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.
Last month, New York Governor Kathy Hochul signed into law Assembly Bill 2672, which both prohibits sellers from charging a credit card surcharge greater than what they are charged by the credit card company and requires sellers to clearly post the price of the credit card surcharge. The law will take effect on February 11, 2024.
On January 17, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a proposed rule with request for public comment to amend exemptions to Regulation Z so the Truth in Lending Act (TILA)/Regulation Z would apply to certain overdraft “credit” provided by insured financial institutions with more than $10 billion in assets, in furtherance of the Bureau’s crusade on “junk fees.” At a highlevel, the CFPB’s proposed rule would provide covered financial institutions with two options for offering overdraft “credit”: (1) a “courtesy” overdraft service with “breakeven” fees exempt from TILA/Regulation Z; or (2) a “covered overdraft credit” line/loan in connection with debit card or routing/account number transactions with “above breakeven” fees subject to TILA/Reg. Z. Under the proposal, an institution subject to the rule would have to provide full TILA disclosures and comply with other substantive TILA requirements for overdraft fees if they exceed costs or a low CFPB safe harbor amount.
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, and requires providers to offer at least one reasonable option for consumers to get EWA proceeds at no cost. Like Nevada, discussed here, the law specifies that EWA products are not loans (including not being subject to the Consumer Finance Act), nor is such activity considered money transmission under Florida law. SB 1146 has been referred to the banking and insurance committee for consideration. If passed, the law would take effect on October 1, 2024.
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 9, the California Department of Financial Protection and Innovation (CA DFPI) announced a consent order with Credova Financial, LLC, (Credova) to resolve allegations that, in violation of the California Consumer Financial Protection Law, the company failed to disclose potential third-party fees to consumers. Pursuant to the settlement, Credova is required to pay a $50,000 penalty and disclose potential third-party convenience fees to consumers in the future.
Late last month, Councilmember Kenyan R. McDuffie introduced B 25-0609, entitled the Protecting Affordable Loans Amendment Act of 2023, that proposes to opt the District of Columbia out of sections 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). But another section of DIDMCA (section 525), permits states to opt out of sections 521-523 via legislation. If the bill passes, the District will join Colorado, discussed here, Iowa and Puerto Rico as the only jurisdictions currently opting out.
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.
On December 19th, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a report highlighting consumers’ experiences with overdraft and nonsufficient funds (NSF) fees. The report found that roughly a quarter of consumers are still being charged these fees despite the CFPB’s hostility towards so called “junk fees,” which has led many banks and credit unions to eliminate such fees. The report further found that many consumers who were charged overdraft and NSF fees had access to an alternative asserted to be cheaper by the CFPB, such as available credit on a credit card.