Regulators Crack Down On FinTechs' Misrepresentation Of Deposit Insurance

In a recent series of regulatory statements and a high profile demand letter, federal banking regulators have given clear warnings to the banking and fintech industries about their customer disclosures and the significant risk of customer confusion relating to bank/fintech relationships and customers' deposit insurance status. These statements follow a significant increase in fintechs offering "banking as a service" to their customers through partnership models, as well as recent bankruptcy filings by crypto platforms, which have raised customer disclosure issues. This Advisory discusses the recent regulatory guidance and provides suggestions for managing the risks identified by the regulators.