In this Issue. The Federal Deposit Insurance Corporation (FDIC) proposed guidelines for corporate governance and risk management; the Consumer Financial Protection Bureau (CFPB) issued a report, guidance, and supervisory highlights focused on junk fees; the CFPB and the Justice Department issued a joint statement affirming that creditors may not use immigration status to illegally discriminate against credit applicants; the Financial Industry Regulatory Authority (FINRA) issued a Special Purpose Acquisition Company (SPAC) sweep exam update; and the Board of Governors of the Federal Reserve System (Federal Reserve) finalized a rule establishing capital requirements for insurers. These and other developments are discussed in more detail below.

Financial Services Weekly Roundup

Our weekly newsletter highlights important legal, regulatory, and business developments related to consumer financial services and banking.

Regulatory Developments

FDIC Proposes Guidelines for Corporate Governance and Risk Management

On October 3, the Board of Directors of the FDIC approved a Notice of Proposed Rulemaking (NPR) for proposed guidelines (Guidelines) establishing standards for corporate governance and risk management for covered institutions with total consolidated assets of $10 billion or more. The Guidelines were approved by notational vote, with three directors (Chairman Gruenberg and Directors Chopra and Hsu) voting in favor of the Guidelines, and two directors (Vice Chairman Hill and Director McKernan) voting against the Guidelines and expressing concerns about the enforceable nature of the Guidelines and the possibility that the Guidelines would, among other things, conflate the roles of the board of directors and senior management.

The NPR explains that the Guidelines are intended to strengthen the corporate governance and risk management practices of insured state nonmember banks, state-licensed insured branches of foreign banks, and insured state savings associations with total consolidated assets of $10 billion or more. The Guidelines describe the general obligations of the board of directors, establishing standards intended to encourage active board engagement and oversight to confirm that the bank operates in a safe and sound manner, emphasizing the importance of adopting a code of ethics, outlining expectations for board committee structures and risk management programs (including the implementation of a three-line-of-defense model, an independent risk management function led by a Chief Risk Officer, and an internal audit unit led by a Chief Risk Officer), and articulating expectations for individual board members and the institution's processes for identifying and reporting breaches of its own policies and procedures. The Guidelines would be enforceable under Section 39 of the Federal Deposit Insurance Act, as amended, which authorizes the FDIC to take action if the institution fails to submit and implement, at the FDIC's request, a plan to comply with the Guidelines.

"The proposed guidelines would clarify the FDIC's expectation that corporate governance and risk management frameworks need to evolve along with growth, complexity and changing business models and risk profiles of larger IDIs. The proposed guidelines describe the general obligations of a board of directors to ensure good corporate governance, including with respect to board composition, duties, and committee structure."
- Martin Gruenberg, Chairman, FDIC

"In my view, a takeaway from the turmoil earlier this year is that bank supervisors should focus more on core risks to safety and soundness, and relatively less on process-related governance."
- Travis Hill, Vice Chairman, FDIC

CFPB Issues Report, Guidance, and Supervisory Highlights Focused on Junk Fees

On October 11, the CFPB issued a data spotlight, an advisory opinion and supervisory highlights, and released prepared remarks from CFPB Director Rohit Chopra focused on reigning in junk fees charged to consumers.

The data spotlight touted the elimination of the vast majority of NSF fees, savings consumers nearly $2 billion annually, and framing financial institutions that still charge NSF fees as "behind the trend."

The advisory opinion offered the CFPB's first guidance regarding section 1034(c) of the Consumer Financial Protection Act, which generally requires large banks and credit unions to comply in a timely manner with consumer requests for information concerning their accounts, including supporting documentation. The CFPB clarified that such consumer requests encompass a wide range of information with limited exceptions, and banks and credit unions are prohibited from imposing conditions or requirements that unreasonably impede a consumer's right to request and receive that information, such as excessively long wait times or, in many cases, fees. The CFPB may seek monetary relief for potential violations of Section 1034(c) that occur after February 1, 2024, giving financial institutions time to process this new guidance.

The CFPB's Fall 2023 Supervisory Highlights identified junk fees discovered during examinations between February and August 2023 in the areas of bank account deposits (e.g., fees for paper bank statements never printed or mailed), auto loan servicing (e.g., fees charged for add-on products that no longer offered any value due to loan pay-off or vehicle repossession), and remittances (e.g., fees charged when the money consumers sent failed to arrive on time).

Finally, CFPB Director Rohit Chopra, in remarks released at the same time, promised "more to come" later this month, when the CFPB will propose new rules intended to make it easier to switch between financial institutions, find more attractive rates, and avoid junk fees.

CFPB and Justice Department Affirm that Creditors May Not Use Immigration Status to Illegally Discriminate Against Credit Applicants

On October 12, the CFPB and Justice Department issued a joint statement affirming that the Equal Credit Opportunity Act (ECOA) protects all credit applicants from discrimination on the basis of their national origin, race, and other protected characteristics, regardless of an applicant's immigration status. The agencies also affirmed that while ECOA permits a creditor to consider an applicant's immigration status when necessary to ascertain the creditor's rights regarding repayment, unnecessary or overbroad reliance on immigration status may violate ECOA as well as other laws.

FINRA: SPAC Sweep Update

In October 2021, FINRA launched a sweep exam to review firms' offerings of and services provided to SPACs and their affiliates. In October 2023, FINRA presented a series of questions and topics, as described below, to remind firms' of the applicable rules and to offer ideas and questions firms can use to enhance their supervisory programs. The questions and topics for consideration focus on a firm's duties, including (i) conducting reasonable investigations of the issuers and the securities they recommend, including SPACs, (ii) assessing compliance with underwriting activities, (iii) assessing how firms identify, address and disclose potential or actual conflicts of interest when underwriting or recommending transactions in SPACs, and (iv) assessing firms' supervisory systems, processes, procedures and controls for underwriting and recommending transactions in SPACs. A detailed list of questions and topics can be found here.

Federal Reserve Finalizes A Rule Establishing Capital Requirements for Insurers

On October 6, the Federal Reserve finalized a rule (the Final Rule), substantially similar to the proposal issued in September 2019, that establishes capital requirements for insurers supervised by the Federal Reserve (SIOs).

The Final Rule establishes the Building Block Approach (BBA) that builds on existing state-based insurance requirements, accounts for risks that are specific to the business of insurance, and is different from the calculations used for bank capital requirements. Under the BBA, an SIO is required to aggregate its top-tier company's capital requirements with its subsidiaries' requirements to determine its enterprise-wide requirement. The Federal Reserve noted that while the Final Rule's requirements would be higher than current state capital requirements, all SIOs currently hold sufficient capital to comply with the Final Rule. The Final Rule takes effect as of January 1, 2024.

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SEC's ATS Reproposal Doubles Down on DeFi and Digital Asset Regulation

In April 2023, the SEC re-proposed amendments to Exchange Act Rule 3b-16 to expand the definition of what it means to be an exchange. When the SEC initially proposed these amendments in January 2022, there were zero direct references to crypto, blockchain, distributed ledger technology, or decentralized finance protocols (DeFi). However, the open-ended nature of the proposed new rule text attracted considerable attention and concern over potentially capturing digital asset exchanges and DeFi protocols within the purview of Regulation ATS. With a heavy focus on digital assets and DeFi in the SEC's re-proposal and with a split 3-2 vote, the re-proposal confirms these concerns. To read the full summary, click here.

Further Light on Generative AI and UK Financial Services Regulation

In a previous alert, the Goodwin team noted a speech made by Nikhil Rathi, CEO of the UK Financial Conduct Authority (FCA), which built on the points made in a joint paper published by the Bank of England (BoE) and FCA on artificial intelligence (AI). Like the Rathi speech and BoE/FCA AI paper, the October 2023 response by the International Regulatory Strategy Group (IRSG)1 to the March 2023 AI white paper published by the Department for Science, Innovation and Technology and the Office for Artificial Intelligence (the DSITOAI paper) shines a further light on emerging themes for regulating the use of generative AI in financial services.

The October 5 speech (the Rusu speech) by Jessica Rusu, the Chief Data, Information, and Intelligence Officer at the FCA also highlights emerging themes. As an aside, the Rusu speech also confirmed that in late October 2023, the FCA will publish a feedback statement on the joint discussion paper that it issued with the Prudential Regulation Authority (PRA) in 2022 (joint DP). To continue reading this client alert on generative AI, click here.

Upcoming Event: Join Goodwin and J.P. Morgan for Lunch During Money 20/20

On October 24, Goodwin's Fintech group and co-host J.P. Morgan will be hosting a luncheon reception at TAO Asian Bistro during the Money 20/20 conference. Please reach out to for more information or to register.

Upcoming Event: Perspectives From Both Sides of the Pond: Regulatory Impacts Affecting the Digital Currency & Blockchain Industry

On November 9, Goodwin's global Digital Currency and Blockchain team will be hosting a client event in the London office that will feature a panel discussion about the recent wave of US and UK regulatory developments. Please reach out to for more information or to register.

Upcoming Event: Discuss the Latest Fintech Developments at Goodwin's Fintech Forum in San Francisco

On November 14, join the conversation about the latest developments in fintech! Goodwin invites you to join our Fintech Forum in San Francisco, where fintech companies, financial institutions, and investors will converge to delve into the latest trends shaping the industry.

Please reach out to for more information or to register.

On-Demand Webinar: CFPB v. Consumer Financial Services Association of America: Post-Argument Debrief on the Constitutionality of the CFPB

On October 3, the Supreme Court heard another challenge to the constitutionality of the CFPB, this time focusing on the agency's funding mechanism and whether it violates the Constitution's Appropriations Clause. Members of Goodwin's Supreme Court and Appellate and Consumer Financial Services practices attended in person and shared reactions from the argument during a webinar on October 4. View the webinar recording here.

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2022 Consumer Financial Services Year in Review

This in-depth report summarizes major regulatory, litigation, and enforcement activity that impacted the consumer financial industry in 2022, and identifies the key trends for 2023.

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