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As SoFi Applies For Bank, FFW Opposes Evasion, Interest Rate North of 20%, FinTech

By Matthew R. Lee, New Platform

NEW YORK, June 15 – As the fintech industry in the US tries to move into banking, either through a new charter or, like SoFi, an end-run using the Utah industrial bank loophole, Fair Finance Watch and others are raising issues. Fair Finance has commented to the FDIC, and Inner City Press made requests citing FOIA: "Re: Timely Opposition to the Application by FinTech Company SoFi to Open a Bank, Including Offering a Secured Credit Card at Upward of 20% interest and trying to limited CRA to Utah
To the Addressees at the FDIC:
  On behalf of Inner City Press / Fair Finance Watch, this is a timely comment on the application by fintech company SoFi to open an FDIC-insured industrial bank in Utah, to limited its CRA assessment area to (part of) Utah while project business nationwide, and to claim that a secure credit card with interest rate north of 20% is a CRA program. We request public hearings and denial of the application.
   As you know, the drive by fintech companies to get into banking is a matter of controversy, with the OCC have proposed a new type of charter. This end run would set a bad precedent, of gerrymandered CRA and even predatory lending as CRA.
  The application - with portions apparently withheld that should be released under FOIA and now whatever ex-parte rules the FDIC has - states twice that “the bank will offer a secured credit card utilizing its credit card and deposit infrastructure to the LMI community and the    members with a 'shallow credit' file [with] the following features... a much higher interest rate north of 20% percent.”  This is outrageous.
  For the record, also in support of the public hearing request, from the WSJ: “the entire sector is in trouble. Growth has slowed dramatically because of deeper worries about consumer-loan defaults and shifting preferences among some investors for other kinds of debt. Some of the largest online lenders have cut jobs, with Avant Inc. and Prosper Marketplace Inc. shrinking their number of employees by more than 25%. Confidence also was bruised badly when LendingClub pushed out its chief executive in May because of a scandal involving fabricated loan data. In the second quarter, venture-capital investments into lending startups fell by nearly half from a year earlier.. SoFi itself stumbled when consumers flooded its website after the lender ran an ad during the Super Bowl in February. Applicants who didn’t hear from SoFi for days blasted it in online ratings.”
Ready for prime time and FDIC insurance?
  Again, we request public hearings, and on the current record the denial of SoFi's application." In other news, Sterling Bank, which is applying for approvals to acquire Astoria Bank, is known by its regulators to have filed unreliable Community Reinvestment Act data from at least 2014 through 2016, a document obtained by Inner City Press shows. The story, and outrage, has been picked up by the American Banker newspaper here, by Paul Davis and Allison Prang, crediting Inner City Press - and Sterling Bank had no comment. Instead, Sterling's outside counsel Wachtel Lipton chose to snail-mail its response to the wrong address, and not e-mail it to Fair Finance Watch. Via here, with envelope re-submitted to Fed and OCC. The OCC has now put up a roadblock to releasing the records Inner City Press has requested under the Freedom of Information Act, writing: "The purpose of this letter is to seek additional information pertaining to your recent request for information from the Office of the Comptroller of the Currency. Your request dated May 13, 2017 was received in my office on May 15, 2017. You requested any and all records related to Sterling Bank's application(s) to acquire Astoria and Sterling Bank's CRA data. Upon further review, we determined that we need clarification on the date range for search of Sterling Bank’s CRA data. If I have not received this information by COB June 19th I will assume that you no longer seek this information and consider your request closed." How did it take the OCC a full MONTH to come up with this? This while the Federal Reserve has granted Inner City Press' request for expedited treatment of its FOIA request for all records, promising the responsive documents by June 1. But then the Fed, in a June 1 letter, unilaterally extended its time to June 22. First Fed letter on Scribd, here.

Regulators Said Sterling's CRA Data Unreliable, Sterling Mis-Sends Response, Fed Expedites ICPs FOIA, Here by Matthew Russell Lee on Scribd

Fair Finance Watch has asked both the Fed and OCC to extend their comment periods past this date. Watch this site. Sterling has issued a press release ("covered" without any analysis by Reuters) that "the Federal Reserve inadvertently made public confidential supervisory information.. Because of the legal constraints relating to disclosure of confidential supervisory information, we are working closely with our regulators to craft a more detailed public response." Sterling is working WITH the regulators - the judges in this case - to spin its inaccurate data? After on its last acquisition, challenged by ICP, having to make a CRA compliance plan? Inner City Press has submitted Freedom of Information Act requests (a response here) and Fair Finance Watch has filed additional comments to the Federal Reserve and OCC, demanding public hearings into the unreliable data AND into how the regulators were dealing with (or covering up) the issue, in stealth. We'll have more on this: the US Federal Reserve denied Fair Finance Watch's request to extend the comment period on Sterling's application, in which even the Fed suspects there is incorrect CRA data.

On May 11, the Federal Reserve Bank of New York along with questions about about branch closures and a CRA plan required after Fair Finance Watch's previous challenge to Sterling asked: "In a letter dated December 23, 2016, from the OCC to Sterling Bank regarding the OCC's data integrity review, the OCC stated that Sterling Bank's 2014-2016 CRA data is not reliable and that Sterling Bank lacks an effective process for collecting, verifying and reporting such data. To the extent that any of the CRA data in the notice is incorrect, submit the corrected data. In addition, describe Sterling Bank's efforts to address its CRA data compliance management deficiencies."

So on April 26 in Sterling's analysts' call, did CEO Jack Kopnisky or Senior EVP Luis Massiani disclose the “unreliable” CRA data to, among others, Dave Bishop – FIG Partners, Casey Haire – Jefferies, Alex Twerdahl – Sandler O'Neill,, Collyn Gilbert – KBW, Matthew Breese – Piper Jaffray and Erik Zwick – Stephens Inc? Questions about this deal (here) and the Fed's commitment to public scrutiny are raised by its simultaneous denial of FFW's request for a hearing and to extend the comment period. There is no indication that the "corrected" CRA data would ever be made available to the public, or that this issue would not have been swept under the US bank regulators' carpet, like so many others. We'll have more on this. 

Regulators Say Sterling Bank's CRA Data Unreliable, Astoria Merger Document Shows, Here by Matthew Russell Lee on Scribd

Background: after Astoria Bank's protested proposal to be acquired by New York Community Bank fell apart in late 2016, it found a new, equally controversial suitor: Sterling Bancorp. Now Fair Finance Watch has submitted a first Community Reinvestment Act challenge to the proposed merger, receipt of which the Federal Reserve has now confirmed, here. Inner City Press' summary of FFW's filing: "Dear Chair Yellen, Secretary Misback and others in the FRS: This is a timely first comment opposing and requesting an extension of the FRB's public comment period on the Application by Sterling Bancorp, Montebello, New York (“Sterling”) to merge with Astoria Financial Corporation, Lake Success, New York, and indirectly acquire Astoria Bank (“Astoria”).
This would be a combination of banks with disparate and in places highly irregular Home Mortgage Disclosure Act (“HMDA”) data. The proposal is the desperate result of the failure of Astoria's attempted merger with NYCB. That is no reason to approve this mis-conceived combination. The applicant's Sterling National Bank (“Sterling”) in the New York City MSA in 2015 for African Americans for home purchase loans denied the applications of African Americans 3.58 times more frequently than those of whites - much worse than other lenders. Sterling made only 22 such home purchase loans to African Americans, versus 495 to whites (and only 37 to Latinos) - again, much more disparate than other lenders. This bank should not buy Astoria. Remember: in the Nassau Suffolk MSA in 2013, Sterling made 149 home purchase loans to whites – and only one to an African American. For home improvement loans, Sterling made 30 to whites, none to African Americans. Taken together, this is unacceptable. The comment period should be extended to clarify – or refile – the HMDA data; evidentiary hearings should be held; and on the current record, the application should not be approved.
For the record, the CRA plan required after Fair Finance Watch's previous protest, we contend has not been complied with, and request evidentiary and public hearings on that basis.
Also for the record:  'The NYCB-Astoria Financial Merger is Kaput: Consumer advocates were among the groups that opposed NYCB’s acquisition of Astoria…'"

   In January, disparate lender Investor Bancorp, on which Fair Finance Watch previously got a condition imposed saw its proposal with Bank of Princeton fall apart.

  There's also Capital One - Cabela, on which Inner City Press commented: "In the New York City MSA in 2015, the most recent year for which HMDA data is available, for conventional home purchase loans Capital One denied the applications of whites 23% of the time, while denying African Africans fully 45% of the time, and Latinos even more, 46% of the time. This is unacceptable.

  Meanwhile, Capital One is “closing branches in Laurel, Gaithersburg, Frederick and Merrifield.”

   Capital One came back with snark, as has Simmons National -- but then announced including to NCRC that  it will withdrawn its application. Onward.


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