The Federal Deposit Insurance Corporation (FDIC) has requested Cross River Bank – known for its services to fintech and crypto firms like Visa and Coinbase – to “self-correct” and appropriately address weaknesses in its lending activities.
On April 28, the FDIC made public a consent order executed with Cross River Bank on March 8, which alleged that the bank engaged in “unsafe” or “unsound” banking practices in regard to its compliance with applicable fair lending laws and regulations in 2021.
Despite accepting the consent order, Cross River has yet to admit nor deny the violations discovered in the 2021 report of examination. It was noted:
“The FDIC considered the matter and determined, and the Bank neither admits or denies, that it engaged in the unsafe or unsound banking practices related to its compliance with applicable fair lending laws and regulations”.
The order states that the bank must immediately take action to increase its supervision over the “system of internal controls, information systems, credit underwriting practises, and internal audit systems related to the consumer protection laws and regulations.”
Cross River is required to promptly “self-correct” any violations of fair lending laws and “appropriately address” the deficiencies and weaknesses identified in its lending activites.
Upon evaluating its current structure, Cross River must create processes to avoid the recurrence of these violations in the future.
Furthermore, the bank is required to submit a fair lending resources study and report by May 7, conducted by an independent third party, outlining the bank’s size and growth plans as well as the current and aniticipated number of credit products, along with their respective volumes.
The report must also detail the number of decisions made on behalf of the bank by a third party related to applications, credit transactions and the promotion of a credit products offered by Cross River Bank.
Just one day before the consent order was made public, Cross River’s CEO, Gilles Gade, released a statement on April 27, without any mention to the FDIC allegations.
Gades emphasized that Cross River upholds the “highest levels of compliance” as he highlighted that regulatory scrutiny is only going to get tougher for banks that support fintech, following the collapse of Silicion Valley Bank.
“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” Gades stated.
“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” he added.
The order was executed with the bank only days before Circle, the stablecoin issuer behind USD Coin (USDC), partnered with Cross River for banking services on March 13.
Circle had sought the new partnership, after the collapse of it’s previous provider, Silicon Valley Bank.