Top five stories of the week – 29 April 2022

Here’s our pick of five of the top news stories from the world of finance and tech this week.

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CFPB invokes “largely unused” Dodd-Frank law to scrutinise fintechs

The US Consumer Financial Protection Bureau (CFPB) has said it is invoking a largely unused legal provision to increase the scrutiny of nonbank financial institutions.

Utilising this “dormant authority” within the regulator’s nonbank supervision programme, CFPB director Rohit Chopra says, will allow it to level the playing field between banks and nonbanks and protect consumers.

“This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads,” Chopra adds.

Read more here

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UK challenger Starling secures £130.5m funding at £2.5bn valuation

UK challenger Starling Bank has completed an internal fundraise of £130.5 million at a pre-money valuation of more than £2.5 billion.

The firm will use the new funds to continue its growth and also plans to “build a war chest for acquisitions”.

“We are looking at a number of potential targets,” says a spokesperson.

Starling made its first acquisition in July last year, a £50 million deal for buy-to-let mortgage group Fleet Mortgages.

Read more here

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Robinhood announces layoffs, sheds 9% of full-time workforce

Stock trading app Robinhood is to cut 9% of its full-time workforce as the company adjusts to the economic environment of the post-pandemic era and aims to continue its mission to “democratise finance”.

Robinhood CEO Vlad Tenev announced the move to employees at a company-wide meeting, citing duplicate roles and job functions and “more layers and complexity than are optimal” after a period of “hyper growth”.

The firm experienced “rapid headcount growth” as it rode a pandemic-era boom accelerated by lockdowns, historically low interest rates and fiscal stimulus.

In order to keep up with this growth, the company’s workforce expanded from 700 to nearly 3,800.

“After carefully considering all these factors, we determined that making reductions to Robinhood’s staff is the right decision to improve efficiency, increase our velocity, and ensure that we are responsive to the changing needs of our customers,” Tenev says.

Read more here

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Tighten financial crime controls, FCA tells challengers

A review by the UK’s Financial Conduct Authority (FCA) has found that some challenger banks in the country need to improve how they assess financial crime risk.

The regulator conducted the review over 2021, finding that some challenger banks did not have financial crime risk assessments in place for their customers.

The review also identified a growing number of suspicious activity reports reported by challengers, which the regulator says raises questions around the adequacy of checks when onboarding new customers.

Read more here

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MoneyGram sued by CFPB and NYAG for allegedly “leaving families high and dry”

P2P remittance paytech MoneyGram is being sued by the US Consumer Financial Protection Bureau (CFPB) and the New York Attorney General (NYAG) for alleged consumer financial protection law violations.

The lawsuit alleges that MoneyGram – one of the largest remittance providers in the US (and in the process of being acquired by PE firm Madison Dearborn Partners) – failed to deliver funds promptly to recipients abroad, “leaving families high and dry”, a claim the company has dismissed as “meritless”.

CFPB director Rohit Chopra says MoneyGram has spent years “failing its customers and failing to follow the law”.

The CFPB says a “significant portion” of the company’s money transfer transactions are initiated by immigrants or refugees in the US sending money back to their native countries.

It is these immigrant communities MoneyGram has “let down”, says NYAG Letitia James. “Companies have an obligation to be transparent with consumers, treat them fairly, and follow the law, but MoneyGram repeatedly failed to do so,” James adds.

Dallas-based MoneyGram responded to the “baseless claims” issued by the CFPB, claiming it is an industry leader in compliance and consumer protection and it is “fully prepared to vigorously defend itself”.

Read more here