly dissented.
Instead, the Order takes the opposite tack. Rather than focus on the illegal telemarketing calls that consumers really care about, the Order twists the law’s words even further to target useful communications between legitimate businesses and their customers. This Order will make abuse of the TCPA much, much easier. And the primary beneficiaries will be trial lawyers, not the American public.”
– Ajit Pai, 2015
If you’ve been threatened or sued by someone for violating the TCPA, you’re not alone. When we researched Smile, Dial and Trial, we reviewed dozens of lawsuits filed against small business finance companies and have since even discovered new ones filed since then.
With Trump and Co. Now in Control, Has The CFPB Made a Costly Mistake?
November 11, 2016
For years, the CFPB has rejected all calls by republicans (and even some democrats) to reconfigure its one-director leadership to a multi-member commission. At present, Director Richard Cordray has full authority to create the rules and enforce the rules and reports to no one, not even the President of the United States. As the only executive agency with significant authority to operate in this manner, critics have become increasingly worried the CFPB might abuse its power. And just last month, the agency was accused to have actually done so.
In PHH Corp. v. CFPB, the CFPB was alleged to have made legal errors in their enforcement action against a mortgage lender, but more to the point, that the CFPB itself was unconstitutional. The United States Court of Appeals for the District of Columbia Circuit agreed in part, ruling the agency’s structure unconstitutional. The agency was ordered to cure the defect either by conceding its directorship to a multi-member commission or making its leader report directly to the President of the United States.
But the CFPB has refused to comply, arguing shortly thereafter in another case that the “decision was wrongly decided and is not likely to withstand further review,” amplifying fears that the agency had gone rogue and potentially become drunk with power.
Cordray, who has tried to assure critics that his agenda is merely meat and potatoes, now faces a new challenge, a Republican president and a Republican-controlled Congress, who may see this as their only opportunity to rein him in.
According to Bloomberg, sources contend that the CFPB’s and Democrats’ previous unwillingness to concede anything at all, now puts the entire agency itself in jeopardy. Cordray himself is at great risk of losing his job, the Huffington Post asserts.
Already there is chatter of firing Cordray on Trump’s first day in office either for cause as Dodd-Frank allows for, or simply at his own discretion, as the Appeals Court ruled would be acceptable.
Has the CFPB erred all this time?
Coming Soon: The OCC’s Fintech Innovation Office
October 27, 2016Coming soon: An innovation office to work with fintech upstarts poised to disrupt to the industry.
The Office of Comptroller of the Currency that regulates and supervises banks plans to set up a dedicated “fintech innovation office” early next year with branches in New York, San Francisco and Washington.
In an attempt to “identify, understand and respond” to the changing banking landscape, the OCC said that the unit will establish an outreach and technical assistance program for banks and nonbanks, conduct research and promote inter-agency collaboration and act as a point of contact for information and requests.
“By establishing an Office of Innovation, we are ensuring that institutions with federal charters have a regulatory framework that is receptive to responsible innovation and the supervision that supports it,” said OCC chief Thomas Curry.
Last month, Curry said that his office was evaluating the “unique risks” fintech companies might pose to the banking system under a less favorable credit cycle. The OCC also plans to release a paper in the next two months raising issues with a limited-purpose charter for nonbanks similar to credit card banks and non-deposit taking entities.
For The CFPB, A Diet of ‘Meat and Potatoes’
October 24, 2016CFPB Director Richard Cordray gave the closing keynote speech during Money2020’s first night in Las Vegas, and he sounded an assertive, yet amenable tone. “We can help push [the innovators] in the right direction,” he said, but he conceded that the agency can’t actually create the products. “That’s what the people here [at this conference] are doing.”
Since their purpose is to go after companies when they do something wrong, there’s only so much they can do to nurture companies to do things right, but they have tried to do their best to reduce uncertainty, he explained, through the use of aids like no-action letters.
Despite this, some fintech companies have already been on the receiving end of an enforcement action, and Cordray explained the reason behind that is very simple. “Our enforcement actions to date have dealt with meat and potatoes issues,” he said, adding that it’s typically centered around deceptive practices, where a company promises something and then doesn’t deliver it.
And being innovative first and patching the holes in the customer experience second, is not the type of formula that Cordray’s CFPB is very accepting of. Be consumer-focused and compliant with all laws from the very beginning, he advised.
Cordray didn’t mention small business lending at all, but Ori Lev, the CFPB’s former deputy enforcement director for litigation, said on an earlier panel that “they’re going to nibble on the edges of it.” Lev couldn’t speak on the agency’s behalf however, since he now works in the private sector as a partner at law firm Mayer Brown.
Still, some folks in commercial finance have told deBanked that they’re afraid a few nibbles could turn into a bite. That’s because even if Cordray is a meat and potatoes kind of guy for now, his unchecked authority is so extensive, that a federal court recently declared it unconstitutional. The CFPB plans to challenge that ruling however, which currently only affects the D.C. Circuit.
With Cybersecurity Rule Looming, It’s About To Get Way More Expensive To Be A Traditional Lender In New York State
October 18, 2016
Coming soon to New York, any company required to operate under a license, registration, charter, certificate, permit, accreditation or similar authorization under the banking law, the insurance law or the financial services law, will need to implement a cybersecurity program.
“Senior management must take this issue seriously and be responsible for the organization’s cybersecurity program and file an annual certification confirming compliance with these regulations,” the NYDFS proposed rule states. That likely means hiring computer experts to comply. Actually, it definitely does because one of the requirements is to employ cybersecurity personnel sufficient to manage cybersecurity risks and to perform core cybersecurity functions. That includes training, monitoring, penetration testing, auditing, implementing multi-factor authentication, and encrypting non-public data, among other tasks.
Based on the language, MCA companies are likely exempt, as are companies that have fewer than 1,000 customers a year, are generating less than $5 million in revenue a year and have less than $10 million in assets.
In Leasing News, Barton, Klugman & Oetting attorney Tom McCurnin, argued the proposal will be a disaster for small banks with branch offices in New York.
The rule is slated to go into effect on January 1, 2017. And even if the rule doesn’t apply to you, it might be a good time to start bolstering your cybersecurity anyway, if for no other reason than to protect your customers and your company.
SBA’s Office of Advocacy Goes to Bat for Payday Lenders
October 17, 2016
What’s the Small Business Administration’s Office of Advocacy doing advocating for payday lenders? Well they’re small businesses first and foremost, according to a letter submitted to CFPB Director Richard Cordray, and the CFPB’s short-term lending proposal puts them at risk.
Coming in at a cool 1,341 pages, the proposal no doubt exudes costly compliance. And it’s not just lawyers and compliance officers that payday lenders need to worry about, they’re also asked to forfeit some of their major profit centers, a condition that has left many of them outraged. In a roundtable convened by the Office of Advocacy, “some [short-term lenders] stated that they may experience revenue reductions of greater than 70 percent and be forced to exit the market.”
The CFPB has more-or-less acknowledged these steep revenue loss projections and if you read between the lines, having these companies be forced to exit the market seems to be the unspoken consequence they’re probably hoping for.
But at what cost?
“The CFPB’s proposed rule may force legitimate businesses to cease operation,” The Office of Advocacy argues. “Imposing such a regulation will not alleviate a consumer’s financial situation. The consumer will still need to pay his/her bills and other expenses. Imposing these strict regulations may deprive consumers of a means of addressing their financial situation.”
