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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 May 1, the Consumer Financial Protection Bureau (CFPB) proposed a rule to implement a congressional mandate to establish consumer protections for residential Property Assessed Clean Energy (PACE) loans. PACE loans, secured by a property tax lien on the borrower’s home, are often promoted as a way to finance clean energy improvements, such as solar panels. The proposed rule would require lenders to assess a borrower’s ability to repay a PACE loan, as well as provide a framework for how these loans will be treated under the Truth in Lending Act. For more information, click here.
  • On April 29, U.S. Representative Patrick McHenry (R-NC) and U.S. Senator Cynthia Lummis (R-WY) stated their belief that President Biden will sign the first comprehensive cryptocurrency regulatory scheme into law within the next year. Speaking at the Consensus 2023 conference, Senator Lummis stated that the next installment of her bill — the Responsible Financial Innovation Act — will be presented to the Senate within eight weeks. Previously introduced in June 2022, the bill fortified its provisions regarding national security and cybercrime — a concern top regulators continue to express about digital assets. However, due to partisanship in the Senate, Senator Lummis believes her bill is unlikely to pass before the House Financial Service Committee’s bill is introduced. The committee’s bill, scheduled for completion in the next two months, will similarly create a regulatory framework for digital assets, with provisions allowing such assets to evolve from highly regulated securities into commodities. The bill additionally leaves room for assets that don’t fit neatly into either category. Regardless of which bill ultimately passes first, both policymakers remain confident that President Biden will sign a bill before the 2024 election. For more information, click here.
  • On April 28, Mastercard announced “Mastercard Crypto Credential,” a service that it says establishes a common set of standards and infrastructure to help attest trusted interactions among consumers and businesses using blockchain networks. The service’s first use case will address cross-border asset transfers, allowing digital asset wallets to be identified in compliance with the Financial Action Task Force’s “travel rule.” The travel rule requires crypto service providers to share a transmitter’s personally identifiable information to the recipient’s crypto service provider for transactions greater than $1,000. Overall, the service seeks to ensure that those interested in interacting across the Web3 environment meet defined standards for the activities they would like to pursue. For more information, click here.
  • On April 28, Venmo announced that users of the mobile payment service will offer expanded cryptocurrency-related capabilities. Beginning in May 2023, the service will allow its users to transact on public blockchains, thereby enabling users to send cryptocurrency to other blockchain participants, regardless of whether their counterparty uses Venmo or not. As part of these expanded services, Venmo also intends to implement a “crypto address QR code,” allowing users to send cryptocurrency to others to wallet addresses originating from a QR code. For more information, click here.
  • On April 28, the CFPB issued an interim final rule, amending the agency’s 2021 LIBOR transition rule. The interim final rule contains updates to reflect the subsequent enactment of the Adjustable Interest Rate (LIBOR) Act and issuance of an implementing regulation by the Board of Governors of the Federal Reserve Board System. This interim final rule will further facilitate the orderly transition of those consumer loans that currently use the LIBOR index to other indices in anticipation of the planned cessation U.S. Dollar (USD) LIBOR after June 30. For more information, click here.
  • On April 27, Federal Trade Commission (FTC) Chair Lina M. Khan appeared before the House Appropriations Subcommittee on Financial Services and General Government to discuss its FY 2024 budget request and the agency’s ongoing work. For more information, click here.
  • On April 27, the U.S. Senate Committee on Banking held a full committee hearing, titled “Oversight of the Credit Reporting Agencies.” Chairman Sherrod Brown (D-OH) described consumer credit reports as “riddled with errors.” Brown argued that medical debt “correlates with illness,” not with credit risk. In his opening statement, Ranking Member Tim Scott (R-SC) hoped that consumer financial companies continue taking “the subjective nature out of lending.” For more information, click here.
  • On April 26, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation issued guidance to banks to address the risks associated with overdraft protection programs. Overdraft protection programs can present a variety of risks, including compliance, operational, reputation, and credit risks. Specifically, this guidance discusses certain practices that may present heightened risk of violating prohibitions against unfair or deceptive acts or practices. The guidance also describes practices that may assist banks with managing overdraft protection program risks. For more information, click here.
  • On April 26, the CFPB issued an advisory opinion, reminding the industry that a debt collector who brings or threatens to bring a foreclosure action to collect a time-barred mortgage debt may violate the Fair Debt Collection Practices Act. According to the CFPB, the impetus for issuing the advisory opinion was “a series of actions by debt collectors attempting to foreclose on silent second mortgages, also known as zombie mortgages, that consumers thought were satisfied long ago and that may be unenforceable in court.” While prompted by activity in the mortgage space, the CFPB noted that the prohibition applies to all time-barred debt. For more information, click here.
  • On April 26, the CFPB published a report, examining the effects to consumer credit reports after the three nationwide consumer reporting companies removed medical collections under $500 from consumer credit reports on April 11. For more information, click here.
  • On April 26, Franklin Templeton, a global asset manager with over $1.4 trillion assets under management, said that the Ethereum network now supports its “OnChain U.S. Government Money Market Fund.” Specifically, the fund has implemented Ethereum’s layer 2 blockchain to “tokenize” one share of the fund into one “BENJI” token, thereby allowing faster transaction processing and share ownership recordation, while simultaneously leveraging the Ethereum network’s security. The fund, which announced its blockchain integration during Consensus 2023, invests at least 95.5% of its total assets in U.S. government securities, cash, and repurchase agreements collateralized by U.S. government securities, and seeks to provide current income consistent with preservation of shareholder capital. For more information, click here.
  • On April 26, South Korean legislators completed a first-phase review of proposed digital asset regulations that provide the nation’s Financial Services Commission with the authority to investigate financial activity related to cryptocurrencies and other digital assets. The proposed bill, which has bipartisan support, additionally implements stipulations governing the sale, storage, and trading of digital assets. The bill also strongly focuses on consumer protection measures. Under the bill’s provisions, cryptocurrency exchanges (and similar service providers) cannot commingle customer assets, must carry insurance, and must maintain adequate reserves in the event of market-related losses. The bill also imposes severe penalties for digital asset-related crimes resulting in losses, with crimes resulting in losses greater than $3.75 million being punished by a prison sentence ranging from five years to life. Notably, this legislation was announced one month after the collapse of Terra Luna, a failed cryptocurrency ecosystem whose collapse resulted in 10 South Koreans being indicted by South Korean officials. For more information, click here.
  • On April 26, the FTC, the commonwealth of Pennsylvania, and debt collection company International Credit Recovery, Inc. agreed to International Credit Recovery’s permanent ban from the debt collection industry after it engaged in a telemarketing scheme against businesses and nonprofits. For more information, click here.
  • On April 26, the CFPB, noting a rise in credit card delinquencies, released a new blog post analyzing civil judgments, the final recourse for creditors to collect on unsecured debt. According to the CFPB, civil judgments are “both common and unevenly distributed.” For more information, click here.
  • On April 26, the Texas Bankers Association and Rio Bank sued the CFPB, challenging the CFPB’s final rule on the collection of small business lending data. The CFPB’s final rule requires financial institutions to collect and provide data to the CFPB on lending to small businesses with gross revenue under $5 million in their last fiscal year. For more information, click here.
  • On April 25, a top U.S. regulatory official claimed that cryptocurrencies enable fraud and cybercrime. These comments came from CFTC Commissioner Christy Goldsmith Romero at a City Week Conference in London. Commissioner Romero added that it is “essential for governments and particularly the industry to address … the allure of anonymity,” and compliant crypto companies must be able to show they have internal controls that prevent money laundering and terrorism financing. For more information, click here.
  • On April 25, Coinbase, the sole publicly traded cryptocurrency exchange in the United States, brought a narrow action against the Securities and Exchange Commission (SEC,) requesting that the agency respond to Coinbase’s previously filed rulemaking petition. In July 2021, Coinbase asked the SEC to propose and adopt rules that would identify the application of securities laws to digital assets. To date, the SEC has not responded to the petition, prompting Coinbase to ultimately file the suit. According to the company, the suit does not seek to “instruct the agency how to respond[,]” but simply “requests that the Court order the SEC [to] respond.” Coinbase has previously stated that the lack of formalized decision-making from the agency creates uncertainty for the company, potentially prompting it to relocate to a jurisdiction with clearer regulations. For more information, click here.
  • On April 25, officials from the FTC, the CFPB, the Civil Rights Division of the U.S. Department of Justice (DOJ), and the U.S. Equal Employment Opportunity Commission (together, the agencies) issued a joint statement, warning against the potential for automated systems, including artificial intelligence (AI), used in credit decisions, housing, and employment opportunities to “perpetuate unlawful bias,” “automate unlawful discrimination,” and produce other “harmful outcomes.” To combat these perceived risks, the agencies resolve to monitor the development and use of automated systems and promote responsible innovation, while underscoring that “[e]xisting legal authorities apply to the use of automated systems and innovative new technologies just as they apply to other practices.” For more information, click here.
  • On April 24, the Department of the Treasury’s Office of Foreign Assets Control sanctioned three individuals for providing support to the Democratic People’s Republic of Korea (DPRK) through illicit financing and malicious cyber activity. The DPRK launders stolen virtual currency and deploys information technology workers to fraudulently obtain employment to generate revenue in virtual currency to support the regime and its unlawful weapons of mass destruction and ballistic missile programs. These actions have been taken in close coordination with the Republic of Korea. For more information, click here.
  • On April 24, the U.S. DOJ unsealed an indictment, charging two U.S. citizens and a South African national with conspiring to manipulate the market for HYDRO, a virtual asset created by the Hydrogen Technology Corporation. Two other individuals were also charged in the Southern District of Florida in separate charging documents for their roles in the scheme. For more information, click here.
  • On April 20, Transunion announced a new partnership that it says will bring anonymized consumer credit information to decentralized applications. The partnership between consumer credit company TransUnion and decentralized technology companies Spring Labs and Quadrata will see TransUnion’s credit data delivered to DeFi and Web3 applications through Spring Labs technology. The delivery will occur at the consumer-borrower’s request, and upon requesting the data, the user then can share the information with a decentralized application. The entire process occurs without compromising the user’s identity by utilizing Quadrata’s decentralized identity technology. The service purports to offer DeFi lenders, who lend to anonymous borrowers, the opportunity to make better decisions through the utilization of anonymized credit data, which “provide[s] lending opportunities to a new group of consumers” … “at a time “lenders are seeking to establish a more inclusive lending environment.” For more information, click here.
  • In April 2023, the U.S. Internal Revenue Service issued Notice 2023-34, which modifies Notice 2014-21 “by revising a sentence in the Background section of that Notice to remove the statement that virtual currency does not have legal tender status in any jurisdiction and to make other changes.” For more information, click here.

State Activities:

  • On April 25, California Attorney General Rob Bonta, alongside 15 attorneys general, submitted a letter, urging the FTC to strengthen its “Guides for Use of Environmental Marketing Claims” (Green Guides). States like California use the Green Guides to hold marketers accountable and protect consumers. In the letter, the AGs push for several updates to the Green Guides, which include recommending that: (1) voluntary carbon offsets should ensure a reduction in greenhouse gas emissions in addition to any reduction that likely would have occurred without the purchase of the offset; (2) the definition of “compostable” be revised to include both scientific standards and the known practical limitations of composting at scale; (3) the FTC make explicit that “recycle” is defined to mean that when a consumer properly disposes of a “recyclable” item, it is actually recycled as a matter of course; and (4) a renewable injury claim be underwritten by actual environmental benefit (e.g., marketers making renewable energy claims must procure and use renewable energy). For more information, click here.
  • On April 25, Oklahoma Governor J. Kevin Stitt approved HB1927, which provides, among other things, that any person in possession of certain motor vehicles that renders any service to the owner (furnishing storage, rental space, material, labor or skill for the protection, improvement, safekeeping, towing, right to occupy space, storage, or carriage) has a special lien due to such person from the owner for such service. For more information, click here.
  • On April 24, California Attorney General Rob Bonta filed a brief, defending the state’s Age-Appropriate Design Code Act against challenges levied against its enforcement by an online trade association. The act, which was signed into law in 2022 and modeled after United Kingdom’s Age Appropriate Design Code, requires businesses involved in trading consumers’ personal information and that offer products, services, and features likely to be accessed by children to proactively protect their young users’ information, and prohibits certain acts involving the collection and use of that information. The AG’s brief argues that efforts to block the act’s enforcement should prevail because (1) the law does not violate the companies’ first amendment rights; (2) the law is not preempted by federal law; and (3) an injunction would inflict irreparable harm on the state by preventing enforcement of a statute enacted by representatives of the people. According to the AG, “children’s childhood experience should not be for sale,” and “it’s time to elevate and protect children’s privacy and safety.” For more information, click here.
  • On April 28, New York Governor Kathy Hochul announced that the New York Green Bank, a division of the New York State Energy Research and Development Authority and the state’s clean energy and sustainable infrastructure financing entity, launched a $250 million community decarbonization fund (CDF). The CDF will provide low-cost capital to certain lenders for local clean energy and to build electrification projects, with a goal of reducing greenhouse gas emissions in disadvantaged communities. The bank has been actively supporting projects in historically marginalized communities and as of December 2022, and it had made commitments of more than $216.5 million to projects in disadvantage communities. New York Green Bank will host a webinar on May 11, 2023 at 10:00 a.m. to share more detail about the CDF, its intended purpose, and eligible recipients. 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 April 21, the Federal Reserve issued initial findings from its 2022 triennial payments study, showing how consumers and businesses chose to make noncash payments via checks, different types of cards, and the automated clearinghouse. For more information, click here.
  • On April 20, the Federal Reserve announced again that it plans to discontinue its cross-border ACH payments service to Europe and Canada later this year. For more information, click here.
  • On April 18, Federal Trade Commission (FTC) Chair Lina M. Khan and Commissioners Rebecca Slaughter and Alvaro Bedoya testified before the House Energy and Commerce Subcommittee on Innovation, Data, and Commerce on the agency’s efforts to protect consumers from unfair or deceptive practices and unfair methods of competition. The hearing addressed the agency’s 2024 budget request, as well as topics focused on rulemaking authority, junk fees, robocalls, fraud, and privacy initiatives, among others. For more information, click here.
  • On April 19, the Federal Housing Finance Agency announced that it requested comment on a proposed rule, formalizing many of the agency’s existing practices and programs on fair housing and lending oversight of its regulated entities. For more information, click here.
  • On April 18, Federal Reserve System Governor Michelle Bowman delivered remarks at the Georgetown University McDonough School of Business Psaros Center for Financial Markets and Policy on evolving money and payments landscape, as well as central bank digital currencies. For more information, click here.
  • On April 17, the FTC stopped a multinational payment processing company and its CEO and chief strategy officer from serving as a facilitator for tech support scammers through credit card laundering. The defendants agreed to court orders, prohibiting them from any further payment laundering, while requiring them to closely monitor other high-risk clients for illegal activity. For more information, click here.
  • On April 17, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra said the CFPB is focusing on finding ways to increase competition and reduce costs as credit card debt continues to rise and interest rates increase. To increase competition, Director Chopra stated that the CFPB proposes to amend a 2010 Federal Reserve Board of Governors rule provision used by credit card issuers to sidestep a congressional prohibition on unreasonable or out-of-proportion penalty fees. Director Chopra explained that in a competitive market, credit card companies will compete upfront on the interest rates they charge, rather than build a business model on back-end fees. Chopra further stated that the existing loophole allows some credit card issuers to charge big fees even when a borrower is just a day late. The proposal would permit credit card issuers to charge a penalty of $8 or an amount in line with their costs. Director Chopra also stated that the CFPB is making it easier for small credit card issuers to challenge bigger players by updating the CFPB credit card database powered by a survey of credit issuers that reveals terms and pricing. Chopra explained that the upgrades to the survey and database intend to create a neutral data source that can facilitate comparison shopping, which will be especially useful for those looking to refinance their credit card debt and for small players in the market offering lower rates. The neutral data source also will help to power comparison shopping on third-party websites, rather than relying on “pay-to-play” marketing arrangements. Chopra further stated that these do not represent the CFPB’s only initiatives — the CFPB is conducting a broader review of credit card industry practices and accepting public feedback until April 24. For more information, click here.
  • On April 17, the Department of Justice filed a complaint on behalf of the FTC against a multinational payment processing company and its CEO and CSO for violating the FTC Act and the Telemarketing Sales Rule (TSR) by allegedly engaging in credit card laundering for tech support scams. The FTC’s complaint against the company (and several of its subsidiaries and an associated company) and its CEO and CSO alleges that the defendants were at the center of several offshore tech support scams, processing tens of millions of dollars in charges and giving the scammers access to the U.S. credit card network. The complaint explained that the company’s relationships with tech support scammers in which the company acquired credit card merchant accounts and then used those accounts to collect money from consumers on behalf of the scammers. The complaint further alleges that the CEO and CSO knew that their tech support clients were scammers and directly received numerous complaints about the companies. The proposed court orders impose monetary judgments of $16.5 million and also prohibit the defendants from engaging in credit card laundering through merchant accounts; require the defendants to screen and monitor any high-risk clients and take action if clients should charge consumers without authorization or violate the TSR; and prohibit the defendants from engaging in payment processing or assisting tech support companies that engage in false or unsubstantiated telemarketing or advertising. For more information, click here.
  • On April 17, CFPB Director Rohit Chopra issued a blog post on credit card debt and the CFPB’s efforts to increase competition and reduce costs. For more information, click here.
  • On April 15, the U.S. House Financial Services Committee published a draft version of a potential landmark stablecoin bill, with proposals including a moratorium on stablecoins backed by other cryptocurrencies and a request to study a central bank digital currency. The draft bill also, among other things, creates definitions for payment stablecoin issuers and requires these issuers to have reserves that back the digital assets on an “at least one-to-one basis.” The draft bill can be found here.
  • On April 14, the CFPB submitted a statement of interest to the U.S. District Court for the Southern District of Florida, arguing that the Equal Credit Opportunity Act’s (ECOA) prohibition on discrimination covers every aspect of an applicant’s dealings with a creditor, not just specific loan terms like the interest rate or fees. This statement shows that the CFPB continues to press its position for a broad view of the ECOA’s scope, notwithstanding that another federal district court recently rebuffed the CFPB’s position. For more information, click here.
  • On April 14, in a 3-2 vote with Republicans opposed, the U.S. Securities and Exchange Commission (SEC) reopened the comment period for a proposal to change the definition of an exchange and published additional information on how the agency thinks securities laws apply to crypto exchanges and decentralized finance systems. The commission believes that some crypto-asset securities trade on systems that would qualify as exchanges under the new proposal, and some systems may be decentralized finance trading systems or use distributed ledger or blockchain technology. According to the SEC, the reopened release reiterated the applicability of existing rules to platforms that trade crypto-asset securities, including so-called “DeFi” systems, and provided supplemental information and economic analysis for systems included in the new, proposed exchange definition. “I believe this supplemental release will help address comments on the proposal from various market participants, particularly those in the crypto markets,” said SEC Chair Gary Gensler. Gensler further stated that “many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws,” and “investors in the crypto markets must receive the same time-tested protections that the securities laws provide in all other markets.”

State Activities:

  • On April 20, Texas Attorney General Ken Paxton filed suit against a couple and the couple’s company, alleging violations of the state’s Deceptive Trade Practices Act. Specifically, the lawsuit alleged that the couple engaged in a $75 million deceptive scheme wherein they supposedly purchased large quantities of SIM cards from wireless internet providers, reprogrammed them, and then repackaged the equipment for resale. The couple allegedly misrepresented their relationship with the reputable wireless internet providers, inducing consumers to purchase expensive monthly internet service plans, which were interrupted when the service providers terminated the SIM cards upon detection of the unauthorized use. Many consumers were left without internet service as a result. The AG seeks a temporary injunction and a freeze of the company’s assets to preserve funds for consumer restitution. For more information, click here.
  • On April 19, New York Attorney General Letitia James released a guide intended to help businesses adopt effective data security measures. Based on the AG’s experience investigating and prosecuting cybersecurity breaches, the guide offers several recommendations to help companies avoid future security breaches. Among other things, the guide urges business to (1) maintain controls for secure authentication; (2) encrypt sensitive customer information; (3) ensure their service providers use reasonable security measures; (4) know where consumer information is stored; (5) guard against automated attacks; and (6) provide prompt and accurate notice to consumers of a data breach. Since March 2022, the AG’s office has recovered approximately $1.6 million from businesses to settle claims related to poor cybersecurity. For more information, click here.
  • On April 19, the California Department of Financial Protection and Innovation announced it issued desist-and-refrain orders against five entities to stop fraudulent investment schemes tied to artificial intelligence. The orders found that the named entities and individuals violated California securities laws by offering and selling unqualified securities and making material misrepresentations and omissions to investors. The entities solicited funds from investors by claiming to offer high-yield investment programs that generate incredible returns by using AI to trade crypto-assets. As part of their solicitations, they used multilevel marketing schemes that reward investors for recruiting new investors. For more information, click here.
  • On April 18, Arizona Attorney General Kris Mayes announced the resolution of an administrative complaint against a mortgage company for alleged violations of the state’s Fair Housing Act (AFHA) based on sexual orientation. The AFHA prohibits sex-based housing discrimination, including discrimination based on sexual orientation and gender identity. As a part of the settlement, the company agreed to, among other things, pay monetary damages to the aggrieved parties. Additionally, the company agreed to rectify credit requests at issue and consented to injunctive relief, which included the company’s agreement not to engage in discrimination or retaliation of any kind against any person. For more information, click here.
  • On April 17, New York Superintendent of Financial Services Adrienne A. Harris announced that the New York State Department of Financial Services (DFS) adopted a final regulation, establishing how companies holding a DFS-issued BitLicense will be assessed for costs of their supervision and examination. The adopted regulation effectuates a New York State FY23 Budget provision, giving DFS the authority to collect supervisory costs from licensed virtual currency businesses similar to other DFS-regulated licensees. This regulation would allow the DFS to continue adding top talent to its virtual currency team to maintain efficient and effective regulatory oversight. 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 16, the Securities and Exchange Commission (SEC) filed a civil enforcement action against Terraform Labs, the creator of the Terra USD (UST) algorithmic stablecoin, and its founder Do Kwon for allegedly offering and selling “crypto-asset securities” without registering the offers and sales with the SEC as required by the federal securities laws. Critically, in its complaint, the SEC described UST as a security — the first time the SEC concluded that a stablecoin meets the definition of an “investment contract” under the Howey Test. For more information, click here.
  • On February 16, the Financial Stability Board (FSB) issued The Financial Stability Risks of Decentralised Finance whitepaper, which analyzes three considerations:
  • Review the financial vulnerabilities of the decentralized finance (DeFi) ecosystem as part of the FSB’s regular monitoring of the wider crypto-asset markets and explore the growth of tokenization of real assets;
  • Explore approaches to fill data gaps to measure and monitor interconnectedness of DeFi and traditional finance (TradFi) with the real economy and with the crypto-asset ecosystem; and
  • Explore the extent to which its proposed policy recommendations for the international regulation of crypto-asset activities may need to be enhanced to acknowledge DeFi-specific risks (which include the use of oracles, smart contracts, and cross-chain bridges) and facilitate the application and enforcement of rules.

For more information, click here.

  • On February 15, the Federal Deposit Insurance Corporation (FDIC) issued cease-and-desist letters to digital asset exchange CEX.IO Corp and nonbank financial service provider Zera Financial for allegedly making false and misleading statements, implying that FDIC deposit insurance protected their customers’ digital assets. Additionally, the FDIC directed two websites, Captaincoin.com and Banklesstimes.com, to remove similar false and misleading statements about CEX.IO’s FDIC-insured status. For more information, click here.
  • On February 15, the SEC issued a proposed rule that broadens the application of SEC’s current custody rule (Rule 206(4)-2 under the Advisers Act) and redesignates that rule as new Rule 223-1 under the Advisers Act. Notably, if finalized, the proposed rule would, in the words of SEC Chair Gary Gensler, “expand the advisers’ custody rule to apply to all assets … including crypto assets … .” For more information, click here.
  • On February 15, during an interview with The Block, Senator Thom Tillis (R-NC) disclosed that he is drafting legislation to require digital asset exchanges and custodians operating in the U.S. to provide an independently verified proof-of-reserves for their assets. For more information, click here.
  • On February 15, Federal Reserve Board Governor Michelle W. Bowman delivered remarks at the Midwest Cyber Workshop. She spoke about the Federal Reserve’s role in supervising cybersecurity in the banking industry, including community banks: “Community banks have been the target of cyber and ransomware attacks, and they frequently name cybersecurity as one of the top risks facing the banking industry. In my conversations with bankers, some note the difficulty in attracting and retaining the staff needed to mitigate cyber risks.” For more information, click here.
  • On February 14, the Consumer Financial Protection Bureau (CFPB) released a report, examining trends in credit reporting of debt in collections from 2018 to 2022. The report found the total number of collections tradelines on credit reports declined by 33% — from 261 million tradelines in 2018 to 175 million tradelines in 2022. The share of consumers with a collection tradeline on their credit report decreased by 20% in the same timeframe. The CFPB also released additional analysis, examining factors that increase the likelihood of inaccurate medical collections reporting and that may contribute to the decline in medical collections tradelines. For more information, click here.
  • On February 14, Federal Trade Commission (FTC) Commissioner Christine Wilson announced plans to leave the agency. For more information, click here.
  • On February 14, the Federal Housing Administration (FHA) published a request for information in the Federal Register, seeking public comments on ways it can enhance its Single Family 203(k) Rehabilitation Mortgage Insurance Program. The 203(k) program enables those purchasing or refinancing a home to obtain FHA insurance on a mortgage to cover the current value of the home plus rehabilitation costs. For more information, click here.
  • On February 14, CFPB Fair Lending Director Patrice Ficklin joined senior leaders from other federal agencies in submitting a joint letter to The Appraisal Foundation (TAF), providing comments on the “Fourth Exposure Draft of Proposed Changes” for the 2023 Edition of the Uniform Standards of Professional Appraisal Practice. The letter expressed concern that the Fourth Exposure Draft eliminated the Third Exposure Draft’s summary of the FHA Act’s and Equal Credit Opportunity Act’s nondiscrimination standards, and instead, substituted a distinction between unethical discrimination and unlawful discrimination. For more information, click here.
  • On February 10, while providing remarks at the Global Interdependence Center Conference: Digital Money, Decentralized Finance, and the Puzzle of Crypto, Federal Reserve Board of Governor Christopher J. Waller discussed “distributed ledger technology” and noted that “[a]lthough this technology is fundamental for the creation of crypto-assets, there is nothing in this technology that restricts it to being used solely in the crypto ecosystem … [and] the technology is being explored to potentially address a wide range of data management problems.” For more information, click here.
  • On February 10, Office of the Comptroller of the Currency (OCC) Senior Deputy Comptroller and Chief Counsel Ben W. McDonough spoke before the OCC Banker Merger Symposium about the future of bank merger policy, including the need to update framework for analyzing bank mergers. For more information, click here.
  • On February 7-8, EU and U.S. participants, including officials from the Treasury Department, Federal Reserve Board, Commodity Futures Trading Commission, FDIC, SEC, and OCC, participated in the U.S.-EU Joint Financial Regulatory Forum. The participants issued a joint statement on market developments and financial stability risks, sustainable finance and climate-related financial risks, regulatory developments in banking and insurance, operational resilience and digital finance, regulatory and supervisory cooperation in capital markets, anti-money laundering, and countering the financing of terrorism. For more information, click here.

State Activities:

  • On February 16, the Department of Financial Protection and Innovation (DFPI) launched the DFPI Crypto Scam Tracker to help Californians spot and avoid crypto scams. For more information, click here.
  • On February 15, the Wyoming Senate and House of Representatives voted to pass HB0086, a bill that effectively prohibits courts and other governmental bodies from compelling the disclosure of a private key that relates to a person’s digital asset, digital identity, or other interest, unless knowledge of the corresponding public key cannot disclose the sought-after information. For more information related to “public-key cryptography,” click here. For more information related to HB0086, click here.
  • On February 14, California Attorney General Rob Bonta, along with two of the state’s senators, introduced SB 478, which intends to prohibit “the practice of hiding mandatory fees.” The proposed legislation seeks to prohibit an alleged advertising practice in the state of using “an artificially low headline price to attract consumers before revealing additional charges later in the buying process.” The press release claims a common practice among sellers in California is to hide these additional fees by (1) using small print, vague descriptions, or misleading wording, such as “service fees”; (2) combining them with legitimate charges like taxes; or (3) revealing them clearly to a consumer only after that consumer has already invested time in the transaction. The legislation would make it illegal to advertise a price for a good or service that does not include all required charges other than taxes and fees imposed by government. For more information, click here.
  • On February 14, the Conference of State Bank Supervisors (CSBS) submitted a comment letter, arguing that the Financial Crimes Enforcement Network (FinCEN) should be more explicit in its inclusion of state regulators as agencies that can request access to its forthcoming beneficial ownership information database. The Corporate Transparency Act (CTA) requires several entities to report their beneficial owner membership to FinCEN. The CTA also makes FinCEN responsible for developing a repository for beneficial ownership information that other enforcement and regulatory agencies, including state regulators, can access for compliance, investigative, and enforcement purposes. In its letter, CSBS urges FinCEN to implement a final rule that explicitly defines state regulators to eliminate confusion about their ability to access beneficial ownership information when examining state-chartered banks and nondepository trust companies for compliance with customer due diligence requirements under the Bank Secrecy Act. For more information, click here.
  • On February 13, California Attorney General Rob Bonta and the Massachusetts AG’s office led a multistate coalition in a comment letter, supporting the U.S. Department of Education’s (DOE) proposed changes to income-driven repayment (IDR) plans for federal student loan borrowers. IDR plans are designed to reduce the burden of high monthly student loan payments; however, the program has experienced persistent regulatory and servicing issues. The proposed changes would provide greater access for borrowers and more affordable payment terms. In the comment letter, the coalition supports DOE’s proposal to end negative amortization for borrowers whose IDR payments are too low to cover loan interest and increase the income exemption threshold to decrease borrower’s monthly payments. Under the proposed rules, more borrowers will qualify for $0 IDR payments, and DOE would waive unpaid interest for borrowers in IDR to prevent ballooning loan balances. The AGs also implore DOE to take further reformatory action, such as making the proposed changes available to borrowers with ParentPlus loans. For more information, click here.

Like most industries today, Consumer Finance Services businesses are being significantly impacted by the novel coronavirus (COVID-19). Troutman Pepper has developed a dedicated COVID-19 Resource Center to guide clients through this unprecedented global health challenge. We regularly update this site with COVID-19 news and developments, recommendations from leading health organizations, and tools that businesses can use free of charge.

Our bank and loan servicing clients also face novel challenges affecting their industry due to COVID-19, particularly the ever-changing rules and regulations concerning evictions and foreclosures. We closely track these updates and have assembled an interactive tracker containing state orders and guidance documents regarding residential foreclosure and eviction moratoriums.

To help you keep abreast of relevant activities, below find a breakdown of some of the biggest COVID-19 driven 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 September 29, the Consumer Financial Protection Bureau (CFPB) released its fifth biennial report to Congress on the consumer credit card market, finding that the market’s growth over the last few years reversed course in 2020. In reviewing the market for potential consumer harm, the report presents the latest research on consumer card use, cost, and availability. From a 2019 peak of $926 billion, credit card debt fell to $811 billion by the second quarter of 2020 — the largest six-month decline on record — before reaching $825 billion by the end of the year. For more information, click here.
  • On September 28, Federal Trade Commission (FTC) Chair Lina M. Khan announced that she has appointed Holly Vedova as director of the FTC’s Bureau of Competition and Samuel A.A. Levine as director of the Bureau of Consumer Protection. Ms. Vedova and Mr. Levine have served as acting directors of these two bureaus since June of this year. For more information, click here.
  • On September 22, the Internal Revenue Service announced that it awarded new contracts to three private sector collection agencies to collect overdue tax debts. Beginning September 23, taxpayers with unpaid tax bills may be contacted by one of the following three agencies: CBE Group, Inc., Coast Professional, Inc., and ConServe. For more information, click here.

State Activities:

  • Two bills — S.B. 531 and A.B. 424 — recently passed in California have been enrolled and presented to the governor for his signature. Among other provisions, S.B. 531 would prohibit debt collectors (with limited exceptions) from making a written statement attempting to collect delinquent consumer debt unless they have access to a contract, or other evidence, demonstrating the debt. A.B. 424 would, among other provisions, place new documentation requirements on any collection activity concerning student loans for private lenders. For more information, click here and here.
  • On September 30, North Carolina Attorney General Josh Stein issued a press release, commending Duke Energy for extending its utility disconnections moratorium. Duke Energy announced it is voluntarily extending its moratorium on utility disconnections through March 2022 for customers who qualify for energy assistance funding programs. Attorney General Stein stated, “We are not out of this pandemic yet, and people still need access to water, power, and gas in their homes to stay healthy and prevent the spread of COVID-19.” For more information, click here.
  • On September 29, Massachusetts’ top appellate court released an order directing state trial judges who conduct virtual bench trials in criminal cases to “explain to the defendant the procedure to be followed during the trial, including how to communicate with counsel, and the arrangements made for witness testimony and the public’s access to the proceedings.” It also informs trial judges that they “shall obtain a defendant’s assent to a virtual bench trial on the record[,]” else it appears the trial would be held in person despite COVID-19 risks. For those interested in reading the complete order, click here.
  • On September 29, the New York Department of Financial Services issued a proposed regulation to implement a new bill, which requires consumer-like disclosures for “commercial financing” transactions of $2.5 million or less. It would become effective on January 1, 2022. Comments on the proposal will be due no later than 60 days after the date it is published in the State Register. For more information, click here.
  • On September 25, Michigan Attorney General Dana Nessel issued a press release regarding the September 26 implementation of the Financial Exploitation Prevention Act. Per the press release, the statute “enacts new requirements on financial institutions to ensure they have training and procedures [in place] to better recognize the signs of financial exploitation and take action to protect those who are unable to protect themselves from abuse, neglect, or exploitation because of a mental or physical impairment or because of advanced age.” The act “also allows financial institutions to freeze customer transactions or assets under certain circumstances; provides immunity from criminal, civil, or administrative liability to financial institutions for actions taken in good faith under the Act; and provides for the powers and duties of certain governmental officers and entities to enforce the Act.” For more information, click here.
  • On September 23, the Division of Banks of the Massachusetts Office of Consumer Affairs and Business Regulation issued a supervisory alert to warn financial institutions of the potential legal and regulatory risks related to the disclosure of nonsufficient funds fees. For more information, click here.

Privacy and Cybersecurity Activities:

  • On September 30, the U.S. Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) issued guidance and a reminder to the public — specifically to employers — that the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule “does not apply to employers or employment records.” HHS reminds the public that HIPAA’s Privacy Rule “only applies to HIPAA covered entities (health plans, health care clearinghouses, and health care providers that conduct standard electronic transactions.), and, in some cases, to their business associates.” For those interested in reading HHS’ full statement, click here. For those interested in learning more about the privacy implications of vaccination requirements in the workplace, check out Troutman Pepper’s Law360 article by clicking here.
  • On September 27, the FTC released guidance to individuals who believe they may have paid a scammer, likely due to the continued economic effects caused by the COVID-19 pandemic. While the FTC’s guidance focuses on individuals who paid someone, it is likely they also shared their personal information. The FTC recognizes that “[s]cammers can be very convincing[.]” However, what should individuals do after they have been scammed? The FTC informs the public that they should immediately contact their bank, gift card provider, or credit card company used to send money. Those who wired money to the scammer should contact the wire transfer company right away. To read the FTC’s complete guidance, click here.