Today, the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency (collectively, the Agencies) issued an Interagency Statement on the use of alternative data in credit underwriting and the consumer protection implications of such use.

In the Interagency Statement, the Agencies recognize that the use of alternative data may improve the speed and accuracy of credit decisions and may help firms evaluate the creditworthiness of consumers who currently may not obtain credit in the mainstream credit system, enabling them to obtain additional products and/or more favorable pricing/terms based on enhanced assessments of repayment capacity. These innovations reflect the continuing evolution of automated underwriting and credit score modeling, offering the potential to lower the cost of and to increase access to credit. However, while noting these benefits to consumers, the Agencies also note that the use of alternative data must be responsible and should comply with applicable consumer protection laws and other requirements.

As expected following yesterday’s action by the US Office of the Comptroller of the Currency,1 at today’s board meeting2 of the Federal Deposit Insurance Corporation (FDIC), the board proposed a rule to clarify Federal interest rate authority to address marketplace uncertainty regarding the enforceability of the interest rate terms of loan agreements following a bank’s assignment of a loan to a non-bank, including confusion resulting from a recent decision from the US Court of Appeals for the Second Circuit (Madden v. Midland Funding, LLC).3 The FDIC’s proposal would codify legal guidance on which the agency has relied for more than 20 years regarding interest rates that may be charged by State-chartered banks and insured branches of foreign banks.

Continue Reading FDIC proposes clarification of federal interest rate authority in response to Madden Case

The United States Office of the Comptroller of the Currency (OCC) has proposed a rule to clarify that when a national bank or savings association sells, assigns or otherwise transfers a loan, interest permissible prior to the transfer continues to be permissible following the transfer.

Continue Reading OCC proposes clarification of “Valid When Made” in response to Madden Case

On October 31, 2019, in a lease dispute related to credit card processing equipment, a California appellate court held that the parties’ choice of New York forum for dispute resolution was unenforceable due to the existence of a pre-dispute waiver of a non-waivable right guaranteed by the California constitution, statutes, and case law interpreting the same.  With a lot of fintech business conducted in northern California, this decision refusing to uphold New York choice of law and forum since the underlying agreement included a waiver that was impermissible under California law is significant.  The case is Handoush v. Lease Fin. Group, LLC, No. A150863, 2019 WL 5615674 (Cal. Ct. App. Oct. 31, 2019).

Navigating the European Rules and Regulations.

Synthetic securitization has had a rocky ride in Europe.  2004-2005 was the high watermark.  The financial crisis almost killed off the market, before a gradual recovery began. In 2018, there were 49 European synthetic securitization deals, reaching a post-crisis record of EUR 105 billion.

Continue Reading Capital Relief Trades: Structuring Considerations for Synthetic Securitizations (Part three of a three part series providing a U.S. and U.K perspective)

On October 30, 2019, SEC Chairman Jay Clayton announced that the SEC will review its RMBS asset-level disclosure requirements with “an eye toward facilitating SEC-registered offerings.”   The announcement notes the absence of SEC-registered RMBS securitizations in recent years and seeks input from investors, issuers and other market participants with respect to several questions posed in the announcement, including questions about the RMBS market, the asset-level disclosure requirements for RMBS, and the market practice of providing 5-digit zip codes to investors in non-registered issuances.  The announcement follows recent reports that some market participants have approached regulators to seek relief from certain of the disclosure requirements of Regulation AB, which many consider difficult or even impossible to comply with.  Chairman Clayton’s announcement signals that the SEC is open to reconsidering the Regulation AB framework as it relates to RMBS.  Read the full announcement here.

In July, the Federal Deposit Insurance Corporation (the “FDIC”) proposed a change (discussed here and here) to certain provisions of its securitization safe harbor rule (the “Rule”) to eliminate the requirement that the securitization documents for non-grandfathered bank-sponsored securitizations not otherwise subject to Regulation AB (i.e. non-public transactions) require compliance with the disclosure and periodic reporting requirements of Regulation AB.   If adopted in its proposed form, this would significantly ease the compliance burden associated with non-public bank-sponsored ABS issuances, potentially resulting in a greater volume of such transactions.

Continue Reading Industry and advocacy groups respond to proposed changes to FDIC’s securitization safe harbor rule

The European Commission (the “Commission”) has now adopted and published the regulatory technical standards (the “RTS”) in relation to the transparency requirements under the EU Securitisation Regulation (the “Securitisation Regulation”).

The Securitisation Regulation has been applicable since 1 January 2019 to all securitisations (as defined therein) other than securitisations existing prior to that date to the extent that they are grandfathered. Article 7 of the Securitisation Regulation sets out transparency requirements (the “Article 7 Requirements”) for originators, sponsors and securitisation special purpose vehicles (“SSPEs”). In addition, Article 5 of the Securitisation Regulation requires institutional investors, other than the originator, sponsor or original lender, to verify (among other things) that the originator, sponsor or SSPE has, where applicable, made available the information required by Article 7 in accordance with the frequency and modalities set out therein.

Read the full Legal Update here.

On 22 October 2019, Mayer Brown’s supply chain and working capital finance team hosted its annual Supply Chain and Working Capital Finance seminar in London.  Now in its third year, the seminar brought together key members of Mayer Brown’s supply chain and working capital finance team from around the world as well as over 100 outside guests for a day-long programme to review recent trends and developments in the dynamic supply chain and working capital finance market.  Topics covered included an overview on receivables purchase in England, a discussion on new trends/current issues in the supply chain and working capital market in England, the U.S., Asia and other emerging markets, and a business panel to discuss insights to market development in the securitisation, receivables purchase and asset-based lending practice areas.

Slides from the programme are available here.

The London programme is one of four such programmes run by the Mayer Brown supply chain and working capital finance team around the world. Our Hong Kong and Singapore programmes were held on 3 September 2019 and 6 September 2019 respectively and our New York programme was held on 15 October 2019.

On October 15th, Mayer Brown’s supply chain finance team hosted its annual Supply Chain and Working Capital Finance seminar in New York.  Now in its fifth year, the seminar brought together key members of Mayer Brown’s supply chain team from around the world as well as over 250 outside guests for a day-long program to review recent trends and developments in the dynamic supply chain finance market.   Topics covered included risk distribution, dealing with alternative finance providers, best practices for cross-border transactions, off-balance sheet inventory finance and true sale and bankruptcy law.

Slides from the program are available here

The New York program is one of four such programs run by the supply chain finance team around the world. Our London program is being held Tuesday, October 22nd.  Programs in Singapore and Hong Kong were held in early September.