In the second part of this engaging Risk Intel podcast episode with Ian P. Moloney, SVP and Head of Policy & Regulatory Affairs at the American Fintech Council (AFC), the conversation shifts now to the anticipated regulatory landscape of 2024. Let's dive into the key insights and predictions discussed in this conversation and the path forward for Financial Institutions and FinTechs.
Moloney points out that besides the ongoing discussions on third-party relationships and data privacy, exciting developments are expected in the regulatory agenda for Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) reform. Both prudential regulators and FINCEN express their intention to pursue rule-making related to reforming customer due diligence. Here are five major focus areas that Ian points out that we should all be keeping a close eye on this year.
The conversation zooms in on the Customer Information Program (CIP) and the requirements to collect the full Social Security number of an individual during transactions. Moloney highlights inconsistencies where credit cards were exempted, but online lenders were not. The AFC has advocated for a rule-making change or exemption in 2024 to alleviate the burden on online lenders and ensure a more streamlined process of verifying individual identities.
Moloney sheds light on the relatively new and innovative financial product, Earned Wage Access (EWA), which allows consumers to access their earned wages promptly. The AFC is actively involved in advocating for a more unified regulatory approach at the federal level, given the current patchwork regulatory environment at the state level. EWA is poised for significant movement in 2024, addressing concerns and ensuring consistency in regulatory oversight.
Next the conversation delves into the FCRA reform initiated by the Consumer Financial Protection Bureau (CFPB) in 2023. Moloney emphasizes the importance of FinTechs being mindful of potential expansions of FCRA requirements and encourages proactive consideration of these changes in 2024. The evolving nature of data privacy regulations poses a unique set of challenges for both banks and FinTechs.
Looking beyond traditional financial regulations, Moloney touches on the buzzword of 2023 – "Artificial Intelligence (AI)". While recognizing the need for responsible regulation, he emphasizes the complexity of legislating AI comprehensively. Differentiating between generative AI and machine learning algorithms, Moloney advocates for careful consideration of AI legislation to avoid stifling innovation while ensuring responsible use in financial services.
The conversation concludes with a focus on debt settlement practices. Moloney stresses the importance of proper disclosures for consumers engaging with debt settlement companies. The AFC is actively urging the Bureau to pursue additional data collection and potential rulemaking to enhance transparency and protect consumers' credit scores.
As the podcast wraps up, both Ed Vincent and Ian Moloney reflect on the multifaceted landscape of 2024. The need for careful consideration, proactive engagement, and responsible innovation remains at the forefront. The AFC anticipates a dynamic year ahead, marked by evolving regulatory standards and the continuous pursuit of a balance between innovation and consumer protection.
In summary, the regulatory landscape for FinTech in 2024 promises to be quite dynamic, with key areas of focus including: customer due diligence reform, EWA, FCRA reforms, AI legislation, and debt settlement practices. Stakeholders in the FinTech industry who want to be compliant are encouraged to stay informed and engage proactively to navigate the complexities of the evolving regulatory environment. Both banks and FinTechs can work with Strategic Risk Associates or become members of the American Fintech Council (AFC) to be better prepared for 2024 and beyond.
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