Cross River accused by the FDIC of engaging in “unsafe” lending practices

Cross River Bank has yet to affirm or refute the allegations that it “engaged in unsafe or unsound banking practises” in 2021 in relation to its lending activity.

The Federal Deposit Insurance Corporation (FDIC) has requested that Cross River Bank, a provider of services to fintech and cryptocurrency companies such as Visa and Coinbase, “self-correct” and resolve vulnerabilities in its lending activities.

On April 28, the FDIC made public a consent order that was signed with Cross River Bank on March 8. The order said that the bank had “unsafe” or “unsound” banking practices in 2021 regarding its compliance with fair lending laws and regulations.

Cross River has yet to affirm or deny the violations discovered in the 2021 report of examination, despite having accepted the consent order. It declared:

“The order stipulates that the bank must take immediate action to strengthen the oversight of its “system of internal controls, information systems, credit underwriting practices, and internal audit systems related to consumer protection laws and regulations.”

Cross River is obligated to “self-correct” any violations of fair lending laws and “appropriately address” any identified deficiencies and weaknesses in its lending activities.

Cross River must develop procedures to prevent a recurrence of these infractions after evaluating its current structure.

In addition, by May 7, the bank must submit an independent third-party-conducted equitable lending resources study and report delineating the bank’s size and development plans, the current and anticipated number of credit products, and their respective volumes.

The report must also include the number of decisions made by third parties on behalf of the bank regarding credit applications, credit transactions, and the marketing of credit products offered by Cross River Bank.

On April 27, just one day before the consent order was made public, Cross River CEO Gilles Gade issued a statement without mentioning the FDIC’s accusations.

Gade emphasized that Cross River adheres to the “highest levels of compliance” and emphasized that regulatory scrutiny will intensify for banks that support fintech in the wake of Silicon Valley Bank’s failure.

“We are delighted to be at the forefront of our industry when it comes to upholding the greatest standards of compliance, openness, and accountability, and we see our capacity to do so as a significant competitive advantage,” he said.

The order was placed with the bank just days prior to Circle’s March 13 partnership with Cross River for banking services. Circle sought out the new partnership after its previous provider, Silicon Valley Bank, failed.

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