Dive Brief:

• Fintech-friendly Cross River Bank engaged in “unsafe and unsound” practices related to fair lending laws and regulations, the Federal Deposit Insurance Corp. alleged in a consent order made public last week.
• The Fort Lee, New Jersey-based lender failed to “establish and maintain internal controls, information systems, and prudent credit underwriting practices” in 2021, the regulator said in an order dated March 8. 
• Cross River, which neither admitted nor denied the charges, is not allowed to enter into any new partnerships with third parties or offer new credit products without the FDIC’s approval, according to the consent order.

Dive Insight:

As part of the order, Cross River agreed to bolster its oversight and monitoring of internal controls, information systems, credit underwriting practices and internal audit systems related to consumer protection laws.

The allegations in the FDIC’s consent order stem from practices the regulator said it identified in a May 3, 2021, consumer compliance report of examination. 

The FDIC ordered the bank to submit to its New York office a list of its credit products, as well as the credit products offered by the third parties it works with.

The regulator also ordered the bank to submit a fair lending resources study, conducted by an independent third party. 

In a statement to Banking Dive, a bank spokesperson said the order places no limitations on Cross River’s existing fintech partnerships or the credit products it currently offers in partnership with them. 

“We don’t expect that the order will have any meaningful impact on our growth trajectory,” the spokesperson said.

Many of the enhancements required under the order have been completed or will be completed in the coming months, the spokesperson added.

The $9 billion-asset bank is a banking-as-a-service powerhouse, providing the technology infrastructure for a deep portfolio of payments, fintech and crypto firms.

In a statement Thursday, a day before the FDIC’s consent order was made public, Cross River CEO Gilles Gade noted how regulators are monitoring firms that serve fintechs amid the recent volatility in the banking sector.

“Regulatory scrutiny on banks in general is increasing and the events with [Silicon Valley Bank] will only expand those efforts with a specific focus on banks that support fintech,” he said. “Cross River is the largest of these banking institutions and as such, we have regulatory examiners reviewing some elements of our business on a continuous basis. We view our compliance capability as a strategic advantage and are proud to lead our industry in maintaining the highest levels of compliance, transparency, and responsibility.”