Photo of Mark Furletti

Mark helps clients navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small business, particularly in connection with credit, deposit, and payments products. He is a trusted advisor, providing practical legal counsel and advice to providers of financial services across numerous industries.

Can digital comparison-shopping operators or lead generators violate the Consumer Financial Protection Act (CFPA) by preferencing products or services based on financial benefit? According to today’s guidance issued by the Consumer Financial Protection Bureau (CFPB or Bureau), the answer to that question is yes. Specifically, according to the CFPB, operators of digital comparison-shopping tools can violate the CFPA’s prohibition on abusive acts or practices by steering consumers to certain products or services based on remuneration. Lead generators can also violate the CFPA if they steer consumers to one financial services provider over another based on compensation received. As is typical for the CFPB today, the Bureau has couched this guidance on its “abusive” authority under Dodd-Frank.

On February 23, the Consumer Financial Protection Bureau (CFPB or Bureau) released an order, dated November 30, 2023, establishing supervisory authority over installment lender World Acceptance Corp. The CFPB found that it had reasonable cause to determine that the conduct of World Acceptance “poses risks to consumers with regard to the offering or provision of consumer financial products or services,” and, therefore, the agency could exercise its supervisory powers over the company under the Consumer Financial Protection Act (CFPA). Notably, this is the CFPB’s first supervisory designation order in a contested matter, andy, as permitted by the Bureau’s amended rules governing this process, the Bureau chose to publicize its decision (and issue a press release about it).

We are pleased to share our annual review of regulatory and legal developments in the consumer financial services industry. With active federal and state legislatures, consumer financial services providers faced a challenging 2023. Courts across the country issued rulings that will have immediate and lasting impacts on the industry. Our team of more than 140 professionals has prepared this concise, yet thorough analysis of the most important issues and trends throughout our industry. We not only examined what happened in 2023, but also what to expect — and how to prepare — for the months ahead.

Yesterday, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a proposed rule with request for public comment to prohibit covered financial institutions from charging nonsufficient funds fees (NSF) for payment transactions that are instantaneously declined. The proposed rule would treat fees for transactions declined in real time to be unlawful under the Consumer Financial Protection Act.

Late last month, the Revenue Based Finance Coalition (RBFC), a trade group of sales-based financing providers, filed a complaint in the U.S. District Court for the Southern District of Florida challenging the Consumer Financial Protection Bureau’s (CFPB or Bureau) final rule under § 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Final Rule). As discussed here, § 1071 amended the Equal Credit Opportunity Act (ECOA) to impose significant data collection and reporting requirements on small business creditors. Specifically, RBFC objects to the CFPB’s characterization of sales-based financing as a form of credit subject to the Final Rule’s collection and reporting requirements.

On January 9, SB 1146, entitled the Earned Wage Access Services Act, was introduced into the Florida Senate. The bill would require earned wage access (EWA) providers to register with the Florida Financial Services Commission. The bill also requires EWA providers to develop procedures for dealing with consumer questions and complaints, requires consumer notifications

On January 10, HB 254, entitled the True Lender Act, was introduced before the Maryland House of Delegates. The Act would amend the Maryland Commercial Law to add an article containing both predominant economic interest and totality of the circumstance tests to determine the “true lender” of a loan. A hearing on HB 254 is scheduled on January 23.

On January 2, New York Governor Kathy Hochul unveiled her 2024 consumer protection agenda, which includes plans to regulate the “buy now, pay later” (BNPL) industry. Specifically, Governor Hochul plans to propose legislation to require BNPL providers to be licensed in the state and to authorize the New York State Department of Financial Services to propose and issue regulations for the industry. According to Governor Hochul, “New Yorkers are increasingly turning to [BNPL] loans as a low-cost alternative to traditional credit products to pay for everyday and big-ticket purchases. This legislation and regulations will establish strong industry protections around disclosure requirements, dispute resolution and credit reporting standards, late fee limits, consumer data privacy, and guidelines to curtail dark patterns and debt accumulation and overextension.”

Washington now joins the list of states that have enacted or proposed legislation adopting so-called anti-evasion provisions, including legislation passed in Minnesota, discussed here, Connecticut, discussed here, Nebraska, discussed here, and proposed in Florida, discussed here. On December 5, HB 1874 was filed, which would amend the Washington Consumer Loan Act (CLA) to adopt both predominant economic interest and totality of the circumstance tests to determine the “true lender” of a loan under the CLA. It also takes aim at the use of voluntary tips, other gratuities or memberships and non-recourse loan programs.