CASH 2018 Annual Report

36 Short-Term, Small-Dollar Installment Lending In October 2017, the OCC rescinded its guidance on deposit advance products in light of the Bureau’s pending small dollar loan rule (see “Risk Factors—The Bureau’s final rule related to certain small dollar loans will impact certain processes used by the Bank and could materially impact the Bank’s ability to grow certain aspects of the Payments division” included in Item 1A of this Annual Report on Form 10-K for more information). On October 26, 2018, the Bureau announced that it will propose changes to this rule in January 2019, and, in early November 2018, a federal judge in Texas stayed compliance with the rule in connection with a court case challenging it. Although the text of the proposed Bureau changes to this rule has not been made available to the public as of the date of this Annual Report on Form 10-K, the Bureau stated that the ability-to-repay component of the small dollar loan rule will be addressed in the upcoming revisions; the repayment provisions in the rule, however, will not be affected. In May 2018, the OCC published guidance that encourages national banks and federal savings associations to offer responsible short-term, small-dollar installment loans with terms between two and twelve months and equal amortizing payments. Pursuant to the OCC’s guidance on this issue, banks are encouraged to offer these products in a manner that is consistent with sound risk management principles and clear, documented underwriting guidelines. Other Regulation The Bank is also subject to a variety of other regulations with respect to its business operations including, but not limited to, the Truth in Lending Act, the Truth in Savings Act, the Consumer Leasing Act, the Equal Credit Opportunity Act, the Electronic Funds Transfer Act, the Military Lending Act, the Servicemembers’ Civil Relief Act, the Fair Housing Act, the Home Mortgage Disclosure Act, the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, the Controlling the Assault of Non-Solicited Pornography and Marketing Act, and the Fair Credit Reporting Act. As discussed below, any change in the regulations affecting the Bank’s operations is not predictable and could affect the Bank’s operations and profitability. Bank Supervision and Regulation The Bank is a federally chartered thrift institution that is subject to broad federal regulation and oversight extending to all of its operations by its primary federal regulator, the OCC, and by its deposit insurer, the FDIC. Such regulation covers all aspects of the banking business, including lending practices, safeguarding deposits, capital structure, transactions with affiliates, and conduct and qualifications of personnel. The Bank pays assessment fees both to the OCC and the FDIC, and the level of such assessments reflects the condition of the Bank. If the condition of the Bank were to deteriorate, the level of such assessments could increase significantly, having a material adverse effect on the Company’s financial condition and results of operations. The Bank is also a member of the FHLB System and is subject to certain limited regulation by the Federal Reserve. Regulatory authorities have been granted extensive discretion in connection with their supervisory and enforcement activities which are intended to strengthen the financial condition of the banking industry, including, but not limited to, the imposition of restrictions on the operation of an institution, the classification of assets by the institution, and the adequacy of an institution’s allowance for loan and lease losses. Typically, these actions are undertaken due to violations of laws or regulations or conduct of operations in an unsafe or unsoundmanner. The OCC has announced that supervisory strategies for 2019 will focus on the following: (i) cybersecurity and operational resiliency; (ii) commercial and retail credit loan underwriting, concentration risk management, and the allowance for loan and lease losses; (iii) the Bank Secrecy Act/AML compliance management; (iv) compliance-related management to address regulatory requirements; and (v) internal controls and end-to-end processes necessary for product service delivery. Any change in the nature of such regulation and oversight, such as the items mentioned above, whether by the OCC, the FDIC, the Federal Reserve, or legislatively by Congress, could have a material impact on the Company or the Bank and their respective operations. The discussion herein of the regulatory and supervisory structure within which the Bank operates is general and does not purport to be exhaustive or a complete description of the laws and regulations involved in the Bank’s operations. The discussion is qualified in its entirety by the actual laws and regulations. Federal Regulation of the Bank The OCC has extensive authority over the operations of federal savings associations, such as the Bank. Pursuant to its authority to regulate and supervise federal savings banks, the OCC has established a comprehensive framework for activities in which a federal savings association can engage and is intended primarily for the protection of the DIF and depositors. The OCC also has extensive discretion in connection with the development and implementation of supervisory and enforcement activities and examination policies.