To keep you informed of recent activities, below are several of the most significant federal and state events that have influenced the Consumer Financial Services industry over the past week:

Federal Activities

State Activities

Federal Activities:

  • On February 8, the Consumer Financial Protection Bureau (CFPB) announced the resolution of an enforcement action, begun in 2014, against a foreclosure relief operation that allegedly violated Regulation O. The defendants and the CFPB jointly agreed to the dismissal of their respective appeals. The final settlement required the defendants to pay $10.9 million in consumer redress and a $1.1 million penalty. For more information, click here.
  • On February 8, a New York bankruptcy judge ruled against cryptocurrency exchange Gemini’s claim that it has a secured claim on more than $800 million in Genesis Global Capital assets. The judge stated that since Genesis never transferred the assets, they cannot be considered as collateral pledged by the debtor. Gemini had alleged that Genesis pledged more than 61 million shares of Grayscale to secure loans, then defaulted on the loans. However, the judge found that the contracts between Genesis and Gemini clearly required a transfer for the assets to be pledged as collateral. The ruling is a victory for other Genesis creditors who could be due for a full recovery on their claims. Genesis filed for Chapter 11 protection in January 2023 with $5.1 billion in debt. For more information, click here.
  • On February 8, the U.S. Supreme Court unanimously ruled that government agencies can be sued for violations of the Fair Credit Reporting Act (FCRA). The case, Department of Agriculture Rural Development Rural Housing Service (USDA) Kirtz, involved a borrower who claimed the USDA inaccurately reported his loan as “past due,” damaging his credit score. The USDA argued it was immune from such suits. However, the Court upheld the Third Circuit’s decision that the FCRA allows for suits against “any person,” including government agencies. The Court emphasized that the FCRA’s statutory text clearly captures government agencies as potential defendants. As such, the Court concluded that a consumer may sue ‘any’ federal agency for defying the FCRA’s terms. For more information, click here.
  • On February 8, a group of Republican senators criticized the Securities and Exchange Commission (SEC) for alleged misrepresentations in its enforcement case against Utah crypto project, Debt Box. The senators, including JD Vance, Thom Tillis, Bill Hagerty, Cynthia Lummis, and Katie Britt, expressed concern over the SEC’s conduct, stating that it could call into question the agency’s other crypto lawsuits. The SEC had allegedly misrepresented evidence to obtain an emergency asset freeze and temporary restraining order against Debt Box. A Utah federal judge later reversed these measures, finding the SEC’s evidence misleading. The SEC acknowledged the mistake but failed to correct the statements, leading to potential sanctions. The senators argued that this incident undermined public trust in the SEC and suggested that other enforcement cases by the commission may warrant scrutiny. For more information, click here.
  • On February 7, the SEC and the California Department of Financial Protection and Innovation (DFPI) settled charges against a Florida-based crypto platform for failing to register the offer and sale of a crypto lending product. This product allowed U.S. investors to deposit or purchase crypto assets into an account in exchange for promised interest payments. The agencies determined that these crypto asset accounts with the “interest feature” were offered and sold as securities in the form of investment contracts, but the company failed to register its offer and sale as required by law. Despite voluntarily halting the offering of the interest feature in 2022, the company agreed to pay a $1.5 million penalty to settle each agency’s charges. The company also announced its intention to terminate all crypto-related products and services in the U.S. on February 22. For more information, click here.
  • On February 6, the Federal Trade Commission (FTC) announced that it will ban a group of student loan debt relief “scammers” (defendants) from the debt relief industry. The defendants allegedly misled consumers by charging them for services that are free through the Department of Education, claiming consumers needed to pay fees or make payments to access federal student loan forgiveness. For more information, click here.
  • On February 6, Treasury Secretary Janet Yellen urged Congress to establish federal regulatory standards for the crypto industry. Speaking to the House Financial Services Committee, Yellen highlighted the potential risks posed by digital assets, including runs on digital asset platforms and price volatility. She also expressed concern about the risks posed by stablecoins to the financial system. While some states have created their own regulatory guidelines for stablecoin issuers, Yellen stressed the need for a federal policy. She suggested that a federal regulator should have the authority to decide if a stablecoin issuer should be barred from issuing such an asset. Yellen’s comments were part of an annual hearing for lawmakers to examine the Financial Stability Oversight Council’s annual report, which identified digital assets as a risk to financial stability. For more information, click here.
  • On February 5, several banking and commerce associations filed a complaint in the U.S. District Court for the Northern District of Texas against the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). The plaintiffs are challenging the agencies’ Final Rule, which modernizes how they assess lenders’ compliance under the Community Reinvestment Act (CRA). The plaintiffs argue that the Final Rule violates the Administrative Procedure Act (APA) as the agencies have exceeded their authority by assessing banks’ activities outside of their physical locations and by assessing banks’ deposit products rather than the credit products targeted in the statute. They also argue that the Final Rule is arbitrary and capricious. The plaintiffs have asked the court to vacate the Final Rule and provide a preliminary injunction that would pause its implementation while the case is decided. For more information, click here.
  • On February 5, the Federal Reserve Board released the results from their January 2024 Senior Loan Officer Opinion Survey (SLOOS) on bank lending practices. The SLOOS addressed changes in standards, terms, and the demand over bank loans over the past three months (i.e., Q4 of 2023). The SLOOS’s topics included commercial and industrial lending, commercial and residential real estate lending, and consumer lending. The SLOOS included questions on banks’ expectations for changes in lending standards, borrower demand, and asset quality over 2024. For more information, click here.
  • On February 2, the SEC announced that Brian Sewell and his company, Rockwell Capital Management, agreed to settle fraud charges in connection with a scheme that targeted students taking Sewell’s online crypto trading course known as the American Bitcoin Academy. The SEC alleges that the fraudulent scheme cost 15 students $1.2 million. For more information, click here.
  • On February 2, lawmakers introduced bills in both chambers of Congress aiming to overturn the SEC’s crypto accounting guidance, Staff Accounting Bulletin 121. The guidance, which lawmakers argue was unfairly administered, requires firms safeguarding consumer crypto to track the funds as liabilities on their balance sheets. This is a departure from how other assets under custody are tracked. The bills were introduced after the Government Accountability Office found that the bulletin met the definition of a rule under the Administrative Procedures Act, meaning it should be subject to a rulemaking process, including Congressional review. Critics of the bulletin argue that it could create risks to consumers by discouraging established players from offering services, thereby limiting safe solutions. For more information, click here.
  • On February 2, Republican lawmakers expressed concerns over the FDIC decision to scale back a Trump-era innovation unit, FDiTech. In a letter to FDIC, Chairman Martin Gruenberg, House Financial Services Committee Chairman Patrick McHenry, and other Republicans accused the FDIC of discouraging innovation within the banking sector. They cited a U.S. Government Accountability Office report that stated FDiTech had been restructured in January 2023 with a lower profile and narrower mission. The lawmakers requested information on the FDIC’s enforcement actions involving banks’ relationships with fintech companies and details on how its enforcement approach has evolved. They further expressed concerns that the FDIC’s approach could prevent the development of innovative products and services that benefit consumers and businesses. For more information, click here.
  • On February 1, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing on “Examining Scams and Fraud in the Banking System and Their Impact on Consumers,” and invited three panelists to testify, including an attorney from a consumer law center and two vice presidents from banking associations. Chairman Sherrod Brown (D-OH) led the hearing by noting that peer-to-peer (P2) apps are a rising target among scammers, alongside a rise in check fraud. For more information, click here.
  • On January 19, the S. Department of Education (ED) announced it approved an additional $4.9 billion in student loan forgiveness for 73,000 individuals through modifications to the income-driven repayment (IDR) and Public Service Loan Forgiveness (PLSF) programs. The approval brought the total student loan forgiveness under the Biden administration to $136.6 billion for more than 3.7 million borrowers. The modifications addressed issues with the misuse of forbearance periods by loan servicers and have resulted in $1.7 billion in forgiveness for nearly 29,700 individuals under the IDR program. Additionally, 43,900 individuals under the PLSF program received $3.2 billion in relief. The ED is also expediting further loan forgiveness through the early implementation of the Saving on a Valuable Education Plan. For more information, click here.

State Activities:

  • On February 8, New York Attorney General (AG) Letitia James announced a judgment against three merchant cash advance companies and their principals, resolving allegations that the companies violated several state laws by charging consumers exorbitantly high interest rates on short-term loans and failing to disclose certain fees. The AG sued the companies back in June 2020 after an investigation revealed that the companies were issuing high-interest, short-term loans to small business owners, while illegally charging undisclosed fees, debiting excess amounts from the businesses’ bank accounts, and fraudulently obtaining judgments against businesses by filing false affidavits in the state’s courts. This judgment follows the companies’ refusal to provide an accounting and full history of monies collected as required by a September 2023 court decision. For more information, click here.
  • On February 5, South Dakota Governor Kristi Noem signed SB65. The bill modifies time limits for collection efforts for debts owed to the state. Among other things, the bill provides for the following:
    • Account Receivable Cycle: Defines the period during which a debt can be actively pursued by the obligation recovery center before determining if it is uncollectible;
    • Debt Collection Process: If the center is unable to collect a debt within the account receivable cycle, the debt may be forwarded to a collection agency for no less than one year. The collection agency can add a charge of up to 20% of the debt for its services;
    • Rules for Contracting With Collection Agencies: The Bureau of Administration is tasked with establishing rules for contracting with and referring debt to debt collection agencies; and
    • Retention of Debts: The center or a collection agency may retain debts beyond the applicable collection period if engaged in substantive collection efforts or based on other good cause. For more information, click here.
  • On February 1, Connecticut AG William Tong released a report outlining the actions that the AG has taken to educate consumers and businesses about, and to enforce compliance with, the Connecticut Data Privacy Act (Act) since the law took effect July 1, 2023. The Act requires the AG to release the report, detailing the number of notices of violation the AG issued, the nature of each violation, the number of violations cured, and any other matter the AG deems relevant. According to the report, the AG has issued more than a dozen notices of violation, many of which remain active and ongoing, since the Act took effect. The Act, which is touted as one of the first comprehensive consumer privacy laws in the U.S., requires covered businesses to limit their collection of personal data, provide transparence about how they use and secure that data, and obtain consumer consent before collecting certain sensitive information. The Act also provides consumers with new baseline privacy rights. For more information, click here.
Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Ethan G. Ostroff Ethan G. Ostroff

Ethan Ostroff’s practice focuses on financial services litigation and consumer law compliance counseling. Ethan is part of the firm’s national practice representing consumer-facing companies of all types in defense of individual and class action claims and counseling them on compliance with federal and

Ethan Ostroff’s practice focuses on financial services litigation and consumer law compliance counseling. Ethan is part of the firm’s national practice representing consumer-facing companies of all types in defense of individual and class action claims and counseling them on compliance with federal and state laws.

Photo of Elizabeth Briones Elizabeth Briones

Elizabeth is an associate in the Consumer Financial Services practice who represents businesses large and small – from corporations to local partnerships. She is an experienced litigator with a background in complex matters ranging from corporate contract disputes, premises liability, negligence, fraud, and…

Elizabeth is an associate in the Consumer Financial Services practice who represents businesses large and small – from corporations to local partnerships. She is an experienced litigator with a background in complex matters ranging from corporate contract disputes, premises liability, negligence, fraud, and other business torts. She has appeared in state, federal, and multidistrict litigation.

Photo of Addison Morgan Addison Morgan

Addison is an associate in the firm’s nationally recognized Consumer Financial Services Practice Group. He has represented several of the nation’s preeminent financial institutions in litigation arising under the Fair Credit Reporting Act (FCRA), the Telephone Consumer Protection Act (TCPA), the Fair Debt…

Addison is an associate in the firm’s nationally recognized Consumer Financial Services Practice Group. He has represented several of the nation’s preeminent financial institutions in litigation arising under the Fair Credit Reporting Act (FCRA), the Telephone Consumer Protection Act (TCPA), the Fair Debt Collection Practices Act (FDCPA), the FTC Holder Rule, and other consumer protection state analogs.

Photo of Thailer Buari Thailer Buari

Thailer is an attorney in the firm’s Consumer Financial Service practice, where he represents clients in consumer law, business disputes, and commercial litigation. Thailer manages cases from inception to trial, focusing on all aspects of the litigation process, including case development, settlement negotiations…

Thailer is an attorney in the firm’s Consumer Financial Service practice, where he represents clients in consumer law, business disputes, and commercial litigation. Thailer manages cases from inception to trial, focusing on all aspects of the litigation process, including case development, settlement negotiations, legal research and analysis, document review, motions hearings, and mediations.

Photo of Jed Komisin Jed Komisin

Jed defends clients engaged in civil litigation. He has significant courtroom experience and works with his clients to find comprehensive solutions to their legal issues.

Photo of Trey Smith Trey Smith

Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice. He focuses his practice on helping financial institutions and consumer facing companies navigate regulatory investigations and resulting litigation. He has experience litigating the Consumer Financial Protection Act, the FTC Act…

Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice. He focuses his practice on helping financial institutions and consumer facing companies navigate regulatory investigations and resulting litigation. He has experience litigating the Consumer Financial Protection Act, the FTC Act, the Truth in Lending Act, state UDAAP statutes, and other consumer protection laws.

Photo of Alan D. Wingfield Alan D. Wingfield

Alan Wingfield helps consumer-facing clients navigate compliance, litigation and regulatory risks posed by the complex web of state and federal consumer protection laws. He is a trusted advisor and tireless advocate, helping clients develop practical compliance and dispute-resolution strategies.