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

Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter

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

Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter

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:

Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter

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

Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter

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

Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter

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

Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter

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 June 2, President Biden announced his intent to extend the tenures of two Republicans serving on the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission: Mark Toshiro Uyeda and Summer Mersinger, respectively. For more information, click here.
  • On June 2, Chairman of the House Financial Services Committee Patrick McHenry and Chairman of the House Committee on Agriculture Glenn Thompson released a discussion draft of legislation intended to provide a comprehensive regulatory framework for the digital asset market. Notably, the bill excludes from the Securities Act of 1933’s disclosure requirement blockchain protocols that certify to the SEC that they become “decentralized networks.” The bill defines a “decentralized network,” in relevant part, as a protocol that “no person, acting on the person’s own, had the unilateral authority, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, to control or materially alter the functionality or operation of the blockchain network… .” Section 204 of the bill carves out a process by which the SEC may rebut a protocol’s assertion that it is sufficiently decentralized and not subject to the act’s reporting requirements. For more information, click here.
  • On June 2, digital asset trade associations Blockchain Association and DeFi Education Fund filed a joint amicus brief in support of Coin Center’s lawsuit regarding the U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanction of open-source software Tornado Cash. In the brief, the trade associations argued that OFAC’s sanction of Tornado Cash “reflects a basic misunderstanding” and “[l]ike any tool — indeed, like the internet itself — software like Tornado Cash can be misused for illicit purposes.” For more information, click here.
  • On June 1, the Federal Reserve (Fed) and the California Department of Financial Protection and Innovation (DFPI) entered against Silvergate Bank (Silvergate) a consent order requiring, among other things, Silvergate to seek the Fed’s and DFPI’s approval before “engag[in] in any expansionary activities, new lines of business, or establish[ing], any new branches or other offices… .” For more information, click here.
  • On June 1, six federal regulatory agencies, including the Consumer Financial Protection Bureau (CFPB), requested public comment on a proposed rule designed to ensure the credibility and integrity of models used in real estate valuations. In particular, the proposed rule would implement quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary market issuers in valuing real estate collateral securing mortgage loans. For more information, click here.
  • On June 1, the CFPB published an issue spotlight on digital payment apps heavily used by consumers and businesses. The analysis finds that funds stored on these apps may not be safe in the event of financial distress, since the funds may not be held in accounts with federal deposit insurance coverage. The CFPB also issued a consumer advisory for customers holding funds in these apps and how they can make sure their funds remain safe. For more information, click here.
  • On May 31, the Department of Housing and Urban Development (HUD) published FHA INFO 23-44, which announced the posting of the Draft Mortgagee Letter (draft ML), Payment Supplement Partial Claim. Through the proposed policy provided in this draft ML, the Federal Housing Administration (FHA) proposes to create a new loss mitigation option to assist struggling borrowers that are delinquent on their mortgage payments. This option is targeted to assist borrowers in default, who are unable to obtain a significant payment reduction through other loss mitigation options. For more information, click here.
  • On May 31, the European Banking Authority (EBA) launched a public consultation on amendments to its guidelines on money laundering and terrorist financing (ML/TF) risk factors. The proposed changes extend the scope of these guidelines to crypto-asset service providers (CASPs). The consultation runs until August 31. For more information, click here.
  • On May 31, the Justice Department announced that ESSA Bank & Trust has agreed to pay more than $3 million to resolve allegations that it engaged in a pattern or practice of lending discrimination by redlining majority-Black and Hispanic neighborhoods in and around Philadelphia. For more information, click here.
  • On May 30, the Commodity Futures Trading Commission Division of Clearing and Risk (DCR) issued a staff advisory on the risks associated with the expansion of Derivatives Clearing Organization (DCO) clearing of digital assets. In the past several years, DCR has observed an increased interest by DCOs and DCO applicants in expanding the types of products cleared, as well as business lines, clearing models, and services DCOs offer, including those related to digital assets. For more information, click here.
  • On May 25, U.S. Representative Alex X. Mooney (R-WV) introduced H.R. 3712 titled the Digital Dollar Pilot Prevention Act to prohibit the Fed from establishing, approving, or otherwise carrying out any proof-of-concept programs intended to test the practicability of issuing a central bank digital currency (CBDC). For more information, click here.
  • On May 25, the World Economic Forum released a white paper titled, “Pathways to Crypto-Asset Regulation: A Global Approach,” which examines the needs for a global approach to regulate digital assets, and analyzes the challenges of a global approach. For more information, click here.
  • On May 25, the Office of the Comptroller of the Currency (OCC) announced revisions to its policies and procedures manual on bank enforcement actions to reflect its consideration of actions against banks that exhibit or fail to correct persistent weaknesses. For more information, click here.
  • On May 24, the CFPB issued a blog post discussing mortgage rates paid by consumers varying across lenders. For more information, click here.
  • On May 23, the Acting Comptroller of the Currency Michael J. Hsu discussed the OCC’s commitment to a fair and inclusive financial system in remarks at the Bank On National Conference. For more information, click here.
  • On May 23, Prometheum Ember Capital LLC announced it has received a first-of-its-kind approval from the Financial Industry Regulatory Authority (FINRA) to operate as a special purpose broker-dealer (SPBD) for digital asset securities. This approval permits Prometheum Capital to custody digital asset securities on behalf of retail and institutional clients. For more information, click here.
  • On May 22, HUD released Mortgage Letter (ML) 2023-11 to update previously issued guidance on loss mitigation options for non-borrowers, who acquire a title through an exempted transfer. For more information, click here.
  • On May 20, the Federal Trade Commission filed an amicus brief in a case on appeal before the U.S. Court of Appeals for the Ninth Circuit, arguing that the Children’s Online Privacy Protection Act does not preempt state laws that are consistent with the federal statute’s treatment of regulated activities. For more information, click here.

State Activities:

  • On May 27, Texas Governor Greg Abbott signed SB 768, amending the state’s data breach notification statutes. Under the amended law, a security breach must be disclosed to the attorney general “as soon as practicable and not later than the 30th day after the date on which the person determines that the breach occurred.” This amendment reduces the amount of time for disclosure down from 60 days. The act also requires that the notice be submitted via an electronic form. For more information, click here.
  • On May 25, while delivering testimony before the New York State Assembly, Superintendent of the New York State Department of Financial Services (NYDFS) Adrienne Harris asserted that the NYDFS’ BitLicense regime has “cement[ed] the [NYDFS] as the leading global prudential regulator for virtual currency business activity.” For more information, click here.
  • On May 25, New York Attorney General Letitia James recovered $300,000 from an online sporting goods retailer following the company’s failure to adequately safeguard consumers’ personal data. The company’s inadequate security measures left it vulnerable to a cybersecurity attack in 2021 that affected consumers private information, including credit card information and email addresses. The company agreed to pay $300,000 in penalties and further agreed to strengthen its cybersecurity policy to better protect consumers’ private information. For more information, click here.
  • On May 24, Minnesota Governor Tim Walz signed AF 2744, a bill that amends several of the state’s statutes concerning financial institutions. Among other things, the bill revises the definition of “annual percentage rate” as it pertains to small consumer loans to “include[] all interest, finance charges, and fees,” and requires that the annual percentage rate “be determined in accordance with either the actuarial method or United States Rule method.” With respect to a consumer short-term loan, the bill provides that a short-term loan lender may charge an annual percentage rate of up to 50% but prohibits any other charges or payments in connection with a consumer short-term loan. Loans that exceed 36% annual percentage rate must also comply with certain other provisions. For more information, click here.
  • On May 24, Florida Governor Ron DeSantis signed HB 1185, which, among other things, permits mortgage loan originators to work from remote locations if certain conditions are met. Some of the conditions set forth in the act are: (a) the licensee has written policies and procedures for the supervision of loan originators working from remote locations; (b) access to company platforms and customer information complies with the licensee’s comprehensive written information security plan; (c) an in-person interaction with a customer does not occur at the originator’s residence unless such residence is a licensed location; (d) physical records are not kept at a remote location; (e) customer interactions and conversations about consumers comply with applicable state and federal information security requirements; (f) the originator must use a virtual private network or system that ensures secure connectivity when access the company’s secure systems or documents from a remote location; (g) the licensee ensures all appropriate security updates are installed and maintained; (h) the licensee is able to remotely lock/erase company-related contents of any device; and (i) the registry’s record designates the originator’s principal place of business as the originator’s registered location. For more information, click here.
  • On May 23, New York Attorney General Letitia James recovered $550,000 from a medical management company for failing to properly shield New Yorkers’ personal information, including health records. The company’s networks were left susceptible to a cyberattack when the company failed to timely update its software, affecting more than 1.2 million individuals across the nation. The security failures violated state law and the federal Health Insurance Portability and Accountability Act (HIPAA). The company has agreed to pay $550,000 in penalties, strengthen its security measures with regard to safeguarding data, and offer consumers free credit monitoring services. For more information, click here.
  • Recently, the New York branch of the U.S. Central Bank published the Phase II report of Project Cedar, an ongoing pilot with the goal of improving cross-border payments using distributed ledger technology. According to a press release, among other things, the report discusses findings related to interlinking simulated central bank currency ledgers; “atomic settlement” where “transactions were only settled if all legs in the cross-currency payment chains were executed successfully”; and “near real-time settlement” where a “simulated payment scenario achieved end-to-end settlement in under 30 seconds on average. For more information, click here.

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 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.

State Activities:

  • 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.

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 April 7, U.S. District Judge Katherine Polk Failla denied the Consumer Financial Protection Bureau (CFPB or Bureau) and the State of New York’s motion to lift the stay placed in Consumer Financial Protection Bureau and the People of the State of New York v. MoneyGram International, Inc. and MoneyGram Payment Systems, Inc. Case No. 22-cv-3256 (KPF). The plaintiffs argued that changed circumstances supported lifting the stay because the Second Circuit issued an opinion, answering the question at the heart of this court’s stay order: Whether the Bureau’s statutory funding mechanism violates the Constitution. In CFPB v. Law Offices of Crystal Moroney, P.C., the Second Circuit held that the method Congress used to fund the Bureau “does not offend the Appropriations Clause.” See — F.4th —, 2023 WL 2604254, at *4 (2d Cir. Mar. 23, 2023). The plaintiffs further argued that because the Second Circuit issued a binding decision resolving the relevant constitutional question in the CFPB’s favor, this court should lift the stay. The case remains stayed. For more information, click here.
  • On April 6, the U.S. Department of the Treasury published the world’s first illicit finance risk assessment concerning decentralized finance, which refers to smart contract empowered distributed ledger technology that enables parties to transfer noncustodial financial products in a peer-to-peer fashion without the need for a centralized intermediary. For more information, click here.
  • On April 5, the European Central Bank issued a blog post titled, “Mind the Gap: We Need Better Oversight of Crypto Activities, ” which discusses the current and widespread digital asset-related regulatory gaps and the need for each individual region of the world to establish “sound regulation and supervision” of digital asset activities before an interconnected, global regulatory regime can be solidified. For more information, click here.
  • On April 5, the U.S. Department of Housing and Urban Development announced the implementation of federal disaster relief for the state of Arkansas to assist state and local recovery efforts for areas affected by severe storms and tornadoes on March 31. For more information, click here.
  • On April 5, the Federal Deposit Insurance Corporation (FDIC) issued the March 2023 Consumer Compliance Supervisory Highlights, intended to enhance transparency regarding the FDIC’s consumer compliance supervisory activities and to provide a high-level overview of consumer compliance issues identified in 2022 through the FDIC’s supervision of state nonmember banks and thrifts. For more information, click here.
  • On April 5, the U.S. Department of the Treasury’s Office of Foreign Assets Control took action to designate Genesis Market, one of the world’s largest illicit marketplaces, for its part in the theft and sale of device credentials and related sensitive information. For more information, click here.
  • On April 5, the FDIC announced a series of steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Arkansas affected by severe storms and tornadoes. The FDIC encouraged banks to work constructively with borrowers experiencing difficulties beyond their control. Banks that extend repayment terms, restructure existing loans, or ease terms for new loans in a manner consistent with sound banking practices can contribute to the health of the local community and serve the long-term interests of the lending institution. Banks may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. For more information, click here.
  • On April 4, the Federal Housing Administration (FHA) posted a draft mortgagee letter, proposing changes to the Home Equity Conversion Mortgage (HECM) program and documentation requirements for the HECM Assignment Claim Type 22 submission criteria. The proposal would allow servicers to begin submitting required claim documentation for FHA review when the mortgage reaches 97% of the maximum claim amount (MCA) versus 97.5% of MCA allowed today. FHA proposed this change to expedite the payment of claim funds when the mortgage reaches 98% of the MCA to mortgage servicers in light of current market liquidity considerations. For more information, click here.
  • On April 3, the Department of Justice (DOJ) issued a press release, announcing its seizure of over $112 million in virtual currency linked to “pig butchering” scams, which entail a fraudulent actor progressively gaining the trust of a fraud victim through an online communications platform before persuading the victim to make an investment into the fraudulent actor’s illegitimate virtual currency trading website. According to the DOJ, investment fraud caused the highest losses of any scam reported by the public to the Federal Investigation Bureau’s Internet Crimes Complaint Center, totaling $3.31 billion. For more information, click here.
  • On March 30, the Office of the Comptroller of the Currency announced the establishment of its Office of Financial Technology and the selection of Prashant Bhardwaj to lead the office as deputy comptroller and chief financial technology officer, effective April 10. For more information, click here.
  • On March 30, during an interview with NBC, U.S. Senator Elizabeth Warren (D-MA) declared that “it is time for [the U.S.] to move in [the] direction” of creating a U.S. central bank digital currency — a digital representation of legal tender issued by a country’s central bank. For more information, click here.
  • On March 29, the National Futures Association (NFA) issued a notice to its members relating to the recently adopted NFA Compliance Rule 2-51, which requires NFA members to engage in just and equitable spot digital asset commodity trading practices with one another and imposes certain anti-fraud and supervisory requirements. This rule also enables the NFA to “discipline a Member or take other action to protect the public if a Member commits fraud or similar misconduct with respect to its spot digital asset commodity activities.” For more information, click here.
  • On March 28, the European Parliament’s Economic and Monetary Affairs and Civil Liberties committees voted in favor of new anti-money laundering and terrorist financing regulation, which seeks to impose a $1,000 cap on crypto-asset transfer “payments that can be accepted by persons providing goods or services.” This cap applies to crypto-asset transfers facilitated using self-custodial wallets where a person cannot be identified. For more information, click here.
  • On March 27, Congressman Bob Good (R-VA) and Senator Bill Cassidy (R-LA) announced that they will lead the joint resolution of disapproval under the Congressional Review Act to overturn President Biden’s student loan forgiveness program after the Government Accountability Office recently ruled the action was eligible for congressional action. For more information, click here.

State Activities:

  • On April 7, the Washington Legislature passed HB 1311, a bill that will require credit repair services to obtain written authorization from a consumer before communicating with a consumer reporting agency, creditor, or collection agency. If enacted, collection agencies and creditors will not be required to communicate with credit repair services if (1) the account has been paid, settled, or otherwise resolve; (2) the account has been removed from the consumer’s credit report; (3) the collection agency has provided verification information under Section 1692g(b) of the Fair Debt Collection Practices Act; or (4) the collection agency “reasonably determines” the dispute is frivolous or irrelevant. Washington’s governor must now approve or veto the bill. For more information, click here.
  • On April 5, the Washington State Senate passed HB 1051, pertaining to robocalling and telephone scams. Among other things, the new law — similar to the TCPA — allows Washington consumers to hold third parties liable for knowing violations. Additionally, the law prohibits a person from initiating, or causing the initiation of, telephone solicitations to a telephone number on the federal Do Not Call Registry. The new law also raises the damages for violations of Chapter 19.86 RCW from $100 to $1,000. Furthermore, the new law provides that a person injured by a “commercial solicitation” by an automatic dialing and announcing device is considered a per se violation of the state’s Consumer Protection Act (WCPA) and permits an injured person to recover damages provided by the WCPA, including actual damages or statutory damages of $1,000 per violation, whichever is greater. Effective July 4, the new law also amends several definitions of RCW 80.36.390, the state’s telephone solicitation statute. For more information, click here.
  • On April 5, the Montana State Auditor and Commissioner of Securities and Insurance Troy Downing announced that his office followed the footsteps of the Texas State Securities Board and the Alabama Securities Commission in filing a civil enforcement action against a Romanian-based cryptocurrency trading platform YieldTrust.ai (YieldTrust) and its owner Stefan Ciopraga for offering artificial intelligence-based investments in the form of securities without being registered with the appropriate state authorities. YieldTrust leveraged a trading bot called YieldBot that uses “quantum artificial intelligence” to make its own trading decisions, which purportedly resulted in “daily profits of up to 2.2%.” Notably, each of the state regulators cited to an audit that uncovered that the YieldBot smart contract was “dangerous.” For more information, click here.
  • On April 4, while delivering event remarks, New York Department of Financial Services (NYDFS) Superintendent Adrienne Harris discussed the NYDFS’ recent closure of Signature Bank and provided additional clarity regarding concerns that the bank’s closure resulted from coordinated efforts to de-bank the digital asset industry: “The idea that taking possession of Signature was about crypto, or that this is Choke Point 2.0 is really ludicrous.” For more information, click here.
  • On March 23, Colorado Governor Jared Polis signed SB 23-015 into law, prohibiting providers from conditioning the extension of credit, credit terms, or vehicle sale/lease terms upon the purchase of a vehicle value protection agreement (VPA). A VPA is a contract that affords a vehicle owner certain benefits when the owner replaces the vehicle at trade-in, when the vehicle is stolen, or after an event that lowers the value of the vehicle. For a VPA to issue, an agreement must (1) provide benefit to the consumer upon trade-in, total loss, or unrecovered theft of a covered vehicle; (2) identify the administrator or provider, the seller, the consumer, and the terms of sale; (3) guarantee the provider’s obligations by an insurance policy; and (4) notify the consumer of the agreement’s terms, including cancellation terms. VPAs are not considered insurance or subject to regulation as insurance if offered in compliance with the bill. For more information, click here.

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 March 24, the Federal Reserve Board of Governors (Federal Reserve) denied Wyoming-based Custodia Bank’s request for membership in the Federal Reserve System based on four factors:
    • Managerial Factor: Custodia’s risk management and controls relating to compliance with the Bank Secrecy Act (BSA), and U.S. sanctions were insufficient;
    • Financial Factor: Custodia’s long-term viability would be contingent upon the longevity of the digital asset markets, which according to the Financial Stability Oversight Council, “is driven in large part by speculation and sentiment, and is not anchored to a clear economic use case”;
    • Corporate Powers Factor: Custodia’s business model places emphasis on digital asset-related activities that are “novel and unprecedented for state member banks,” and Custodia seeks to engage in “uninsured deposit-taking” — both of which would potentially render Custodia susceptible to runs and contagion; and
    • Convenience and Needs Factor: Under Regulation H, which outlines the requirements that state-chartered banks must adhere to upon becoming members of the Federal Reserve, the Federal Reserve considers the convenience and needs of the community to be served, and Custodia has not demonstrated it can operate in a safe and sound manner.

For more information, click here.

  • On March 23, the U.S. Court of Appeals for the Second Circuit held that the Consumer Financial Protection Bureau’s (CFPB) funding structure is constitutional — splitting from the U.S. Court of Appeals for the Fifth Circuit’s decision in Community Financial Services Association of America v. Consumer Financial Protection Bureau, which concluded that Congress violated the Constitution’s appropriations clause when it created a “perpetual self-directed, double-insulated funding structure.” The U.S. Supreme Court will review the Fifth Circuit’s decision next term. For more information, click here.
  • On March 23, the U.S. Department of Education announced that it will hold virtual public hearings on April 11-13 to receive stakeholder feedback on potential issues for future rulemaking sessions. Potential topics include third-party servicers and related issues, such as reporting, financial responsibility, compliance, and past performance requirements as a component of institutional eligibility for participation in the Title IV, HEA federal student financial assistance programs under 34 CFR 668.25 and 682.416. For more information, click here.
  • On March 23, the Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy published investor alert “Exercise Caution with Crypto Asset Securities,” highlighting four broad points:
    • Companies offering digital assets or related activities (i.e., staking) may not be in compliance with disclosure-related federal securities laws;
    • Digital assets are volatile;
    • The rising popularity of digital assets creates an environment potentially ripe for fraud; and
    • Understanding risk is imperative when investing.

For more information, click here.

  • On March 23, the Federal Trade Commission (FTC) issued a notice of proposed rulemaking with the stated goal to make it easier for consumers to cancel recurring subscriptions and memberships. The proposed rules contained a “click-to-cancel” provision, requiring sellers to make it just as easy for consumers to cancel their enrollment as it was to sign up. For more information, click here.
  • On March 22, the SEC filed a civil enforcement action against Justin Sun and three of his wholly owned companies: Tron Foundation Limited (Tron), BitTorrent Foundation Ltd. (BitTorrent), and Rainberry, Inc. (formerly BitTorrent). The SEC’s complaint alleged that Sun, through Tron and BitTorrent, offered and sold unregistered “crypto asset securities” Tronix (TRX) and BitTorrent (BTT). Further, the SEC alleged that Sun and his companies engaged in fraudulent “wash trading,” which involves the simultaneous purchase and sale of a particular tradable asset to increase the asset’s perceived trading volume although this type of transaction activity often does not result in change in beneficial ownership of the assets. Lastly, the SEC also charged multiple celebrity influencers with endorsing TRX and BTT without disclosing to their followers that they were compensated by Sun for marketing TRX and BTT. For more information, click here.
  • On March 22, the SEC issued a Wells Notice to Nasdaq-traded cryptocurrency exchange Coinbase, Inc. In the notice, the SEC informed Coinbase that it preliminarily determined that certain digital assets Coinbase listed on its exchange platform — Coinbase’s staking service Coinbase Earn; Coinbase Prime, an institutional custodial service; and Coinbase Wallet, a consumer-based self-custodial asset wallet — may each be in violation of either the Securities Act of 1933 or the Securities Exchange Act of 1934. For more information about the notice, click here. For more information about Coinbase’s response to the notice, click here.
  • On March 22, the FTC staff requested information on the business practices of cloud computing providers, including issues related to the market power of these companies, impact on competition, and potential security risks. In a request for information, FTC staff seeks information about the competitive dynamics of cloud computing, the extent to which certain segments of the economy rely on cloud service providers, and the security risks associated with the industry’s business practices. In addition to the potential impact on competition and data security, FTC staff also are interested in the impact of cloud computing on specific industries, including health care, finance, transportation, e-commerce, and defense. For more information, click here.
  • On March 21, the CFPB launched an improved survey of credit card issuers that can help consumers and families compare interest rates and other features when shopping for a new credit card. For more information, click here.
  • On March 20, the White House released its annual publication “Economic Report of the President,” authored by the Council of Economic Advisers. Chapter 8 contains a section titled, “The Perceived Appeal of Crypto Assets.” According to the report, “[A]lthough it has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and the recipient,” “crypto assets have brought none of these benefits.” For more information, click here.
  • On March 20, the CFPB announced that approximately 4,394 HMDA filers can now obtain their 2022 Home Mortgage Disclosure Act (HMDA) Modified Loan Application Register (LAR) data on the Federal Financial Institutions Examination Council’s HMDA Platform. The published data contains loan-level information filed by financial institutions and modified to protect consumer privacy. For more information, click here.
  • On March 20, the CFPB published a final rule in the Federal Register to make non-substantive technical corrections and updates to CFPB and other federal agency contact information found within Regulations B, E, F, J, V, X, Z, and DD, including federal agency contact information. For more information, click here.
  • On March 17, the U.S. Department of Housing and Urban Development (HUD) announced that it submitted a final rule titled, “Restoring HUD’s Discriminatory Effects Standard, to the Federal Register for publication. The final rule rescinds HUD’s 2020 rule, governing Fair Housing Act disparate impact claims and restores the 2013 discriminatory effects rule. In the final rule, HUD emphasizes that the 2013 rule more consistently aligns with how the Fair Housing Act (FHA) has been applied in the courts and in front of the agency for more than 50 years, and it more effectively implements the FHA’s broad remedial purpose of eliminating unnecessary discriminatory practices from the housing market. For more information, click here.
  • On March 17, the Office of the Comptroller of the Currency (OCC) released new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations. For more information, click here.
  • On March 16, the FTC announced that it launched an inquiry into the small business credit reporting industry, ordering five firms in that industry to provide the commission with detailed information about their products and processes. For more information, click here.
  • On March 16, the Conference of State Bank Supervisors announced a public comment period for proposed uniform state licensing standards for mortgage companies. Public comments will be accepted at comments@csbs.org until May 15 at 5 p.m. ET. The final requirements will be built into the Nationwide Multistate Licensing System in the future. For more information, click here.

State Activities:

  • On March 27, the California Department of Financial Protection and Innovation (DFPI) issued a warning to student loan borrowers about student debt relief scams. Specifically, DFPI warns borrowers that many companies contacting student loan borrowers that claim to provide services to assist borrowers with managing or reducing their student loan repayments charge a fee for services that federal loan servicers provide for free or that the borrower can complete on his/her own. DFPI reminds borrowers, however, that federal student loan servicers cannot charge borrowers for applying for loan forgiveness, income-driven repayment plans, deferment, forbearance, or for filing any other paperwork. Additionally, DFPI reminds borrowers that federal loan services do not charge application or processing fees to consolidate student loan debt or for the borrower to switch payment plans. In its warning, DFPI also provides a helpful list of ways a borrower can identify a debt relief scam, which include, among other things, being alert when a person or company: (1) sends unsolicited phone calls, emails, or letters in the mail, claiming that the borrower is eligible for student loan forgiveness; (2) requests a borrower’s Federal Student Aid log-in and PIN; (3) demands payment upfront to apply to student loan forgiveness; (4) requires the borrower to sign a contract with the company for their services and demands payment authorization; or (5) uses an email address or website that does not end with “.gov.” For more information, click here.
  • On March 29, the New Mexico Financial Institutions Division of the Regulation and Licensing Department’s (NM FID) new rule on the New Mexico annual percentage rate (NM-APR) will become effective. Previously, New Mexico’s 36% APR cap on loans of $10,000 or less under the Small Loan Act (SLA) and Bank Installment Loan Act (BILA) became effective on January 23. The new rule, however, among other things, excludes charges based solely on a borrower’s individual behavior after the extension of credit that cannot reasonably be predicted at the time of the NM-APR disclosure. For more information, click here.
  • On March 22, Iowa Governor Kim Reynolds signed SF133 into law. The bill provides that the only obligation that a financial institution that purchases retail installment contracts with voluntary debt cancellation coverage has upon prepayment in full is to notify the relevant motor vehicle dealer within 30 days of a payment in full of an installment contract. The bill also provides that the dealer shall determine whether the consumer is entitled to a refund of voluntary debt cancellation coverage and issue the refund within 60 days of notice. For more information, click here.
  • On March 21, Virginia Governor Glen Younkin approved HB1544, which requires that the information statement provided to a consumer include a statement of a customer’s right to receive a free copy of the consumer’s credit report annually from each of the three nationwide consumer reporting agencies. The bill goes into effect on July 1. For more information, click here.
  • On March 20, Florida Governor Ron DeSantis (R-FL) proposed legislation, prohibiting the use of a federally adopted central bank digital currency (CBDC) as money within the state. Specifically, the legislative proposal includes certain prohibitions and protections:
    • Expressly prohibiting the use of a federally adopted CBDC as money within Florida’s Uniform Commercial Code (UCC);
    • Instituting protections against a central global currency by prohibiting any CBDC issued by a foreign reserve or foreign sanctioned central bank;
    • Calling on other states to join Florida in adopting similar prohibitions within their respective UCCs.

For more information, click here.

  • On March 15, North Dakota Governor Doug Burgum signed SB 2119, which revises provisions related to money transmitters. The act outlines provisions related to consistent state licensure, application for licensure, information requirements for certain individuals, and reporting and recordkeeping requirements. For more information, click here.
  • On March 13, North Dakota Governor Doug Burgum signed SB 2090, which, among other things, revises licensing requirements for residential mortgage lenders. The act outlines provisions related to application for licensure; licensing fees; surety bond and minimum net worth requirements; license renewal, expiration, revocation, suspension, and surrender; recordkeeping requirements; prohibited acts and practices; prohibitions on advance fees; and permitted maximum charges for loans and installment payments. For more information, click here.
  • On March 10, the Colorado Department of Regulatory Agencies published a consumer advisory titled, “When Cryptocurrency Exchanges Fail Consumer Beware – Scams Abound.” The advisory discusses the collapse of defunct cryptocurrency exchange FTX and declares that the conditions that led to FTX’s implosion also may act as catalysts for crypto-related fraud schemes that scammers create to “cash in” on persons affected by failed exchanges. For example, one type of fraud scheme that frequently occurs against the backdrop of a failed cryptocurrency exchange is the “recovery scam,” which involves a fraudster who attempts to persuade an aggrieved party that his/her money can be recovered from the failed exchange for a “fee.” For more information, click here.
  • On March 7, the California DFPI filed a notice of proposed rulemaking with the Office of Administrative Law, seeking to add several sections to Title 10, Chapter 3 of the California Code of Regulations relating to the California Consumer Financial Protection Law, the California Financing Law, the California Deferred Deposit Transaction Law, and the California Student Loan Servicing Act. For more information, click here.