WEDNESDAY MARCH 10, 2021 VOL. 186 No. 46 AMERICANBANKER.COM Follow us on Twitter @AmerBanker Pandemic has redefined role 5 of bankers: New ICBA chair Protecting privacy “We were already shifting to recruiting more problem solvers than people handling Virginia and California have enacted laws that give consumers transactions,” said Robert Fisher, CEO of more control over their personal data. Both measures: Tioga State Bank in New York and incoming chairman of the Independent Community See story on page 2 Bankers of America. “That pace of change has accelerated.” Page 5 Require companies to give consumers access to their personal information Berkshire Hills reaches 6 truce with activist investor Allow consumers to ask companies to delete their personal HoldCo Asset Management, which gains two information board seats from a standstill agreement, had expressed disappointment that the Boston Allow consumers to correct inaccuracies in their personal data company hired a CEO instead of pursuing a sale. Page 7 Allow consumers to opt out of the processing of their data for advertising or sales purposes PayPal to acquire Curv 7 to further its push into cryptocurrencies Allow consumers to collect copies of data files companies PayPal Holdings Inc. said it will acquire have collected on them the cryptocurrency firm Curv as it seeks to beef up its talent pool for handling digital Require companies to comply with consumer requests within currencies. Page 7 45 days FDIC chair hopes regulators 8 will ‘come together’ on CRA reform: Report dailybriefing Fed will continue supporting The comments by Federal Deposit Insurance 3 PPP loans until June 30 Corp. Chair Jelena McWilliams published in Nonbanks had worried the end of the Politico reinforce optimism that the banking State data privacy laws Paycheck Protection Program Liquidity agencies could settle years of disagreement 1 pose compliance Facility would hurt their ability to lend to about modernizing the Community headaches for banks small businesses. On Monday, the Federal Reinvestment Act. Page 7 New measures in California and Virginia Reserve announced the facility would be give consumers more control over their extended for three months. Page 5 Goldman weighs plan information and may prevent banks from 9 for $29 billion of debt using geolocation services or analyzing Wells Fargo targets set to outlive Libor personal data without obtaining consent first 4 net-zero emissions Goldman Sachs is evaluating what to do with — except when preempted by federal law. after rivals set goals about $29 billion of debt and preferred stock (See chart above.) Page 2 The bank also committed to finance $500 it issued that’s pegged to dollar Libor and billion in sustainable businesses and doesn’t mature until after the discredited SoFi buying small California projects by 2030. Page 5 benchmark expires in mid-2023. Page 8 2 bank for $22.3 million The acquisition of Golden Pacific Bank Disclosure’s great, but will accelerate the online lender’s effort to 10 what consumers really become a full-service bank. Page 4 need is protection In “Democracy Declined,” Duke public policy professor Mallory SoRelle argues that policymakers should be more aggressive in combating unfair lending practices. Page 8 WEDNESDAY MARCH 10, 2021 AMERICANBANKER.COM PAGE 2

Here are answers to key questions and California laws.” CONSUMER BANKING surrounding the new Virginia law and The California law exempts data that updated California law. banks already protect under Gramm- Leach-Bliley. But banks must comply with State data When do the new laws take effect? the California rules for any data that is not Both are effective Jan. 1, 2023. However, covered by the federal law. privacy the California Privacy Rights Act of 2020 Gramm-Leach-Bliley covers all personal has a 12-month look-back period. This data on people who use a bank’s products means that when consumers make a request and services, including their browser history. laws pose for access to their personal information, It does not cover data gathered from people companies are required to provide records who are not customers. So if someone goes compliance covering the year preceding the date of the to a bank’s website and applies for a financial request. education newsletter, the information “Banks are going to have to have their that consumer enters into that form is not headaches for business processes and technical systems in covered by Gramm-Leach-Bliley and could place to manage the data as of January 2022,” be subject to the California law. Marketing banks Reber said. data on prospects who are not yet customers may be subject to California’s rules. Once By Penny Crosman To what extent does each law apply to an individual starts applying for a bank March 08, 2021 banks? product, such as a mortgage or brokerage States are stepping up their efforts to The Virginia law exempts financial account, the information becomes subject protect the privacy of consumer data, and institutions that are subject to the privacy- Gramm-Leach-Bliley. the trend is adding to banks’ compliance protection provisions of the federal Gramm- Banks can take two approaches to this challenges as stewards of vast amounts of Leach-Bliley Act of 1999. But banks could data distinction, Reber said. Some banks personal information. still be on the hook. are going to ignore the Gramm-Leach-Bliley Virginia passed a data privacy law on “If you’re a bank, the Virginia law may exemption in California and follow the March 2, while California strengthened not apply to you directly, but absolutely state’s more stringent rules for all consumer its existing data privacy law on Nov. 3. could apply to some of the vendors and data, she said, because that route is easier These new rules only partially affect banks, third parties that you do business with,” and safer than trying to categorize and label raising plenty of questions and concerns for Whitworth said. “There’s also a debate all data. Others will draw a line between bank employees responsible for handling within the industry about how far the Gramm-Leach-Bliley data and other data consumer data. Vendors and partners may exemption will carry. There is a GLBA entity and apply the California protections only to be subject to the new laws, too. And these exemption, but it remains to be seen how far the latter. new laws are just the beginning: Other states, that exemption will carry. Does it cover all It’s important for financial institutions including Washington, are writing their own activities or just banking activities? These to understand what information is subject data privacy legislation and a national data are some of the questions that a lot of the to the California law and what is not, said privacy law may be coming. industry benchmarking forums are already Boris Segalis, partner in and co-chair of the “The reality for the financial services working on as they wrestle with the Virginia data, privacy and cybersecurity group at industry is that this is going to be somewhat of a national exercise one way or the other within the next few years,” said Ron Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 Whitworth, chief privacy officer at Truist Phone 212-803-8200 AmericanBanker.com Financial in Charlotte, N.C. These state actions are part of a broader Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 trend of increasing consumer awareness of Managing Editor Dean Anason 770.621.9935 data privacy. Reporters/Producers “Customers care about how you’re Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 handling their personal data anyway,” said Washington Bureau Chief Joe Adler 571.403.3832 Jill Reber, general manager of the data Executive Editor, Technology Miriam Cross 571.403.3834 privacy practice at Logic20/20, a business Penny Crosman 212.803.8673 Jim Dobbs 605.310.7780 and technology consulting company BankThink Editor Rachel Witkowski 571.403.3857 based in Seattle. “Your end game is to keep John Heltman 571.403.3847, Allissa Kline 716.243.2679 Community Banking Editor Paul Davis 336.852.9496 your customer loyalty. And so if you’re Hannah Lang 571.403.3855 mishandling their personal data because Contributing Editor Daniel Wolfe 212.803.8397 John Reosti 571.403.3864, Gary Siegel 212.803.1560 you aren’t worried about these data privacy Digital Managing Editor regulations, that’s going to create a new Christopher Wood 212.803.8437 Kevin Wack 626.486.2341 issue for you.”

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MARCH 10, 2021 AMERICANBANKER.COM PAGE 3 the New York law firm Goodwin. “And that have all their data deleted. California’s law also addresses the new line usually is: A consumer visits a website The updated California law requires concept of “dark patterns,” or user interfaces and signs up for a newsletter — that data is companies to tell consumers why they’re that are designed or manipulated with the subject to the California law. Once they start collecting and using their personal data, and effect of impairing user autonomy. submitting their information to apply for a then not use it for a different purpose. “If a bank has a user interface that leads financial product or inquire about a product “There are no secondary uses allowed somebody into purchasing something or service, that’s covered by GLBA. Even without additional notice and then consent,” because they’re doing targeted advertising if a consumer abandons that application, Reber said. This means covered businesses to them, that could be a dark pattern,” Reber that abandoned application is probably still need to have internal processes and systems said. “Any consent that’s obtained through subject to GLBA.” that alert any use of consumer data that was use of a dark pattern interface is not valid.” not anticipated at the time of collection. The California law prevents banks from What are the requirements of the new Companies have to tell consumers how collecting geolocation data on prospective laws? long they’re going to keep their personal customers, or analyzing their data without The two laws are a little different, but both information and then not keep it any first obtaining consent. generally follow some of the same principles longer than that. They cannot collect more “Precise geolocation is in the new of the European Union’s General Data information than they need to meet the category of sensitive personal data that’s Protection Regulation in giving consumers purpose for which they’re gathering the regulated,” Reber said. more rights around their data, such as the data. Banks have to set up opt-out links and right to know how their data is being used, For all consumer data not subject to specific-purpose limitations for anything the right to access that data and the right to Gramm-Leach-Bliley, banks have to make that’s considered sensitive information, have their data deleted. sure that they’re providing privacy notices including financial account login Virginia’s law provides consumers with about how they collect, use and share the information, credit card numbers and the right to access any personal data a information that they provide, Segalis said. precise geolocation. company has gathered about them; to If a bank has non-Gramm-Leach- Banks tend to have complex legacy correct that data or make the company Bliley data on a lot of California residents systems and information architectures that delete it; to obtain a copy of the personal (basically, where the bank has gathered were created for siloed lines of business. data the company has collected about them information from individuals who are not “Having to follow the data trail in an in a readily usable format that the consumer the bank’s customers), and gets many environment that was architected in a siloed can transmit to another company (a process requests under the California law to access fashion without those data subject rights known as data portability); and to opt out or delete their data, this may become hard in mind presents a challenge,” Reber said. of the use of their data for purposes like to handle manually. “When you have siloed organizations, when advertising, sales or profiling. “They have to figure out what volume of one line of business might be an access And businesses must comply with these requests under [the California law] the bank point for that personal data, banks need to requests within 45 days. If they don’t, is likely to receive,” Segalis said. “They have to understand where it’s flowing through the consumers can appeal to the state attorney have a process to respond to these requests. organization and how the organization is general. If they have one a day, maybe they can using it.” Like the California law and the EU handle it manually. But if the bank expects Data that comes in through the website, regulator before it, Virginia’s law limits the to have 100 requests a day, they can’t handle goes to marketing and then is put through an collection of data to that which is “adequate, it manually. They will need to implement algorithm that predicts what bank products relevant and reasonably necessary in technology to allow individuals access to the a person might need would be an example. relation to the purposes for which the data information that the bank keeps about them “The data and system mapping that was is processed.” and delete that information.” done originally didn’t have to worry about Once the data has been collected, the The California law addresses modern those kinds of secondary uses,” Reber said. statute mandates a business “not process digital practices of monitoring and “That’s where I see the biggest thing that [the personal data for purposes that are neither manipulating data. California law] imposes: It’s kind of forcing reasonably necessary to nor compatible “It recognizes a greater need for regulation you to break down the silos.” with the disclosed purposes for which such around technological advances in machine There are data privacy software personal data is processed, as disclosed to learning and [artificial intelligence] and companies that address some aspects of this the consumer, unless the controller obtains the data that can be collected along need, but they have limitations. the consumer’s consent.” Furthermore, the with that leading to potential biases and “Capturing the purpose for gathering and act prohibits companies from processing profiling practices,” Reber said. “So it using the data isn’t something that a software sensitive personal information without gives you the right to say, don’t track me program can accurately pick up,” Reber obtaining consumer consent. across different devices, different websites, said. “You really need folks interviewing Virginia’s law requires companies to have different unrelated businesses.” Thisthe lines of business individuals who are data privacy policies. means companies have to be careful using actually handling the data and not just send Under both laws, consumers can request algorithms that combine multiple data sets out surveys, the way some of the software all data a company has on them and ask to to create customer profiles. companies do.”

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What software companies help auto- Sacramento and surrounding counties,” mate compliance with data privacy M&A Golden Pacific President and CEO Virginia laws? Varela, who will remain at the helm of the OneTrust, Collibra, WireWheel and business, said in the release. Trunomi are a few. SoFi buying SoFi, founded in 2011 with a focus on refinancing student loans, has since How quickly will banks try to conform small expanded into mortgages, personal to the new rules? loans, credit cards, deposit accounts and Ron Raether, partner at Troutman Pepper, investment products, focusing on young, expects states and banks to follow a bell California well-to-do consumers. In January, SoFi curve of adoption of these new rules, the announced plans to go public via a merger way they did with data-breach statutes. bank for $22.3 with a blank-check company that values the “You had the California law, and then you firm at $8.65 billion. had a few early adopters, and then you had SoFi first applied in 2017 to become a a mass of followers, and then you had a few million Utah-based industrial bank, but quickly late adopters,” Raether said. “I think we’re withdrew its application amid a scandal that going to see that experience with the state By Kevin Wack and Brendan Pedersen forced the departure of CEO Mike Cagney. privacy rules.” March 09, 2021 In July 2020, SoFi filed a de novo bank Many U.S. banks are currently trying to Social Finance announced Tuesday that application with the OCC, following a path think through their data governance and it has reached an agreement to buy a small blazed by the neobank Varo Money. After how it needs to change under the new laws, bank in California, a move designed to getting the OCC’s preliminary conditional Whitworth said. hasten the online lender’s quest to obtain a approval three months later, the company “We have to think through, what tools, bank charter. was expected to apply for Federal Reserve technologies, people and processes do we SoFi said that it will pay $22.3 million in membership and to seek deposit insurance have that are dedicated to understanding cash for Golden Pacific Bank and its holding from the Federal Deposit Insurance Corp. our data: what do we have, where is it, can company in a transaction expected to close SoFi said Tuesday that it expects to file we access it? Can we control it?” he said. “If before the end of 2021. The Sacramento- an application soon with the Fed for bank we’re required to deliver data to a client, how based bank has three branches and about holding company status. And together with are we going to do that? Can we identify, is it $150 million of assets. Golden Pacific, SoFi plans to file an updated tagged properly? Under the [California law] Last October, SoFi received preliminary business plan with the OCC. coming in 2023, for instance, certain types conditional approval from the Office Last October, the OCC stated that SoFi of data are considered sensitive. Are they of the Comptroller of the Currency to Bank’s initial paid-in capital was to be no tagged that way? They’ll have to be at some start its own bank. The deal announced less than $550 million. That’s $200 million point.” Tuesday will enable SoFi to switch from a less than what SoFi pledged Tuesday to de novo application to a change of control contribute. What are bankers most worried about application, which is generally seen as a Golden Pacific is an OCC-regulated with regard to privacy laws? faster route to a bank charter than starting national bank that reported a $50,000 loss “One of the biggest concerns is that if from scratch. last year after earning $333,000 in 2019. we see a patchwork of state laws that are CEO Anthony Noto said in a press The bank charter, if approved, figures inconsistent with one another, how do we release that the acquisition will enable SoFi to bring several benefits to SoFi. It should reconcile these things?” Whitworth said. to “accelerate our pursuit to establish a lower the company’s cost of funds, which “How are you going to stand up your controls national bank subsidiary.” are considerably higher than banks’, and it to manage all of this properly? I think you’ll Assuming SoFi obtains the necessary could make it easier for SoFi, over time, to see a lot of the banks will heavily lobby for regulatory approvals, the San Francisco- offer more deposit products. a single standard, whether it’s a federal law based fintech plans to contribute $750 SoFi would also be able to operate under or just clarity such that financial institutions million in capital to SoFi Bank, and to pursue a single set of regulatory standards, rather will understand what parameters they’re a plan to build a nationwide digital banking than the 50-state scheme that applies to operating under. If you have inconsistent operation. Paul Mayer, a former executive at nonbank lenders, which should result in laws, it becomes impossible to comply.” Sallie Mae, Navient and Cross River Bank, is cost savings. expected to serve as the bank’s president. A slew of fintechs have sought to obtain SoFi plans to keep operating Golden bank charters in the last couple of years, Pacific’s community bank business and its either by starting a new depository or branches as a division of SoFi Bank. acquiring one. Firms that have taken the “We will continue our commitment to latter route include the online lender bringing more services and convenience for LendingClub, which in February completed our individual customers, small businesses its acquisition of Radius Bancorp in Boston. and the communities that we serve in

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usage since last summer.” The firm joins Goldman Sachs, Citigroup, PAYCHECK PROTECTION The Fed’s Commercial Paper Funding Bank of America and Morgan Stanley in PROGRAM Facility and Money Market Mutual Fund promising to achieve net-zero emissions in Liquidity Facility used funding from their lending and underwriting activities. Treasury’s exchange stabilization fund, while JPMorgan Chase, which was the biggest Fed will the Primary Dealer Credit Facility and the financier of fossil fuels last year, said in PPPLF did not. October that it’s planning to set emissions continue In November, the Fed had pushed targets for its financing portfolio. back against Treasury’s request to return Still, environmental advocates have congressionally appropriated funds for five argued that many of the finance industry’s supporting separate emergency lending programs, net-zero targets are set too far ahead and including the Main Street Lending Program. don’t mention any plans to stop financing PPP loans The central bank eventually agreed to return fossil fuels. the money, which consequently closed those Wells Fargo said Monday that it will facilities at the end of 2020. disclose how it will measure some financed until June 30 emissions within a year, and will share financed emissions for certain carbon- By Hannah Lang CLIMATE CHANGE intensive portfolios, including oil and gas, by March 08, 2021 the end of next year. The company will also WASHINGTON — The Federal Reserve will set interim targets for those portfolios by that extend by three months the liquidity facility Wells Fargo time. bolstering the Paycheck Protection Program The firm will also set up an Institute while letting other emergency lending targets for Sustainable Finance that will work to programs expire on March 31, the agency “support clients in their climate transitions” announced Monday. and deploy the $500 billion. The Fed has been offering low-interest net-zero loans to lenders through the facility in an effort to expand the reach of the PPP, a emissions COMMUNITY BANKING massive rescue program administered by the Small Business Administration to provide forgivable loans to businesses struggling after rivals set Pandemic has in the pandemic. The Paycheck Protection Program Liquidity Facility, or PPPLF, has goals redefined role provided nondepository institutions their first access to Fed financing. By Bloomberg News Community development financialMarch 08, 2021 of bankers: institutions and nonbank SBA lenders had Wells Fargo joined rivals in pledging to lobbied the Fed for an extension of the achieve net-zero greenhouse gas emissions New ICBA facility, arguing that they were counting on in the coming decades. the program to fund new originations and The fourth-largest U.S. lender said Monday likely wouldn’t be able to participate if the it aims to reach that goal, which includes chair facility were to close. its financed emissions, by 2050. It will also The Fed, with support from the Treasury deploy $500 billion in financing to sustainable By Jim Dobbs Department, has twice extended the life of businesses and projects by 2030. March 08, 2021 the PPLF. It moved an original August end “Climate change is one of the most urgent Robert Fisher will begin his one-year term date initially to Dec. 31 and then March 31. environmental and social issues of our time, as chairman of the Independent Community With the newest extension, the program will and Wells Fargo is committed to aligning our Bankers of America with more clarity about remain open until June 30. activities to support the goals of the Paris the pandemic than that of his predecessor However, the central bank said it would Agreement and to helping transition to a net — but continued uncertainty over banking’s not be extending its other emergency lending zero carbon economy,” CEO Charlie Scharf competitive landscape. facilities still in place past their current said in a statement. “The risks of not taking A year earlier, Noah Wilcox became ICBA expiration date of March 31. action are too great to ignore, and collective chairman as everyone was starting to grapple In a press release, the Fed said that those action is needed to avoid the significant with unknowns tied to coronavirus. Bankers programs — the Commercial Paper Funding impact on our most vulnerable communities.” attending the in-person conference became Facility, the Money Market Mutual Fund Wells Fargo was the seventh-largest increasingly concerned during the event Liquidity Facility and the Primary Dealer financier of fossil fuel companies last year, about the spread of the virus while wondering Credit Facility — have “not had significant according to data compiled by Bloomberg. what it would do to the economy.

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Though the pandemic is still forcing Businesses are very eager to get back to [took out a PPP] loan last year that has been everyone to alter their plans — Fisher was normalized operations. I’m excited for forgiven. They might have been able to get supposed to accept his chairmanship at an in- this year and going forward beyond this larger loans [with a recent change to the person conference in Hawaii — he expressed year. There’s a lot of pent-up demand for calculations] but they can’t go back and apply optimism during a conversation about his recreation, entertainment, services — a lot of for that difference. We’d like to see them be priorities for the next year. But Fisher still positives. able to go back and get that increase. realizes that bankers are still adapting to We’re also seeing some businesses that are changes that have occurred in the last year. Logically, consumer demand would unable to qualify for a second draw because “I’m nervous and excited all at the same help businesses and create lending op- of the level of reduction in their income. We’d time,” said Fisher, who is also chairman, portunities. Do you see loan growth like to see Congress go back and look at a de president and CEO of the $520 million-asset ahead? minimis threshold that will help those that Tioga State Bank in Spencer, N.Y. Yes, the pent-up demand it only going are right on the cusp of being able to qualify. Community banks have been able to to help us and the economy rebound more And there’s a grant program for “save our navigate the pandemic, Fisher said. Credit quickly. stages” for live venues for the performing arts. quality has been relatively unscathed and We’d like to see those venues qualify for some many banks successfully hastened efforts to Credit quality has held up so far. What PPP dollars. For now, they can’t apply for provide more digital services. does that say about the industry? PPP if they’ve received a grant. [They could Smaller banks have been big participants Government stimulus definitely helped, be allowed to] subtract the grant amount in the Paycheck Protection Program, making and the PPP played a big role. But I think it from what they could get from PPP to prevent nearly half of the total loans and accounting speaks to the high credit quality that was in double-dipping. These are organizations that for 45% of the roughly $690 billion of volume the system going into this. Banks had done were very hard hit by the pandemic. through March 7, according to data from the a really good job managing credit risk and Small Business Administration. And the ICBA oversight was strong coming into this. What are some key lessons learned continued to run its two-year-old fintech from the pandemic? accelerator in Little Rock, Ark., replacing What are the ICBA’s priorities for 2021? Customers’ willingness to change in terms many in-person meetings with virtual ones. We need to shine a light on the antiquated of online banking and technology is speeding Still, the role of many bankers will evolve tax subsidies credit unions enjoy. It’s just up, and I don’t think that’s going to change as customers continue to gravitate to digital troubling that we have this uneven playing after we get back to normal. I think we will channels. field and we intend to continue to wake up only see much greater utilization of digital “We were already shifting to recruiting Congress. We need to open their eyes to the channels as we go forward. more problem solvers than people handling things like credit unions buying banks and transactions,” Fisher said. “That pace of how that works. They get to count part of the That’s the big one, right? Not just for change has accelerated.” premium that they pay as capital, so they will banks but a host of industries. As conditions normalize, expect the ICBA continue to win in bidding against banks. Yes. I chair a local hospital board, to refocus on a number of longstanding We also have on the priority list a common- for example, and telemedicine is up issues, including an ongoing push for taxing sense, tiered regulatory system that eases the exponentially. credit unions and regulatory reform. Fisher regulatory burden for community banks. We said he also plans to emphasize financial have a relationship banking model and the How does this change your workforce? education over the next year. regulation should be geared to the risk of the We were already shifting to recruiting Here is an edited transcript of the institutions, not rolled downhill from how the more problem solvers than people handling conversation. big banks are regulated. transactions. That pace of change has accelerated. The pandemic created challenges for What’s your sense of the political cli- Prior to the pandemic, we had planned a all. Do you expect a return to normal- mate after the November election? new retail office. We’ve put that on hold, and cy? What’s the outlook for community It’s still a very divided political climate in I’m not sure we need a 3,000-square-foot banks? D.C. But the ICBA is a bipartisan organization. office at this point. We’re looking at the layout ROBERT FISHER: I’m certainly optimistic We’re all about supporting candidates that and what we really need post-pandemic. that will be the case. That’s what I’ve missed support community banks and we work both I believe we’ll have a portion for our the most — the travel and the interaction. I’m sides of the aisle. workforce going forward that will always now hopeful by summer, early fall we can get back work remotely. I’m anxious to bring people to normal. What do you see as key takeaways back, but there are folks that are very effective I think there will be a lot of opportunity. about the PPP? remotely, and I see them wanting to continue The president has said we should have Community banks really stepped up in that. vaccines for everyone who wants them by the 2020. But there are a few things we’d like end of May, and that makes me even more to address with PPP that would make the Do you have a personal priority as optimistic. program be a lot more effective. ICBA chairman? That’s very positive for community banks. The first issue involves borrowers who Financial literacy, for me, is a big priority.

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I see it as lacking in our country. Our bank which will be held on May 20. financial system,” Jose Fernandez da Ponte, participates in high schools and we try to “We are pleased to have reached this PayPal’s vice president and general manager, help our kids in the schools. But we are agreement with HoldCo,” Berkshire Hills blockchain, crypto and digital currencies, said always looking for new avenues, and that’s Chairman Williar Dunlaevy said in the in the statement. “During our conversations part of another priority for me, which is release. “This agreement underscores our with Curv’s team, we’ve been impressed by innovation. It’s critical for community banks commitment to listening to and incorporating their technical talent, entrepreneurial spirit to be creative. We’re actually partnering the views of our investors.” and the thinking behind the technology with a company that’s developed a gamified “We appreciate the constructive dialogue they’ve built.” approach to financial literacy with an app. we have had with Berkshire throughout this PayPal said it expects the acquisition process and believe that today’s agreement is to be completed by midyear. Last year, an important step in improving the ompany’s Curv announced it had raised $30 million CORPORATE GOVERNANCE performance and strengthening shareholder in total funding from investors including alignment for the benefit of all shareholders,” CommerzVentures, Coinbase Ventures and Zaitzeff said. Digital Currency Group. Berkshire As part of the agreement, HoldCo backed off a plan to nominate six candidates for Hills reaches Berkshire’s board. The investor agreed to REGULATORY REFORM support Berkshire’s nominees and to refrain from making any disparaging comments truce with about the company for at least a year. FDIC chair activist hopes M&A investor PayPal to regulators By Jim Dobbs will ‘come March 08, 2021 acquire Curv Berkshire Hills Bancorp in Boston has resolved a dispute with an activist investor. together’ on The $12.9 billion-asset Berkshire said in to further a press release Monday that it will add two CRA reform: nominees from HoldCo Asset Management its push into to its board. HoldCo, a New York company that owns Report 3.3% of Berkshire’s outstanding stock, had cryptocurren- recently expressed disappointment that the By Joe Adler company opted to hire a new CEO rather that cies March 08, 2021 look to sell itself. WASHINGTON — The head of the Federal Berkshire, which reported a $533 million By Bloomberg News Deposit Insurance Corp. became the second loss in 2020 that reflected a large goodwill March 08, 2021 top regulator in as many weeks to voice impairment tied to past acquisitions, PayPal Holdings Inc. said it will acquire support for an interagency framework to announced in January that it had hired Nitin the cryptocurrency firm Curv as it seeks to reform the Community Reinvestment Act. Mhatre, a former Webster Bank executive, beef up its talent pool for handling digital “I would hope that the agencies will come as its next leader. Mhatre is Berkshire’s third currencies. together and have a uniform application of CEO in three years. PayPal, which didn’t disclose financial the new CRA framework for all our entities, HoldCo co-founders Vik Ghei and terms of the deal, has been building out a whether national bank, FDIC bank or [Federal Michael Zaitzeff had also been pushing new unit dedicated to furthering its efforts Reserve-supervised] state bank,” FDIC Chair Berkshire’s board to improve its oversight in cryptocurrencies after it began allowing Jelena McWilliams said in an interview with of management and authorize a new share consumers to buy, sell and hold certain Politico published Monday. repurchase program. digital currencies in its wallet in recent Her comments reinforce recent optimism Berkshire, as part of the deal struck months. Curv, with about 40 employees, that the FDIC, Fed and Office of the with HoldCo, will add Zaitzeff and another will join that team, the payments giant said Comptroller of the Currency are focused on individual to be nominated with the Monday in a statement. settling years of disagreement over CRA. investor’s consent to its board. The nominees, “The acquisition of Curv is part of our The OCC issued a unilateral CRA reform along with 11 current directors, will stand for effort to invest in the talent and technology rule in May under former Comptroller Joseph election at Berkshire’s 2021 annual meeting, to realize our vision for a more inclusive Otting, but critics objected to how it would

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MARCH 10, 2021 AMERICANBANKER.COM PAGE 8 measure sufficient CRA activity. The FDIC Regulators confirmed Friday that most Libor and allowing access to borrowing is the load- and Fed declined to sign on to the rule, and rates, which underpin hundreds of trillions bearing beam that holds up the structural the Fed outlined an alternative CRA plan in of dollars of assets across five currencies, will house of the U.S. economy. If you take away September. be discontinued at the end of 2021, while credit — or provide credit without adequate Most of the OCC’s CRA rule will not be a few key dollar tenors will continue to be underwriting constraints, as happened effective until 2023. That combined with published for an additional 18 months. leading up to the 2008 financial crisis — the the Biden administration’s ability to name A large portion of Goldman Sachs’s $29 house crumbles. a new comptroller leaves the door open to billion represents hybrid fixed- to floating- Credit has become so deeply ingrained the agencies agreeing on a unified approach. rate products that are currently in fixed-rate in the American psyche that even policy Bankers have urged the agencies to speak periods and include call options before the discussions about extending credit are with one voice on reforming the decades-old Libor exposure begins, according to the bank. framed around the nation’s core concepts of anti-redlining law. “While calling these products would freedom and individual responsibility. McWilliams comments to Politico echoed reduce our Libor exposure, this decision That tension between protecting testimony last month by Fed Chair Jerome involves multiple considerations beyond the consumers and promoting responsibility Powell to the House Financial Services transition,” according to the presentation. is at the center of “Democracy Declined: Committee, in which he said, “There is an One key concern amid the transition is that The Failed Politics of Consumer Financial opportunity for a harmonized [CRA] rule hundreds of billions of dollars of assets have Protection.” The author, Mallory SoRelle, among the agencies.” no viable way of shifting to replacement rates an assistant professor at Duke University’s short of a legislative intervention, given the Sanford School of Public Policy, argues complexities of amending deal documents that over the past 60 years policymakers LIBOR and the sheer number of parties involved. have largely placed the responsibility for Federal Reserve Chairman Jerome Powell protecting consumers from harmful credit last month said national legislation is needed products squarely on the shoulders of Goldman to ensure a smooth shift to alternative individuals rather than the government — a benchmarks, while Gov. Andrew Cuomo of decision largely at odds with other developed weighs plan New York proposed a similar solution in the nations. state’s budget. Lawmakers have long resisted stronger Goldman Sachs said it was reviewing its consumer protection laws because they fear for $29 billion options for legacy debt and preferred stock such laws would restrict access to credit, and in case necessary beyond potential legislative less access to credit means less consumer of debt set to solutions, which the bank said it supports. spending — which is bad for a consumption- driven economy. The result, she argues, is a legal framework that prioritizes access to outlive Libor BANKTHINK credit over consumer protection. Surprisingly, SoRelle traces the origin By Bloomberg News of what she calls the “political economy of March 08, 2021 Disclosure’s credit” to the Great Depression and the New Goldman Sachs Group is evaluating what Deal in the 1930s. FDR wielded considerable to do with about $29 billion of debt and great, political capital in that era, but it was not preferred stock it issued that’s pegged to unlimited. Extending credit, SoRelle argues, dollar Libor and doesn’t mature until after was a more politically palatable way of the discredited benchmark expires in mid- but what getting spending power to the masses than 2023. the alternative — namely, establishing a The bank is considering buying back consumers more robust and vigorous welfare state. obligations via tenders and calls or swapping Public Works Administrator Harold Eccles the securities through exchange offers, as exemplified this approach by steering policy well as amendments to credit agreements or really need is toward encouraging the “consumption” triggering provisions that shift instruments to of personal loans through banks. Wary of new benchmarks, according to a presentation protection getting the government directly involved in released Monday. the housing market in 1933, Eccles, then an Banks around the world have expended By Kate Berry assistant to the Treasury secretary, pushed significant resources preparing to transition March 08, 2021 for a federal backstop against losses. That from the London interbank offered rate after Is it possible to imagine an economy that approach, he argued, achieves a similar effect global regulators announced plans in 2017 does not run on consumer credit? while spending far less than if the government to do away with the benchmark in the wake Credit is the grease that smooths the way originated loans itself. of a manipulation scandal and as underlying for consumption — everything from toilet Prioritizing lending over direct trading informing the rate dried up. paper to TVs to tractors. Extending credit government intervention had advantages

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MARCH 10, 2021 AMERICANBANKER.COM PAGE 9 and disadvantages in its own time. The New some consumer advocates, who think sense for policymakers to examine whether Deal’s lending-first approach fostered the accessing credit will solve more problems consumers are able to make rational financial blossoming postwar middle class in a variety than it creates. choices when taking on more credit. of ways, from expanded homeownership Today, there is a brewing backlash against Expanding credit alone, without further to previously unavailable education relying on disclosure as the centerpiece protections, will simply lead to more debt- opportunities. But it also institutionalized of consumer protection, and it has been laden consumers. That’s the problem. But it horrible prejudices against Blacks and other brewing for some time, SoRelle writes. Back isn’t clear who will solve it. minorities in the form of redlining and when Elizabeth Warren was a professor and outright discrimination. not a senator, she decried the use of financial Kate Berry has covered the Consumer We then fast forward 30 years to the disclosures in the fight over the creation Financial Protection Bureau for American legislative fight in 1968 over the Truth in of her brainchild the CFPB: “Financial Banker since 2016. Lending Act. At the time, lawmakers were products have become more dangerous in primarily concerned with protecting the part because disclosure has become a way to national economy “and its constituent obfuscate rather than to inform.” FINTECH financial institutions rather than the welfare SoRelle’s recounting of the history of of individual borrowers,” SoRelle writes. consumer protection in America is rich, but As a result, TILA mandated the “informed has its flaws. She too easily dismisses the Fintech trade use of credit” that laid the groundwork for influence of banks, lenders and lobbyists how the federal government would protect in shaping the debate around credit and groups merge, consumers going forward. By focusing almost consumer protection policies in the New exclusively on the disclosure of information, Deal era. (A more conventional analysis of SoRelle writes, policymakers ensured that the New Deal policies and how business recruit more “the onus was in the hands of borrowers to interests sought to crush them can be found make smart decisions.” in Kim Phillips-Fein’s excellent “Invisible members That precedent of defining consumer Hands: The Businessmen’s Crusade Against protection as a matter of disclosure remains the New Deal.”) By Miriam Cross the cornerstone of consumer protection laws SoRelle also airs out her frustration March 08, 2021 to this day. Of the 18 consumer regulations with what she describes as a widespread Fintech companies are joining a new trade that were passed from 1968 to 2008, almost failure among well-funded nonprofits to group called the American Fintech Council all adopted financial disclosures as the sole mobilize citizens to demand more consumer to lobby Washington lawmakers and set or primary form of consumer protection. protections. She seems genuinely puzzled standards for their industry. More explicit restrictions do exist in some that consumers are more likely to contact The group, which debuted March 3, cases, but the message is clear: Financial their bank or lender to complain about a added 10 new members to its roster on disclosures became the de facto way for the product or service than to call their senator Monday, including Varo and Green Dot. government to protect consumers. or representative and ask for tougher It also launched a Community Advisory That approach satisfies lenders and regulations. Board intended to help promote responsible lawmakers, SoRelle argues, but at the expense “The majority of policies obfuscate the role practices in the fintech industry. of consumers. Confining the question of of government in consumer credit regulation, “The American Fintech Council is poised whether a loan is “fair” or “unfair” to whether thus privatizing the use of credit for most to play a critical role in the US regulatory consumers were given accurate information borrowers,” SoRelle writes. landscape,” Colin Walsh, founder and CEO of limits lender liabilities and creates an “Democracy Declined” provides much- Varo, said in a press release. incentive for them to make those disclosures needed context toward understanding how The Washington-based organization was as opaque as possible — hence the term “fine consumer protection policies have been formed with the merger of the Marketplace print.” shaped by lawmakers’ broader focus on Lending Association and Online Lending A decade after the Consumer Financial credit and the economy. But the question Policy Institute. The group says its goal is to Protection Bureau was created in 2010, many remains: Whose job is it to protect consumers promote policies that benefit consumers of its rules still focus on financial disclosures. from taking on too much credit? and foster responsible innovation, financial Only recently did the CFPB’s own task force Lenders and fintech firms — and, inclusion and racial equity. suggest that the disclosure of financial frequently, we at American Banker — talk “Joining these two organizations together information is not a substitute for protecting about the need for equal access to credit as will allow us to build on our complementary consumers from harm. synonymous with equal access to critical strengths and create a unified voice for all But since the turn of the century, goods and services. But credit is inherently industry stakeholders committed to helping expanding credit to low-income borrowers biased against people who need it and in hardworking families take control of their has emerged as a major profit center for favor of those who don’t. Given the much- financial health,” Cornelius Hurley, professor the lending industry. “Access to credit” has cited Federal Reserve statistic that 40% of at Boston University School of Law and likewise become a popular mantra among Americans do not have $400 to cover an executive director of the Online Lending many lawmakers, fintech firms and even emergency expense, it perhaps makes more Policy Institute, said in a separate release.

For up to date and complete coverage go to AmericanBanker.com WEDNESDAY MARCH 10, 2021 AMERICANBANKER.COM PAGE 10

The American Fintech Council’s more customers exceptional service without any than 50 members span digital banks, online disruption,” Lewis said in the release. lenders, robo advisers and other types of “The acquiring investors are committed fintech firms. They include the lenders Affirm, to maintaining the bank’s high-quality Figure, LendingClub and Prosper; the credit customer service with a long-term view that bureaus Equifax, Experian and TransUnion; prioritizes the bank’s positive contribution to and the banking-as-a-service provider Cross the Chico community,” Lewis added. River. The proposed transaction is subject to Members must adhere to a set of shareholders’ selling at least 67% of the bank’s standards, including capping loans at an outstanding stock. The deal is expected to annual percentage rate of 36%, following the close in the second half of this year. Small Business Borrowers’ Bill of Rights from NorCal earned $3.2 million in 2020, an 11% the Responsible Business Lending Coalition, increase from a year earlier. and demonstrating transparency in products Piper Sandler; Kirton McConkie; and and fees. Manatt, Phelps & Phillips advised NorCal. On its website, the council also expresses Hovde Group and Luse Gorman advised the support for regulations that prevent investor group. q discrimination in algoirthms, a bill that would provide debt relief for people hit hard © 2021 Arizent and American Banker. by the pandemic and more. All rights reserved. The Community Advisory Board is made up of consumer advocacy groups, community development financial institutions and academic organizations, including the Woodstock Institute and the Capital Good Fund.

M&A NorCal agrees to sell to investor group

By Paul Davis March 08, 2021 Northern California National Bank in Chico has agreed to be sold to an investor group. The $310 million-asset bank said in a press release Monday that the group is looking to take over ownership through a tender offer. The unnamed investors would pay $50 million, or $33.07 a share, to NorCal’s shareholders, representing a 61% over the bank’s closing price on Friday. Todd Lewis, NorCal’s president and CEO, will remain in an active leadership role with other members of the bank’s senior management after the deal closes. The pending sale is “a unique opportunity to provide compelling value to our shareholders while continuing to deliver our

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