Welcome back to Fintech Recap. I’m Alex Johnson, joined as always by my partner in recapping, Jason Mikula.
We open with Coastal Community Bank, which swung from a $12M in profit in Q1 to a $42M loss in Q2 after recording a $68.8M credit provision on $530M of loans originated by its fintech lending partner, LendingPoint. Coastal held the loans on its own balance sheet, but relied on LendingPoint to indemnify it against losses. The credit risk didn’t disappear; it became counterparty risk.
Next, we talk standards. The FDIC is reportedly working on an independent standards body (tentatively called BISDO) that would certify third parties as risk-assessed and manageable. The draft term sheet promises no regulatory safe harbor, then a few paragraphs later promises examiners would accept certification for onboarding due diligence and wouldn’t take adverse action over onboarding a certified third party. Safe harbor-ish? We have questions.
Finally, charter watch. Wise was denied a national trust charter amid AML concerns. Bunq’s application was rejected after the OCC questioned its proposed CEO’s lack of U.S. banking and unsecured-credit experience (and his part-time, non U.S. based role). World Liberty Trust, the new subsidiary of World Liberty Financial – whose unusual ownership structure includes the UAE as well as President Trump and his family – was approved despite some striking parallels to Bunq. I unpack why I think the OCC applied fundamentally different logic to World Liberty than it did to Wise and Bunq.
Plus, in our Can’t Let It Gos: an FTC proposal on suppression of accuracy in AI systems that could treat undisclosed fair-lending adjustments as deceptive, and Transportation Secretary Sean Duffy’s family road trip, paid for by a nonprofit whose sponsors include the Electronic Payments Coalition (aka Dick Durbin’s arch nemesis).
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