The Federal Deposit Insurance Corp. (FDIC) has issued a consent order against First Northwest Bancorp’s subsidiary, First Fed Bank. The consent order stems from the bank’s fintech partnership, which was created through a joint venture with Quin Ventures. The FDIC alleges that the bank engaged in unsafe and unsound banking practices, as well as deceptive and unfair acts and practices.
This enforcement action is part of a larger trend of increased scrutiny on banks that work closely with fintech firms. Regulators are taking a closer look at these partnerships to ensure that banks are operating in a safe and compliant manner.
First Fed Bank formed a joint venture with POM Peace of Mind, Inc. in 2021 to establish Quin Ventures. This fintech firm focuses on financial wellness and lifestyle protection for consumers across the country. Under a marketing and banking services agreement, Quin promoted its digital financial wellness platform, and First Fed Bank provided banking services to the customers who utilized the platform.
The FDIC alleges that First Fed Bank violated Section 5 of the Federal Trade Commission Act in several ways. The bank made implied claims that certain credit products were unemployment insurance, approved consumers who did not qualify for certain features, and misrepresented the fees and benefits associated with these products.
Without admitting or denying the FDIC’s allegations, First Fed Bank has consented to the order. As part of the order, the bank must correct all violations and ensure that its board fully participates in the oversight of its compliance management system. The bank is also required to submit a list of all its bank products and third-party offerings for review by the FDIC regional director.
Furthermore, First Fed Bank is prohibited from entering into any binding commitment or agreement with a new third party without first obtaining written non-objection from the regional director. The bank must also implement enhanced policies for third-party oversight, including reviewing and approving all third-party marketing materials and establishing processes for managing regulatory agency inquiries, customer complaints, and legal actions. The bank must also review its third-party service providers’ policies and practices for compliance with consumer protection laws.
In anticipation of the consent order, First Fed Bank has proactively provided remediation to affected customers, terminated the Quin partnership in 2022, and strengthened its internal controls to prevent future issues. The bank remains committed to compliance and has invested resources to resolve the matter.
This consent order follows similar actions taken against other banks that have partnerships with fintech companies. Regulators are increasingly demanding stronger oversight of these partnerships to protect consumers and ensure banking operations are conducted soundly.
In conclusion, First Fed Bank has been issued a consent order by the FDIC over its fintech partnership with Quin Ventures. The order requires the bank to correct all violations, enhance its oversight of third-party relationships, and strengthen its compliance management system. The bank has taken proactive steps to address the issues and remains committed to serving its customers with integrity and excellence.
Frequently Asked Questions:
1. What is the consent order issued by the FDIC against First Fed Bank?
The consent order is a regulatory action taken by the FDIC against First Fed Bank due to alleged unsafe and unsound banking practices and deceptive and unfair acts and practices in connection with its fintech partnership with Quin Ventures.
2. What violations did the FDIC allege against First Fed Bank?
The FDIC alleges that First Fed Bank violated Section 5 of the Federal Trade Commission Act by making implied claims about certain credit products, approving unqualified consumers for certain features, and misrepresenting the fees and benefits associated with these products.
3. What actions are required of First Fed Bank under the consent order?
First Fed Bank must correct all violations outlined in the order and ensure that its board fully participates in the oversight of its compliance management system. The bank is also required to submit a list of all its bank products and third-party offerings for review by the FDIC.
4. How has First Fed Bank responded to the consent order?
First Fed Bank has proactively provided remediation to affected customers, terminated its partnership with Quin Ventures, and strengthened its internal controls to prevent future issues. The bank remains committed to compliance and has cooperated fully with the FDIC.
5. Why are regulators increasing scrutiny of fintech partnerships with banks?
Regulators are scrutinizing fintech partnerships with banks to ensure that consumer protection laws are upheld and to verify that banks are operating soundly. These partnerships often involve new and innovative financial products and services that require careful oversight to prevent potential risks to consumers.
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