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:

Federal Activities

State Activities

Federal Activities:

• On August 3, the Securities and Exchange Commission (SEC) obtained a temporary restraining order against crypto-based company Digital Licensing Inc. dba DEBT Box. The SEC accuses DEBT Box’s principals, brothers Jason Anderson and Jacob Anderson, of defrauding investors of at least $49 million. The brothers allegedly sold unregistered securities they called “node licenses,” which they told investors would generate crypto assets through mining activity, and that revenue-generating businesses would drive up the value of the various tokens DEBT Box mined. Instead, the Anderson brothers allegedly used the investor funds to purchase luxury cars, homes, and lavish vacations. For more information, click here.
• On August 2, the U.S. Department of Housing and Urban Development (HUD) and the National Association of Real Estate Brokers (NAREB) announced a partnership geared toward reducing appraisal bias and discrimination in the housing market. According to the press release, the collaboration “will increase education, outreach, and efforts to combat racial appraisal bias in property valuation.” For more information, click here.
• On August 2, the Federal Financial Institutions Examination Council issued updates to the following sections of the Bank Secrecy Act/Anti-Money Laundering Examination Manual:
• Special Information Sharing Procedures to Deter Money Laundering and Terrorist Activity;
• Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions;
• Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions;
• Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions;
• Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions; and
• Reporting Obligations on Foreign Bank Relationships with Iranian-Linked Financial Institutions.

For more information, click here.

• On August 1, the Board of Governors of the Federal Reserve System (the Fed) delivered to Congress its Cybersecurity and Financial System Resilience Report (report). Under the Consolidated Appropriations Act, the Fed is required to submit to Congress annually for seven years a report focused on cybersecurity. The report contains the Fed’s policies and procedures related to cybersecurity risk management, board activities to address cybersecurity risks, and current and emerging cyberthreats. For more information, click here.
• On August 1, the Enforcement Bureau of the Federal Communications Commission (FCC) issued a cease-and-desist letter to One Owl Telecom for allegedly transmitting prerecorded voice message calls to consumers, which included illegal scam robocall traffic. For more information, click here.
• On August 1, the U.S. Small Business Administration (SBA) began implementing additional policies aimed at expanding small business access to capital by modernizing SBA’s signature 7(a) and 504 loan programs. According to the press release, “[t]he loan program improvements will increase small businesses’ ability to access funding to start up and grow through a broader network of lenders with streamlined lender procedures.” These new Standard Operating Procedures (SOPs) will include updated origination policies and procedures, lender participation requirements, and 7(a) loan servicing and liquidation requirements. For more information, click here.
• On July 31, the District Court for the Central District of California entered judgment in favor of the court-appointed receiver of defendants True Count Staffing Inc., dba SL Account Management; Prime Consulting LLC, dba Financial Preparation Services; TAS 2019 LLC dba Trusted Account Services; First Priority LLC; and Horizon Consultants LLC and its managing member, Shih-Hao Lai aka Jimmy Lai and Swift Payments, in the amount of $75,000. The court issued this judgment in connection with the civil enforcement action filed by the CFPB in 2019. For more information, click here.
• On July 31, New York District Judge Jed S. Rakoff denied Terraform Labs’ and its founder, Do Kwon’s motion to dismiss the SEC’s case against them. In the motion, the defendants argued that they did not sell assets as part of investment contracts, and attempted to bolster their arguments by citing a decision from the SEC enforcement against Ripple Labs. In Ripple Labs, Judge Analisa Torres held that Ripple’s XRP token was not a security when sold on the secondary market, but could constitute an investment contract when sold to sophisticated investors. Expressly rejecting Judge Torres’ holding, Judge Rakoff “declined to draw a distinction between … coins based on their manner of sale[,]” and denied Terraform and Kwon’s motion to dismiss. For more information, click here.
• On July 31, the SEC sued Richard Heart, and his cryptocurrency projects Hex, and PulseChain, alleging that Heart, who raised more than $1 billion across three different unregistered securities offerings, defrauded investors by touting his products as a pathway to wealth. Rather than serving as investments, the projects saw high fees, liquidity issues, and exploitable bugs after launch, causing the value of the projects to plummet. The suit charges Heart and the projects with fraud and securities registration violations. For more information, click here.
• On July 31, the Internal Revenue Service (IRS) issued a revenue ruling concluding that if a cash-method taxpayer stakes cryptocurrency native to a proof-of-stake blockchain and receives additional units as rewards for validation, the fair market value of the validation rewards received is included in gross income for the taxable year in which the taxpayer gains dominion and control over the validation rewards. For more information, click here.
• On July 31, the Board of Governors of the Fed issued its July Senior Loan Officer Opinion Survey on Bank Lending Practices, which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households in the second quarter of 2023. Banks reported that lending standards are currently on the tighter end of the range for all loan categories. Specifically, standards tightened for all consumer loan categories and demand weakened for auto and other consumer loans, while it remained basically unchanged for credit card loans. For more information, click here.
• On July 28, Apple CEO Tim Cook received letters from representatives Gus Bilirakis (R-FL) and Jan Schakowsky (D-IL), who serve as chairman and ranking member of the Innovation, Data, and Commerce Subcommittee, respectively. The letter inquired about the company’s App Store practices, and the representatives shared concerns that Apple may be using the App Store to restrict emerging technologies like blockchains, NFTs, and other distributed ledgers. This letter further seeks additional information and documentation from Apple. For more information, click here.
• On July 27, SEC Chief Accountant Paul Munter released a statement highlighting the potential pitfalls of crypto “assurance” work completed by accounting firms. “Assurance” work is an emerging practice in the cryptocurrency industry, where accounting firms perform nonaudit reviews of certain aspects of a crypto firms’ business practices. Munter’s statement warns that accounting firms could face potential liability for antifraud violations of the Securities Act of 1933, the Securities Exchange Act of 1934, and several other statutes and regulations. For more information, click here.

State Activities:

• On July 31, the California Privacy Protection Agency’s (CPPA) Enforcement Division announced review of data privacy practices by connected vehicle (CV) manufacturers and related CV technologies. CVs use several features, such as location sharing, web-based entertainment, smartphone integration, and cameras, that usually automatically collect information about consumers’ locations, personal preferences, and other details about consumers’ lives. In light of this fact, CPPA is seeking information about how CV manufacturers are complying with the state’s California Privacy Rights Act. For more information, click here.
• Oregon Governor Tina Kotek recently signed HB-2052, an act that addresses registration of business entities that qualify as data brokers. Specifically, the act prohibits a data broker form collecting, selling, or licensing brokered personal data within the state unless the broker first registers with the Department of Consumer and Business Services. Additionally, the act outlines the form, method, and contents for an application for licensure. The act also carves out certain exceptions to its requirements and imposes a civil penalty not to exceed $500 for each act violation. For continuing violations, the act permits levying a civil penalty for each day that the violation continues. Civil penalties are, however, capped at $10,000 in a calendar year. For more information, click here.
• The California Department of Financial Protection and Innovation (DFPI) recently released an opinion letter addressing whether the proposed activities of a data processor require licensure under the state’s Money Transmission Act (MTA). DFPI opined in its letter that a data processor’s services were exempt from licensure because the data processor “never actually or constructively receives, takes possession of, or holds money or monetary value for transmission.” To the contrary, DFPI found that the data processor merely received instructions from customers and merchants to transmit money to each other and forwards those instructions for processing. DFPI also underscored the fact that the data processor’s website does not demonstrate that the data processor is advertising, soliciting, or holding itself out as providing money transmission in the state. For more information, click here.