Regulatory Enforcement + Compliance

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Yesterday, the Federal Trade Commission (FTC) issued a Supplemental Notice of Proposed Rulemaking, seeking public comment on its proposal to amend the Rule on Impersonation of Government and Businesses (Impersonation Rule or Rule), that is being finalized by the FTC today, to add a prohibition on the impersonation of individuals. The amendment would also extend liability for violations of the Impersonation Rule to parties who provide goods and services with knowledge or reason to know that those goods or services will be used in illegal impersonations. The FTC stated the impetus for the amendment is the surging number of complaints it has received around impersonation fraud, including “deepfakes” generated using artificial intelligence (AI).

On February 13, the Federal Trade Commission (FTC) released a blog post warning companies that it could be deemed an unfair or deceptive practice for a company to adopt more permissive data practices and to only inform consumers of such changes through retroactive amendments to its terms of service or privacy policy.

As federal student loan repayments resume after a three-year pause due to the COVID-19 pandemic, the Consumer Financial Protection Bureau (CFPB) published an Issue Spotlight on student borrowers’ experiences, using consumer complaints to identify emerging problems.

As discussed here, in a recent letter, the Chairman of the National Credit Union Administration (NCUA) outlined the agency’s supervisory priorities for 2024. In this post, we delve deeper into the area of consumer protection oversight.

Recently, Lead Bank and its loan servicer Hyphen, LLC, an online lending platform operating Helix Financial, filed a motion to dismiss a purported class action alleging violations of the Georgia Installment Loan Act (GILA) and Georgia racketeering law arising out of a consumer installment or “payday loan.” Specifically, the plaintiff alleged that the loan agreement between herself and Lead Bank was “nothing more than a façade, and a temporary one at that” in an attempt to evade Georgia’s restrictions on payday lending.

Recently, Arizona, Kentucky, and Hawaii have jumped on the bandwagon to regulate earned wage access (EWA) products and services. Arizona’s proposed bill makes clear that EWA services are not considered to be loans or money transmissions, and voluntary tips or gratuities are not finance charges. It further requires EWA providers to be licensed, provide mandatory disclosures to consumers, and to submit an annual report detailing yearly revenue from EWA products. Kentucky’s legislation also makes clear that EWA services are not consumer loans or deferred deposit transactions, and regulates any consideration or gratuity requested as part of the transaction. Hawaii’s bill amends the interest and usury law by defining “debt,” “finance charge,” and “credit” to include EWA products, and requires “annual percentage rate” to be calculated pursuant to the Truth in Lending Act (TILA). Each proposal is discussed below.

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.

On January 15, the American Arbitration Association (AAA) issued amended Mass Arbitration Supplementary Rules and new Consumer Mass Arbitration and Mediation Fee Schedules (collectively, the New Rules). The New Rules will apply to all mass arbitration cases filed on or after January 15, but not to any mass arbitrations filed prior to that date. The New Rules aim to reduce friction and enhance process efficiency. However, unless the New Rules are supplemented by a well-constructed pre-dispute arbitration agreement, they will not solve the principal problems posed by mass arbitrations.

On January 23, the Chairman of the National Credit Union Administration (NCUA) released a letter outlining its supervisory priorities for the new year. While the organization acknowledged that the credit union system had remained largely stable during 2023, it observed growing signs of financial strain on balance sheets. Specifically, the “rise in interest rate and liquidity risks resulted in an increase in the number of composite CAMELS code 3, 4, and 5 credit unions. Inflation and interest rates are affecting household budgets, which could lead to an increase in credit risk in future quarters.”