- First Northwest Bancorp’s subsidiary, First Fed Bank, has entered into a consent order with the Federal Deposit Insurance Corp. in connection with a fintech it developed through a joint venture, the Port Angeles, Washington-based bank disclosed in a Securities and Exchange Commission filing last week.
- In connection with the bank’s relationship with Quin Ventures, the bank “engaged in unsafe or unsound banking practices [and] deceptive and unfair acts and practices in or affecting commerce,” the FDIC said in the order.
- The consent order is the latest fintech partnership-related enforcement action to come down on a bank as regulators continue to step up scrutiny of banks that work closely with fintech firms.
First Fed Bank entered a joint venture with POM Peace of Mind, Inc. in 2021 to found Quin Ventures, a firm the bank described in a press release as “a fintech focused on financial wellness and lifestyle protection for consumers nationwide.”
Through a marketing and banking services agreement, Quin promoted the services offered through the digital financial wellness platform and First Fed Bank provided banking services to the customers who utilized the platform, according to a 2021 SEC filing.
Among the violations outlined in last week’s order, the FDIC claims First Fed Bank violated Section 5 of the Federal Trade Commission Act by “making implied claims that credit products with non-optional debt cancellation features were unemployment insurance, approving consumers who did not qualify for the debt cancellation feature, and misrepresenting the fees and benefits for those products.”
First Fed Bank, without admitting or denying the FDIC’s allegations, has consented to the order, the FDIC said.
In addition to correcting all violations outlined in the order, the FDIC ordered First Fed Bank’s board to participate fully in the oversight of the bank’s compliance management system.
The FDIC also ordered the firm to submit a list of all bank products and the third party offering it to the FDIC regional director for review.
First Fed Bank is not allowed to enter into a binding commitment or agreement with a new third party without first receiving the regional director’s written non-objection, the FDIC said.
The firm was also ordered to implement several policies that would enhance its third-party oversight.
First Fed Bank must review and approve copies of all third-party marketing materials, including promotional materials, advertising and telemarketing scripts whether delivered through direct mail, the internet, electronically, telephonically, social media platforms, mobile devices or any other type of media, the FDIC said.
The regulator also ordered the firm to establish processes around managing regulatory agency inquiries, customer complaints and legal actions. The bank must also review all third-party service providers’ policies and practices to determine compliance with all consumer protection laws, the FDIC said.
In advance of the order, First Fed “proactively provided full remediation for all affected customers, ended the Quin partnership in 2022, and continues to bolster internal controls to prevent future issues,” the bank said in a statement last week.
“These actions are consistent with the consent order. The bank notes that the issue was unrelated to its traditional customers, its core business, or commitment to vigilant financial management,” the firm said. “First Fed’s leadership is committed to strengthening compliance controls and has invested significant resources into resolving the matter, including implementing substantial internal control improvements to prevent any similar future occurrences. First Fed remains in full cooperation with the FDIC surrounding this matter. Our team is dedicated to serving the financial needs of our customers with integrity and excellence.”
First Fed Bank’s consent order follows similar actions levied against fintech-heavy banks Blue Ridge and Cross River, as regulators are increasingly requiring firms to implement stricter oversight of their fintech partners.