Upstart’s bank charter application is the biggest strategic move in consumer lending this year. Plus: CFPB exam activity at historic lows, the Fed holds rates amid Middle East uncertainty, and what it all means for lenders.
THE LENDING PULSE · Issue 1 · March 25, 2026
01 — THE BIG STORY
Upstart wants to become a bank
On March 10, Upstart Holdings announced it will apply to the OCC and FDIC to establish Upstart Bank, N.A. — and to the Federal Reserve to become a bank holding company. It is the most consequential strategic move in consumer lending this year, and arguably in Upstart’s history.
The rationale is straightforward: a national bank charter lets Upstart access deposit funding, lend directly to consumers under a single federal framework, and eliminate the patchwork of state-by-state regulatory complexity it currently navigates as a marketplace lender. In plain terms — it removes the middleman, reduces cost, and gives Upstart direct control over the full lending stack.
Upstart’s incoming CEO Paul Gu called it “the first bank built from the ground up on AI.” Chief Risk Officer Annie Delgado — proposed as CEO of Upstart Bank, N.A. — framed it as an opportunity to set the standard for AI model deployment within the regulated banking system.
Importantly, Upstart was careful to signal it is not going after retail deposits or competing with its existing bank and credit union partners. President Sanjay Datta stated that depository partners will continue to be the capital source for the vast majority of loans on the platform. This is a bid for operational efficiency and regulatory simplicity — not a land grab.
The application is pending. Charter approvals are lengthy and uncertain. But the direction of travel is clear: Upstart is moving from marketplace to institution.
What it means for lenders: Watch this space carefully. If approved, Upstart gains a structural cost advantage that pure marketplace lenders cannot easily replicate. It also signals that AI-native lending is mature enough to operate under full prudential oversight — a threshold moment for the industry.
02 — COMPANY MOVES
Upstart repurchases $100M in shares. In February, Upstart bought back 3.19 million shares at an average of $31.31 under its $400 million board-authorized repurchase program. $122 million remains under the program — suggesting continued buyback activity ahead.
Upstart raises 2026 guidance. In its Q4 2025 earnings call, Upstart projected a 35% compound annual growth rate over three years, with 2026 revenue targeted at approximately $1.4 billion and an adjusted EBITDA margin of 21%. The company also surpassed 100 million repayment events in its AI training dataset.
03 — REGULATORY WATCH
CFPB pulls back — but enforcement hasn’t disappeared
The CFPB is operating at historically low exam volume in 2026 — fewer than 70 supervisory events are planned for the full year, compared to over 600 annually under the prior administration. The bureau has also de-prioritized BNPL enforcement and pulled back on several open rulemakings.
However, compliance teams should not interpret reduced federal activity as reduced risk. The DOJ recently reached a $68 million fair lending settlement — a reminder that egregious violations remain actionable. State attorneys general in California, Illinois, and New York are accelerating their own oversight frameworks, particularly around BNPL and AI-driven underwriting.
Separately, a federal judge ruled this week that the CFPB must continue requesting funds from the Federal Reserve — a significant ruling against the Trump administration’s efforts to restructure the bureau.
Key compliance note: UDAAP, fair lending, TILA, and RESPA remain fully enforceable by state AGs and private plaintiffs regardless of federal exam frequency.
04 — MACRO SIGNAL
Fed holds at 3.50–3.75% — one cut projected for all of 2026
At its March 18 meeting, the FOMC voted 11-1 to hold the federal funds rate steady at 3.50–3.75% for a second consecutive meeting. The Fed now projects just one 25 basis point cut in 2026 — down from two cuts projected in December — citing elevated inflation and geopolitical uncertainty from the conflict in the Middle East.
Core PCE inflation is now projected at 2.7% for 2026, up from 2.5% in December. GDP growth revised slightly upward to 2.4%. One dissent: FOMC member Stephen Miran voted to cut rates by 25bps.
For consumer lenders: Funding costs remain elevated and borrower affordability stays under pressure. NIM expansion will be harder to achieve. Lenders who locked in lower-cost funding structures in late 2025 are better positioned heading into the second half of the year.
05 — WORTH READING
1. The Treasury’s new AI Risk Management Framework for financial services sets out governance and documentation expectations for AI-based underwriting — worth reviewing against your current model risk management program. Particularly relevant as Upstart’s charter application puts AI governance in the regulatory spotlight. (U.S. Treasury)
2. The Congressional Research Service published a fresh analysis on BNPL and Truth in Lending Act applicability following the CFPB’s interpretive rule withdrawal — a clean summary of where federal and state frameworks currently stand for installment lenders. (Congressional Research Service)
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