First Northwest Bancorp in Port Angeles, Wash., is the latest banking company to face scrutiny over a fintech relationship.
The $2.2 billion-asset company disclosed in a regulatory filing that its bank entered into a consent order with the Federal Deposit Insurance Corp. that requires it to correct certain violations of consumer protection laws.
The order claimed that First Fed Bank “engaged in unsafe and unsound banking practices” as part of its relationship with Quin Ventures.
The bank and POM Peace of Mind created Quin, a joint venture, in 2021. The fintech was created to focus “on financial wellness and lifestyle protection for consumers nationwide.” First Fed provided banking services to the customers who used the platform.
The FDIC alleged that First Fed violated the Federal Trade Commission Act by “making implied claims that credit products with non-optional debt cancellation features were unemployment insurance.” The agency claimed that, as a result, the bank approved “consumers who did not qualify for the debt cancellation feature” and misrepresented the fees and benefits.
Under terms of the consent order, First Fed must give the FDIC a list of all credit and deposit products offered in conjunction with third parties. It must review, revise, develop and implement “appropriate policies and procedures” tied to onboarding, monitoring and auditing third-party fintech partners.
First Financial did not admit or deny wrongdoing as part of the consent order.
First Financial said in the filing that it self-reported to the FDIC last year, while adding resources to its compliance and control functions. The company said it does not anticipate compliance with the order to have a material effect on earnings or capital.
Several banks have faced intense regulatory scrutiny over their fintech partnerships, particularly with Banking-as-a-Service (BaaS) platforms.
Blue Ridge Bankshares in Charlottesville, Va., and Cross River Bank in Teaneck, N.J., are both operating under regulatory orders that place limits and restrictions on their fintech dealings.