Navy Fed Enforcement Action; Sunbit Lands $355Mn Facility; Klarna Preps IPO

Prices up 0.3% month over month. Supreme Court decisions cast uncertainty on Fed interchange proposal. Navy Fed hit with CFPB enforcement action. Comerica pushes back on “overreaching” CFPB probe. Sunbit lands $355Mn debt facility. Neo Financial raises $258.3Mn Series D. Klarna preps U.S. IPO. Cash App to expand BNPL feature.

In case you missed our webinar on subledger management and FDIC’s new proposed rule, here are 10 key takeaways from our discussion with industry experts.

Inflation Remains Stubbornly Steady

Core inflation, which excludes volatile food and energy prices, increased 0.3% month over month in October, for an annualized rate of 3.6% over the last three months. That makes it the fastest pace of price increases since this April. While the Fed has made significant progress in restoring inflation to its long run 2% target, recent readings make clear the fight against inflation isn’t finished. Though the Fed has begun a rate cutting cycle, that effort may be complicated should President-elect Trump pursue some of the policies he espoused on the campaign trail, including tariffs and mass deportations, both of which are likely to stoke inflation, should they come to pass.

Fed Gov Waller Flags Legal Uncertainty After Loper Bright, Corner Post Decisions

Fed Governor Waller said last week that he wants a better understanding of the impact of recent Supreme Court decisions before the central bank progresses an updated cap on debit interchange fees for banks covered by the Durbin Amendment. At a conference hosted by The Clearing House last week, Waller said, “The legal uncertainty around things now, with Chevron, Corner Post, all the legal cases, for me… I'd like a little more clarity on how the courts are going to be interpreting things, like how we interpret Reg II, before we put up a big new proposal or new stage. I'd like to see how fast that will happen." The Chevron doctrine, or the concept that courts should defer to the expertise of executive branch agencies, was repudiated in the court’s decision in Loper Bright. In the Corner Post case, the court made the statute of limitations to challenge federal rulemaking functionally meaningless, by allowing a challenge to the Fed’s implementation of 2010’s Durbin Amendment to Dodd-Frank, on the grounds that the statute of limitations begins when a prospective plaintiff first incurs injury, rather than when the rule was finalized.

Navy Fed Hit With $95Mn CFPB Enforcement Action

Navy Federal, the country’s largest credit union, will pay $95Mn in restitution and penalties related to “surprise” fees in a consent order it reached with the Consumer Financial Protection Bureau. According to the CFPB, $171Bn-asset Navy Federal charged customer overdraft fees on certain ATM and debit card transactions, even when their accounts showed sufficient funds at the time of the transaction, known as “authorize positive, settle negative.” The CFPB describes the practice as an “illegal, surprise” junk fee. As part of the settlement, Navy Federal will refund users over $80Mn and pay a $15Mn civil money penalty.

Comerica Pushes Back on CFPB’s “Overreaching” Probe

Comerica is pushing back against a CFPB probe of its handling of a Treasury Department prepaid card program, arguing the Bureau’s investigation is “aggressive and overreaching.” Comerica, the bank says, acted as an agent of the Treasury’s Direct Express program, and thus had the oversight and knowledge or approval of the federal government, which the CFPB has not acknowledged. The probe, which began in 2021, has been costly and caused the bank “substantial harm,” Comerica says. The bank is asking a judge to declare the probe illegal, as Comerica believes the probe exceeds the CFPB’s authority.

Sunbit Lands $355Mn Debt Facility

Buy now, pay later lender Sunbit has secured a new $355Mn debt warehouse from JPMorgan, Mizuho Bank, and Waterfall Asset Management, the company announcedearlier this month. This marks the lenders second credit facility announcement this year, following news earlier in the year that Sunbit had secured a $310Mn facility led by Citi and Ares Capital Management. Like other popular BNPL lenders, Sunbit has sought to diversify its product mix and distribution channels, striking deals with auto dealers, dental practices, and recently announcing an integration with Stripe. Sunbit has also expanded into the cobrand credit card space.

Neo Financial Raises $258.3Mn Series D

Canadian fintech Neo Financial, which offers consumer financial services that include credit cards, saving accounts, bill pay, mortgages, and budgeting tools, announced it has raised a $258.3Mn Series D, composed of $78.9Mn in equity and $179.3Mn in debt. Valar Ventures, Golden Ventures, AFore Capital, and Thomvest Ventures, and other existing investors participated in the round. The company plans to use the fresh funding to “accelerate product velocity,” it said in a statement.

Klarna Preps U.S. IPO

In a sign the IPO window may be opening, Swedish buy now pay later provider Klarna has confidentially filed paperwork for its public market debut. The company notably opted for a U.S. listing, rather than doing so in London, in a blow to the U.K. fintech and capital markets. Klarna has had something of a wild ride. The nearly 20-year-old company swung from mild profitability to large losses but a ballooning valuation during the COVID-19 pandemic. At one point, the company was valued at about $46Bn in a Softbank-led funding round. But its valuation cratered, dipping as low as $6.7Bn as interest rates rose and the fintech bubble, if not popped, at least deflated. Klarna has seen its valuation improve alongside a wider fintech market rebound, with recent reports claiming a $14.6Bn valuation. A successful Klarna IPO could help pave the way for other late-stage private companies to transition to the public markets.

Cash App to Roll Out Afterpay to Debit Card Users

Block’s consumer Cash App service is leaning into lending. The company, which acquired BNPL service Afterpay for a hefty $29Bn, plans to roll out the pay later capability to its 24Mn Cash App debit card users, the company said last week during its earnings webcast. Company founder and CEO Jack Dorsey wrote in Block’s quarterly shareholder letter that he hopes to leverage Afterpay and other lending products to reach the approximately 45Mn U.S. adults who are “unable to access credit through traditional means.” Block has also leaned into crypto, specifically bitcoin. The prospect of improved regulatory clarity around crypto could provide Block with additional tailwinds, Dorsey said.