FinTech Exam 3 questions with
complete solutions passed
what is the most regulated area in financial services because there is a lot of opportunity for
vulnerable individuals to be taken advantage of - ANS ✔✔lending
chartered financial institution that accepts deposits - ANS ✔✔bank
what are state banks - ANS ✔✔-chartered by state agencies
-certain federal regulations apply if FDIC or Fed Reserve
what are national banks - ANS ✔✔-chartered by the OCC
-federal statutes and regulations preempt state procedures
charters allow banks to - ANS ✔✔-accept deposits (and have them insured by the FDIC)
-facilitate payments nationwide
-lend nationwide
what happened to SoFi in 2022 - ANS ✔✔received regulatory approval from t OCC and the Fed
Reserve to acquire a nationally chartered bank, Gold Pacific Bancorp and to operate its
subsidiary SoFi Bank as a nationally chartered bank
how can a non-bank lender make loans - ANS ✔✔-by obtaining lending licenses in each state
where their borrowers reside
-partnering with a bank
,why has there been an increased supply of nonbank lenders - ANS ✔✔-new digital innovations
(underwrite using algorithms, computer programming)
-ability to scale (once platform is set, not much of an expense to add more customers)
-cost advantages
why has there been an increased demand for nonbank lenders - ANS ✔✔-customer
expectations
-changing demographics (digital natives)
-decline in customer trust in banks
what are the 3 types of lending business models - ANS ✔✔-balance sheet lending
-originate to sell
-hybrid models
what are the characteristics of balance sheet lending - ANS ✔✔-underwrite loans
-keep the loans on their balance sheet
-revenue derived from interest and fees
-bear risk of borrower default
-examples: Wellesley and SoFi
this lending business model relies on origination fees to make money and then sell your
mortgage/loan - ANS ✔✔originate to sell
consumer facing market; the market between the lender and the borrower - ANS ✔✔primary
in this market, the bank sells/transfers loans to another bank, institutional investor, or hedge
fund - ANS ✔✔secondary
,subtype of originating to sell; sell loans to individuals; peer-to-peer lending - ANS
✔✔marketplace lending
what are the characteristics of marketplace lending - ANS ✔✔-collect applicant data
-post loan for investors to view and make bids on the loan or a portion of the loan
-website anonymizes the loans and posts them for sale
-platform makes money on fees
-borrower goes to lending platforms and loan to investors, but the loan itself is a partnering
bank of the lending platform
-examples: Funding Circle, LendingClub, Zopa
what are the two reasons why FinTech lenders partner with banks - ANS ✔✔-bypass state
licensing requirements
-bypass state usury laws
what are the state licensing requirements for nonbank lenders who are not partnered with a
chartered bank - ANS ✔✔lenders engaged in loan underwriting, origination, or servicing will be
subject to state-by-state licensing requirements
charging an excessive rate of interest as a lender - ANS ✔✔usury laws
what state does not have a usury limit - ANS ✔✔Utah
what happened in Marquette National Bank of Minneapolis v. Omaha Service Corps in 29178 -
ANS ✔✔national banks need only follow the usury laws of their home state regardless of the
state where the borrower resides
, what did Section 27 of the Federal Deposit Insurance Act (FDIA) do - ANS ✔✔state-chartered
banks need only follow the usury laws of their home state regardless of the state where the
borrower resides
a common law doctrine that holds a loan that is valid at its inception does not become usurious
upon transfer to another entity even if that entity is not a bank; foundation of non-bank, bank
partnerships - ANS ✔✔valid when made doctrine
what happened in Madden v. Midland in 2015 - ANS ✔✔-invalidated Valid When Made Doctrine
in 2nd Circuit (Vermont, Conn, NY); still viable outside of these states
-OCC/FDIC codified Valid When Made Doctrine (2020)
-CA, ILL, and NY sued to challenge the new rule (2021)
-US District Court ruled against them (2022)
what is the most common type of lending model - ANS ✔✔hybrid
what is the hybrid lending model - ANS ✔✔-sell some loans to investors
-keep some loans on the balance sheet
-example: OnDeck
what are consumer protection laws that apply to lending - ANS ✔✔-Truth in Lending Act (TILA)
-Electronic Funds Transfer Act / Regulation E
-UDAP and UDAAP
-Fair Credit Reporting Act
-Fair Debt Collection Practices Act
-Racketeer Influenced Corrupt Organizations Act (RICO)
-Equal Credit Opportunity Act
Community Reinvestment Act
complete solutions passed
what is the most regulated area in financial services because there is a lot of opportunity for
vulnerable individuals to be taken advantage of - ANS ✔✔lending
chartered financial institution that accepts deposits - ANS ✔✔bank
what are state banks - ANS ✔✔-chartered by state agencies
-certain federal regulations apply if FDIC or Fed Reserve
what are national banks - ANS ✔✔-chartered by the OCC
-federal statutes and regulations preempt state procedures
charters allow banks to - ANS ✔✔-accept deposits (and have them insured by the FDIC)
-facilitate payments nationwide
-lend nationwide
what happened to SoFi in 2022 - ANS ✔✔received regulatory approval from t OCC and the Fed
Reserve to acquire a nationally chartered bank, Gold Pacific Bancorp and to operate its
subsidiary SoFi Bank as a nationally chartered bank
how can a non-bank lender make loans - ANS ✔✔-by obtaining lending licenses in each state
where their borrowers reside
-partnering with a bank
,why has there been an increased supply of nonbank lenders - ANS ✔✔-new digital innovations
(underwrite using algorithms, computer programming)
-ability to scale (once platform is set, not much of an expense to add more customers)
-cost advantages
why has there been an increased demand for nonbank lenders - ANS ✔✔-customer
expectations
-changing demographics (digital natives)
-decline in customer trust in banks
what are the 3 types of lending business models - ANS ✔✔-balance sheet lending
-originate to sell
-hybrid models
what are the characteristics of balance sheet lending - ANS ✔✔-underwrite loans
-keep the loans on their balance sheet
-revenue derived from interest and fees
-bear risk of borrower default
-examples: Wellesley and SoFi
this lending business model relies on origination fees to make money and then sell your
mortgage/loan - ANS ✔✔originate to sell
consumer facing market; the market between the lender and the borrower - ANS ✔✔primary
in this market, the bank sells/transfers loans to another bank, institutional investor, or hedge
fund - ANS ✔✔secondary
,subtype of originating to sell; sell loans to individuals; peer-to-peer lending - ANS
✔✔marketplace lending
what are the characteristics of marketplace lending - ANS ✔✔-collect applicant data
-post loan for investors to view and make bids on the loan or a portion of the loan
-website anonymizes the loans and posts them for sale
-platform makes money on fees
-borrower goes to lending platforms and loan to investors, but the loan itself is a partnering
bank of the lending platform
-examples: Funding Circle, LendingClub, Zopa
what are the two reasons why FinTech lenders partner with banks - ANS ✔✔-bypass state
licensing requirements
-bypass state usury laws
what are the state licensing requirements for nonbank lenders who are not partnered with a
chartered bank - ANS ✔✔lenders engaged in loan underwriting, origination, or servicing will be
subject to state-by-state licensing requirements
charging an excessive rate of interest as a lender - ANS ✔✔usury laws
what state does not have a usury limit - ANS ✔✔Utah
what happened in Marquette National Bank of Minneapolis v. Omaha Service Corps in 29178 -
ANS ✔✔national banks need only follow the usury laws of their home state regardless of the
state where the borrower resides
, what did Section 27 of the Federal Deposit Insurance Act (FDIA) do - ANS ✔✔state-chartered
banks need only follow the usury laws of their home state regardless of the state where the
borrower resides
a common law doctrine that holds a loan that is valid at its inception does not become usurious
upon transfer to another entity even if that entity is not a bank; foundation of non-bank, bank
partnerships - ANS ✔✔valid when made doctrine
what happened in Madden v. Midland in 2015 - ANS ✔✔-invalidated Valid When Made Doctrine
in 2nd Circuit (Vermont, Conn, NY); still viable outside of these states
-OCC/FDIC codified Valid When Made Doctrine (2020)
-CA, ILL, and NY sued to challenge the new rule (2021)
-US District Court ruled against them (2022)
what is the most common type of lending model - ANS ✔✔hybrid
what is the hybrid lending model - ANS ✔✔-sell some loans to investors
-keep some loans on the balance sheet
-example: OnDeck
what are consumer protection laws that apply to lending - ANS ✔✔-Truth in Lending Act (TILA)
-Electronic Funds Transfer Act / Regulation E
-UDAP and UDAAP
-Fair Credit Reporting Act
-Fair Debt Collection Practices Act
-Racketeer Influenced Corrupt Organizations Act (RICO)
-Equal Credit Opportunity Act
Community Reinvestment Act
