Fintech Takes

S7 E10: Dissecting Federal Preemption Laws, Citibank Dodges Consumer Protections, and Why We Don’t Have a National Fintech Charter

Jun 12, 2024

The podcast delves into the Supreme Court's decision on bank laws, Citibank's consumer protection issues, and the debate on national fintech charters. They discuss the importance of real-time data, challenges in banking industry disruption, and complexities of regulatory oversight.

01:08:46

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Episode notes

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Quick takeaways

Federal preemption laws create conflicts between state and federal regulations in banking, impacting consumer protection.

Reputation risk in banking is under scrutiny, emphasizing the importance of regulatory oversight for ethical conduct.

Interpretation of consumer protection laws like the EFTA raises concerns about fraud defenses and industry accountability.

Deep dives

Interpreting Federal Preemption in Banking Regulations

In a recent Supreme Court decision, the case of Kentaro versus Bank of America highlighted the issue of federal preemption in banking regulations. Bank of America questioned the need to pay interest on escrow accounts based on a state rule, arguing its national charter exempted it. The Supreme Court ruled that whether a bank must follow state rules depends on the level of interference with its powers, signaling potential conflicts in fintech with varying state regulations.

Intro

2min

Exploring Large Insects, Montana Weather, and Trampoline Adventures

3min

Impact of Supreme Court Decisions on Banks and Federal Preemption Laws

18min

Consumer Protection in Wire Transfers: The Citibank Case

12min

Evolution of Financial Laws and Customer Protection

7min

Identifying Banks Experiencing Runs

9min

Challenges in Establishing a National Fintech Charter for Non-Bank Technology Companies

11min

Challenges of Fintech Founders and VCs Ignorant of Banking Industry Basics

4min

Summer’s almost here, and Kiah Haslett is braving the swarms of Tennessee cicadas to join Alex for another session of Bank Nerd Corner.

First up on the docket, Alex and Kiah tackle the Supreme Court’s decision on Cantero vs. Bank of America. Bank of America contests that they don’t have to pay interest on escrow accounts in accordance with federal law because hey, the state law says something different. But which law do federally chartered banks have to follow if both state and federal laws speak to the same conflict? Should banks be granted the freedom of choice? After all, it’s a free market, and that’s capitalism, baby!

And a big round of applause for Citibank for finding a new way to make consumers feel even less protected when it comes to making wire transfers. Alex and Kiah unpack the current case against the banking giant by several consumers (represented by New York state regulators) who have lost money to scammers after being locked out of their accounts. What legal loophole is Citibank using to defend itself from paying consumers back? And shouldn’t they be a wee bit more concerned about losing trust with their clients?

Plus, Alex and Kiah ask some big questions, including why banks and regulators aren’t relying on real-time data more often and why fintech banks don’t have national charters. But more importantly, how much hubris do you have to have to rant about disrupting the banking industry while knowing absolutely nothing about it? Let’s rant about it!

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