FDIC alleges Cross River engaged in ‘unsafe’ lending practices

Cross River Bank is yet to confirm or deny the allegations that it “engaged in the unsafe or unsound banking practices” related to its lending activity in 2021.

The Federal Deposit Insurance Corporation (FDIC) has requested Cross River Bank — known for its services to fintech and crypto firms like Visa and Coinbase — to “self-correct” and appropriately address weaknesses in its lending activities.

On April 28, the FDIC made public a consent order executed with Cross River Bank on March 8, which alleged that the bank engaged in “unsafe” or “unsound” banking practices regarding its compliance with applicable fair lending laws and regulations in 2021.

Despite accepting the consent order, Cross River has yet to confirm or deny the violations discovered in the 2021 report of examination. It stated:

“The FDIC considered the matter and determined, and the Bank neither admits or denies, that it engaged in the unsafe or unsound banking practices related to its compliance with applicable fair lending laws and regulations.”

The order states that the bank must immediately take action to increase its supervision over the “system of internal controls, information systems, credit underwriting practices, and internal audit systems related to the consumer protection laws and regulations.”

Cross River is required to promptly “self-correct” any violations of fair lending laws, and “appropriately address” the deficiencies and weaknesses identified in its lending activities.

Upon evaluating its current structure, Cross River must create processes to avoid future recurrence of these violations.

Furthermore, the bank must submit a fair lending resources study and report by May 7 — conducted by an independent third party — outlining the bank’s size and growth plans, the current and anticipated number of credit products, and their respective volumes.

The report must also detail the number of decisions made on behalf of the bank by third parties in relation to credit applications, credit transactions and the promotion of a credit products offered by Cross River Bank.

Just one day before the consent order was made public, Cross River CEO Gilles Gade released a statement on April 27 without mentioning the FDIC allegations.

Gade emphasized that Cross River upholds the “highest levels of compliance” and highlighted that regulatory scrutiny will only get tougher for banks that support fintech following the collapse of Silicon Valley Bank.

“Cross River is the largest of these banking institutions and as such, we have regulatory examiners reviewing some elements of our business on a continuous basis,” Gade stated.

“We view our compliance capability as a strategic advantage and are proud to lead our industry in maintaining the highest levels of compliance, transparency, and responsibility,” he added.

Related: Crypto-friendly banks mismanaged traditional risks, FDIC head tells Senate hearing

The order was executed with the bank only days before USD Coin (USDC) issuer Circle partnered with Cross River for banking services ­on March 13.

Circle had sought the new partnership after the collapse of it’s previous provider, Silicon Valley Bank. 

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