Inflation Jumps; Google Pushes Back on CFPB; Klarna Fined $50Mn

Inflation jumped 0.1% points in November. Google pushes back on CFPB. Comerica faces suit over Direct Express program. FDIC keeping tabs on banks’ fintech partners. MoneyLion to be acquired. Banks push on in BaaS. Klarna fined $50Mn.

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Inflation Jumps 0.1% Points

Inflation numbers for November increased to an annualized 2.7%, in-line with estimates. November’s report marks a 0.1%-point increase vs. September. A substantial portion of the November increase came from shelter costs. Core CPI, which excludes more volatile food and energy prices, increased 3.3% year over year. Markets currently expect the Fed to cut rates by 25bps at its December meeting next week, but to skip a January rate cut while they wait to assess the impact on the economy.

Google Pushes Back on CFPB

Google is pushing back against the CFPB’s attempt to designate its payments arm, Google Pay, as “posing a risk” to consumers, a designation which would bring the company under the bureau’s supervisory umbrella. Within hours of the CFPB announcing that, despite Google’s objection, the bureau was proceeding with the designation, Google filed a lawsuit, arguing that the regulator is acting beyond its authority. Part of Google’s objection centers on the service the CFPB claims poses a risk to consumers: Google’s since-discontinued peer-to-peer payment feature. Specifically, Google argues in its lawsuit that Congress has not authorized the CFPB to bring a company under supervision for a product or service it no longer offers. Rather, Google’s suit argues, Congress intended to empower the CFPB to supervise companies whose products may pose a current or future risk to consumers, which is not the case here. While the firm does continue to offer financial services features through its Google Wallet app, those services do not include P2P payments. Google also pushed back against some of the evidence of consumer harm the bureau presented, arguing in its suit that the 26 consumer complaints the CFPB cited were “cherry-picked and unverified.”

Comerica Faces CFPB Suit Over Direct Express Program

The CFPB is suing Comerica over its administration of the U.S. Treasury’s Direct Express program. Direct Express facilitates disbursements of federal benefits, such as Social Security, to some 3.4Mn prepaid cardholders, the majority of which are unbanked. The CFPB alleges Comerica intentionally disconnected more than 20Mn customer service calls. Many of those who were able to get through were subjected to “excessively long” wait times, the bureau says, often “in excess of several hours.” The bureau further alleges that Comerica charged ATM fees to more than 1Mn cardholders, even though program participants are legally entitled to free withdrawals. The bank also mishandled fraud complaints from consumers who claimed their information had been used to fraudulently enroll in benefits programs, according to the CFPB. The CFPB suit is the latest challenge with Comerica’s administration of the Direct Express program. Previously, it has been reported that a service provider to the bank, i2c, had relied on a subcontractor in Pakistan, despite a contractual requirement for all services related to the Direct Express program to be provided in the U.S. or its territories.

FDIC Keeping Closer Track of Fintechs

The FDIC is looking to keep better track of non-bank fintechs, Bloomberg reports. While the FDIC doesn’t have direct authority over fintechs, it does supervise state-chartered non-member banks, including those that partner with fintechs or operate banking-as-a-service business lines. Per Bloomberg, the FDIC has developed a system to better keep track of fintechs, even when they switch banking partners, in order to better understand which third parties a bank is working with.

MoneyLion to be Acquired for $1Bn

Gen Digital, which owns popular security and identity brands like Norton and Lifelock, announced it will acquire neobank and small-dollar lender MoneyLion. Gen Digital will pay $82 a share in cash, valuing MoneyLion at approximately $1Bn. MoneyLion shareholders will also receive a “contingent value right,” or CVR, for each share of MoneyLion they own, which entitles them to a payment of $23 of Gen common stock, if Gen’s average volume-weighted average share price reaches at least $37.50 a share over 30 consecutive trading days from Dec. 10 until two years after the close. Of the deal, Gen CEO Vincent Pilette said, “By bringing MoneyLion into the Gen family, we're not only helping people protect what they already have, we're extending our capabilities to enable people to better manage and grow their financial wealth.” The boards of both companies have approved the deal, which is expected to close in the first half of Gen’s FY2026.

Banks Persevere in BaaS

Despite the tumult in the banking-as-a-service space in the last couple of years, some banks are cautiously moving ahead by developing their own technology infrastructure and platforms, rather than relying on third-party middleware solutions. For example, First International Bank and Trust is leveraging its payments division, Kotapay, as the foundation to its new, cloud-native, API-driven BaaS platform, dubbed Kavinu. As a bank-owned and -operated platform, First International has better oversight and control over what programs it works with. Trent Sorbe, chief payments officer at First International, said, “What we wanted to do was to put a developer-friendly layer on top of [our payroll technology stack] to attract other companies to build products and services effectively on top of us.”

Klarna Fined Approximately $50Mn for AML Failures

BNPL provider Klarna has been fined SEK 500Mn, or about USD $50Mn, by its Swedish regulator, the Financial Supervisory Authority, for anti-money laundering failures. The fine stems from an investigation that took place during 2021-2022, which found that the lender, which owns a chartered bank in Sweden, failed to meet customer due diligence and general risk assessment requirements. The Financial Supervisory Authority found “significant deficiencies,” including that Klarna failed to assess how its products could be used to facilitate money laundering or terrorist financing. Daniel Barr, the Director General of the Swedish financial regulator, said, “The anti-money laundering regulations must be followed. It is important to counteract the risk that the firm's operations could be used by criminals. Our investigation shows that Klarna has not followed the requirements on, among other things, a general risk assessment and procedures and guidelines for due diligence measures. There are therefore grounds on which to intervene against the bank.”

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