Cross River Bank Target of FDIC Enforcement Action

Cross River Bank, a top Fintech enabler, is a target of a Federal Deposit Insurance Corporation (FDIC) enforcement action that includes a consent order which has been accepted by the Bank’s board.

The consent order was filed on March 8, 2023, but is just now coming to light.  To quote the Order:

“The FDIC considered the matter and determined, and the Bank neither admits [nor] denies, that it engaged in the unsafe or unsound banking practices related to its compliance with applicable fair lending laws and regulations by failing to establish and maintain internal controls, information systems, and prudent credit underwriting practices…”

The Order demands remediation, requiring CRB to:

  • Increase its supervision of management, including internal controls and credit underwriting referencing specifically the Bank’s “Marketplace Lending Compliance Management System.”
  • Assume responsibility consistent with the Bank’s risk profile, size, considering its total assets and volume of credit transactions
  • and more

Corrective action is demanded, and responses are required within a proscribed time frame.

As CRB has operated for over a decade, the FDIC may be upping the scrutiny of certain financial institutions in the wake of the latest banking crisis.

Controls and Procedures.

Cross River Bank works with big-name Fintechs like Affirm, Upgrade, Upstart, and others. It was not immediately clear if the Order would have any impact on these operations.

An industry insider shared their opinion on the FDIC enforcement action, stating the Consent Order brings all aspects of the bank’s activities into question.

“…from their own compliance affairs such as fair credit lending to their risk management practices such as their credit risk underwriting and risk models all the way to various products CRB has been offering throughout the years. As we know, CRB is one of the foundational banks during the Fintech renaissance period and partners with some of the first and biggest fintech players in existence. CRB has a very short period of time to answer some tough questions from the FDIC, and to do it properly with all of their Fintech partners. It’s tall order by any measure. Every Fintech partner may have to provide their individual practices with respect to Cross River’s offerings to complete the major tasks within the consent order and it will have a large ripple effect across the industry.  One of the most difficult tasks to complete is to show to the FDIC that the bank and their partners are following fair lending laws and regulations.”

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