#AI – Federal Financial Analytics

16 02, 2023

DAILY021623

Eliza Allen2023-02-16T16:46:08-05:00February 16th, 2023|2- Daily Briefing|

House GOP Slams Beneficial-Ownership Database

Reiterating longstanding concerns, HFSC Chairman McHenry (R-NC) and National Security, Illicit Finance, and International Financial Institutions Subcommittee Chairman Luetkemeyer (R-MO) submitted a comment letter today strongly opposing FinCEN’s latest beneficial ownership NPR.

House GOP Decries SEC Crypto-Custody Construct

Reflecting GOP concerns about the SEC’s new custody proposal as well as broad GOP objections to much of what Chairman Gensler does, HFSC Republicans today tweeted that the proposal will not ensure sufficient investor safeguards in part because restrictions on bank custody services remain.

Biden Order Reasserts Racial-Equity Agenda

Reiterating much of his last racial-equity executive order, President Biden today issued an order directing federal agencies to establish equity teams and comprehensive strategies to implement the order’s new equity initiatives.

FSB Pledges Further Work on DeFi Financial-Stability Risks

The FSB today released a report finding that DeFi’s financial stability risks are limited but may grow should linkages increase to traditional finance.

CFPB: Unfair Credit-Card Competition Evident Via Data Suppression

Following strongly-worded letters to six credit card lenders last May, the CFPB today concluded that these companies have suppressed payment data for competitive purposes.

FHFA Floats Single-Family ESG Bonds

Building on its equitable-finance initiative, FHFA today released a request for input on the benefits and risks of Fannie and Freddie single family social bonds.

Daily021623.pdf…

6 10, 2022

DAILY100622

Eliza Allen2022-10-06T17:22:24-04:00October 6th, 2022|2- Daily Briefing|

OSTP Establishes AI User Rights, Privacy Protections

The White House Office of Science and Technology Policy (OSTP) has released a little-noticed AI “Bill of Rights” that establishes AI user rights and data privacy principles. Although nonbinding, this framework now sets policy that individual agencies are likely to follow even if they are nominally independent, as is the case with the FRB, OCC, and FDIC. The CFPB is no longer independent and is in any case already committed to like-kind principles; the banking agencies so far have only issued an RFI (see FSM Report AI).

OCC Tightens Fintech, Payment, Crypto Supervisory Screws

The OCC today released its Bank Supervision Operating Plan for FY2023, highlighting the Office’s supervisory issues based in part on policy considerations. The agency is prioritizing cybersecurity; third-party service providers with a particular focus on fintechs; consumer-protection and AML compliance; new product risk, such as payment systems technology and digital assets; and climate risks.

Daily100622.pdf…

15 09, 2022

DAILY091522

Eliza Allen2022-10-13T11:49:04-04:00September 15th, 2022|2- Daily Briefing|

Financial Transactions to Get More Stringent CFIUS Scrutiny

The President today issued an executive order (EO) redefining key criteria used by the Committee on Foreign Investment in the U.S. (CFIUS).

BNPL Faces DOA Consumer Standards

In conjunction with issuing a lengthy report, CFPB Director Chopra today announced that he has directed staff to work on new interpretive rules or guidance for the BNPL sector.

Basel Battles On

Acting as anticipated following instructions from on-high, the Basel Committee today “exchanged views” on pending crypto regulation (see FSM Report CRYPTO29) – terminology suggesting the committee has yet to reach agreement on this controversial consultation despite a request by central bankers and supervisory heads to finalize standards by year end.

Fed Joins Agencies with CRE Workout Policy

After a delay doubtless reflecting the need to run policies by Michael Barr, the FRB today proposed the same CRE-workout policies released for comment in early August by the OCC, FDIC, and NCUA.

Waters Tries Late-Game CRA Tackle

Chairwoman Waters (D-CA) today announced that she has introduced legislation to update the CRA, making the standards tougher for banks but – as far as known so far – failing to extend the law’s reach to nonbanks as urged by CFPB Director Chopra and Sen. Warren (D-CA), among others.

Daily091522.pdf…

9 09, 2022

DAILY090922

Eliza Allen2022-10-24T12:01:09-04:00September 9th, 2022|2- Daily Briefing|

White House Reaffirms Anti-Algo Stand

The White House late yesterday announced core bigtech policy principles. These are extremely general and do not go as far in areas such as antitrust that progressives sought.

U.S. Announces Start of Work on Basel “End Game”

Ahead of what might otherwise have been a fractious Basel Committee meeting, the Fed, OCC, and FDIC today reaffirmed the U.S. commitment to finalize what FRB Vice Chair Barr Wednesday called the Basel III “end-game.”

Basel Chair Announces Preliminary AI Priorities

Pablo Hernández de Cos, Chair of the Basel Committee, announced today the work that regulators plan on AI and algorithmic decision-making.

OFR Details Climate Data-Sharing Efforts

Acting OFR Director James Martin today addressed the need for integrated climate-related financial data and challenges to forecasting and modeling climate risk.

Liang Stresses Climate-Resiliency

Treasury Under Secretary Liang today reiterated an array of agency and Administration climate-risk priorities, emphasizing ongoing Treasury and FSOC climate resiliency efforts and underscoring Treasury’s commitment to a net-zero economy.

Treasury To Issue Price-Cap Sanction Guidance

Deputy Treasury Secretary Wally Adeyemo today made it clear that enforcement of the anti-Russia oil-price caps will depend not only on restricting shipping insurance, but also doing so for financial and payment services.

Daily090922.pdf…

17 08, 2022

DAILY081722

Eliza Allen2023-01-04T11:35:25-05:00August 17th, 2022|2- Daily Briefing|

Bowman Cautions on Payment-System Access, CBDC

In remarks today, FRB Gov. Bowman pointed to the Fed’s final payment-system access guidelines, again urging nonbanks not to have “false expectations” about access while an implementation process advances. She also noted a longstanding inter-agency proposal addressing partnership risks (see FSM Report VENDOR9) and said she believes final action is needed but provided no insight into when this might in fact occur. Noting also yesterday’s Fed supervisory letter on cryptoassets, Gov. Bowman indicated that additional supervisory guidance on stablecoins, custody, and other outstanding digital-asset issues is also being developed.

CFPB Digital-Market Standards Start Now

Today’s Federal Register includes the CFPB’s interpretive rule subjecting digital companies using behavioral or similar data to market consumer-finance products to federal consumer law (see FSM Report FINTECH30). The rule is effective immediately. As noted, the rule curtails the extent to which digital advertising and marketing strategies are exempt from CFPB regulation and state or federal enforcement actions.

Daily081722.pdf…

10 08, 2022

DAILY081022

Eliza Allen2023-01-04T12:52:02-05:00August 10th, 2022|2- Daily Briefing|

Penalizes Fintech for Taking Consumer Funds Instead of Encouraging Savings

Striking at the heart of the purported financial-inclusion benefits of fintech, the CFPB today took action against Hello Digit under both its UDAAP powers (see FSM Report CONSUMER39) and its more recent stand on AI (see FSM Report FAIRLEND11).

Sen Dems Demand More re Rental Housing, Short-Term Loans in CRA Standards

Yesterday’s HFSC CRA comment letter has been followed by one from Chairman Brown (D-OH) and eighteen Democrats.

Senate Banking GOP Ramps Up Fed Demands

Following Sen. Toomey’s (R-PA) diatribe last week, Senate Banking Republicans have followed through with direct demands for greater Fed transparency and recognition of the central bank’s duties to the Congress.

Waters Demands Bureau Halt Equifax Scoring Until Erroneous-Data Problems Revealed, Remediated

HFSC Chairwoman Waters today sent a letter to the CFPB calling on the Bureau to use all of its powers to ensure remediation for consumers harmed by Equifax’s alleged credit-reporting error, as well as institute greater protections for consumers in the “broken” credit-reporting system.

CFPB Sweeps Up Bigtech in Scope of Consumer-Protection Standards

Building on its inquiry into bigtech and a controversial interpretive rule expanding its power to nonbanks (see FSM Report CONSUMER41), the CFPB today issued an expansive interpretive rule subjecting digital companies using behavioral or similar data to market consumer-finance products to the full thrust of federal consumer law.

Progresses Press Hsu on Crypto Authorizations

Sens. Warren (D-MA), Durbin (D-IL), Whitehouse (D-RI), and Sanders (D-VT) …

1 06, 2022

FedFin: AI Adverse-Action Requirements

Arezou Rafikian2023-02-21T12:52:57-05:00June 1st, 2022|The Vault|

Continuing its use of novel rulings that preclude public notice and comment, the CFPB has issued a landmark ruling on artificial intelligence (AI) and other forms of algorithmic underwriting stipulating lender responsibility for sending out the adverse action notices required under the Equal Credit Opportunity Act (ECOA). The CFPB recently added a broader range of credit decisions on outstanding loans (e.g., granting or reducing lines), to these notice requirements, making the reach of this new policy still broader. Lenders are responsible for adherence to these requirements even if their underwriting models are provided by third parties or credit decisions are made by third parties such as fintechs or auto dealers. However, when these nonbanks are the lender, they are then subject to CFPB enforcement even if the Bureau does not have formal supervisory power over them under another recent CFPB ruling…

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

1 06, 2022

FedFin: How Adverse Is This?

Arezou Rafikian2023-02-21T12:50:01-05:00June 1st, 2022|The Vault|

As detailed in our new in-depth report, the CFPB has issued another sweeping rule by way of a seemingly innocuous circular not subject to public notice and comment. Under it, lenders that use third-party underwriting are responsible for ensuring that borrowers receive thorough adverse action notices even if the lender has no authority over the AI or other complex models determining credit outcome.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.

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1 06, 2022

GSE-060122

Arezou Rafikian2023-02-21T12:49:48-05:00June 1st, 2022|4- GSE Activity Report|

How Adverse Is This?

As detailed in our new in-depth report, the CFPB has issued another sweeping rule by way of a seemingly innocuous circular not subject to public notice and comment. Under it, lenders that use third-party underwriting are responsible for ensuring that borrowers receive thorough adverse action notices even if the lender has no authority over the AI or other complex models determining credit outcome.

GSE-060122.pdf…

1 06, 2022

FAIRLEND11

Eliza Allen2023-02-21T12:52:48-05:00June 1st, 2022|1- Financial Services Management|

AI Adverse-Action Requirements

Continuing its use of novel rulings that preclude public notice and comment, the CFPB has issued a landmark ruling on artificial intelligence (AI) and other forms of algorithmic underwriting stipulating lender responsibility for sending out the adverse action notices required under the Equal Credit Opportunity Act (ECOA). The CFPB recently added a broader range of credit decisions on outstanding loans (e.g., granting or reducing lines), to these notice requirements, making the reach of this new policy still broader. Lenders are responsible for adherence to these requirements even if their underwriting models are provided by third parties or credit decisions are made by third parties such as fintechs or auto dealers. However, when these nonbanks are the lender, they are then subject to CFPB enforcement even if the Bureau does not have formal supervisory power over them under another recent CFPB ruling. The press release accompanying the circular also includes more sweeping statements about broader fair-lending compliance obligations when using these underwriting systems.

FAIRLEND11.pdf…