Keeping Up with Compliance: January 2025

Welcome to another issue of LoanPro’s Compliance & Fintech Newsletter, bringing you news from across the industry with a focus on compliance. Expect new editions monthly. Subscribe to the newsletter to make sure you don’t miss an issue.

Compliance actions & changes in the industry

Rulemaking

• Medical bills removed from credit reports: The CFPB issued a final rule ending removing medical bills and debt from credit reports. Aimed at preserving consumer privacy, the rule follows similar moves in the private sector: Since 2022, the three major credit bureaus have weighed medical debt differently from other bills, since delinquency is often the result of miscommunication between insurers and medical providers, rather than a borrowers’ inability to pay. Commentary has been sharp on both sides of the issue, and not always with a perfectly factual record. For more details, see our blog post, How the CFPB’s new medical bills rule will—and won’t—affect consumers.

Enforcement actions

• Deceptive practices: The CFPB is suing Capital One for misleading consumers about its 360 Savings accounts, resulting in over $2 billion in lost interest by failing to notify them about a higher-interest alternative, 360 Performance Savings.
• P2P payment penalty: The CFPB ordered Block to pay $120 million in refunds and a $55 million penalty for failing to secure Cash App, mishandling fraud investigations, and misleading customers, leading to widespread fraud on the platform.
• Deceiving customers, federally insured financial institution: American Express will pay $108.7 million to settle allegations of deceptive marketing, falsifying information, and misrepresenting tax benefits for credit card and wire transfer products.

Research

• Automotive repossession rates exceed pre-pandemic levels: According to the most recent automotive lending data compiled by the CFPB, automotive repossessions increased by 22.5% from December 2019 to December 2022. But with upward trends in delinquency since 2022, more recent data may show even higher repossession rates.
• Interchange caps limit rewards, availability: An independent study examining the effect of interchange caps on debit cards found a strong pattern of unintended (though perhaps not unforeseeable) consequences. Because capping interchange limits the potential profit for debit programs, banks stopped promoting them, both cutting rewards programs and reducing their offerings. The research suggests that similar interchange caps on credit cards could result in over 2.5 million people losing access to credit.

Other items

• Outgoing FDIC chair’s final thoughts: In his last days leading the agency, FDIC Chair Martin Gruenberg expressed concerns about the growing, unregulated non-bank financial sector and warned of potential risks, while reflecting on past financial crises and emphasizing the need for stronger supervision in the face of current economic uncertainties.
• Rumors of a new CFPB director: Rohit Chopra is—as of this writing—still at the CFPB, where a regulatory freeze prevents him from issuing any new rules. Senator Tim Scott (R–S.C.) has hinted at an ‘imminent’ new pick, and joined his voice to the chorus of libertarians who wonder whether the CFPB should simply be abolished and rolled into existing agencies, like the FTC.

Fintech news

• Digital banking: Ramp is expanding into digital banking with its new Ramp Treasury product, allowing businesses to earn interest on cash deposits while maintaining liquidity, in a move to become a one-stop shop for corporate financial needs.
• Bankruptcy: Accounting startup Bench filed for bankruptcy with $65.4 million in liabilities, including massive debts to the National Bank of Canada and its investors, after a sudden shutdown and acquisition by Employer.com.
• Fire relief: Five major banks are providing mortgage relief to those impacted by California’s fires, providing 60-90 day grace periods for payments, fees, and foreclosures so that consumers can focus on their immediate needs while they await insurance payouts.

Insights

With the inauguration earlier this month, we’ve officially entered a second Trump administration. And if Ron Shevlin’s What’s Going on in Banking 2025 is any indicator, leaders in banking and financial services are feeling optimistic. Of the thousands of C-suite executives, presidents, and vice presidents Shevlin surveyed, 83% said they were optimistic about 2025 for the industry. (Only a single respondent said they were “very pessimistic”.)

A point to consider: The excitement, optimism, and anxieties surrounding a presidential transition are as much about the incoming leader as they are the incumbent. The last month has been dominated with stories about what Trump will and won’t do, but the other half of the story is the Biden administration, which officially set the record for most pages of regulation added to the Federal Register.

Regardless of whether you agreed with Biden’s regulatory agenda, you can hopefully sympathize with the businesses who had to sift through thousands of pages of legalese to align their operations with new regulations (often on as short a window as 60 days). Contrast that with the Trump administration’s regulatory freeze, and you can see why compliance officers might be relieved.

And time will tell how the second Trump administration regulates. Less regulation seems likely, but it’s worth remembering Trump’s previous record with the CFPB: Expect a recalibration, not a complete course change.

Compliance feature spotlight

If you’re reading a newsletter called Keeping up with Compliance, you’re probably of the opinion that obeying the law is important. (And even if you don’t think it’s important per se, you’d probably still prefer to avoid fines and other enforcement actions.)

But how do you communicate the value of compliance (and risk of violations) with other members of your team? While it’s easier to calculate the ROI for a tool that drives repayment or increases efficiency, the catastrophic risk of a major compliance breach makes it difficult to accurately weigh.

In a recent blog post, we cover how to calculate return on investment for your loan management software. Compliance failures bring a definite monetary cost, so leaving them out of your ROI calculations can be a recipe for disaster.

Thanks for reading this month's edition of Keeping up with Compliance! Don't forget to subscribe, and keep your eyes peeled for our February issue.