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The California Department of Financial Protection and Innovation (DFPI) has issued a Consent Order against Hatch Bank, a state-chartered, FDIC-insured, Banking as a Service (BaaS) sponsor bank, requiring its Board of Directors to strengthen it supervision and direction of bank management, and its monitoring of the bank's AML/CFT program. The order results from a March 2024 Report of Examination by the DFPI and FDIC that identified unsafe or unsound banking practices, reportedly connected to the bank's third-party-fintech business model.

The case is of importance as it may be one of the first times that a state has pursued a state-chartered BaaS bank on its own, instead of jointly with a federal agency involved. In this case, the order was issued only by the California DFPI. To date, no parallel enforcement action has been issued by the FDIC. In addition, the timing for remediation in the order is very short compared to what we have traditionally seen.

The bank is ordered to revise its written AML/CFT risk assessment to accurately reflect the bank's fintech partnerships, customer types, volumes, and geographies within 60 days. Within 90 days, it must also improve its policies for internal controls, transaction alert review and SAR processes, customer due diligence, monitoring model evaluations, and staffing adequacy.

The bank must also make periodic reviews of every vendor or fintech partner that provides BSA functions such as customer due diligence, monitoring, case management, etc.

The OCC has released a list of CRA performance evaluations for 25 national banks and federal savings associations that became public in April. Eleven of the evaluations (44 percent) received ratings of Outstanding. The remaining 14 evaluations were rated Satisfactory. Our congratulations go out to the institutions with Outstanding ratings:

• Associated Bank, NA, Green Bay, WI
• Citibank, NA, Sioux Falls, SD
• First National Bank of Oklahoma, Oklahoma City, OK
• The Granger National Bank, Granger, TX
• The Huntington National Bank, Columbus, OH
• Lake Forest Bank & Trust Company, NA, Lake Forest, IL
• OceanFirst Bank, NA, Red Bank, NJ
• The Old Exchange National Bank of Okawville, Okawville, IL
• Old Plank Trail Community Bank, NA, Mokena, IL
• Shamrock Bank, NA, Coalgate, OK
• Union Federal Savings and Loan Association, Kewanee, IL

The Federal Trade Commission reports it is sending more than $18 million in refunds to consumers harmed by misleading claims made by Publishers Clearing House (PCH). FTC action led to PCH agreeing to pay $18.5 million in refunds and make substantial changes to its ecommerce operations.

The FTC’s complaint charged:

• PCH targeted older and lower-income consumers, deceiving them into thinking either that consumers could not enter into sweepstakes without purchasing a product or that their chances of winning would be increased by purchasing products.
• PCH misled consumers by sending emails with deceptive subject lines that led consumers to believe the email was related to official documents, such as tax forms.
• PCH added deceptive shipping and handling fees and misrepresented that ordering was “risk-free,” even though consumers who wanted refunds had to return products at their own expense.

The FTC is sending checks to 281,724 affected consumers who ordered a product from Publishers Clearing House after receiving and clicking on one of the emails that the FTC alleged were deceptive.

On April 29, Acting Comptroller of the Currency Rodney E. Hood discussed the role of artificial intelligence in financial services in recorded remarks at the National Fair Housing Alliance’s Responsible AI Symposium.

In his remarks, Acting Comptroller Hood highlighted the OCC's work to ensure AI and other technologies are used ethically and responsibly within the banking industry. He also discussed the OCC’s work to promote innovation in the banking system through Project REACh.

Yesterday, the CFPB announced it will not prioritize enforcement or supervision actions with regard to entities currently outside the stay imposed under Texas Bankers Association v. CFPB relating to the Bureau's Small Business Lending Under the Equal Credit Opportunity Act Rule implementing Section 1071 of the Dodd-Frank Act.

The Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemembers and veterans. The CFPB's press release states the Bureau looks forward to resolving the status of this regulation and ensuring fair, consistent treatment for all entities impacted by it.

The ABA Banking Journal has reported that the ABA, Texas Bankers Association and other plaintiffs have announced they have reached an agreement with the Consumer Financial Protection Bureau to end a lawsuit over changes to the bureau’s UDAAP exam manual.

The plaintiffs sued the CFPB in 2022, arguing that under the previous administration, the Bureau had unlawfully expanded the statutory definition of “unfairness” to encompass discrimination. A federal judge in Texas granted summary judgment to the plaintiffs the following year. The CFPB appealed the ruling (although it reversed the changes to the definition in the exam manual).

Under the terms of the joint stipulation announced yesterday, the CFPB will dismiss its appeal.

The National Credit Union Administration yesterday reported it has liquidated Unilever Federal Credit Union of Englewood Cliffs, New Jersey. The NCUA made the decision to liquidate Unilever Federal Credit Union and discontinue operations after determining the credit union was insolvent and had no prospect for restoring viable operations.

Unilever Federal Credit Union served 1,448 members and had assets of $46,669,599, according to the credit union’s most recent Call Report.

The NCUA has reported it issued two consent orders and one prohibition notice in April 2025. The three individuals involved are permanently prohibited from participating in the affairs of any federally insured depository institution.

• Anh-Thu Nguyen, a former employee of Goldenwest Federal Credit Union in Ogden, Utah
• Amber Grabill, a former employee of Merho Federal Credit Union in Johnstown, Pennsylvania
• Dorothy Ellis, a former employee of St. John’s Buffalo Federal Credit Union in Buffalo, New York