In a 2023 letter and multiple follow up meetings with FinCEN, AFC requested updated guidance to create equity and alignment of data collection for CIP Rule

Current confusion surrounding the CIP Rule has led to inconsistent regulatory decisions and differing practices in the marketplace

WASHINGTON, D.C. (April 1, 2024) – The American Fintech Council (AFC), the leading industry association representing responsible fintech companies and innovative BaaS banks applauds the Financial Crimes Enforcement Network (FinCEN) for issuing a Request for Information (RFI) related to existing requirements for banks under the Customer Identification Program (CIP) Rule. AFC has long advocated for regulatory guidance to better align data collection components of the Customer Identification Rule (CIP Rule) to the evolution of the modern digital banking environment, specifically related to Buy Now Pay Later (BNPL) loans.

"The decision by FinCEN is a step in the right direction towards regulatory modernization that will level the playing field for innovators who are creating critical access to safe and affordable credit options,” said Phil Goldfeder, Chief Executive Officer of the American Fintech Council. “We are thankful to Director Gacki and her team for heeding our calls. This is further proof that advocacy and collaboration produce results and when combined, responsible innovation with engaged and pragmatic regulators can help develop the future of financial services.”

“FinCEN recognizes the significant changes in technology and financial services that have taken place since promulgation of the CIP Rule, and we welcome comments from interested parties as we explore ways to modernize the U.S. anti-money laundering/countering the financing of terrorism regime,” said Andrea M. Gacki Director of FinCEN in a recent Press Release.

In an April 2023 letter to then FinCEN Acting Director Himamauli Das, AFC wrote seeking regulatory clarity with the CIP Rule specifically to determine the sufficiency of collecting the last four digits of a Tax ID Number (TIN) directly from the consumer, while collecting full TINs from a third party, and verifying the provided numbers through the bank’s risk-based identity verification procedures. In addition, AFC together with their members met directly with FinCEN on multiple occasions since last April to advocate for necessary changes.

“Since the adoption of the CIP Rule there has been significant innovation in customer identifying information collection and verification tools available to banks and other financial institutions. This RFI will inform FinCEN’s understanding in this area and evaluate the risks, benefits, and safeguards if banks were permitted to collect partial SSN information from a customer and subsequently use reputable third-party sources to obtain the full SSN prior to account opening,” wrote FinCen in their recent press release.

“FinCEN recognized the rapid speed of technological change and implemented an exemption to full TIN collection within the CIP Rule specific to credit card issuers.” Wrote the American Fintech Council in their 2023 letter. “The credit card exemption allows credit card issuers to obtain a customer’s TIN information from a third-party source instead of directly from the customer… (which) allows credit card issuers to streamline application processes and grant access to credit more efficiently.”

A report by the Consumer Financial Protection Bureau (CFPB) on BNPL loan products specifically highlights comparisons to credit cards in the consumer experience and services that new products like BNPL provide. The report cites BNPL as a rapidly expanding alternative to credit, serves consumers similarly, and provides a less expensive alternative than revolving credit.

“FinCEN is aware of public interest by banks, trade associations, and Congress about the SSN collection requirement. In particular, there has been expressed interest in permitting banks to collect a partial SSN while also permitting the use of reputable third-party sources to obtain the full SSN prior to account opening,” wrote FinCEN in their RFI.

AFC will work with its members and respond to the RFI.

Read AFC April 2023 letter here.