Monthly Fintech 5 Newsletter - April 2025
1) CFPB Memo Planning Regulatory Rollback Leaks
On April 16, news broke of an internal CFPB memorandum circulated to its staff outlining the rescission of past Bureau guidance on enforcement and supervisory priorities. According to the memorandum, the CFPB will “shift resources away from enforcement and supervision that can be done by the States,” as well as focus its supervisory activity back primarily (though not exclusively) to banks rather than nonbank entities. Moreover, the memorandum suggests the Bureau will reserve its enforcement actions to cases involving “material and measurable” consumer injury rather than the “perception that consumers made ‘wrong’ choices,” and be more judicious in its use of civil money penalties. Taken together, this strongly suggests that the CFPB’s oversight of fintechs will be significantly diminished under the current Administration, as will its heavy reliance on its authority to investigate unfair, deceptive or abusive acts or practices (“UDAAP”).
2) State Enforcement Actions Ramp Up As Federal Actions Slow Down
In the first 100 days of the Trump Administration, federal regulators and enforcement agencies have begun pulling back on enforcement of fair lending, digital payment systems, and other consumer protection laws. For example, the CFPB has dropped suits against Zelle, and the banks tied to Zelle. Further, the CFPB also dropped cases involving allegations of steering in mortgage lending, unfair and deceptive deposit account practices, student loan debt collection, and impermissible Real Estate Settlement Procedures Act (“RESPA”) “kickbacks.” At the end of the last administration, the CFPB issued a report publicly calling on states to strengthen their regulations and enforcement actions to address emerging technologies—a call certain states are likely to respond to. For example, even before the report, New Jersey and Maryland have recently been aggressively pursuing unfair and deceptive practices matters, and New York has introduced extraordinarily broad unfair competition legislation that would provide its attorney general with sweeping powers to investigate companies within its jurisdiction even in the absence of potential consumer injury, similar to California’s Unfair Competition Law and the CFPB’s prior application of its UDAAP authority.
3) Agency Shifts Indicate Receptiveness to Implementing New Technology, Establishing Bank Partnerships, and Engaging with Digital Assets
In a series of announcements across agencies, federal regulators have highlighted their willingness to work with emerging technologies. In March, the FDIC rescinded, among other things, its proposed rule on brokered deposits which would have specifically targeted fintech and bank partnerships, as well as prior guidance to banks which established advance notification and approval requirements for depositories seeking to engage in crypto-related activities. On April 24, the FDIC and Federal Reserve additionally withdrew statements issued in 2023 on cryptocurrency risk to further align the approach across the banking agencies. The OCC also announced the approval of SmartBiz’s acquisition of CenTrust Bank and its conversion of the bank to a fintech business model. Meanwhile, the CFPB disclosed via status report in Financial Technology Association v. CFPB, (Case. No. 1:24-cv-02966), that the Bureau intends to revoke the interpretative rule treating buy now, pay later products the same as credit cards, and announced it would not prioritize enforcement or supervision actions related to Payment Withdrawal and Payment Disclosure provisions of the Payday, Vehicle Title, and Certain High-Cost Installment Loans Regulation (“Payday Lending Rule”) which would have affected certain EWA providers. Notably, the Bureau also published a policy statement in the Federal Register announcing that it is once again accepting applications for No-Action Letters. This portends a more favorable environment for introducing new products and forming bank partnerships at the federal level, tempered by opposing trends at the state level indicating increased efforts to regulate new technologies and oversee fintechs entering bank partnerships, particularly those involving credit or credit-like products and digital assets.
4) CFPB Payments Rule on Track for Revocation
On April 9, the House of Representatives voted to approve the repeal of the CFPB’s “larger participants” rule (“Payments Rule”) concerning digital payment applications. This follows a vote on March 5, where the Senate voted to nullify the Payments Rule pursuant to the Congressional Review Act. The Payments Rule grants the CFPB supervisory authority over certain consumer payments companies and applies to digital wallet and payment providers that handle more than 50 million transactions per year. Now the bill will go to the President’s desk, where he expected to sign off.
5) NYDFS Fines Block $40 Million Over BSA/AML Violations
On April 10, the New York Department of Financial Services (“NYDFS”) announced a $40 million penalty against Block, Inc. for failures in its Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) compliance program. Additionally, Block will be required to hire an independent investigator to evaluate its compliance with all NYDFS regulations. In particular, this penalty relates to Block’s operation of Cash App. The penalty follows an investigation by NYDFS which revealed inadequate consumer due diligence, failure to implement sufficient risk-based controls, and failure to effectively and timely monitor transactions. The NYDFS highlighted how “Block’s rapid growth, coupled with inadequate BSA/AML controls, created an environment vulnerable to criminal exploitation.”
This article is for general information purposes and is not intended to be and should not be taken as legal advice.
Download a PDF copy of our monthly Fintech 5 Newsletter here.
Questions?
If you’d like to discuss any of these issues or have any questions, please reach out to Partner and head of the Fintech group, Chris Napier.
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