To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:
- On May 19, the Federal Reserve Bank of New York’s New York Innovation Center (NYIC) and the Monetary Authority of Singapore (MAS) published a joint research report of Phase II of Project Cedar and the MAS’ Ubin+ Project, both of which seek to uncover whether central bank digital currencies (CBDCs) and distributed ledger technology (DLT) can be leveraged to improve the efficiency of cross-border payments and lessen the need of foreign exchange conversions for settlement. For more information, click here.
- On May 18, the House Financial Services Committee Subcommittee on Digital Assets, Financial Technology, and Inclusion hosted a hearing, titled “‘Stable’ in ‘Stablecoins’: How Legislation Will Help Stablecoins Achieve Their Promise.” During the hearing, Congress discussed two stablecoin regulatory proposals: (1) a framework proposed by Chairman Patrick McHenry and (2) a framework proposed by Ranking Member Maxine Waters. Notably, Chairman McHenry’s proposal would preserve the current dual banking system model and delegate “supervisory, examination, and enforcement authority” of “state qualified stablecoin payment issuers” to “state payment stablecoin regulators.” Under McHenry’s proposal, a state payment stablecoin regulator is afforded the option to enter a memorandum of understanding with the Federal Reserve (Fed) under which the Fed would carry out the supervision, examination, and enforcement duties of state-qualified stablecoin payment issuers of a particular state. Without a memorandum of understanding in place, McHenry’s proposal limits the Fed’s enforcement authority of state-qualified payment stablecoin issuers to exigent circumstances. Conversely, Ranking Member Waters’ proposal specifically requires state-qualified payment stablecoin issuers to register with the Fed within 180 days after being approved to issue stablecoins by a state payment stablecoin regulator.
For more information about the hearing, click here. For more information about, Chairman McHenry’s proposal, click here. For more information about Ranking Member Waters’ proposal, click here.
- On May 18, U.S. House Majority Whip Tom Emmer (R-MN) and U.S. House Representative Darren Soto (D-FL) published a bill called the “Securities Clarity Act,” which seeks to amend the term “security” within Section 2(a) of the Securities Act of 1933 to include the term “investment contract asset.” The bill defines “investment contract asset” as “an asset, whether tangible or intangible, including assets in digital form (A) sold or otherwise transferred, or intended to be sold or otherwise transferred, pursuant to an investment contract; and (B) that is not otherwise a security pursuant to the first sentence of paragraph (1) [of Section 2(a)].” The bill is premised on the notion that an “investment contract” as defined by the U.S. Supreme Court’s Howey test is a security, but the assets sold pursuant to the investment contract themselves are not. According to a press release about the bill, “Without this distinction between the asset and the securities contract, token projects that must raise capital to fund development in the early stages will not be able to move out of the securities framework once the project is decentralized … .” For more information about the Securities Clarity Act, click here. For more information about the proposed bill, click here.
- On May 18, Financial Action Task Force (FATF) President T. Raja Kumar issued a letter to the Group of Seven (G7) leaders, titled “An end to the lawless crypto space.” The letter implores the G7 to adopt the FATF updated digital asset recommendations, which the FATF hopes will become the global standards on combatting money laundering, terrorism financing, and proliferation financing. For more information, click here.
- On May 18, the Consumer Financial Protection Bureau (CFPB) published “Consumer experiences with overdraft programs” — a report that synthesizes interviews and focus groups with low- and moderate-income consumers during summer 2022 to better understand their experiences with overdraft programs. Topics raised in the report included the following:
- Confusion among consumers about overdraft;
- Concerns about fees, payment timing, and notifications;
- Experiences with financial hardships and fee waivers;
- Experiences with account closures;
- Approaches to avoid overdraft fees; and
- Limited awareness of account options without overdraft fees.
For more information, click here.
- On May 17, House Representative French Hill (R-AR), who also serves as the chairman of the Subcommittee on Digital Assets, Financial Technology, and Inclusion, and House Representative Jake Auchincloss (D-MA) introduced the Power of the Mint Act bill. If enacted, the bill would prohibit the Fed and the secretary of the treasury from issuing a central bank digital currency. For more information, click here.
- On May 15, during an interview with Financial Times, U.S. Department of Justice (DOJ) Crypto Enforcement Director Eun Young Choi noted that the DOJ intends to focus on digital asset companies that are obviating anti-money laundering and know-your-customer rules, as well as “chain bridge” exploits that have become prevalent in decentralized finance. For more information, click here.
- On May 11, the Bank of International Settlements (BIS) Innovation Hub published a guidance handbook for central banks considering implementing offline CBDC payments. The handbook defines an offline payment as “a transfer of value (CBDC) between devices that takes place without requiring connection to any ledger system.” For more information, click here.
- On May 11, the Internal Revenue Service Criminal Investigation (IRS-CI) announced that it is delivering blockchain analysis tools and cyber training to Ukranian law enforcement agencies in April and May. To date, the IRS-CI has donated 15 Chainalysis Reactor licenses, which grants access to blockchain forensics software, to Ukranian authorities for training. For more information, click here.
- On May 11, the Securities and Exchange Commission announced that it filed an enforcement action against GA Investors for allegedly conducting fraudulent offerings of securities, including crypto-asset mining pools. For more information, click here.
- Earlier this month, the Federal Trade Commission (FTC) modified its Telemarketing Sales Rule (TSR) guidance webpage to clarify the requirements for obtaining consent to deliver calls with prerecorded messages and the elements of assisting and facilitating liability. For more information, click here.
- On May 19, the Massachusetts Division of Banks and Educational Computer Systems, Inc. (ECSI) entered a consent order that required ECSI to pay a $500,000.00 administrative penalty for operating as an unlicensed student loan servicer. For more information, click here.
- On May 19, California Attorney General Rob Bonta issued a statement on a decision by the U.S. District Court for the District of Massachusetts, blocking two major airline companies from continuing and further implementing what had become known as the Northeast Alliance — an anticompetitive joint venture that enabled the two airlines to operate as a single carrier on certain routes to and from New York and Boston. The AG, along with the DOJ, filed a lawsuit against the airlines in 2021, alleging violations of the federal Sherman Act. As AG Bonta explained, “Whether you call it a merger, a takeover, or an alliance, we’re not going to stand by when companies take action to consolidate their market share and disrupt competition in the process.” For more information, click here.
- On May 19, Governor Greg Gianforte signed the Montana Consumer Data Privacy Act into law, making Montana the ninth state to enact a comprehensive consumer data privacy law. The law will take effect October 1, 2024. For more information, click here.
- On May 16, Maryland Governor Wes Moore signed SB106 into law, exempting up to $500 in a deposit account or other accounts of a judgment debtor held in certain financial institutions from execution on the judgment without an election by the debtor to exempt the money. The bill also establishes the procedures a depository institution must follow upon receipt of a writ of garnishment or other levy or attachment under certain circumstances. The law will take effect October 1. For more information, click here.
- On May 16, Maryland Governor Wes Moore signed HB384 into law, which prohibits an institution of higher learning from refusing to provide a current or former student with a transcript or taking other punitive measures regarding a student’s transcript request because the student owes a debt to the institution of higher education. The law will take effect on July 1. For more information, click here.
- On May 15, the Texas Senate voted in favor of Texas House Bill 1666 — dubbed the “Proof of Reserve” bill. If enacted, the bill would require digital asset exchanges to create plans to enable its customers to view a quarterly accounting of their liabilities and their customers’ digital assets held in custody by the exchange. Further, the bill would require digital asset exchanges to file with the Texas Department of Banking annual attestations of the exchanges’ outstanding liabilities to their customers. For more information, click here.
- On May 11, the Texas House of Representatives passed HJR 146, seeking to amend the Texas Constitution to formally guarantee that citizens of Texas have the right to “own, hold, and use … digital currency … when trading and contracting for goods and services … .” For more information, click here.
- Earlier this month, Indiana Governor Eric Holcomb signed SB452, a bill that provides that a collection agency may engage in taking assignments of subordinate lien mortgage transactions and undertake the direct collection of payments from or the enforcement rights against debtors arising from subordinate lien mortgage transactions, without obtaining a mortgage license issued by the department. The law will take effect July 1. For more information, click here.