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The FDIC recently entered into a consent order with Cross River
Bank, one of the earliest banks to focus on Banking-as-a-Service
(BaaS). Cross River is widely known as an active bank partner to
both lending and cryptocurrency fintech companies, but the order
primarily relates to its lending relationships. In particular, it
precludes Cross River from onboarding new partners without FDIC
approval and requires the bank to increase its supervision of
management and credit underwriting controls, and to perform various
risk assessments and audits of its lending practices and
relationships.
The order is an important reminder of the emphasis that
regulators place on BaaS banks’ oversight of their fintech
partners. Such oversight must be based on strong contractual
provisions that are properly operationalized. The oversight must be
ongoing and should continue throughout the life of the BaaS
relationships. Regulators also expect such banks to conduct fair
lending risk assessments, develop a fair lending compliance plan,
and ensure that their fintech partners have established appropriate
compliance internal controls.
Originally published by 11 May, 2023
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