On January 22, New York Attorney General Letitia James announced a significant settlement with Yellowstone Capital of New Jersey and its affiliated companies over allegations of illegal high-interest loans disguised as merchant cash advance (MCA) transactions.
On January 15, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a Compliance Aid to clarify the requirements under the Electronic Fund Transfer Act (EFTA) and Regulation E. Electronic Fund Transfers (EFTs) are defined as “any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account.” The Compliance Aid, presented in a Frequently Asked Questions (FAQs) format, addresses various aspects of EFTs, including coverage, financial institutions’ obligations, and error resolution processes.
As part of a flurry of last minute regulatory activity by the Biden administration’s Consumer Financial Protection Bureau (CFPB or Bureau), on January 15, the CFPB published an advisory opinion in the Federal Register rescinding a previous advisory opinion which the Bureau issued during the first Trump administration in November 2020. The 2020 advisory opinion had described how a specific type of “earned wage” product did not constitute the offering or extension of “credit” under the Truth in Lending Act (TILA) and Regulation Z. The new advisory opinion is effective immediately.
Last week, the Consumer Financial Protection Bureau (CFPB or Bureau) released its latest Supervisory Highlights report, focusing on the use of advanced technologies in credit scoring models. This edition of Supervisory Highlights concerns select examinations of institutions that use credit scoring models, including models built with advanced technology commonly marketed as AI/ML technology, when making credit decisions. The report repeated the CFPB’s previous statements that there is “no ‘advanced technology’ exception” to federal consumer protection laws (which, to our knowledge, no industry participant has suggested to exist) and asserted that financial institutions will need to improve their practices to ensure compliance with the Equal Credit Opportunity Act (ECOA) and Regulation B. This includes actively searching for less discriminatory alternatives, critically evaluating the use of alternative data, and rigorously testing and validating adverse action reasons.
This article was republished on insideARM on January 23, 2025, in their newsletter on January 27, 2025, and was mentioned in this insideARM article on February 3, 2025.
As the Consumer Financial Protection Bureau (CFPB or Bureau) anticipates a shift in its leadership with the incoming administration of President Trump, the Bureau has released a report titled “Strengthening State-Level Consumer Protections.” This report appears to be a strategic move by the CFPB to influence state-level consumer protection laws before the anticipated shift in federal regulatory policy, and the Bureau’s recommendations appear to be items that would need to be the subject of legislation, if they are to occur. As detailed below, the changes advocated by the CFPB would strengthen the position of both state regulators and private plaintiffs in actions against industry participants.
On January 13, the Consumer Financial Protection Bureau (CFPB or Bureau) released a report providing its analysis of the growth and impact of Buy Now, Pay Later (BNPL) loans in the United States since 2019. BNPL loans, typically zero-interest loans repaid in four or fewer installments, have not been widely reported to nationwide consumer reporting companies, creating a lack of data, according to the CFPB. (Most consumer reporting agencies do not offer a readily available mechanism to report BNPL loans.) The stated purpose of the CFPB’s study was to bridge that gap by using a matched sample of BNPL applications and originations from six major BNPL firms along with corresponding de-identified credit records.
Yesterday, the Consumer Financial Protection Bureau (CFPB or Bureau) proposed a new rule aimed at banning certain contractual provisions in agreements for consumer financial products or services. The CFPB’s proposal targets certain terms and conditions sometimes found in so-called contracts of adhesion or standard-form contracts, including waivers of legal rights and protections, contract terms that limit free expression, and other terms that the CFPB believes undermine consumers’ rights and protections. The proposed rule also seeks to codify certain prohibitions under the Federal Trade Commission’s (FTC) Credit Practices Rule.
On December 18, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a circular to “other law enforcement agencies,” urging them to take action against certain credit card practices. The CFPB highlights alleged legal violations by some credit card companies, particularly in relation to the devaluation of rewards points and the clarity of terms and conditions for earning and redeeming rewards.
In this episode of The Consumer Finance Podcast, host Chris Willis, co-leader of Troutman Pepper’s Consumer Financial Services Regulatory practice, is joined by colleagues Mark Furletti, Stephen Piepgrass, Jesse Silverman, and James Stevens. Together, they delve into the anticipated regulatory landscape and legal needs for financial services companies under the upcoming Trump administration. The discussion covers the potential resurgence of new financial products, the impact on M&A activity, the role of state attorneys general, and the future of bank-fintech partnerships. Tune in to gain insights on how to strategically navigate the evolving regulatory environment and leverage opportunities in the financial sector.
In a significant development in the ongoing litigation over the Consumer Financial Protection Bureau’s (CFPB or Bureau) Final Rule on credit card late fees, the U.S. District Court for the Northern District of Texas denied the CFPB’s motions to dismiss the Fort Worth Chamber of Commerce, transfer the case to the District of Columbia, and dissolve the preliminary injunction. This ruling follows the court’s earlier request for further briefing on the issue of associational standing, as discussed in our prior blog post, here.