The relationship between regulators and business is, to say the least, a tense one. By its very nature, the relationship requires that regulators constantly be playing catch-up to business, and because of this the two can easily get into some serious spats. With technology rapidly changing the way we move money around, and with a new and potentially powerful regulator on the scene in the form of the CFPB, these clashes could start to ramp up. This week we saw lots of newfangled fin-tech products and services — and some scams — and an expensive enforcement action from the CFPB.
This week was busy with cutting-edge alternative financial services. We spoke with Boom Financial (formerly M-Via) about its new round of funding, and its plans to build out the first cross-border mobile money ecosystem. It could potentially change the lives of millions of immigrants here in the States and their families back home. Openbucks, the company that allows users to turn gift cards into online cash (mostly for playing video games), closed a $4.8 million round of funding which will enable the company to…well it’s not clear yet. Also, PayPal purchased card.io this week. Card.io allows merchants to photograph customers’ credit/debit cards with smartphones in order to run payments; PayPal already has a mobile swipe dongle, making this a bit confounding, too.
And finally, it came out that an Australian bank is partnering with Facebook, to allow its customers to use the social network to do their banking. What could possibly go wrong?
The most rapidly-growing segment of the alternative financial services market is likely prepaid. And we saw a few new entrants to the market there, too. Pennsylvania’s PNC Bank launched a new prepaid card, which has a similar fee structure for Chase Liquid — one catch: you can’t load the cards at ATMs, making them substantially less attractive than Chase’s product. Kmart launched its own card too, and we didn’t like the looks of it. And Dollar General, not one to miss out on all the fun, announced that it will be selling Western Union prepaid cards.
In somewhat related news, GreenDot issued a warning that scammers are using its MoneyPak product to bilk the elderly. Scammers call people telling them that they’ve won some princely sum of money — but there’s a catch! They must first get a MoneyPak and give the scam artist some money…by telling them the account number. Speaking of scams, we learned from the Pew Charitable Trusts that people are not using payday loans for emergency purposes, but actually to pay for routine expenses like rent. Could it be that these extortionate loans put consumers into a debt trap they can never get out of? The CFPB is on the case…
And speaking of them, they laid the smack down in a way we had yet to see: the agency required that Capital One issue $140 million in refunds to consumers that it had pressured into or misled about unnecessary add-on services. Nicely done. The agency also expressed concern over the behavior of credit bureaus, and announced that it will be monitoring them, too.
If the CFPB is just getting around to credit bureaus right now, when will they catch up to all this other craziness — and what will they find acceptable?