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Michael Freno 92da927899 FRE-5418: decompose consumer protection compliance into actionable subtasks

Created 5 child tasks assigned to CTO covering usury, TILA, state disclosures, and fair lending.

Co-Authored-By: Paperclip <noreply@paperclip.ing>

2026-05-19 00:41:34 -04:00

2026-05-19

Today's Plan

Produced comprehensive 50-state licensing analysis document
Covered MTL, lending licenses, usury caps, costs, bonds, exemptions, micro-loan rules
Tiered states: 15 Tier 1 (launch), 25 Tier 2 (6-month), 12 Tier 3 (defer)
Key finding: Bank CDP model reduces licensing cost by ~85-88%
Top 5 launch states: SD, UT, CO, ND, WY
Uploaded as issue document, committed to repo, marked issue done
FRE-5414 is now unblocked

Researched: Do micro-loans under $1,000 have lowered regulatory requirements?
Answer: No. Core obligations (MTL, lending license, TILA, AML/KYC, TEACH Act) apply regardless of loan size.
Federal: No exemptions. TILA, ESIGN, Dodd-Frank, TEACH Act all apply to all loan sizes.
State: No blanket exemption for sub-$1,000 loans. Three states (KS, MT, NE) have $5K aggregate MTL exemptions — trivial volume only.
Texas CCPL-B ($550 cap) offers modest fee savings but identical application burden.
Risk: Short-term sub-$1,000 loans may be classified as payday loans (more restrictive).
Recommendation: Installment structure (>31 days) over amount capping. Bank CDP model remains primary burden reduction path.
Uploaded research document, marked issue done. FRE-5414 can proceed.

Produced state launch recommendations synthesizing FRE-5412 + FRE-5413 research
Top 5 launch states: SD (unlimited usury via bank charter), UT (84% APR, fastest 60-90 day timeline), GA (10.9M population), VA (8.7M population), CO (fintech-friendly regulator)
6-month expansion (5 states): ND, TX, TN, ID, AR
18 states deferred: NY, CA, MA, CT, DC, RI, IL, FL, MI, WA, NC, OH, MN, NE, AZ, PA, WV, SC
Cost: ~$22K (CDP model) vs ~$187K (direct model) for initial 5 states
Critical path: Bank CDP partnership search before any state filings
Uploaded as issue document state-recommendations, marked issue done
FRE-5415 (UI state selection gate) should auto-unblock

Created comprehensive BSA/AML compliance program (4 issue documents)
AML Compliance Program (LND-AML-001): 12 sections — CIP, transaction monitoring, OFAC screening, SAR procedures, record retention, independent testing, employee training, risk assessment, examination readiness
SAR Filing Procedures (LND-SAR-001): Detection triggers, investigation process, BSA Authority filing, P2P lending-specific suspicious activity indicators, tipping off prohibition
Record Retention Policy (LND-RET-001): 15 record categories with retention periods, storage requirements, destruction procedures, legal hold process
FinCEN MSB Registration Guidance (LND-FIN-001): FinForm 107 preparation guide, pre-filing checklist, BOI reporting, post-filing obligations
Remaining human actions: file FinForm 107 (requires founder info + counsel review), appoint named Compliance Officer, set annual renewal reminder