To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Federal Activities:

• On March 24, the Federal Reserve Board of Governors (Federal Reserve) denied Wyoming-based Custodia Bank’s request for membership in the Federal Reserve System based on four factors:
  • Managerial Factor: Custodia’s risk management and controls relating to compliance with the Bank Secrecy Act (BSA), and U.S. sanctions were insufficient;
  • Financial Factor: Custodia’s long-term viability would be contingent upon the longevity of the digital asset markets, which according to the Financial Stability Oversight Council, “is driven in large part by speculation and sentiment, and is not anchored to a clear economic use case”;
  • Corporate Powers Factor: Custodia’s business model places emphasis on digital asset-related activities that are “novel and unprecedented for state member banks,” and Custodia seeks to engage in “uninsured deposit-taking” — both of which would potentially render Custodia susceptible to runs and contagion; and
  • Convenience and Needs Factor: Under Regulation H, which outlines the requirements that state-chartered banks must adhere to upon becoming members of the Federal Reserve, the Federal Reserve considers the convenience and needs of the community to be served, and Custodia has not demonstrated it can operate in a safe and sound manner.

For more information, click here.

• On March 23, the U.S. Court of Appeals for the Second Circuit held that the Consumer Financial Protection Bureau’s (CFPB) funding structure is constitutional — splitting from the U.S. Court of Appeals for the Fifth Circuit’s decision in Community Financial Services Association of America v. Consumer Financial Protection Bureau, which concluded that Congress violated the Constitution’s appropriations clause when it created a “perpetual self-directed, double-insulated funding structure.” The U.S. Supreme Court will review the Fifth Circuit’s decision next term. For more information, click here.
• On March 23, the U.S. Department of Education announced that it will hold virtual public hearings on April 11-13 to receive stakeholder feedback on potential issues for future rulemaking sessions. Potential topics include third-party servicers and related issues, such as reporting, financial responsibility, compliance, and past performance requirements as a component of institutional eligibility for participation in the Title IV, HEA federal student financial assistance programs under 34 CFR 668.25 and 682.416. For more information, click here.
• On March 23, the Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy published investor alert “Exercise Caution with Crypto Asset Securities,” highlighting four broad points:
  • Companies offering digital assets or related activities (i.e., staking) may not be in compliance with disclosure-related federal securities laws;
  • Digital assets are volatile;
  • The rising popularity of digital assets creates an environment potentially ripe for fraud; and
  • Understanding risk is imperative when investing.

For more information, click here.

• On March 23, the Federal Trade Commission (FTC) issued a notice of proposed rulemaking with the stated goal to make it easier for consumers to cancel recurring subscriptions and memberships. The proposed rules contained a “click-to-cancel” provision, requiring sellers to make it just as easy for consumers to cancel their enrollment as it was to sign up. For more information, click here.
• On March 22, the SEC filed a civil enforcement action against Justin Sun and three of his wholly owned companies: Tron Foundation Limited (Tron), BitTorrent Foundation Ltd. (BitTorrent), and Rainberry, Inc. (formerly BitTorrent). The SEC’s complaint alleged that Sun, through Tron and BitTorrent, offered and sold unregistered “crypto asset securities” Tronix (TRX) and BitTorrent (BTT). Further, the SEC alleged that Sun and his companies engaged in fraudulent “wash trading,” which involves the simultaneous purchase and sale of a particular tradable asset to increase the asset’s perceived trading volume although this type of transaction activity often does not result in change in beneficial ownership of the assets. Lastly, the SEC also charged multiple celebrity influencers with endorsing TRX and BTT without disclosing to their followers that they were compensated by Sun for marketing TRX and BTT. For more information, click here.
• On March 22, the SEC issued a Wells Notice to Nasdaq-traded cryptocurrency exchange Coinbase, Inc. In the notice, the SEC informed Coinbase that it preliminarily determined that certain digital assets Coinbase listed on its exchange platform — Coinbase’s staking service Coinbase Earn; Coinbase Prime, an institutional custodial service; and Coinbase Wallet, a consumer-based self-custodial asset wallet — may each be in violation of either the Securities Act of 1933 or the Securities Exchange Act of 1934. For more information about the notice, click here. For more information about Coinbase’s response to the notice, click here.
• On March 22, the FTC staff requested information on the business practices of cloud computing providers, including issues related to the market power of these companies, impact on competition, and potential security risks. In a request for information, FTC staff seeks information about the competitive dynamics of cloud computing, the extent to which certain segments of the economy rely on cloud service providers, and the security risks associated with the industry’s business practices. In addition to the potential impact on competition and data security, FTC staff also are interested in the impact of cloud computing on specific industries, including health care, finance, transportation, e-commerce, and defense. For more information, click here.
• On March 21, the CFPB launched an improved survey of credit card issuers that can help consumers and families compare interest rates and other features when shopping for a new credit card. For more information, click here.
• On March 20, the White House released its annual publication “Economic Report of the President,” authored by the Council of Economic Advisers. Chapter 8 contains a section titled, “The Perceived Appeal of Crypto Assets.” According to the report, “[A]lthough it has been argued that crypto assets may provide other benefits, such as improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and the recipient,” “crypto assets have brought none of these benefits.” For more information, click here.
• On March 20, the CFPB announced that approximately 4,394 HMDA filers can now obtain their 2022 Home Mortgage Disclosure Act (HMDA) Modified Loan Application Register (LAR) data on the Federal Financial Institutions Examination Council’s HMDA Platform. The published data contains loan-level information filed by financial institutions and modified to protect consumer privacy. For more information, click here.
• On March 20, the CFPB published a final rule in the Federal Register to make non-substantive technical corrections and updates to CFPB and other federal agency contact information found within Regulations B, E, F, J, V, X, Z, and DD, including federal agency contact information. For more information, click here.
• On March 17, the U.S. Department of Housing and Urban Development (HUD) announced that it submitted a final rule titled, “Restoring HUD’s Discriminatory Effects Standard,“ to the Federal Register for publication. The final rule rescinds HUD’s 2020 rule, governing Fair Housing Act disparate impact claims and restores the 2013 discriminatory effects rule. In the final rule, HUD emphasizes that the 2013 rule more consistently aligns with how the Fair Housing Act (FHA) has been applied in the courts and in front of the agency for more than 50 years, and it more effectively implements the FHA’s broad remedial purpose of eliminating unnecessary discriminatory practices from the housing market. For more information, click here.
• On March 17, the Office of the Comptroller of the Currency (OCC) released new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations. For more information, click here.
• On March 16, the FTC announced that it launched an inquiry into the small business credit reporting industry, ordering five firms in that industry to provide the commission with detailed information about their products and processes. For more information, click here.
• On March 16, the Conference of State Bank Supervisors announced a public comment period for proposed uniform state licensing standards for mortgage companies. Public comments will be accepted at comments@csbs.org until May 15 at 5 p.m. ET. The final requirements will be built into the Nationwide Multistate Licensing System in the future. For more information, click here.

State Activities:

• On March 27, the California Department of Financial Protection and Innovation (DFPI) issued a warning to student loan borrowers about student debt relief scams. Specifically, DFPI warns borrowers that many companies contacting student loan borrowers that claim to provide services to assist borrowers with managing or reducing their student loan repayments charge a fee for services that federal loan servicers provide for free or that the borrower can complete on his/her own. DFPI reminds borrowers, however, that federal student loan servicers cannot charge borrowers for applying for loan forgiveness, income-driven repayment plans, deferment, forbearance, or for filing any other paperwork. Additionally, DFPI reminds borrowers that federal loan services do not charge application or processing fees to consolidate student loan debt or for the borrower to switch payment plans. In its warning, DFPI also provides a helpful list of ways a borrower can identify a debt relief scam, which include, among other things, being alert when a person or company: (1) sends unsolicited phone calls, emails, or letters in the mail, claiming that the borrower is eligible for student loan forgiveness; (2) requests a borrower’s Federal Student Aid log-in and PIN; (3) demands payment upfront to apply to student loan forgiveness; (4) requires the borrower to sign a contract with the company for their services and demands payment authorization; or (5) uses an email address or website that does not end with “.gov.” For more information, click here.
• On March 29, the New Mexico Financial Institutions Division of the Regulation and Licensing Department’s (NM FID) new rule on the New Mexico annual percentage rate (NM-APR) will become effective. Previously, New Mexico’s 36% APR cap on loans of $10,000 or less under the Small Loan Act (SLA) and Bank Installment Loan Act (BILA) became effective on January 23. The new rule, however, among other things, excludes charges based solely on a borrower’s individual behavior after the extension of credit that cannot reasonably be predicted at the time of the NM-APR disclosure. For more information, click here.
• On March 22, Iowa Governor Kim Reynolds signed SF133 into law. The bill provides that the only obligation that a financial institution that purchases retail installment contracts with voluntary debt cancellation coverage has upon prepayment in full is to notify the relevant motor vehicle dealer within 30 days of a payment in full of an installment contract. The bill also provides that the dealer shall determine whether the consumer is entitled to a refund of voluntary debt cancellation coverage and issue the refund within 60 days of notice. For more information, click here.
• On March 21, Virginia Governor Glen Younkin approved HB1544, which requires that the information statement provided to a consumer include a statement of a customer’s right to receive a free copy of the consumer’s credit report annually from each of the three nationwide consumer reporting agencies. The bill goes into effect on July 1. For more information, click here.
• On March 20, Florida Governor Ron DeSantis (R-FL) proposed legislation, prohibiting the use of a federally adopted central bank digital currency (CBDC) as money within the state. Specifically, the legislative proposal includes certain prohibitions and protections:
  • Expressly prohibiting the use of a federally adopted CBDC as money within Florida’s Uniform Commercial Code (UCC);
  • Instituting protections against a central global currency by prohibiting any CBDC issued by a foreign reserve or foreign sanctioned central bank;
  • Calling on other states to join Florida in adopting similar prohibitions within their respective UCCs.

For more information, click here.

• On March 15, North Dakota Governor Doug Burgum signed SB 2119, which revises provisions related to money transmitters. The act outlines provisions related to consistent state licensure, application for licensure, information requirements for certain individuals, and reporting and recordkeeping requirements. For more information, click here.
• On March 13, North Dakota Governor Doug Burgum signed SB 2090, which, among other things, revises licensing requirements for residential mortgage lenders. The act outlines provisions related to application for licensure; licensing fees; surety bond and minimum net worth requirements; license renewal, expiration, revocation, suspension, and surrender; recordkeeping requirements; prohibited acts and practices; prohibitions on advance fees; and permitted maximum charges for loans and installment payments. For more information, click here.
• On March 10, the Colorado Department of Regulatory Agencies published a consumer advisory titled, “When Cryptocurrency Exchanges Fail Consumer Beware – Scams Abound.” The advisory discusses the collapse of defunct cryptocurrency exchange FTX and declares that the conditions that led to FTX’s implosion also may act as catalysts for crypto-related fraud schemes that scammers create to “cash in” on persons affected by failed exchanges. For example, one type of fraud scheme that frequently occurs against the backdrop of a failed cryptocurrency exchange is the “recovery scam,” which involves a fraudster who attempts to persuade an aggrieved party that his/her money can be recovered from the failed exchange for a “fee.” For more information, click here.
• On March 7, the California DFPI filed a notice of proposed rulemaking with the Office of Administrative Law, seeking to add several sections to Title 10, Chapter 3 of the California Code of Regulations relating to the California Consumer Financial Protection Law, the California Financing Law, the California Deferred Deposit Transaction Law, and the California Student Loan Servicing Act. For more information, click here.

To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Federal Activities:

• On March 2, Chairman of the House Financial Services Committee Patrick McHenry (R-NC) and Senator Cynthia Lummis (R-WY) issued a letter to the Board of Governors of the Federal Reserve System (Fed), the Office of Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA), voicing their collective concerns on the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121). SAB 121 directed companies that custody digital assets — whether directly or indirectly — to recognize a consumer’s digital assets as a liability and a corresponding offset on their balance sheets. Historically, assets held in a custodial capacity are not reported as either assets or liabilities on the custodian’s balance sheet. The federal agencies that received the letter must provide a response to certain questions by March 16. For more information, click here.

• On March 2, the Consumer Financial Protection Bureau (CFPB) published a new report, analyzing the financial profiles of Buy Now, Pay Later borrowers. While many Buy Now, Pay Later borrowers use the product without noticeable indications of financial stress, the report finds that Buy Now, Pay Later borrowers will more likely become active users of other types of credit products like credit cards, personal loans, and student loans. They also will more likely exhibit measures of financial distress than non-users. For example, Buy Now, Pay Later borrowers are more likely to be highly indebted or have revolving balances or delinquencies on their credit cards compared to consumers who do not use Buy Now, Pay Later products. Buy Now, Pay Later borrowers also are more likely to use high-interest financial services, such as payday loans, pawn loans, and bank account overdrafts. For more information, click here.

• On March 2, the Federal Trade Commission (FTC) issued a proposed order, banning online counseling service BetterHelp, Inc. from sharing consumers’ health data, including sensitive information about mental health challenges, for advertising. The proposed order also requires the company to pay $7.8 million to consumers to settle charges that it revealed consumers’ sensitive data with third parties for advertising after promising to keep the data private. For more information, click here.

• On March 1, Senators Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), and Roger Marshall (R-KS) issued a letter to cryptocurrency exchange Binance and its CEO Changpeng Zhao, alleging that Binance “implemented a series of systems specifically designed to circumvent regulatory oversight and facilitate theft, money laundering, and terrorist financing … .” Critically, the letter requests Binance, among other things, to produce complete copies of all Binance and Binance subsidiary balance sheets from 2017 to the present. For more information, click here.

• On March 1, the CFPB released a new issue spotlight, examining how the financial products used to deliver public benefits, such as Social Security and unemployment compensation, affect individuals’ ability to fully access the assistance provided through those programs. The issue spotlight outlines how governments often choose to deliver public benefits through financial products, particularly prepaid cards, that may subject recipients to high fees and cut into the amount of funds the consumer receives. For more information, click here.

• On March 1, while delivering remarks during an Atlantic Council GeoEconomics Center-hosted event, Under Secretary of Treasury for Domestic Finance Nellie Liang revealed that the Central Bank Digital Currency (CBDC) Working Group — established by President Biden’s 2022 digital asset-related executive order — will begin to meet regularly to discuss possible CBDC and other payment innovations. According to Liang, “114 countries … are exploring a CBDC … [and] 11 countries have fully launched CBDCs … .” For more information, click here.

• On March 1, cryptocurrency exchange Coinbase CEO Brian Armstrong released an op-ed, describing the potential consequences of the United States “falling behind both technologically and politically” by failing to be a leader in the digital asset space. For more information, click here.

• On February 28, the U.S. Department of Justice (DOJ) announced its sixth redlining settlement under its Combatting Redlining Initiative. This most recent case involves an agreement between the DOJ and Ohio-based Park National Bank to resolve allegations that the bank failed to provide mortgage loans by redlining majority-Black and Hispanic neighborhoods in the Columbus, OH area. Under the terms of the proposed consent order, Park National will pay more than $9 million to resolve the allegations that it engaged in a “pattern or practice” of redlining in violation of the Fair Housing Act and the Equal Credit Opportunity Act. For more information, click here.

• On February 28, the FDIC Office of Inspector General issued its annual “Top Management and Performance Challenges Facing the Federal Deposit Insurance Corporation” assessment report. The FDIC ranked “supervising risks posed by digital assets” as the third top challenge and noted that “136 FDIC-insured banks have ongoing or planned digital asset activities.” For more information, click here.

• On February 28, the Financial Crimes Enforcement Network of the U.S. Department of Treasury (FinCEN) issued an alert, warning financial institutions to be vigilant in identifying and reporting check fraud schemes targeting the U.S. Mail after a nationwide surge in such activity. In 2021, FinCEN saw a 23% increase in the number of check fraud-related suspicious activity reports (SARs). This upward trend continued in 2022, when the number of SARs-related check fraud nearly doubled. For more information, click here.

• On February 28, the FTC and CFPB jointly issued a request for information, seeking public comment on how background screening affects individuals pursuing rental housing in the United States. Specifically, the request asks for information on the use of consumer reports and credit scores, criminal and eviction records, and algorithms in the tenant screening process. For more information, click here.

• On February 27, the CFPB permanently banned RMK Financial Corporation, which does business as Majestic Home Loans, from the mortgage lending industry by prohibiting RMK from engaging in any mortgage lending activities or receiving remuneration from mortgage lending. In 2015, the CFPB issued an agency order against RMK for, among other things, sending advertisements to military families that led the recipients to believe the company was affiliated with the U.S. government. Despite the 2015 order’s prohibition on these and other actions, the company engaged in a series of repeat offenses, including disseminating millions of mortgage advertisements to military families that deceptively used fake U.S. Department of Veterans Affairs (VA) seals, the Federal Housing Administration (FHA) logo, and other language or design elements to falsely imply that RMK was affiliated with the government. In addition to the ban, RMK will also pay a $1 million penalty to be deposited into the CFPB’s victims’ relief fund. For more information, click here.

State Activities:

• On March 2, the Wyoming Senate president and the Wyoming House of Representatives speaker signed SF0127. If enacted, the bill (Wyoming Stable Token Act) would establish a Wyoming stable token commission with authority to issue Wyoming stable tokens and retain funds received for issuance of such tokens in a Wyoming stable token trust account to support redemption of Wyoming stable tokens. Notably, the bill would require the commission to maintain 100% of the notional value of all outstanding issued Wyoming stable tokens in the Wyoming stable token trust account. For more information, click here.

• On March 2, New York Attorney General Letitia James issued new proposed rules designed to protect consumers and small businesses from corporate profiteering. The rules would enhance the enforcement of the state’s current price gouging laws, making it easier to investigate and combat price gouging by setting clear guidelines against price gouging during emergencies. The state’s current price gouging law prevents companies in any stage of the supply chain from capitalizing on a market disruption to increase profits for vital and necessary goods and services. The state’s legislature amended the law in 2020 to imbue the AG with rulemaking authority. The AG initiated the first-ever price gouging rulemaking process this month, and the proposed rules include, among other things, actions to (1) clarify that a price increase of more than 10% during an abnormal market disruption may constitute price gouging; (2) prohibit corporations with large market shares from increasing profit margins during abnormal market disruptions; (3) provide guidelines for companies that rely on dynamic pricing; (4) provide protection for products or services introduced after a market disruption; and (5) clarify what costs a company may claim when setting prices. For more information, click here.

• On February 28, the California Department of Financial Protection and Innovation (DFPI) announced that it entered into a consent order with an unlicensed Orange County student debt relief company and its owner. The announcement comes as a part of DFPI’s continuing efforts to prevent student loan debt relief companies from engaging in operations that violate the state’s Consumer Financial Protection Law and the Student Loan Service Act. According to DFPI Commissioner Clothilde Hewlett, “These so-called debt relief companies are preying upon the nearly 4 million California consumers with student loans” during a time when there is immense uncertainty surrounding the Biden debt relief plan. The February 28 consent order resolves claims that the Orange County student debt relief company advertised and acquired customers via unsolicited phone calls and falsely represented to borrowers that the company was a part of, or affiliated with, an official government agency. DFPI ordered the company to desist and refrain from unlicensed student loan debt relief servicing and refrain from engaging in unlawful, deceptive, and abusive student loan debt relief practices. Additionally, the order required the company to rescind all debt relief, debt management, or debt consulting service agreements, and provide refunds to California consumers. For more information, click here.

• On February 28, DFPI issued guidance regarding remote work, as it pertains to California’s Residential Mortgage Lending Act (CRMLA), after discontinuing the COVID-19 state of emergency. The CRMLA does not expressly prohibit employees of a licensee from working at a remote location. Rather, a licensee may authorize an employee to perform limited functions at a remote location not considered a branch office, as long as the location does not have the indicia of a branch office and is not advertised to the public as a business location. Where a mortgage loan originator is working remotely, a branch manager is required to continue to supervise the employee. Under certain CRMLA provisions, DFPI must examine the supervisory activities of a branch manager to ensure that the manager adequately supervises each mortgage loan originator and employee regardless of whether they work at a branch office or remote location. As a part of the guidance, DFPI provides a list of several items it will consider when determining whether a location is adequately supervised. For more information, click here.

• On February 27, Wyoming Governor Mark Gordon signed HB0284 into law, which will take effect July 1. The bill subsumes debt buyers into the definition of “collection agency,” subjecting debt buyers to regulation by the state’s Collection Agency Board. Accordingly, debt buyers will be required to obtain licenses from the board to conduct collections or act as a debt collector. A “debt buyer” is defined a person who is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes. The act will not affect the validity of any civil action or arbitration filed or commenced by a debt buyer, or any judgment entered in favor of a debt buyer, before the law takes effect. For more information, click here.

To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Federal Activities:

• On March 2, Chairman of the House Financial Services Committee Patrick McHenry (R-NC) and Senator Cynthia Lummis (R-WY) issued a letter to the Board of Governors of the Federal Reserve System (Fed), the Office of Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA), voicing their collective concerns on the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121). SAB 121 directed companies that custody digital assets — whether directly or indirectly — to recognize a consumer’s digital assets as a liability and a corresponding offset on their balance sheets. Historically, assets held in a custodial capacity are not reported as either assets or liabilities on the custodian’s balance sheet. The federal agencies that received the letter must provide a response to certain questions by March 16. For more information, click here.
• On March 2, the Consumer Financial Protection Bureau (CFPB) published a new report, analyzing the financial profiles of Buy Now, Pay Later borrowers. While many Buy Now, Pay Later borrowers use the product without noticeable indications of financial stress, the report finds that Buy Now, Pay Later borrowers will more likely become active users of other types of credit products like credit cards, personal loans, and student loans. They also will more likely exhibit measures of financial distress than non-users. For example, Buy Now, Pay Later borrowers are more likely to be highly indebted or have revolving balances or delinquencies on their credit cards compared to consumers who do not use Buy Now, Pay Later products. Buy Now, Pay Later borrowers also are more likely to use high-interest financial services, such as payday loans, pawn loans, and bank account overdrafts. For more information, click here.
• On March 2, the Federal Trade Commission (FTC) issued a proposed order, banning online counseling service BetterHelp, Inc. from sharing consumers’ health data, including sensitive information about mental health challenges, for advertising. The proposed order also requires the company to pay $7.8 million to consumers to settle charges that it revealed consumers’ sensitive data with third parties for advertising after promising to keep the data private. For more information, click here.
• On March 1, Senators Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), and Roger Marshall (R-KS) issued a letter to cryptocurrency exchange Binance and its CEO Changpeng Zhao, alleging that Binance “implemented a series of systems specifically designed to circumvent regulatory oversight and facilitate theft, money laundering, and terrorist financing … .” Critically, the letter requests Binance, among other things, to produce complete copies of all Binance and Binance subsidiary balance sheets from 2017 to the present. For more information, click here.
• On March 1, the CFPB released a new issue spotlight, examining how the financial products used to deliver public benefits, such as Social Security and unemployment compensation, affect individuals’ ability to fully access the assistance provided through those programs. The issue spotlight outlines how governments often choose to deliver public benefits through financial products, particularly prepaid cards, that may subject recipients to high fees and cut into the amount of funds the consumer receives. For more information, click here.
• On March 1, while delivering remarks during an Atlantic Council GeoEconomics Center-hosted event, Under Secretary of Treasury for Domestic Finance Nellie Liang revealed that the Central Bank Digital Currency (CBDC) Working Group — established by President Biden’s 2022 digital asset-related executive order — will begin to meet regularly to discuss possible CBDC and other payment innovations. According to Liang, “114 countries … are exploring a CBDC … [and] 11 countries have fully launched CBDCs … .” For more information, click here.
• On March 1, cryptocurrency exchange Coinbase CEO Brian Armstrong released an op-ed, describing the potential consequences of the United States “falling behind both technologically and politically” by failing to be a leader in the digital asset space. For more information, click here.
• On February 28, the U.S. Department of Justice (DOJ) announced its sixth redlining settlement under its Combatting Redlining Initiative. This most recent case involves an agreement between the DOJ and Ohio-based Park National Bank to resolve allegations that the bank failed to provide mortgage loans by redlining majority-Black and Hispanic neighborhoods in the Columbus, OH area. Under the terms of the proposed consent order, Park National will pay more than $9 million to resolve the allegations that it engaged in a “pattern or practice” of redlining in violation of the Fair Housing Act and the Equal Credit Opportunity Act. For more information, click here.
• On February 28, the FDIC Office of Inspector General issued its annual “Top Management and Performance Challenges Facing the Federal Deposit Insurance Corporation” assessment report. The FDIC ranked “supervising risks posed by digital assets” as the third top challenge and noted that “136 FDIC-insured banks have ongoing or planned digital asset activities.” For more information, click here.
• On February 28, the Financial Crimes Enforcement Network of the U.S. Department of Treasury (FinCEN) issued an alert, warning financial institutions to be vigilant in identifying and reporting check fraud schemes targeting the U.S. Mail after a nationwide surge in such activity. In 2021, FinCEN saw a 23% increase in the number of check fraud-related suspicious activity reports (SARs). This upward trend continued in 2022, when the number of SARs-related check fraud nearly doubled. For more information, click here.
• On February 28, the FTC and CFPB jointly issued a request for information, seeking public comment on how background screening affects individuals pursuing rental housing in the United States. Specifically, the request asks for information on the use of consumer reports and credit scores, criminal and eviction records, and algorithms in the tenant screening process. For more information, click here.
• On February 27, the CFPB permanently banned RMK Financial Corporation, which does business as Majestic Home Loans, from the mortgage lending industry by prohibiting RMK from engaging in any mortgage lending activities or receiving remuneration from mortgage lending. In 2015, the CFPB issued an agency order against RMK for, among other things, sending advertisements to military families that led the recipients to believe the company was affiliated with the U.S. government. Despite the 2015 order’s prohibition on these and other actions, the company engaged in a series of repeat offenses, including disseminating millions of mortgage advertisements to military families that deceptively used fake U.S. Department of Veterans Affairs (VA) seals, the Federal Housing Administration (FHA) logo, and other language or design elements to falsely imply that RMK was affiliated with the government. In addition to the ban, RMK will also pay a $1 million penalty to be deposited into the CFPB’s victims’ relief fund. For more information, click here.

State Activities:

• On March 2, the Wyoming Senate president and the Wyoming House of Representatives speaker signed SF0127. If enacted, the bill (Wyoming Stable Token Act) would establish a Wyoming stable token commission with authority to issue Wyoming stable tokens and retain funds received for issuance of such tokens in a Wyoming stable token trust account to support redemption of Wyoming stable tokens. Notably, the bill would require the commission to maintain 100% of the notional value of all outstanding issued Wyoming stable tokens in the Wyoming stable token trust account. For more information, click here.
• On March 2, New York Attorney General Letitia James issued new proposed rules designed to protect consumers and small businesses from corporate profiteering. The rules would enhance the enforcement of the state’s current price gouging laws, making it easier to investigate and combat price gouging by setting clear guidelines against price gouging during emergencies. The state’s current price gouging law prevents companies in any stage of the supply chain from capitalizing on a market disruption to increase profits for vital and necessary goods and services. The state’s legislature amended the law in 2020 to imbue the AG with rulemaking authority. The AG initiated the first-ever price gouging rulemaking process this month, and the proposed rules include, among other things, actions to (1) clarify that a price increase of more than 10% during an abnormal market disruption may constitute price gouging; (2) prohibit corporations with large market shares from increasing profit margins during abnormal market disruptions; (3) provide guidelines for companies that rely on dynamic pricing; (4) provide protection for products or services introduced after a market disruption; and (5) clarify what costs a company may claim when setting prices. For more information, click here.
• On February 28, the California Department of Financial Protection and Innovation (DFPI) announced that it entered into a consent order with an unlicensed Orange County student debt relief company and its owner. The announcement comes as a part of DFPI’s continuing efforts to prevent student loan debt relief companies from engaging in operations that violate the state’s Consumer Financial Protection Law and the Student Loan Service Act. According to DFPI Commissioner Clothilde Hewlett, “These so-called debt relief companies are preying upon the nearly 4 million California consumers with student loans” during a time when there is immense uncertainty surrounding the Biden debt relief plan. The February 28 consent order resolves claims that the Orange County student debt relief company advertised and acquired customers via unsolicited phone calls and falsely represented to borrowers that the company was a part of, or affiliated with, an official government agency. DFPI ordered the company to desist and refrain from unlicensed student loan debt relief servicing and refrain from engaging in unlawful, deceptive, and abusive student loan debt relief practices. Additionally, the order required the company to rescind all debt relief, debt management, or debt consulting service agreements, and provide refunds to California consumers. For more information, click here.
• On February 28, DFPI issued guidance regarding remote work, as it pertains to California’s Residential Mortgage Lending Act (CRMLA), after discontinuing the COVID-19 state of emergency. The CRMLA does not expressly prohibit employees of a licensee from working at a remote location. Rather, a licensee may authorize an employee to perform limited functions at a remote location not considered a branch office, as long as the location does not have the indicia of a branch office and is not advertised to the public as a business location. Where a mortgage loan originator is working remotely, a branch manager is required to continue to supervise the employee. Under certain CRMLA provisions, DFPI must examine the supervisory activities of a branch manager to ensure that the manager adequately supervises each mortgage loan originator and employee regardless of whether they work at a branch office or remote location. As a part of the guidance, DFPI provides a list of several items it will consider when determining whether a location is adequately supervised. For more information, click here.
• On February 27, Wyoming Governor Mark Gordon signed HB0284 into law, which will take effect July 1. The bill subsumes debt buyers into the definition of “collection agency,” subjecting debt buyers to regulation by the state’s Collection Agency Board. Accordingly, debt buyers will be required to obtain licenses from the board to conduct collections or act as a debt collector. A “debt buyer” is defined a person who is regularly engaged in the business of purchasing charged-off consumer debt for collection purposes. The act will not affect the validity of any civil action or arbitration filed or commenced by a debt buyer, or any judgment entered in favor of a debt buyer, before the law takes effect. For more information, click here.

To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Federal Activities:

• On February 25, during the G20 Finance Ministers and Central Bank Governors Meeting in Bengaluru, India, India announced that a global crypto-regulatory framework is forthcoming, which will be premised on a synthesis paper expected to be jointly submitted by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) to India’s G20 presidency in September. For more information, click here.

• On February 25, during an interview with Reuters at the G20 Finance Ministers and Central Bank Governors Meeting in Bengaluru, India, U.S. Treasury Secretary Janet Yellen revealed that the United States is not suggesting an “outright [ban] of crypto activities,” and it is “critical to put in place a strong regulatory framework.” For more information, click here.

• On February 24, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of Comptroller of the Currency (OCC) conveyed in the “2022 Shared National Credit (SNC) Report” that credit quality associated with large, syndicated bank loans improved in 2022, but noted the results do not fully reflect increasing interest rates and softening economic conditions that began to impact borrowers in the second half of 2022. Overall, the report found that credit risks for syndicated loans — large loans originated by multiple banks — were moderate at the end of the review period. While risks to borrowers impacted by COVID-19 have declined, they remain high for leveraged loans, as well as the entertainment, recreation, and transportation services industries. For more information, click here.

• On February 23, the Consumer Financial Protection Bureau (CFPB) took action against a web of corporate entities for violating the financial rights of military families and other consumers in providing auto title loans. The CFPB found that the entities violated the Military Lending Act by extending prohibited title loans to military families and, oftentimes, by charging nearly three times over the 36% annual interest rate cap. The CFPB ordered the company to pay more than $5 million in consumer relief and a $10 million civil money penalty. For more information, click here.

• On February 23, Board of Governors of the Federal Reserve System, the FDIC, and the OCC issued a joint statement, highlighting the purported liquidity risks associated with engaging crypto-asset sector participants that utilize cryptocurrency as a source of funding. For more information, click here.

• On February 23, the International Monetary Fund (IMF) discussed its white paper Elements of Effective Policies for Crypto Assets, which examines the purported benefits and risks of crypto-assets and possible policy solutions through a nine-element framework:

• Safeguard monetary sovereignty and stability by strengthening monetary policy frameworks and do not grant crypto-assets official currency or legal tender status.
• Guard against excessive capital flow volatility and maintain effectiveness of capital flow management measures.
• Analyze and disclose fiscal risks and adopt unambiguous tax treatment of crypto-assets.
• Establish legal certainty of crypto-assets and address legal risks.
• Develop and enforce prudential, conduct, and oversight requirements to all crypto-market actors.
• Establish a joint monitoring framework across different domestic agencies and authorities.
• Establish international collaborative arrangements to enhance supervision and enforcement of crypto-asset regulations.
• Monitor the impact of crypto-assets on the stability of the international monetary system.
• Strengthen global cooperation to develop digital infrastructures and alternative solutions for cross-border payments and finance.

For more information, click here.

• On February 22, the Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), announced a 30-basis point reduction to the annual mortgage insurance premiums (annual MIP) charged to homebuyers who obtain an FHA-insured mortgage. The premium will be reduced from 0.85% to 0.55% for most homebuyers seeking an FHA-insured mortgage, which could mean an estimated savings of $678 million for American families in aggregate by the end of 2023 alone. For more information, click here.

• On February 21, U.S. House of Representatives Majority Whip Tom Emmer (R-MN) introduced a bill, prohibiting the Federal Reserve from issuing a retail central bank digital currency (CBDC) directly to the American public. The bill — the CBDC Anti-Surveillance Act — shares similarities to a prior version introduced by Emmer in 2022. However, the updated version provides additional protections designed to prevent the Federal Reserve from issuing a retail CBDC by prohibiting both the Board of Governors and the Federal Open Market Committee from using “any central bank digital currency to implement monetary policy.” For more information, click here.

• On February 21, the FDIC, the Board of Governors of the Federal Reserve System, and the OCC published proposed regulatory reporting changes in the Federal Register for public comment. The proposed revisions to the reporting forms and instructions for the Call Reports and the FFIEC 002 relate primarily to the statutorily mandated review of the Call Reports. Section 604 of the Financial Services Regulatory Relief Act of 2006 requires that the agencies review information collected in the Call Reports to reduce or eliminate any requirement to file certain information or schedules if the continued collection of such information or schedules is no longer necessary or appropriate. The changes to eliminate and consolidate items in the Call Reports included in the attached proposal resulted from the agencies’ evaluation of user survey responses, covering all the Call Report schedules, similar to the group of surveys the agencies conducted as part of the previous statutorily mandated review. For more information, click here.

• On February 17, the FTC launched a new Office of Technology that will strengthen the FTC’s ability to keep pace with technological challenges in the digital marketplace by supporting the agency’s law enforcement and policy work. The Office of Technology will include dedicated staff and resources and will be headed by Chief Technology Officer Stephanie T. Nguyen. For more information, click here.

• On February 17, the FTC sued to stop an interconnected web of operations responsible for delivering tens of millions of unwanted Voice Over Internet Protocol and ringless voicemail phony debt service robocalls to consumers nationwide. The Department of Justice filed the complaint in federal court on the FTC’s behalf. For more information, click here.

• On February 17, the Federal Reserve updated sections of the Bank Holding Company Supervision Manual. Some changes include updates to sections on the supervision of savings and loan holdings companies; supervision of holding companies with less than $10 billion in total consolidated assets; liquidity planning and positions applicable to large financial institutions; holding company ratings applicability and inspection frequency; supervision of subsidiaries related to nondeposit investment products; control and ownership of bank holding company formations; asset securitization risk management and internal controls; retail-credit classification; supervision of savings and loan holding companies; and Bank Holding Company Act exemptions. For more information, click here.

• On February 16, the OCC issued the “Change in Bank Control” booklet of the Comptroller’s Licensing Manual, which replaces the booklet of the same title issued in September 2017. For more information, click here.

• On February 14, the Department of Veterans Affairs announced a funding fee charge update for loans closed on or after April 7. The funding fees are charged on VA transactions involving a home loan where a borrower does not qualify for a fee waiver. For more information, click here.

State Activities:

• On February 23, the Montana Senate passed SB 178 to help protect the rights of “digital asset mining businesses” that operate within the state of Montana. If the governor executes the bill, it would prohibit governmental entities from imposing arbitrary restrictions or taxes on digital asset mining businesses. Further, the bill would expressly prohibit the creation of a rate classification for digital asset mining businesses that creates “unduly discriminatory rates” for the use of electricity. For more information, click here.

• On February 22, New York attorney general’s office filed a civil enforcement action against Hong Kong-based cryptocurrency exchange CoinEx for allegedly selling commodities and securities in the form of virtual currencies without first registering with the New York AGs’ office as a commodity broker-dealer or a securities broker-dealer. Notably, in its complaint, the New York AGs’ office characterized the following cryptocurrencies as both securities and commodities: “AMP, LBC, LUNA, and RLY.” For more information, click here.

• On February 21, the New York Department of Financial Services (NYDFS) announced its enhanced ability to detect fraud and other illegal activity among New York state-regulated entities engaged in virtual currency through new insider trading and market manipulation risk monitoring tools. For more information, click here.

• On February 16, Massachusetts AG Andrea Joy Campbell announced a $2.5 million settlement with a Massachusetts-based company, resolving allegations that the company engaged in unfair, deceptive, and abusive debt collection practices in violation of the state consumer law and debt collection regulations. More specifically, the assurance of discontinuance (AOD) alleged that the company sent “Seriously Past Due” and “Final Demand” letters to consumers who failed to comply with Massachusetts regulation or otherwise violated the law by, among other things, (1) not including mandatory language informing consumers of their right to stop the company from placing debt collection calls to their place of employment; (2) including misleading threats, indicating that the company would use a debt collection agency or attorney to pursue the debt if not paid; (3) bringing lawsuits against consumers in a forum inconvenient for the vast majority of its consumers, which allowed the company to obtain default judgments against the consumers who could not get to the forum to defend the action; and (4) making false and misleading representations about the extent or amount of their debts. The AOD also alleged the company violated MassHealth regulations by, for example, charging the full value of equipment to MassHealth members, even when MassHealth had already paid part of the equipment balance. Under the terms of the settlement, the company must vacate every judgment it obtained against consumers in the Leominster District Court (the improper forum in many instances), subject to certain conditions, in addition to paying the $500,000 to the state. An estimated $2.1 million worth of judgments are expected to be vacated. For more information, click here.

To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Federal Activities:

• On January 2, the Consumer Financial Protection Bureau (CFPB) released an annual report that details improvements and deficiencies in the nationwide consumer reporting agencies’ responses to consumer complaints transmitted by the CFPB. The report includes considerations for the nationwide consumer reporting companies to improve compliance with consumer financial protection laws. For more information, click here.
• On December 27, 2022, investors of Gemini’s interest-bearing crypto deposit product Gemini Earn filed a class-action lawsuit against Gemini and its founders Tyler and Cameron Winklevoss, alleging Gemini failed to register the Gemini Earn product as a security in violation of the Securities Exchange Act, and Gemini fraudulently misrepresented pertinent information relating to the Gemini Earn product. In November 2022, Gemini announced its decision to pause consumer withdrawals on its Gemini Earn product. Notably, through a lending partnership with now-bankrupt crypto brokerage firm Genesis Global Capital LLC, the complaint alleges Genesis entrusted all “Gemini Earn investors’ crypto assets” to Genesis. For more information, click here.
• On December 22, 2022, the CFPB issued an order against an international remittance company for multiple violations of the requirements governing electronic money transfers, including failing to refund customers after the company made money transfer errors. The CFPB found the company failed to comply with many Electronic Fund Transfer Act requirements, including failing to provide accurate disclosures to senders. The agency order requires the company to bring its business practices into compliance with the law, to reimburse harmed consumers, and to pay a $700,000 penalty. For more information, click here.
• On December 22, 2022, the Federal Reserve Bank of Boston (Boston Fed) and the Massachusetts Institute of Technology (MIT) announced the conclusion of Project Hamilton — a two-year collaborative project that analyzed the technical aspects of a hypothetical U.S. central bank digital currency (CBDC). According to Boston Fed Executive Vice President Jim Cunha, Project Hamilton focused on better understanding the capabilities and limitations of different technologies potentially used to manage and transfer CBDCs. For more information, click here.
• On December 21, 2022, the Federal Reserve Board issued technical updates to its policy governing the intraday credit provision in accounts at Federal Reserve banks. In particular, the updates include a new rule, establishing settlement times for debits and credits to institutions’ Federal Reserve accounts for certain transactions. The updates streamline the settlement process and shorten the time needed for debits and credits to settle. For more information, click here.

State Activities:

• On December 30, 2022 former District of Columbia Attorney General Karl Racine secured a $3.5 million settlement from Grubhub Holdings, Inc. and Grubhub, Inc. (Grubhub) for unlawfully charging customers hidden fees and using deceptive marketing tactics to increase its profits. The AG sued Grubhub in March 2022, alleging violations of D.C.’s Consumer Protection and Procedures Act. The settlement includes an $800,000 civil penalty. Additionally, Grubhub must take certain actions to prevent any future consumer law violations, including prominently displaying a disclosure that additional fees may apply at checkout and itemizing each fee charged to a consumer. For more information, click here.
• On December 28, 2022 the New York Department of Financial Services (DFS) released its revised proposed amendments to 23 NYCRR 1 — the state’s debt collection regulation. Initially proposed in late October 2022, the amendments intend to change several provisions of the current regulation related to initial disclosure requirements, disclosures pertaining to the statute of limitations, substantiation requirements, and telephone and electronic communications. The revised proposed amendments include, among others:
  • A prohibition against excessively communicating or attempting to communicate with a consumer. Also, a collector communicating by phone is presumed to comply with the prohibition if the collector makes no more than one completed call and three attempted calls to a consumer per seven-day period per alleged debt.
  • A requirement that within five days of an initial consumer communication about the collection of any debt, the collector must provide the consumer clear and conspicuous written notification of information about the debt, such as: (1) validation information mandated by Regulation F (with exceptions), (2) the reference date used by the collector to determine the itemization date, and (3) the account number (for revolving or open-end credit accounts). The collector must also provide notice that the consumer has the right to dispute the validity of the date, along with instructions for how the consumer may do so.
  • A requirement that a collector clearly and conspicuously include in all consumer communications a disclosure notice that the statute of limitations on the debt is or may be expired, and, among other things, notify the consumer that suing on an expired debt is a Fair Debt Collection Practices Act violation.

DFS also released a copy of its assessment of the initial round of public comments, and the comment period for the most recent amendments is open until February 13. For more information, click here.

• From December 27 through December 30, 2022, the California Department of Financial Protection and Innovation (DFPI) issued 32 separate consumer alerts, concerning certain crypto brokers and websites that “appear to be engaged in fraud.” The DFPI released the consumer alerts in response to complaints it received from retail investors who alleged they were victims of various crypto investment scams that resulted in individual consumer losses of $2,000 to as much as $1.2 million. The consumer complaints received by the DFPI contained allegations primarily related to pig-butchering scams, which involve an individual creating a fake identity online to build fake relationships, or the advance fee scam, which entails a fraudster requesting a large amount of money from the consumer to process fake withdrawals from the fraudster’s scam site. For more information, click here.

To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Federal Activities:

• On December 8, the Office of the Comptroller of Currency (OCC) released its Semiannual Risk Perspective for Fall 2022, which discusses major risk themes facing the federal banking system. In its report, the OCC categorized “crypto-assets” as an “emerging risk” for a variety of reasons, including “high volatility among crypto-assets, high-risk lending and leverage within crypto-asset markets, high interconnectedness and concentration within the crypto industry, and a lack of consistent or comprehensive regulation for certain crypto-asset entities.” The OCC noted that it is primarily concerned with whether banks are integrating cryptocurrencies into their business models in a “safe, sound, and fair manner.” For more information, click here.
• On December 7, Senators Elizabeth Warren (D-MA) and Senator Tina Smith (D-MN) issued a letter to several federal regulators — Federal Reserve Chairman Jerome Powell, Federal Deposit Insurance Corporation Acting Chair Martin J. Gruenberg, and OCC Acting Comptroller Michael J. Hsu — inquiring about the U.S. banking system’s exposure to the crypto industry. Among other things, the letter discusses Alameda Research, a defunct crypto trading firm and sister-company of bankrupt cryptocurrency exchange FTX, and its $11.5 million investment in Washington-based bank Moonstone Bank. Alameda’s investment in Moonstone constituted “more than double the bank’s worth” at the time the investment was consummated. The letter posits that cryptocurrency consumer deposits accounted for almost 90% of overall deposit base (a total of $11.9 billion) for a bank comparable in size to Moonstone. To better understand the full extent by which crypto has become integrated into the U.S. banking system, the letter requires the federal regulator addressees to submit responses to certain questions by December 21. Notably, one of the questions posed by Senator Warren and Senator Smith probes whether Alameda’s investment in Moonstone includes “FTX customer funds” or “assets received from sources that did not meet the Know Your Customer (KYC) guidelines.” For more information, click here.
• On December 7, the Consumer Financial Protection Bureau (CFPB) released research, revealing that Reserve and National Guard members called to active duty are paying an extra $9 million in interest every year because they are not always receiving the benefit of their right-to-rate reductions under the Servicemembers Civil Relief Act (SCRA). The SCRA gives active duty servicemembers the right to request interest rate reductions on outstanding loans during the time they are activated and for an additional year in the case of mortgages. For more information, click here.
• On December 7, the CFPB updated state laws on lending to businesses. Recently, a number of states have enacted laws to require improved disclosure of information in commercial financing transactions. This can include, for example, loans to small businesses. For more information, click here.
• On December 7, unknown sources close to Senator Elizabeth Warren (D-MA) revealed that she is working on a cryptocurrency bill that will empower the Securities and Exchange Commission (SEC) to exclusively govern the cryptocurrency industry. Still in its infancy, this bill appears to be primarily focused on addressing issues that have recently become amplified in the wake of the implosion of FTX: (1) capital requirements; (2) audited financial statements; and (3) commingling of customer funds. For more information, click here.
• On December 6, while delivering remarks at the ABA Financial Crimes Enforcement Conference, Financial Crimes Enforcement Network (FinCEN) Acting Director Himamauli Das disclosed that FinCEN is taking a close look at decentralized finance (DeFi) and “its potential to reduce or eliminate the role of financial intermediaries” who currently assist FinCEN with its AML/CTF efforts through suspicious activity reporting required by the Bank Secrecy Act. Considering DeFi’s capacity to disintermediate, FinCEN is reviewing its current money services business framework to determine whether additional regulations or guidance is needed to combat the erosion of financial surveillance. For more information, click here.
• On December 6, the Federal Reserve (Fed) announced its formation of an industry working group to establish voluntary principles for a consistent end-user experience for solutions leveraging the Fed’s request for payment (RFP) solution, which will enable financial institutions to build instant bill pay services to improve consumer and business cash flow management. The RFP industry working group is comprised of noteworthy U.S. financial institutions and corporations. For more information, click here.
• On December 6, the CFPB issued its Semi-Annual Report to Congress for the period beginning October 1, 2021 and ending March 31, 2022. For more information, click here.
• On December 6, Fannie Mae (FNMA/OTCQB) announced enhancements to its automated underwriting system designed to responsibly expand eligibility and further simplify the borrowing process for loans where homebuyers do not have a credit score. For more information, click here.
• On December 5, Senators Elizabeth Warren (D-MA), John Kennedy (R-LA), and Roger Marshall (R-KS) issued a letter to Silvergate Bank, inquiring into its relationship with FTX, especially since FTX’s sister-company Alameda Research maintained a bank account at Silvergate. FTX ex-CEO Sam Bankman-Fried recently conceded that FTX did not originally have a bank account of its own. Therefore, to facilitate consumer purchases of cryptocurrency on its exchange platform, FTX required consumers to wire money to Alameda’s bank account with Silvergate. The letter primarily takes issue with Silvergate’s role in the transfer of FTX consumer funds to Alameda, but it also criticizes Silvergate for failing to uphold its AML and SAR filing duties under the Bank Secrecy Act. Additionally, the letter requires Silvergate to provide responses to certain questions by December 19. Notably, one of the questions probes whether Silvergate’s AML compliance program has ever undergone an independent audit. For more information, click here.
• On December 2, the U.S. Department of Education issued a letter, informing guaranty agencies of their obligations regarding the Federal Family Education Loan (FFEL) Program for loans in default according to the Fresh Start Initiative. For more information, click here.
• On December 2, the Federal Reserve Board finalized clarifying and technical updates to its policy governing the provision of intraday credit to healthy depository institutions with accounts at the Federal Reserve Banks. The updates expand access to collateralized intraday credit under the Policy on Payment System Risk (known as PSR policy), while providing greater clarity to institutions that streamline administrative requirements and support the launch of the FedNow℠ The final updates are substantially similar to the proposal issued in May 2021. For more information, click here.
• On December 1, the Cato Institute released an article, discussing the launch of Project Hamilton, the Federal Reserve of Boston’s (Boston Fed) 12-week central bank digital currency (CBDC) pilot, and the Boston Fed’s decision to engage certain private financial institutions to research feasible CBDC implementation strategies. Numerous members of Congress believe a conflict of interest between the Boston Fed and the private sector exists since Project Hamilton, although touted as a collaborative research project, could potentially act as a CBDC incubator and provide an unfair competitive advantage to Project Hamilton’s private market participants. For more information, click here.

State Activities:

• On December 8, New York Governor Kathy Hochul announced a report from the Department of Financial Services (DFS), highlighting racial disparities in mortgage lending practices in certain parts of the state. This new report comes on the heels of another report released by DFS earlier this year that identified redlining and other forms of housing discrimination by mortgage lenders. In light of the findings noted in the report, two mortgage lenders in the state agreed to reform their lending practices and implement programs to ensure better access to underserved communities, even though DFS did not find that either lender violated any of the state’s fair lending laws. However, DFS continues to investigate the lending practices of other lenders in the state. For more information, click here.
• On December 7, New York Governor Kathy Hochul announced that DFS adopted a new regulation to address circumstances where consumers seek medical treatment with an out-of-network health care provider after relying on misinformation found in their insurer’s provider directory that indicates the provider is in-network. In such instances, the new regulation will limit consumer payment costs to their in-network costs. The regulation sets forth several instances where “misinformation” occurs, including when an insurer fails to provide network status information in writing to a consumer within a certain number of days of the consumer’s request for such information by phone or through electronic means. The new regulation squares with the state’s No Surprises Act and is a part of Hochul’s “commitment to ensuring consumers are treated fairly.” For more information, click here.
• On December 7, Texas Attorney General Ken Paxton joined a multistate comment letter championed by Massachusetts Attorney General Maura Healey, which urged the Federal Trade Commission (FTC) to implement stronger privacy protections related to commercial surveillance and data security. In the letter, Paxton underscores location data, biometric data, and medical data as areas of particular vulnerability requiring increased safeguards. The letter demands aggressive data minimization efforts be considered and adopted to address Americans’ fears around data aggregation. For more information, click here.
• On December 5, the California Department of Financial Protection and Innovation (DFPI) announced that it was investigating crypto-related lending company CONST LLC (doing business as “MyConstant”), which is not licensed to operate in California by DFPI. For more information, click here.

To help you keep abreast of relevant activities, below find a breakdown of some of the biggest events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Federal Activities:

• On December 1, U.S. Rep. Tom Emmer (R-MN), ranking member on the House Financial Services Subcommittee on Oversight and Investigations, issued a letter to Susan Collins, president of the Federal Reserve Bank of Boston (Boston Fed), about “Project Hamilton,” an exploratory research initiative between the Boston Fed and the Massachusetts Institute of Technology that studies the potential risks and benefits associated with implementation of a U.S. central bank digital currency (CBDC). According to Emmer, “any U.S. CBDC must be open, permissionless, and private,” and private firms engaging in Project Hamilton should not receive an “unfair competitive advantage” over other private competitors who intend to develop CBDC products in the future. For information related to the press release of Emmer’s letter, click here. To read Emmer’s letter, click here.

• On November 30, the Federal Trade Commission (FTC) announced that it has temporarily shut down a credit card debt relief program and its affiliated companies that allegedly took millions from consumers by falsely promising to eliminate or substantially reduce their credit card debt. In its complaint, the FTC alleges that the operators engaged in several deceptive and unlawful tactics, including deceptive telemarketing, making phony debt relief promises, and charging deceptive upfront fees. For more information, click here.

• On November 30, in remarks at the Futures Industry Association’s Asia Derivatives Conference in Singapore, CFTC Commissioner Christy Goldsmith Romero proposed potential crypto-related consumer protection initiatives to mitigate the risks revealed by the collapse of FTX. Romero emphasized the catastrophic risks associated with “the commingling of customer funds with company funds,” and how the user agreements of two of the world’s leading cryptocurrency exchanges, Coinbase, Inc. and Kraken, authorize the commingling of customer cryptocurrency deposits with cryptocurrency owned by the exchanges. Notably, Romero advocated for a two-tiered approach to reducing consumer harm in the crypto markets:
  1. Redefining the definition of a “retail investor” to include two categories of retail customers: (1) household retail; and (2) professional and high net worth individuals. This bifurcation would enable the CFTC to devise specific customer protections relevant to the different risks imposed on each category of customer.
  2. Heightened supervision of cryptocurrency exchanges, which would entail frequent examinations, an increased focus on cybersecurity, conflicts of interest, and a safety and soundness financial review.

For more information, click here.

• On November 30, U.S. Sen. Sherrod Brown (D-OH), chair of the Senate Banking Committee, issued a letter to U.S. Treasury Secretary and Chair of the Financial Stability Oversight Committee (FSOC) Janet Yellen about the consumer, investor, and financial stability risks of crypto assets and how the collapse of FTX was precipitated by “three of the most common hazards in financial markets,” each of which contributed to the demise of the Lehman Brothers in 2008: leverage; illiquid holdings; and extreme concentration. Brown’s letter requests the U.S. Treasury to collaborate with other financial regulators to refine and implement the recommendations promulgated by FSOC in its October 2022 report discussing the need for a regulatory framework for crypto-related entities. For more information, click here.

• On November 29, the Office of the Comptroller of the Currency (OCC) announced revisions to its civil money penalty (CMP) manual, which the OCC will begin using on January 1, 2023. The OCC’s CMP manual summarizes the agency’s policies and procedures governing the imposition of civil money penalties against national banks, other OCC-regulated institutions, and their institution-affiliated parties. OCC Acting Comptroller Michael J. Hsu noted that the “revised CMP matrix for OCC institutions will strengthen the effectiveness and fairness” in the OCC’s enforcement actions. For more information, click here.

• On November 28, 2022, U.S. Sen. Ron Wyden (D-OR), chair of the Senate Finance Committee, issued a letter to Coinbase, Inc. inquiring into the policies and procedures Coinbase has in place to protect its customers’ assets in the event of bankruptcy. Wyden’s letter comes after the bankruptcy of FTX and corresponding reports of widespread corporate mismanagement and misappropriation of consumer cryptocurrency deposits held by FTX on its exchange platform. Wyden’s letter primarily focuses on the need for consumer protection assurances in the cryptocurrency industry and requests Coinbase to provide responses to certain questions by December 12, 2022. Notably, one of the questions posed in Wyden’s letter concerns whether Coinbase will publish proof-of-reserves of both its working capital and equity. After the collapse of FTX, many industry stakeholders have begun to implore crypto-related entities to adopt a proof-of-reserves auditing practice, which reveals whether a custodial exchange has sufficient liquidity to cover all customer withdrawals and provides transparency to customers. For more information, click here.

State Activities:

• On December 1, the New York State Department of Financial Services (NYDFS) announced that it is seeking public comment on a proposed regulation that will permit the agency to charge the cryptocurrency companies it regulates for the costs associated with their oversight. Rules currently in place permit NYDFS to charge other non-crypto financial institutions for these expenses. NYDFS Superintendent Adrienne Harris explained that “[t]he ability to collect supervisory costs will help the department continue protecting consumers and ensuring the safety and soundness of this industry.” The proposed regulation is subject to a 10-day pre-proposal comment period, which began December 1, followed by a 60-day comment period upon publication in the State Register. For more information, click here.

• On November 23, New York Gov. Kathy Hochul signed S.6522A/A.7363A to protect patients with significant medical debts. The legislation amends current laws to prohibit health care providers from securing a lien against an individual’s primary residence or garnishing an individual’s wages to collect on medical debt. This legislation furthers the goals Hochul outlined in her 2022 State of the State Address to protect the state’s consumers and improve their financial health, in part, by addressing medical debt and shielding them from abusive and punitive practices that create financial stress. “No one should face the threat of losing their home or falling into further debt after seeking medical care,” Hochul said, adding, “I’m proud to sign legislation today that will end this harmful and predatory collection practice….” For more information, click here.