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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.

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 November 18, U.S. Assistant Secretary of the Department of the Treasury (Treasury) Elizabeth Rosenberg provided remarks at the Crypto Council for Innovation. She spoke on a report published by the Treasury, an “Action Plan to Mitigate the Illicit Finance Risks of Digital Assets,” which identifies seven priority actions, including improving global anti-money laundering/countering the financing of terrorism (AML/CFT) regulation and enforcement, strengthening U.S. supervision of the virtual asset service providers sector, and engaging with the private sector. For more information, click here.
  • On November 17, Financial Stability Board Working Group for Crypto Assets Chair Steven Maijoor addressed the need for a globally consistent digital asset regulatory framework and suggested that the current structural vulnerabilities of the market may “soon reach a point where they represent a threat to the stability of the global financial system.” For more information, click here.
  • On November 17, S. Deputy Secretary of the Treasury Wally Adeyemo continued a series of roundtable discussions to gather insight on IRS modernization efforts that will improve accessibility and service equity as part of implementing the Inflation Reduction Act. Adeyemo convened a roundtable discussion with national advocates representing underserved communities to identify ways the agency can improve accessibility and responsiveness to all taxpayers. For more information, click here.
  • On November 17, the Consumer Financial Protection Bureau (CFPB) announced it is seeking public comment on its proposal to develop a new data set to better monitor the auto loan market. According to the CFPB, greater visibility into market trends would allow lenders and investors to spot emerging opportunities, improve risk management practices, and ultimately expand access to credit and refinancing. The CFPB will be accepting comments on its proposal until December 19. For more information, click here.
  • On November 17, CFPB Director Rohit Chopra issued prepare remarks at the Financial Literacy and Education Commission, where he spoke about consumer complaints related to crypto assets. For more information, click here.
  • On November 16, the Federal Trade Commission (FTC) released a bulletin addressing “recovery services” scams, in which a fraudster may attempt to persuade a consumer, who has lost money on cryptocurrency exchange, to pay the fraudster a fee to recover the lost funds. For more information, click here.
  • On November 16, U.S. Treasury Secretary Janet Yellen released a statement discussing the recent collapse of FTX and urging Congress “to move quickly to fill the regulatory gaps” identified in various reports issued under President Biden’s Executive Order on Digital Assets. For more information, click here.
  • On November 16, while presenting remarks before the House Committee on Financial Services, Federal Reserve Board Vice Chair of Supervision Michael Barr discussed the digital assets market and emphasized that stablecoins can be subject to destabilizing runs and that legislative action would help promote responsible innovation and protect the financial system. For more information, click here.
  • On November 14, the U.S. Supreme Court denied YouTube influencer and BitConnect recruiter Glenn Arcaro’s petition to review the Eleventh Circuit’s assessment of the scope of statutory seller liability under Section 12(a)(1) of the Securities Act of 1933. In Parks v. BitConnect Ltd., et al., No. 20-11675, a class-action lawsuit in which Arcaro was a named defendant, the Eleventh Circuit determined that a direct solicitation to a prospective buyer is not necessary to satisfy statutory seller liability. Therefore, the Eleventh Circuit reasoned that the lawsuit’s allegations of Arcaro’s extensive online video promotion to the public of BitConnect, a cryptocurrency exchange, and BitConnect Coin, the native cryptocurrency of BitConnect, was sufficient to state a claim under Section 12(a)(1) of the Securities Act of 1933. On February 25, 2022, the U.S. Department of Justice indicted Satish Kumbhani, founder of BitConnect, on multiple charges, including conspiracy to commit commodity price manipulation, as BitConnect operated as a Ponzi scheme that misappropriated approximately $2.4 billion from investors. For more information concerning the Eleventh Circuit’s opinion in Parks, click here. For more information concerning the U.S. Supreme Court’s denial of certiorari, click here.
  • On November 16, the CFPB released a new Supervisory Highlights report, focusing on the auto servicing industry, consumer reporting, mortgage servicing, and COVID-19 relief funds. The report highlights the CFPB’s continued focus on so-called junk fees and inaccurate credit reporting. This edition of Supervisory Highlights was notable for the announcement that the CFPB had created a “Repeat Offender Unit” within supervision, the focus of which will be to “enhance the detection of repeat offenses, develop a process for rapid review and response designed to address the root cause of violations, and recommend corrective actions designed to stop recidivist behavior. This will include closer scrutiny of corporate compliance with orders to ensure that requirements are being met and any issues are addressed in a timely manner.” For more information, click here.
  • On November 15, the FTC announced that it is extending by six months the deadline for companies to comply with some of the changes the agency implemented to strengthen the data security safeguards financial institutions must put in place to protect their customers’ personal information. The deadline for complying with some of the updated requirements of the Safeguards Rule is now June 9, 2023. For more information, click here.
  • On November 15, the CFPB filed a petition for a writ of certiorari to the U.S. Supreme Court, requesting expedited review of the Fifth Circuit’s decision finding its funding structure unconstitutional. On October 19, a three-judge panel of the Fifth Circuit Court of Appeals held that the CFPB funding mechanism violates the appropriations clause because the CFPB does not receive its funding from annual congressional appropriations like most executive agencies, but instead receives funding directly from the Federal Reserve based on a request by the CFPB’s director. For more information, click here.
  • On November 15, the CFPB issued two reports on the tenant background check industry. The reports describe how errors in these background checks contribute to higher costs and barriers to quality rental housing. Too often, these background checks — which purport to contain valuable tenant background information — are filled with largely unvalidated information of uncertain accuracy or predictive value. While renters bear the costs of errors and false information in these reports, they have few avenues to allow tenant screening companies to fix their sloppy procedures. The CFPB’s analysis of more than 24,000 complaints highlighted the renter challenges associated with the industry’s failures to remove wrong, old, or misleading information, and to provide adequate investigations of disputed information. For more information, click here.
  • On November 14, the Financial Industry Regulatory Authority (FINRA) announced that it will begin conducting targeted exams of brokerage firm marketing practices relating to crypto assets. The assessment will require brokerage firms to provide all retail communication concerning crypto assets distributed between July 1 and September 30 of this year. For more information, click here.
  • On November 14, Office of the Comptroller of the Currency (OCC) Senior Deputy Comptroller for Bank Supervision Policy Grovetta Gardineer delivered keynote remarks at the 2022 CRA & Fair Lending Colloquium where she discussed the OCC’s commitment to “elevating fairness” and ongoing efforts to ensure that its regulated institutions comply with the federal fair lending laws. In her comments, Gardineer explained how the OCC will strategically execute on its commitment to fair lending through the agency’s focus on three strategic goals for 2023-2027: (1) agility and learning; (2) credibility and trust; and (3) leadership in supervision. For more information, click here.
  • On November 14, the FTC announced that it is sending payments totaling more than $9.8 million to consumers who were harmed by Illinois-based auto dealership’s junk fees and discriminatory practices. The FTC and the State of Illinois sued in March 2022, alleging that employees were sneaking illegal junk fees for unwanted “add-ons” onto vehicle purchases and discriminating against Black consumers. According to the joint complaint, eight of the company’s dealerships illegally tacked on junk fees for unwanted “add-on” products such as payment insurance and paint protection, costing consumers hundreds or even thousands of dollars. The complaint also alleged that the company discriminated against Black consumers by charging them more for add-ons and financing. For more information, click here.
  • On November 11, the U.S. District Court of Wyoming ruled that Custodia Bank plausibly alleged that the Federal Reserve Bank of Kansas City (FRBKC) has unreasonably delayed decisioning Custodia’s request for master account access, since the “Master Account Agreement,” which Custodia submitted to the FRBKC notes that applications are generally processed in five to seven business days, and Custodia’s application has been pending since October 29, 2020. For more information, click here.
  • On November 9, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC), pursuant to Executive Order 14059 (EO 14059), designated three individuals for supplying illicit fentanyl, synthetic stimulants, cannabinoids, and opioids to U.S. markets. OFAC also included various Bitcoin, Bitcoin Cash, and Ethereum addresses as identifiers of the three designated individuals on the Specially Designated Nationals list. This action marks the first time EO 14059 has been used to designate activities related to the sale of illicit drugs via darknet marketplaces. For more information, click here.
  • On November 4, the Federal Reserve Board invited public comment on a proposal to publish a periodic list of depository institutions that have access to Federal Reserve accounts — often referred to as “master accounts” — and payment services. For more information, click here.

State Activities:

  • On November 16, the California Department of Financial Protection and Innovation (DFPI) issued a notice to suspend SALT Lending LLC’s California Financing Law license for 30 days pending the DFPI’s investigation into SALT’s recent announcement to pause client withdrawals on its platform. Although the extent of the impact has yet to be determined, SALT, a crypto-lending platform, was affected by the recent collapse of cryptocurrency exchange FTX. For more information, click here.
  • On November 15, the city council of Toledo, Ohio (Council) and the county commissioners for Lucas County (Commissioners), where Toledo is located, combined forces to put $1.6 million toward purchasing residents’ medical debt. The Council decided to use $800,000 of the $180 million it received from the federal government as part of the American Rescue Plain Act. The Commissioners agreed to match the city’s funding. The ordinance that will enable the Council and the Commissioners to carry out this plan of eliminating up to $200 million in past due medical expenses for Toledo residents is expected to be the first attempt by government at any level, to aid residents in managing unpaid medical debt. The individuals seeking to have their debt forgiven must earn less than four times the federal poverty level or have unpaid medical debts that exceed 5% of their annual income. For more information, click here.
  • On November 15, New York Department of Financial Services Superintendent Adrienne Harris keynoted a Brookings Institute event, titled “Digital Asset Regulation: The State Perspective.” During her speech, Harris called on Congress to develop a federal digital asset regulatory framework that resembles New York’s state regulatory regime. For more information, click here.
  • On November 15, the Federal Reserve Bank of New York’s Innovation Center announced that it will launch a 12-week pilot program for a central bank digital currency (CBDC) to “explore the feasibility of an ‘interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger.'” This pilot program follows the initial phase of the CBDC trial, which examined foreign exchange spot trades to determine whether a blockchain solution could enhance the speed, cost, and access to cross-border wholesale payments. Notable banking institutions and financial services providers will be participating in the pilot project. Although federal regulators have not agreed on whether to launch a digital dollar in the country, several agencies and individuals in the private sector have been experimenting with the possibility. For more information, click here.
  • On November 11, the California DFPI issued notice of its intent to suspend a cryptocurrency lender’s license for 30 days while DFPI investigates the lender’s recent announcement that it will limit some of its platform activity. The lender made the announcement on its social media page, acknowledging that is unable to “operate business as usual” due to lack of clarity regarding the status of several crypto asset platforms. The cryptocurrency lender has reportedly terminated its loan offerings in California and has asked its clients not to make deposits to its platform. 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 November 4, the Federal Reserve Board invited public comment of a proposed rule to publish a periodic list of depository institutions that have access to Federal Reserve accounts, also known as “master accounts.” For more information, click here.
  • On November 2, the Consumer Financial Protection Bureau (CFPB) released a blog post, exploring the potential impact of student loan payment reinstatement. The CFPB found that student loan borrowers are increasingly likely to struggle once their monthly student loan payments are reinstated. However, the CFPB also found that student debt cancellation may substantially reduce the number of borrowers at risk when the payment suspension ends. Overall, the CFPB found that “despite worsening credit outcomes … the cancellation of some student loan debt means that fewer student loan borrowers are likely to be at risk of payment difficulties when federal student loan payments resume in January 2023 than they otherwise would be.” For more information, click here.
  • On November 2, CFPB Director Rohit Chopra delivered remarks at the Consumer Advisory Board meeting, which included a discussion on the fast-growing buy now, pay later market. For more information, click here.
  • On November 1, Deputy Secretary of the Treasury Wally Adeyemo delivered remarks at the semi-annual joint session of the Financial and Banking Information Infrastructure Committee and Financial Services Sector Coordinating Council where he discussed Treasury’s efforts to bolster public-private relationships to protect the department and financial sector from cyber threats. These include modernizing Treasury’s IT systems with an elevated cybersecurity threat focus, as well as ramping up partnerships with the financial and regulatory sectors. For more information, click here.
  • On October 31, the Financial Crimes Enforcement Network (FinCEN) informed U.S. financial institutions that the Financial Action Task Force (FATF), an intergovernmental body that establishes international standards for anti-money laundering, countering the financing of terrorism, and countering the financing of proliferation of weapons of mass destruction (AML/CFT/CPF), issued public statements, updating its lists of jurisdictions with strategic AML/CFT/CPF deficiencies following its plenary meeting this month. U.S. financial institutions should consider the FATF’s stance toward these jurisdictions when reviewing their obligations and risk-based policies, procedures, and practices. For more information, click here.
  • On October 31, the U.S. Department of Education released final regulations that streamline and improve the rules for major targeted debt relief programs. The regulations expand eligibility, remove barriers to relief, and encourage automatic discharges for borrowers who are eligible for loan relief because their school closed, they have a total and permanent disability, or their loan was falsely certified. The rules also establish a fairer process for borrowers to raise a defense to repayment, while preserving the borrowers’ day in court by preventing institutions of higher education (institutions) from forcing students to sign away their legal rights using mandatory arbitration agreements and class-action waivers. For more information, click here.
  • On October 31, the CFPB announced that it will re-open the public comment period for 30 days and add additional questions for six large technology and peer-to-peer platforms that operate payment services to provide information about their business practices, including their data collection and use, their policies for removing individuals or businesses from their platforms, and their policies and practices for adhering to key consumer protections like addressing disputes and errors. For more information, click here.
  • On October 31, the Federal Trade Commission announced that it is taking action against an education technology provider for its lax data security practices that exposed sensitive information about millions of its customers and employees, including Social Security numbers, email addresses, and passwords. The provider allegedly failed to fix problems with its data security despite experiencing four security breaches since 2017. The FTC’s proposed order requires the company to bolster its data security, limit the data the company can collect and retain, offer users multifactor authentication to secure their accounts, and allow users to access and delete their data. For more information, click here.
  • On October 27, the American Bankers Association expressed concern regarding a proposal currently being considered by the CFPB that would shift liability from consumers to banks for scams involving peer-to-peer (P2P) payments. This would include requiring banks to reimburse consumers for P2P payments made but later identified by consumers as payments to a scammer. For more information, click here.
  • On October 27, the Office of the Comptroller of the Currency (OCC) announced it will establish an Office of Financial Technology early next year to bolster the agency’s expertise and ability to adapt to a rapidly changing banking landscape. The Office of Financial Technology will build on and incorporate the Office of Innovation, which the OCC established in 2016 to coordinate agency efforts to support responsible financial innovation. For more information, click here.
  • On October 27, the Federal Financial Institutions Examination Council announced an update to its 2018 Cybersecurity Resource Guide for Financial Institutions. The guide includes updated references and now includes ransomware-specific resources. The FDIC is amplifying this resource in recognition of Cybersecurity Awareness Month, which highlights the importance of safeguarding our nation’s critical infrastructure from malicious cyber activity and protecting citizens and businesses from ransomware and other cyberattacks. For more information, click here.
  • On October 26, FinCEN announced the renewal and expansion of its Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in non-financed purchases of residential real estate. FinCEN renewed the GTOs that cover certain counties within the following major U.S. metropolitan areas: Boston, Chicago, Dallas-Fort Worth, Las Vegas, Los Angeles, Miami, New York City, San Antonio, San Diego, San Francisco, Seattle, the District of Columbia, Northern Virginia, and Maryland (DMV) area, as well as the city and county of Baltimore, the county of Fairfield, CT, and the Hawaiian islands of Honolulu, Maui, Hawaii, and Kauai. For more information, click here.
  • On October 26, the Congressional Research Service issued a report, discussing the ongoing development of AML/CFT policy since the release of President Biden’s Executive Order 14067 (Ensuring Responsible Development of Digital Assets). The report mainly addressed the Biden administration’s next steps for addressing illicit finance concerns related to digital assets:
    • Evaluating potential legislative proposals to amend the Bank Secrecy Act and laws related to unlicensed money transmitters;
    • Authorizing the DOJ to prosecute digital asset crimes in any jurisdiction where a victim of those crimes is located;
    • Conducting illicit finance risks assessment of decentralized finance (by the end of February 2023) and of non-fungible tokens (by July 2023);
    • Increasing dialogue with private sector on the illicit financing risks associated with digital assets and compliance with AML/CFT obligations;
    • Continuing to hold misusers of digital assets accountable for their actions through law enforcement action and node analysis.

      For more information, click here.
  • On October 25, Rep. Alma Adams introduced a bill in the U.S. House of Representatives, seeking to protect a greater portion of consumers’ disposable income from garnishment. If enacted, the Protecting Wages of Essential Workers Act of 2022 (H.R. 9224) would amend the Consumer Credit Protection Act to raise the amount of a consumer’s disposable income protected from garnishment to $1,000 or 75%, whichever is greater. The current limit is $217.50, which is tied to the federal minimum wage. The protected amount would also adjust annually based on the Consumer Price Index. For more information, click here.

State Activities:

  • On November 4, the Federal Reserve Bank of New York (New York Fed) issued a report on the Phase 1 results of Project Cedar, a multiphase research effort to develop a technical framework for a theoretical wholesale central bank digital currency (wCBDC) issued by the Federal Reserve. A wCBDC is designed primarily for the settlement of interbank payments and would be available only to those parties with master account access at a central bank. Phase 1 of Project Cedar involved cross-border settlement of FX spot trades, which generally take at least two days to settle. By leveraging a permissioned blockchain network, the New York Fed substantially reduced the historical settlement time of FX spot trades since the results of Phase 1 of Project Cedar revealed blockchain-enabled payments systems settle transactions in fewer than 10 seconds. For more information, click here.
  • On November 3, the Massachusetts Division of Banks issued a cease-and-desist order to a debt collector believed to have been operating within the state for more than six years without the requisite state licensure. The debt collector originally obtained licensing in 2010, but its license expired in 2012 and was terminated less than six months later. The order requires the collector to cease all collection activities within the state until properly licensed, provide a record of the funds it collected from consumers in the state from January 2019 through November 3, 2022, and provide an itemization of the accounts of consumers from whom it is currently attempting to collect. For more information, click here.
  • On November 3, Pennsylvania Attorney General Josh Shapiro announced that his office filed a lawsuit against New York-based Fluent, Inc. — a company that connects advertisers to potential new customers through the consumers’ personal data — for its and its subsidiaries’ role in allegedly causing hundreds of thousands of unwanted robocalls to be placed to Pennsylvania consumers. Fluent and its subsidiaries Fluent LLC, CAC, American Prize Center LLC, Deliver Technology LLC, Rewardzone USA LLC, and Samples & Savings USA LLC, collected personal information, including telephone numbers, then sold them to telemarketing companies. This included the personal information of thousands of consumers on Pennsylvania’s Do Not Call List. For more information, click here.
  • On October 31, Connecticut state regulators levied a $4.5 million fine against a utility company accused of trying to garnish customers’ wages during the COVID-19 pandemic without complying with state law. Specifically, the utility company failed to adhere to a pandemic-related plan implemented by the state’s Public Utilities Regulatory Authority, which required companies to offer a payment program option to customers seeking financial assistance or whenever a customer missed his or her first payment. The state regulators’ eight-month investigation unearthed evidence that the utility company filed more than 200 applications for wage garnishments against customers who did not pay their bills during the pandemic. Additionally, the utility company allegedly engaged a collection agency with knowledge that the agency reported customer information to consumer reporting agencies without first notifying the customers, as required by state law. State regulators are seeking the maximum fine of $10,000 per violation against the utility company. For more information, click here.
  • On October 27, the California Department of Financial Protection and Innovation (DFPI) announced that it intends to begin issuing conditional licenses to companies that have applied under the state’s debt collection licensing law. Additionally, the agency will end the safe harbor provision, which currently permits companies that have applied for a license to continue collecting debt within the state. These changes are being implemented as a means of offsetting anticipated delays in the licensing process as DFPI continues to develop a system for performing background checks and collecting fingerprints that meets the standards set forth by the Federal Bureau of Investigation. So far, the agency has received approximately 1300 applications. 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 October 4, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) issued a press release documenting its collaborative central bank digital currency (CBDC) cross-border payment pilot project with Capgemini, which accomplished facilitating real-time gross settlement CBDC-to-CBDC transactions between different distributed ledger networks run on Quorum and Corda. For more information, click here.
  • On October 4, the Consumer Financial Protection Bureau (Bureau) filed an enforcement action against Choice Money Transfer for allegedly violating the Remittance Transfer Rule and the Electronic Fund Transfer Act (EFTA) by failing to accurately disclose important prepayment information to remittance senders and maintaining deficient recordkeeping practices, which made it difficult for consumers to dispute erroneous transactions and receive a refund of certain fees. For more information, click here.
  • On October 4, the Federal Housing Administration (FHA) issued a request for information (RFI) on how it can increase access to small balance mortgages through its single-family mortgage insurance programs, which generally apply to mortgages with an original principal obligation of $70,000 or less. In conjunction with the RFI, the U.S. Department of Housing and Urban Development (HUD) released a report titled Financing Lower-Priced Homes: Small Mortgage Loans, which highlighted the challenges faced by borrowers who need loans to purchase lower-priced homes. For more information about the RFI, click here. For more information about the HUD report, click here.
  • On October 3, the Federal Reserve finalized updates to Regulation II (Final Rule), which establishes standards for assessing whether a debit card interchange fee received by a debit card issuer for an electronic debit transaction is reasonable and proportional to the costs incurred by the issuer with respect to the transaction. Like the proposed rule issued in 2021, the final rule requires debit issuers to enable unaffiliated payment card networks across all transaction types, including but not limited to online (card-not-present) transactions. For more information, click here.
  • On October 3, the U.S. Financial Stability Oversight Council (FSOC) released its Report on Digital Asset Financial Stability Risks and Regulation, which was issued in response to President Biden’s Executive Order 14067, Ensuring Responsible Development of Digital Assets. The report identified three gaps in the regulation of crypto-asset activity in the United States: (1) the spot markets for crypto-assets that are not securities are subject to limited direct federal regulation; (2) crypto-asset businesses do not have a consistent or comprehensive regulatory framework and can engage in regulatory arbitrage; and (3) a number of crypto-asset trading platforms have proposed offering retail customers direct access to markets by vertically integrating the services provided by intermediaries such as broker-dealers or futures commission merchants. For more information, click here.
  • On October 3, the Consumer Bankers Association, American Bankers Association, Bank Policy Institute, and The Clearing House expressed their collective disagreement with a report by Sen. Elizabeth Warren (D-MA) regarding the prevalence of fraud on Zelle, the popular peer-to-peer (P2P) payment service. In the statement, the banking groups stated “Today’s report from Sen. Warren fails to acknowledge that 99.9% of the 5 billion transactions processed on the Zelle network in the past 5 years were sent without any report of fraud or scams. Zelle has soared in popularity with bank customers because it’s fast, free and easy to use. Customers also take comfort in knowing that Zelle transactions are provided by and through their trusted bank.” For more information, click here. 
  • On September 30, the Federal Deposit Insurance Corporation (FDIC) released a list of orders of administrative enforcement actions taken against banks and individuals in August 2022. For more information, click here.
  • On September 30, the Office of Foreign Assets Control (OFAC) of the U.S. Department of Treasury released guidance entitled Sanctions Compliance Guidance for Instant Payments, which suggested financial institutions should implement risk-based approaches to manage sanction risks and, to the extent possible, deploy innovative sanctions compliance technologies to eliminate such sanction risks. For more information, click here.
  • On September 30, OFAC entered a settlement with Tango Card, Inc., a gift card distributor, in the amount of $116,048.60 for potential civil liability arising from Tango’s alleged transmission of 27,720 gift cards (an economic benefit totaling $386,828) to individuals with IP addresses associated with Cuba, Iran, Syria, Ukraine, and North Korea, which are sanctioned jurisdictions. For more information, click here.

State Activities:

  • On October 4, New York Attorney General Letitia James provided $2 million to Erie County to strengthen consumer protection laws in western New York. James secured the funds in an action against several companies accused of engaging in predatory debt collection practices nationwide. A portion of the funds will be used to hire a full-time, in-house counsel in the Erie County Consumer Protection Office. The county thanked James, stating that it “will now be able to better investigate consumer complaints and improve [its] ability to educate [its] residents about predatory and unlawful businesses.” For more information, click here.
  • On October 3, Florida Attorney General Ashley Moody issued a consumer fraud alert to Florida residents regarding the potential for disaster scams, price gouging, and fraud in the wake of Hurricane Ian. Moody warned residents that qualified contractors are generally in “high demand,” leaving room for out-of-state scammers to prey upon Floridians in need of expert services. Moody gave residents a list of tips for avoiding a scam, including, for example, researching the company’s reputation and making sure the company is bonded and verified with a bonding agency. Additionally, on October 5, Moody announced she will send consumer protection investigators to parts of Florida to assist with protecting vulnerable consumers. For more information, click here.
  • On October 1, amendments to the Maryland Personal Information Protection Act took effect. Some of the changes include (1) expanding the scope of the statute to include businesses that maintain personal information of Maryland residents, as opposed to only those that own or license such information; (2) requiring specific information that must be disclosed in a company’s notice to the Maryland Attorney General of a security breach; (3) shortening the period of time a business that maintains personal information on behalf of a data owner has to notify the owner of a security breach from 45 days to 10 days; and (4) expanding the nature of information that will be considered protected genetic information under the statute. For more information, click here.
  • On September 28, California Gov. Gavin Newsom approved Senate Bill 786, which requires vital records offices in the state to allow for the use of blockchain technology and verifiable credentials. The change will allow Californians to receive PDFs of birth, death, and marriage records immediately, as opposed to a standard 10-day postal delivery. The senator responsible for introducing the bill, Sen. Robert Hertzberg, argued that blockchain technology is a “faster, cheaper, more efficient delivery method” for Californians that is “more secure” because it “is nearly impossible to hack.” For more information, click here.

On August 29, the Federal Reserve Board (Fed) announced that its real-time payments system, FedNow, will launch sometime between May and July of 2023. FedNow will provide a platform on which banks can build their products. Products enabled by FedNow will allow a common consumer or business to send and receive payments instantly, instead of the government’s current system that is closed on weekends and holidays and can sometimes take days to process transfers. What differentiates FedNow from other instant payment services is that FedNow will service all federal reserve banks, which provides payment services to thousands of financial institutions. More than 120 banks and payment processors currently participate in the FedNow pilot program.

“The FedNow Service will transform the way everyday payments are made throughout the economy, bringing substantial gains to households and businesses through the ability to send instant payments at any time on any day, and the funds being immediately available to recipients to make other payments or manage cash flow efficiently. Immediate availability of funds could be especially important for households managing their finances paycheck to paycheck or small businesses with cash flow constraints,” according to Vice Chair Lael Brainard in a speech at a FedNow Early Adopter Workshop.

Vice Chair Brainard also urged financial institutions and software providers to update their systems in anticipation of the summer launch. “The time is now for all key stakeholders — financial institutions, core service providers, software companies, and application developers — to devote the resources necessary to support instant payments. This means upgrading back-office processes, evaluating account procedures to accommodate a seven-business-day week, arranging liquidity providers, deploying a new customer-facing application, and promoting instant payments for key use cases to customers.”

Some of the expected benefits of the FedNow system include:

  • Making instant payment technology more accessible to smaller community banks;
  • Reducing the payment processing costs for banks and other financial institutions; and
  • Providing consumers with instant access to payments and other electronic fund transfers.

Some say the launch of the FedNow service will provide an alternative to the creation of a central bank digital currency (CBDC). As we discussed previously, in January 2022, the Fed issued a report titled, “Money and Payments: The U.S. Dollar in the Age of Digital Transformation.” The report was widely viewed as “the first step in a public discussion” regarding the creation of a CBDC — legal tender just like a paper bill, but in digital format, which would be “a digital liability of a central bank that is widely available to the general public.” Some maintain that the instant payment capability of FedNow could negate the need for a CBDC.

Troutman Pepper will continue to monitor important developments involving the FedNow system and will provide further updates as they become available.

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

Privacy and Cybersecurity Activities Continue Reading Troutman Pepper Weekly Consumer Financial Services Newsletter

Like most industries today, Consumer Finance Services businesses continue to be significantly impacted by COVID-19. To help you keep abreast of relevant activities, below find a breakdown of some of the biggest legislative and regulatory events at the federal and state levels to impact the Consumer Finance Services industry this past week:

Federal Activities

State Activities

Privacy and Cybersecurity Activities

Federal Activities:

  • On June 26, the Bank for International Settlements released its Annual Economic Report 2022, arguing that global monetary systems should be built upon central bank digital currencies (CBDCs), not cryptocurrencies. For more information, click here.

  • On June 23, the Federal Trade Commission (FTC) proposed a new and historic federal regulation specific to car dealers to address concerns of consumer deception in the sales process. The proposed Motor Vehicle Trade Regulation Rule would:

    • Require price advertising to be based on a standard formula for presenting the “Offering Price” for a vehicle;

    • Require new paperwork in the sales process to confirm that any optional “add-on” products included in a sale are purchased voluntarily with the “Express, Informed Consent” of the consumer; and

    • Prohibit a laundry list of specific kinds of misrepresentations in the sales process.

The commissioners approved the proposal in a 4-1 vote, garnering the support of three Democratic appointees and one Republican appointee, which bodes well for the rule’s final adoption. The FTC seeks comments on the proposed rule within 60 days of the rule’s official publication in the Federal Register. For more information, click here.

  • On June 24, the Consumer Financial Protection Bureau (CFPB or Bureau) announced that it will amend Regulation V, which implements the Fair Credit Reporting Act (FCRA), to address recent legislation that assists consumers who are victims of trafficking. This final rule establishes a method for victims of trafficking to submit documentation to consumer reporting agencies, including information identifying any adverse item of information about the consumer that resulted from certain types of human trafficking, while also prohibiting consumer reporting agencies from furnishing a consumer report containing the adverse item(s) of information. As mandated by the National Defense Authorization Act for Fiscal Year 2022, the Bureau is taking this action to assist consumers who are victims of trafficking in building or rebuilding financial stability and personal independence. For more information, click here.

  • On June 23, the Federal Reserve Board released the results of its annual bank stress test, which showed that banks continue to have strong capital levels, allowing them to continue lending to households and businesses during a severe recession. All banks tested remained above their minimum capital requirements, despite total projected losses of $612 billion. Under stress, the aggregate common equity capital ratio — which provides a cushion against losses — is projected to decline by 2.7% to a minimum of 9.7%, which is still more than double the minimum requirement. For more information, click here.

  • On June 22, the CFPB took “the first step toward addressing credit card company penalty policies costing consumers $12 billion each year, starting by looking at excessive late fees.” In an Advance Notice of Proposed Rulemaking, the CFPB asks for information on the Federal Reserve Board of Governors’ 2010 immunity provision for excessive late fees that allows credit card companies to escape enforcement scrutiny. The CFPB seeks data about credit card late fees and late payments, assessing whether those fees are “reasonable and proportional.” It is also requesting data about card issuers’ revenue and expenses, the potential deterrent effect of late fees, and the role late fees play in credit card companies’ profitability. For more information, click here.

  • On June 22, the Office of Information and Regulatory Affairs released the Spring 2022 Unified Agenda of Regulatory and Deregulatory Actions. The report, which includes contributions related to the Securities and Exchange Commission, lists short- and long-term regulatory actions that administrative agencies plan to take. For more information, click here.

  • On June 21, the Department of Justice (DOJ) filed a lawsuit and a settlement framework with Meta Platforms, Inc. (previously known as Facebook) to resolve allegations that Meta’s advertising placement algorithms discriminate against Facebook users based on their race, color, religion, sex, disability, familial status, and national origin in violation of the Fair Housing Act. The DOJ action stemmed directly from the discrimination charge filed by HUD against Facebook in 2019. For more information, click here.

  • On June 21, the Federal Deposit Insurance Corporation (FDIC) issued a notice of proposed rulemaking, applicable to all insured depository institutions, to increase initial base deposit insurance assessment rates by 2 basis points, beginning with the first quarterly assessment period of 2023. The FDIC concurrently adopted an amended restoration plan, which incorporates the increase in initial base assessment rates to raise the reserve ratio to the minimum threshold of 1.35% by the September 30, 2028 statutory deadline. The proposed assessment rate schedules would remain in effect unless and until the reserve ratio meets or exceeds 2% to support growth in the deposit insurance fund in progressing toward the FDIC’s long-term goal of a 2% designated reserve ratio. For more information, click here.

  • On June 17, the CFPB Director Rohit Chopra announced that the CFPB intends to “move away from highly complicated rules” in favor of “simpler and clearer rules.” As part of this effort, the CFPB will “dramatically [increase] the amount of guidance it [provides] to the marketplace,” while intending such guidance to be simple and straight forward. For more information, click here.

  • On June 15, in a keynote address at the Consumer Federation of America’s 2022 Consumer Assembly, CFPB Deputy Director Zixta Martinez squarely took aim at “rent-a-bank schemes” in some of the first (if not the first) such comments by a senior CFPB official. Historically, the CFPB confines itself to “true lender” litigation against participants in high-rate programs involving Native American tribal parties (and not banks) already challenged by state enforcement authorities. We view Deputy Director Martinez’s comments as potentially signaling more widespread pursuit of this theory by the CFPB. For more information, click here.

State Activities:

  • On June 22, Pennsylvania Attorney General Josh Shapiro announced, as part of a coalition of 46 attorneys general, a $1.25 million multistate settlement with Florida-based Carnival Cruise Line (Carnival), stemming from a 2019 data breach involving the personal information of 180,000 Carnival employees and consumers nationwide. While Carnival publicly reported the breach in March 2020, notifications sent to attorneys general offices stated that Carnival first became aware of suspicious email activity in May 2019 — 10 months before Carnival reported the breach. “When personal data is exposed to bad actors, it’s essential that consumers are notified as quickly as possible,” said AG Shapiro. “Added delays increase the possibility of that personal data being used for nefarious purposes.” For more information, click here.

  • On June 21, Connecticut Attorney General William Tong and Department of Consumer Protection Commissioner Michelle Seagull advised homeowners interested in residential solar panels to do careful research and be wary of misleading marketing and high-pressure sales tactics by solar companies. Attorney General Tong and Commissioner Seagull “warned consumers to pay particular attention to: whether their home gets adequate sun exposure to justify the solar panel investment, whether their current roof will need replacement during the projected life of the solar panels, how tax credits and refunds work, the effect solar panels may have on their home’s value, and how selling their home would be affected if leasing solar panels.” For more information, click here.

  • On June 8, the New York State Department of Financial Services (NYDFS) issued new guidance on issuing U.S. dollar-backed stablecoins, establishing first-of-its-kind state standards for USD-backed stablecoins issued by entities subject to NYDFS regulation. Informal policies have been in place since 2018, but NYDFS Superintendent Adrienne A. Harris believes this new guidance “creates clear criteria for virtual currency companies looking to issue USD-backed stablecoins in New York.” For more information, click here.

Privacy and Cybersecurity Activities:

  • On June 23, the House Subcommittee on Consumer Protection and Commerce unanimously passed an amended draft of the American Data Privacy and Protection Act (ADPPA). This legislation would create a comprehensive federal privacy regime and would preempt most existing state privacy laws. The ADPPA now moves to the House Committee on Energy and Commerce, which will consider this legislation next month. If passed by the House, this legislation may face significant challenges in the Senate where key leadership members have indicated that the legislation’s current version would not advance. For more information, click here.

  • On June 21, President Biden signed the State and Local Government Cybersecurity Act of 2021 (S.2520), which updates the Homeland Security Act and directs the Department of Homeland Security to improve information sharing and coordination with state, local, and tribal governments. This legislation encourages federal cybersecurity experts to share information regarding cybersecurity threats, vulnerabilities, and breaches, as well as resources to prevent and recover from cyberattacks. The law also builds on previous efforts by the Multi-State Information Sharing and Analysis Center (MS-ISAC) to prevent, protect, and respond to future cybersecurity incidents. For more information, click here.

On May 19, the Department of Commerce’s International Trade Administration issued a Request for Comment (RFC), seeking public input on the development of a framework for driving economic competitiveness and leadership in, and leveraging of, digital asset technologies as part of reinforcing U.S. leadership in the global financial system. This RFC is in response to President Biden’s March 9 Executive Order , “Ensuring Responsible Development of Digital Assets,” which outlines the first U.S. comprehensive federal digital asset strategy, and tasked Commerce to work “across the U.S. Government” to establish this framework.

In its RFC, Commerce invites input on any matter relevant to its development of the framework, and it seeks comments on 17 specific questions about the global competitiveness of U.S. digital asset businesses, comparisons to traditional financial services and financial inclusion considerations, as well as technological considerations. Some of the specific questions include:

  • What are the features of U.S.-based digital asset businesses (e.g., administrators, operators, validators, and other key stakeholder roles in the function of digital assets, as well as the exchanges, brokers, and custodians used to trade and store them) that currently underpin their competitiveness in a global market?
  • What obstacles do U.S. digital asset businesses face when competing globally?
  • How does the current U.S. regulatory landscape affect U.S. digital asset businesses’ global competitiveness?
  • What, if any, is the future role of digital assets mining in the U.S. digital assets sector?
  • What impact, if any, will global deployment of central bank digital currencies (CBDC) have on the U.S. digital assets sector?
  • What factors and conditions, if any, that have driven and sustained the global leadership of U.S.-based legacy financial institutions will foster the same leadership for U.S. digital asset businesses?
  • Can digital assets improve international payments (including trade and remittances) and improve trade finance access?
  • How do digital assets compare to other initiatives in payments, such as the Federal Reserve’s FedNow?
  • What role can the federal government and the digital assets sector play to ensure that underserved Americans can benefit from the increased commercial availability of digital assets?
  • To what extent do new standards for digital assets and their underlying technologies need to be maintained or developed, for instance those related to custody, identity, security, privacy, and interoperability?

Written comments must be received by July 5, 2022.