Photo of Taylor Gess

Taylor Gess

Subscribe to Taylor Gess's Posts

Taylor focuses her practice on providing regulatory advice on matters related to federal and state consumer protection, consumer finance, and payments laws, including those that apply to payment cards, lines of credit, installment loans, electronic payments, online banking, buy-now-pay-later transactions, retail installment contracts, rental-purchase transactions, and small business loans.

Contact:Read more about Taylor Gess

Today, the Consumer Financial Protection Bureau (CFPB or Bureau) published an Issue Spotlight focusing on consumer complaints relating to credit card rewards programs. The report notes that credit card companies often focus marketing efforts on rewards, like cash back and travel, instead of on interest rates and fees. However, the CFPB has previously reported that consumers who carry debt from month to month earn just 27% of rewards at major credit card companies, while paying 94% of the interest and fees that those companies charged. In its analysis of several hundred complaints relating to these rewards programs, the Bureau identified four recurring themes: 1) vague or hidden promotional conditions; 2) devalued rewards; 3) customer service issues that delay or block reward redemption; and 4) issuers unilaterally revoking reward balances.

As discussed here, in March 2023, the California Department of Financial Protection and Innovation (DFPI) proposed new regulations under the California Financing Law that would interpret the definition of “loan” to include “income-based advances” or earned wage access (EWA) products, except those offered by employers. The proposal also sought to require providers of such products to register with the state, and imposed requirements on debt settlement companies and education financing providers.

On April 19, Kansas Governor Laura Kelly signed House Bill (HB) 2560 to regulate earned wage access (EWA) products and services. HB 2560 enacts the Earned Wage Access Services Act that requires EWA providers to be licensed by the state bank commissioner and comply with certain disclosure rules. Kansas follows Nevada, Missouri, and Wisconsin in enacting EWA legislation.

Yesterday, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a procedural rule streamlining the designation proceedings for nonbank supervision based on a particular entity posing “risks to consumers.” As discussed in “Our Take” below, the changes are designed to encourage nonbanks to volunteer to be supervised, while making it easier for the CFPB to impose supervisory oversight when companies do not consent.

Can remittance transfer providers be held liable under the Consumer Financial Protection Act (CFPA) when marketing about the speed and cost of their services? According to a March 27 Circular issued by the Consumer Financial Protection Bureau (CFPB or Bureau), the answer to that question is yes, if the marketing is deceptive. Specifically, according to the CFPB, providers may be liable under the CFPA for deceptive marketing practices if they market: remittance transfers as being delivered within a certain time frame when transfers actually take longer; remittance transfers as “no fee” when in fact the provider charges fees; promotional fees or promotional exchange rates for remittance transfers without sufficiently clarifying when an offer is temporary; and remittance transfers as “free” if they are not in fact free.

Yesterday, three trade organizations filed a complaint in Colorado federal court challenging H.B. 1229, Colorado’s effort to limit interest charges by out-of-state financial institutions, which is set to take effect on July 1, 2024. As discussed here, in June 2023, Colorado passed H.B. 1229, limiting certain charges on consumer loans and simultaneously opting Colorado out of §§ 521-523 of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA). Sections 521-523 of DIDMCA empower state banks, insured state and federal savings associations and state credit unions to charge the interest allowed by the state where they are located, regardless of where the borrower is located and regardless of conflicting state law (i.e., “export” their home state’s interest-rate authority). However, § 525 of DIDMCA enables states to opt out of this rate authority with respect to loans made in the opt-out state.

On February 20, the Wisconsin Senate passed House Bill (HB) 574 to regulate earned wage access (EWA) products and services. HB 574 creates a new chapter to the Wisconsin Statutes that requires EWA providers to be licensed by the Division of Banking and imposes substantive and disclosure rules. HB 574 expressly exempts EWA offered by licensees under the new law from the licensed loan company provisions in Wis. Stat. § 138.09 but does not clearly address whether EWA is covered by the Wisconsin Consumer Act. HB 574 will be sent to Governor Tony Evers for signature.

On March 8, Washington State’s legislature passed a significant amendment (SB 6025) to the Consumer Loan Act (CLA) targeting bank model lending. SB 6025 is an updated version of a prior bill, discussed here. The act awaits Governor Jay Inslee’s signature.

On February 15, Massachusetts became the latest state to introduce legislation to regulate earned wage access (EWA) products and services. House Bill (HB) 4456 would create a new chapter to the Massachusetts Code explicitly stating that EWA services offered under the new chapter are not loans or other form of credit or debt, and voluntary tips or gratuities are not interest or finance charges. It further requires EWA providers to be licensed and provide mandatory disclosures to consumers. The bill is pending before the Joint Financial Services Committee.

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, and, 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).