Answer ... (a) Mortgage lending?
Both federal and state law impose significant obligations on both banks and non-banks that engage in mortgage lending. Among other things, non-bank mortgage lenders and individuals involved in the mortgage business must be licensed and are subject to ongoing supervision and, in the case of individuals, training and educational requirements. Mortgage lending is also subject to significant disclosure and substantive regulations under federal and state consumer protection statutes, including the Truth in Lending Act. Further, the Fair Housing Act prohibits discrimination or differential treatment in mortgage lending.
Banks engaged in mortgage lending must generally obtain appraisals of the property against which they lend in order to assure the quality and safety of such loans. Further, the Dodd-Frank Act requires financial institutions which sponsor a securitisation of mortgage loans to retain 5% of the risk of such a securitisation.
(b) Consumer credit?
Both US banks and non-bank lenders are subject to licensing, disclosure and other substantive requirements with respect to their consumer lending. While US banks are generally permitted to extend consumer credit in any state, most states require non-bank lenders to obtain a licence to extend consumer credit.
In addition, consumer lenders are subject to the regulations of the Consumer Financial Protection Bureau (CFPB), which implement a number of federal statutes governing consumer credit and credit rating agencies. The CFPB also has the authority to supervise and examine certain financial institutions to ensure compliance with its regulations.
(c) Investment services?
Securities brokers and dealers, and investment advisers, are subject to licensing and regulation by the Securities and Exchange Commission (SEC). Banks may engage in limited securities activities without registering with the SEC, such as the provision of securities custodial services; but are otherwise not exempt from such licensing.
Commodity and derivatives brokers, dealers, investment advisers and large investors are regulated by the Commodity Futures Trading Commission (CFTC). As with securities activities, banks may be subject to CFTC registration if they engage in the foregoing derivatives activities.
As noted above, US banks and bank holding companies (BHCs) are subject to significant limitations on their ability to provide certain types of investment services. Approval to engage in such activities from a US banking agency is generally required in addition to any required SEC or CFTC licensing.
In addition, investment and trading activities of US banks, BHC and foreign banking organisations are subject to the Volcker Rule, which broadly prohibits proprietary trading and investments or sponsorship of certain types of private fund vehicles, subject to a number of exceptions.
(d) Payment services and e-money?
Non-bank companies involved in the payments and e-money sector may be subject to regulation under both federal and state statutes. Most states require a non-bank company that provides payment services to register as a ‘money transmitter’. Those statutes typically also impose a number of requirements on money transmitters, including with respect to consumer protection, custody of customer assets, minimum capital requirements, reporting and recordkeeping.
E-money services may also be subject to regulation as money transmission, depending on exactly how they are structured and what types of instruments are involved. For instance, certain states regulate the transmission and trading of cryptocurrency as money transmission to the same extent as fiat currency, while others limit their statutes to fiat transactions.
In addition, money transmitters – including those involved in the cryptocurrency space – are considered ‘money services businesses’ under the Bank Secrecy Act and as such are required to register with the federal Financial Crimes Enforcement Network (FinCEN). FinCEN regulations require money services businesses to establish an anti-money laundering programme, maintain certain records and report certain types of transactions to FinCEN.
US banks generally are not subject to state money transmitter statutes or registration as a money services business under the Bank Secrecy Act.