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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 September 23, the Federal Reserve Board invited comment on operational risk-management requirement updates for certain systemically important financial market utilities (FMUs) supervised by the Fed. FMUs provide essential infrastructure to clear and settle payments and other financial transactions relied upon by financial markets and the broader economy to function effectively. The proposed updates generally provide more specificity to the existing requirements. For more information, click here.
  • On September 22, the Consumer Financial Protection Bureau (CFPB) announced its request for public input on ways to spur new mortgage products that help households. The CFPB invites insights on ways to improve mortgage refinances for homeowners who would benefit from refinancing, especially for borrowers with smaller loan balances. The CFPB also seeks public input on ways to support automatic short- and long-term loss mitigation assistance for homeowners experiencing financial disruptions. The CFPB plans to use this information as it considers steps to support household financial stability and address refinance market gaps. For more information, click here.
  • September 22, the Commodity Futures Trading Commission (CFTC) entered an order, simultaneously filing and settling charges against Ooki DAO and its co-founders Tom Bean and Kyle Kistner. The order states that the bZx protocol, the predecessor of Ooki DAO, violated the Commodity Exchange Act (CEA) by failing to register as a futures commission merchant prior to enabling users of the bZx protocol to engage in margin and leverage trading. Notably, the order specifically stated that “[v]irtual currencies such as ETH, DAI, and others” traded on the bZx protocol constitute “commodities” under the CEA. Additionally, the order held that Ooki DAO is an unincorporated association, and as a result, the co-founders are personally liable for CEA violations committed by Ooki DAO. In July 2020, alleged members of Ooki DAO brought a class-action lawsuit against the DAO in a California federal court, which we discussed in depth here. For more information about the CFTC’s recent settlement with Ooki DAO, click here.
  • On September 22, the Department of Justice and the Internal Revenue Service announced that a federal judge granted their request for an order, authorizing the IRS to issue a John Doe summons requiring M.Y. Safra Bank to produce information about U.S. taxpayers who may have failed to report to the IRS, and pay taxes on, cryptocurrency transactions. For more information, click here.
  • On September 20, an identified party hacked DeFi liquidity provider Wintermute and absconded with $160 million worth of cryptocurrency. For more information, click here.
  • On September 19, the CFPB released its annual report on residential mortgage lending activity and trends for 2021, based on data from thousands of the nation’s lending institutions per the Home Mortgage Disclosure Act. The report shows a shift from refinance loans in 2020 to home purchase loans in 2021, with a greater share of home purchase loans going to Asian, Black, and Hispanic white borrowers relative to the share of home purchase loans for non-Hispanic white borrowers. The top 25 closed-end lenders by loan volume held nearly half of the market share of residential mortgage lending — a trend that has risen each year since 2018. For more information, click here.
  • On September 19, the Securities and Exchange (SEC) issued a cease-and-desist order against Sparkster Ltd. and Sparkster CEO Sajjad Daya for the unregistered offer and sale of crypto-asset securities from April 2018 through July 2018 and charged crypto influencer Ian Balina for failing to disclose compensation he received after reselling Sparkster tokens. For more information, click here.
  • On September 19, Representatives Peter Welch (D-VT) and Lance Gooden (R-TX) introduced the House companion of the Credit Card Competition Act of 2022 (CCCA), which Senators Dick Durbin (D-IL) and Roger Marshall (R-KS) introduced in late July 2022. The bill intends to expand interchange price controls by creating a new credit card routing mandate. For more information, click here.
  • On September 14, while addressing testimony presented by SEC Commissioner Gary Gensler, U.S. Senate Banking Committee Ranking Member Pat Toomey (R-PA) clearly expressed his frustration toward the SEC’s lack of helpful public guidance concerning the distinction between cryptocurrencies that constitute securities and cryptocurrencies that do not. For more information, click here.

State Activities:

  • On September 20, Colorado Governor Jared Polis (D) announced that Colorado residents may now pay state taxes with cryptocurrencies using PayPal. For more information, click here.
  • On September 15, California Governor Gavin Newsom signed into law Assembly Bill 1904, which amends the California Consumer Legal Remedies Act to make it unlawful for “covered persons” to fail to include certain information in a solicitation to a consumer for a financial product or service. The amendment supplements already-existing consumer protection laws, targeting the unlawful, unfair, deceptive, or abusive acts or practices related to consumer financial products or services, as well as unfair competition and deceptive acts pertaining to the sale or lease of goods or services to a consumer. As an example, the amendment would require a “covered person” to disclose that a solicitation is an “advertisement” and does not require payment or other action by the consumer. For more information, click here.
  • On September 15, New York Governor Kathy Hochul signed legislation to expand the reach of the federal Public Service Loan Forgiveness (PSLF) program statewide. PSLF incentivizes public service work by forgiving a portion of borrowers’ federal student loan debt. Hochul noted that “this legislation acknowledges the significant contributions of our public servants, first responders, educators, and more, by helping unlock federal loan forgiveness for countless members of New York’s workforce.” An estimated 2.7 million people currently serve New York’s public or nonprofit sectors. For more information, click here.
  • On September 14, the New York Department of Financial Services issued notice of proposed rules, pertaining to the state’s Commercial Finance Disclosure Law (CFDL). The CFDL requires certain providers of commercial financing to provide prescribed disclosures when extending a financing offer to a potential recipient. Among some of the issues addressed by the proposed regulations are the disclosure of annual percentage rate, a formula for determining when an annual percentage rate disclosure is accurate, and formatting and content requirements for various disclosures. Though the rules’ reception varied, many commenters acknowledged the rules as necessary to implement the CFDL. The public have until October 31 to provide further feedback on the proposed rule. For more information, click here.
  • On September 13, California Governor Gavin Newsom signed Assembly Bill 2311, which, among other things, would prevent a seller from conditioning the extension of credit, term of credit, or terms of a conditional sale contract for purchase of an automobile on the consumer’s purchase of a guaranteed asset protection (GAP) waiver. Additionally, the bill would prevent a GAP waiver sale where the loan-to-value ratio of the vehicle purchase exceeds the maximum loan-to-value ratio of the waiver, unless the GAP waiver discloses and the consumer is informed of the limitation. Furthermore, the bill would require that the GAP waiver include a statement, advising the consumer of the right to a refund of any unearned portion of the waiver on a pro-rata basis. For more information, click here.

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 9, the Consumer Financial Protection Bureau (CFPB) launched an inquiry into practices and financial products that may leave employees indebted to their employers. In the request for information, the CFPB seeks data about, and worker experiences with, these emerging practices and financial products referred to as employer-driven debt. For more information, click here.
  • On June 8, Office of the Comptroller of the Currency (OCC) proposed adding cannabis and digital currency activities to the list of business data it collects from banks in an attempt to better identify areas of risk in the financial system. For more information, click here.
  • On June 7, Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced the Responsible Financial Innovation Act, a bill highly anticipated by all cryptocurrency industry stakeholders. For more information, click here.
  • On June 7, the Federal Reserve announced it will release a second tool to help community financial institutions implement the Current Expected Credit Losses (CECL). Known as the Expected Losses Estimator, the spreadsheet-based tool utilizes a financial institution’s loan-level data and management assumptions to aid community financial institutions in calculating their CECL allowances. For more information, click here.
  • On June 3, the Federal Trade Commission (FTC) published a request for information that could form the basis for a major update of its digital advertising guidance. The FTC’s most recent digital advertising guidance — the 2013 “.com Disclosures – How to Make Effective Disclosures in Digital Advertising” (.com Disclosures Guide) — provides guidance on how to make “clear and conspicuous” disclosures in online advertisements, while also offering examples of problematic advertisements with explanations for how to make clear and conspicuous disclosures. The .com Disclosure Guide has been hugely influential in setting the bar for compliant internet advertising. For more information, click here.

State Activities:

  • On June 9, California’s Office of Administrative Law approved commercial financing disclosure regulations, which require consumer-like disclosures for certain commercial financing products, such as small business loans and merchant cash advances. With this final step completed, these Department of Financial Protection and Innovation regulations will become effective on December 9, completing a process that began with the passage of SB 1235 in 2018. For more information, click here.
  • On June 8, Colorado Governor Jared Polis signed a bill into law, prohibiting health care facilities from pursuing debt collection activities against individuals with unpaid medical bills unless those facilities comply with federal price transparency guidelines. For more information, click here.
  • On June 8, the New York Department of Financial Services issued new compliance requirements for issuers of U.S. dollar-backed stablecoins. For more information, click here.
  • On June 2, the Washington, D.C. City Council unanimously approved the “Protecting Consumers from Unjust Debt Collection Practices Amendment Act of 2022.” The bill clarifies that a debt collector or debt buyer may only send text messages, emails, or private messages on social media after sending the required written notice to consumers. It also clarifies that a debt collector or debt buyer may send one text message, email, or private message in any seven-day period for the purposes of acquiring consent from the consumer to communicate via one or more of these methods. For more information, click here.

Privacy and Cybersecurity Activities:

  • The U.S. House Committee on Energy and Commerce’s Subcommittee on Consumer Protection and Commerce will hold a hearing on June 14 to discuss the American Data Privacy and Protection Act. Subcommittee members U.S. Representatives Frank Pallone (D-NJ) and Cathy McMorris Rodgers (R-WA) co-authored the draft.
  • On June 8, the California Privacy Protection Agency Board voted unanimously to authorize Executive Director Ashkan Soltani to begin the California Privacy Rights Act rulemaking process. The agency released draft regulations in preparation for the June 8 meeting, while Director Soltani previously stated that the agency would go past the July 1 deadline, with anticipated rulemaking completion in Q3 or Q4. To read more, click here.

Our Cannabis Practice provides advice on issues related to applicable state law. Cannabis remains an illegal controlled substance under federal law.

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.

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 April 8, Acting Comptroller of the Currency Michael Hsu discussed the architecture of a U.S. dollar-based stablecoin system and policy considerations regarding stablecoin stability, interoperability, and separability. For more information, click here.
  • On April 7, the Consumer Financial Protection Bureau (CFPB) announced that it is using its rulemaking authority to propose that consumer reporting agencies (CRAs) do not prevent human trafficking survivors from achieving financial independence. The proposed rule would protect human trafficking survivors by preventing CRAs from including negative information resulting from abuse. Congress required the CFPB to issue rules as part of the recently enacted Debt Bondage Repair Act. For more information, click here.
  • On April 7, Secretary of the Treasury Janet Yellen addressed the Biden administration’s forthcoming legislative approach to digital assets, as we discussed here, as well as the digitization of the American economy, which Yellen assessed through the lens of five lessons she suggests are often implicated by emerging technologies generally: (1) responsible innovation; (2) appropriate guardrails; (3) monetary sovereignty; (4) technological neutrality; and (5) interagency and international collaboration. For more information, click here.
  • On April 6, the U.S. Department of Education announced an extension of its pause on student loan repayment, interest, and collections through August 31, 2022. For more information, click here.
  • On April 6, the CFPB published a report, showing that few payday loan borrowers benefit from no-cost extended payment plans, which must be offered to borrowers in the majority of states that do not prohibit payday lending. Instead of using the payment plans, borrowers continue to pay for costly loan rollovers. While no-cost extended payment plans are meant to help borrowers exit the cycle of rollovers and fees, the payday business model continues to depend on high rollover rates and fees. For more information, click here.
  • On April 6, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will require servicers to suspend foreclosure activities for up to 60 days if the servicer has been notified that a borrower has applied for assistance from the Treasury Department’s Homeowner Assistance Fund. For more information, click here.
  • On April 6, Senator Pat Toomey (R-PA) released a draft of the Stablecoin Transparency of Reserves and Uniformed Safe Transactions Act, also called the Stablecoin TRUST Act of 2022. The bill includes a definition of “payment stablecoin,” which must be convertible directly to fiat currency and its backing must be with assets “with a market value equal to not less than 100 percent of the par value of the payment stablecoins outstanding” and “that are cash and cash equivalents or level 1 high-quality liquid assets denominated in United States dollars.” For more information, click here.
  • On April 5, the Federal Reserve Board announced that it had prohibited six former bank employees from future employment in the banking industry for fraudulently obtaining loans and grants administered under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. For more information, click here.

State Activities:

  • On April 7, the New York Department of Financial Services issued guidance “to address potential confusion” about how to comply with a new statute of limitations requirement that went into effect last week. The new requirement would lower the statute of limitations period to three years, while also disallowing a partial payment to restart the statute of limitations and requiring additional disclosures to be made. For more information, click here.
  • On April 6, New York Attorney General Letitia James announced a lawsuit against a law firm and its partners for “engaging in deceptive rent collection practices and initiating frivolous lawsuits against New York tenants.” The lawsuit was filed after the attorney general’s office investigated the firm and found it “did not conduct any meaningful reviews of their non-payment eviction cases before filing litigation, resulting in the distribution of deceptive rent collection letters, unnecessary legal actions against tenants, and improper evictions without cause.” Attorney General James’ office claims the conduct “violates New York Executive Law, the Federal Debt Collection Practices Act, and the New York General Business Law.” For more information, click here.
  • On April 6, California Attorney General Rob Bonta, as part of a multistate coalition of 17 attorneys general, urged the nation’s largest banks to eliminate overdraft fees. According to the press release, “U.S. consumers paid an estimated $11 billion in overdraft fees in 2019, with the financial burden disproportionately falling on low-income consumers and consumers of color.” In support of the request, Attorney General Bonta stated, “For banks, overdraft fees are easy way to pad their profits, but for struggling consumers, these fees can seriously derail their financial plans.” For more information, click here.
  • On March 24, Utah’s governor signed the Commercial Financing Registration and Disclosure Act (CFRDA) into law. Under the CFRDA, beginning January 1, 2023, commercial financing providers must register with the Utah Department of Financial Institutions and provide certain disclosures. These disclosures include the amount of funds provided to the business, the total amount to be paid to the provider, and information about the costs or discounts associated with the prepayment. For more information, click here.

Privacy and Cybersecurity Activities:

  • On April 6, the Department of Human Health and Services (HHS) issued a request for information, seeking input on two requirements of the Health Information Technology for Economic and Clinical Health Act of 2009 (HITEACH Act), as amended in 2021. Specifically, HHS seeks comment on Section 13412 and Section 13410(c)(3). Section 13412 requires the HHS to consider certain recognized security practices of covered entities and business associates when determining potential fines, audit remedies, or other remedies for resolving potential violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Section 13410(c)(3) requires the HHS to establish a methodology to determine potential civil monetary penalties and settlement sharing for individuals harmed by a potential violation of the HIPAA Privacy, Security, and/or Breach Notification Rules. For more information, click here.
  • On April 7, California Attorney General Rob Bonta announced a new partnership with the Federal Communications Commission (FCC) on robocall investigations to protect consumers and businesses from scams and financial loss. This partnership establishes critical information sharing and cooperation structures to investigate spoofing and robocalls scam campaigns. For more information, click here.

On March 22, the Virginia legislature sent HB1027 (Act) to the governor. If signed by April 11, the Act will impose the nation’s first registration requirement on sales-based financing providers and brokers.

Virginia would also be the third state to create commercial financing disclosure requirements applicable to sales-based financing, after New York and California. The New York and California requirements have not yet taken effect due to regulatory delays.

What Is Sales Based Financing Under HB1027?

HB1027 imposes requirements related to “sales-based financing.”

Sales-based financing is a transaction that is repaid by a recipient Virginia business as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the volume of sales or revenue received by the business. The term also includes a transaction with a true-up mechanism for financing that is repaid as a fixed payment but provides for a reconciliation that “adjusts the payment” to an amount that is a percentage of sales or revenue.

That definition does not distinguish between sales and loans, and therefore covers both merchant cash advances and loans that otherwise meet the definition. However, it is unclear whether that definition covers all types of merchant cash advances.

For example, in some merchant cash advances, a reconciliation does not result in an adjustment to payments going forward, but instead involves providing a refund of any excess amounts collected in fixed payments where the fixed payments did not precisely match the percentage of the recipient’s actual sales or revenue that was required to be paid. Those contracts involve a reconciliation, but do not include an adjusted payment.

As a result, providers using that alternative model, which is not expressly addressed, must consider whether HB1027 applies.

Who Will Be Required to Register?

HB1027 will require registration with the commissioner of financial institutions for both sales-based financing providers and brokers by November 1, 2022.

Under the Act, a broker is a person who for compensation or in the expectation of compensation obtains or offers to obtain sales-based financing from a provider for a recipient.

A provider is a person that extends a specific offer of sales-based financing to a recipient. It also includes a person that solicits and presents offers of sales-based financing under an exclusive contract or arrangement with a provider.

HB1027 has exemptions for a financial institution, providers, and brokers with no more than five sales-based financing transactions in 12 months, and individual sales-based financing transactions of more than $500,000.

There is no express exception for employees of providers. If the issue is not clarified by the commissioner, providers may need to consider whether the definition of provider is broad enough to cover employees engaged in solicitation of merchants, in addition to registration of the provider’s business.

The registration requires an application that will require certain control persons of providers and brokers to disclosure specified judgments, orders, and convictions. Virginia will also require the provider or broker to have authority to transact business in Virginia and to pay a fee of $1,000 (and $500 in subsequent years).

What Are the Disclosure Requirements?

HB1027 also imposes disclosure requirements when a specific offer for sales-based financing is given to the recipient Virginia business. Unlike California and New York, Virginia will not require an APR or similar rate disclosure.

However, Virginia will require disclosure of nine specific items:

  1. The total amount of the sales-based financing, and the disbursement amount, if different from the financing amount, after any fees deducted or withheld at disbursement;
  1. The finance charge;
  1. The total repayment amount, which is the disbursement amount plus the finance charge;
  1. The estimated number of payments, which is the number of payments expected, based on the projected sales volume, to equal the total repayment amount;
  1. The payment amounts, based on the projected sales volume (this requirement differs for fixed and variable payment contracts);
  1. A description of all other potential fees and charges not included in the finance charge;
  1. Certain information related to prepayments;
  1. A description of collateral requirements or security interests, if any; and
  1. A statement of whether the provider will pay compensation directly to a broker in connection with the specific offer of sales-based financing and the amount of compensation.

Additionally, updated disclosures are required if the business elects to prepay or refinance the sales-based financing.

The requirement to provide a statement regarding compensation paid by a provider to a broker is notable as the plain language is not limited to fees paid by the merchant. As a result, a provider may be required to disclose a fee paid to a broker even if that fee is not directly passed on to the recipient.

The disclosures must be provided separately from other information given to the recipient, and the recipient must sign the disclosures at the time a specific offer is accepted.

Effective Date and Potential Regulations

HB1027 authorizes the commission to adopt appropriate regulations to implement the Act. However, HB1027 applies to contracts entered into on or after July 1, 2022.

That effective date is not expressly delayed if the commission has not yet issued regulations.

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.

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 October 29, the Consumer Financial Protection Bureau (CFPB) announced the following leadership changes: Lorelei Salas will join as the assistant director for the Office of Supervision Policy, and Eric Halperin has joined as the assistant director for the Office of Enforcement. For more information, click here.
  • On October 29, the Federal Trade Commission (FTC) issued a new enforcement policy statement, warning companies against deploying illegal dark patterns that trick or trap consumers into subscription services. The agency ramped up its enforcement in response to a rising number of complaints about the financial harms caused by deceptive sign-up tactics, including unauthorized charges or ongoing billing that is impossible cancel. For more information, click here.
  • On October 29, the CFPB released several guidance documents to assist industry with providing the validation information to prepare for the Debt Collection Rule’s upcoming effective date. First, the CFPB released a “complete and accurate” Spanish translation of the model validation notice. Second, the CFPB added a new section to the Debt Collection Rule’s frequently asked questions (FAQs), addressing frequent questions on, among other things, use of the model validation notice and the validation information special rule for certain residential mortgage debts. Third, the CFPB released a new guidance document titled, “Debt Collection Rule: Disclosing the Model Validation Notice Itemization Table,” which reviews certain required validation information, includes examples, and illustrates how a debt collector could comply with the requirement to disclose that information. For more information, click here.
  • On October 27, the FTC announced a newly updated rule that strengthens the data security safeguards that financial institutions must implement to protect their customers’ financial information. In recent years, widespread data breaches and cyberattacks have resulted in significant harms to consumers, including monetary loss, identity theft, and other forms of financial distress. For more information, click here.
  • On October 27, Bills introduced in the House of Representatives and the Senate by Representative Mike Levin and Senator Maggie Hassan respectively seek to amend the Servicemembers Civil Relief Act, which protects members of the armed forces and other branches of the government from certain financial situations, including judgments, garnishments, and other adverse collection-related actions. For more information, click here.
  • On October 26, President Joe Biden renewed Acting Chairwoman Jessica Rosenworcel’s term at the Federal Communications Commission (FCC) and nominated former FCC Adviser Gigi Sohn. For more information, click here.
  • On October 25, U.S. Representative Tom Emmer introduced a bill that creates a whistleblower program at the CFPB. For more information, click here.
  • On October 21, the Office of the Comptroller of the Currency issued Bulletin 2021-49, announcing the revision of the Payment Systems booklet of the Comptroller’s Handbook. For more information, click here.

State Activities:

  • On December 31, licensing renewals are due in most states. State regulators are encouraging businesses to renew online now to avoid processing delays, especially as new states join the Nationwide Multistate Licensing System. For more information, click here.
  • On October 20, the New York Department of Financial Services published a notice in the New York State Register, announcing that it issued a proposed regulation to implement S 5470-B, which requires disclosures for commercial financing transactions of $2.5 million or less under a commercial financing agreement. The notice allows for public comment for 60 days. The bill becomes effective on January 1, 2022, but compliance with the rule will not be mandated until six months after final publication. For more information, click here.
  • As of November 1, the Connecticut Department of Banking will require that certain licensees and registrants “file the surety bonds required by the Commissioner electronically on the system” for any application submitted that requires a bond. Further, “[e]xisting licensees and registrants shall transition to the electronic bond format no later than March 1, 2022.” For more information, click here.
  • On October 29, New York Attorney General Letitia Jams announced “agreement with Ticket Fulfillment Services, L.P. (TFS) and five ticket resale websites for failing to provide legally-mandated refunds to more than 11,000 affected consumers who purchased tickets — through one of TFS’s affiliate marketers — to events that were cancelled in the wake of the coronavirus disease (COVID-19) pandemic.” According to the press release, New York law requires companies that facilitate ticket resales to guarantee refunds for cancelled events. Collectively, the companies allegedly withheld $4.4 million in refunds that were required to be returned to consumers. For more information, click here.

Privacy and Cybersecurity Activities:

  • On October 29, the FTC issued a new enforcement policy statement, warning companies against deploying illegal dark patterns that trick or trap consumers into subscriptions services, especially as many consumers continue to transact with businesses from home due to the COVID-19 pandemic. For example, the FTC has sued companies that “hid important payment information, or even the fact that consumers would be charged at all, behind hyperlinks, hovers-overs or in inconspicuous places.” The FTC reminds businesses to:
    • Disclose clearly and conspicuously all material terms of the product or service;
    • Obtain the consumer’s express informed consent before charging them for a product or service; and
    • Provide easy and simple cancellation to the consumer.

To read the full warning, click here.

  • On October 28, California Attorney General Rob Bonta provided consumers and businesses with tips on how to defend against cybersecurity threats. With the increase of remote work and high-profile cyberattacks during the COVID-19 pandemic, California Attorney General Rob Bonta offers “steps you can take to protect yourself and your data.” California Attorney General Rob Bonta reminded consumers that they can protect themselves and those around them by (1) enabling multifactor authentication; (2) using strong passwords and password managers; (3) performing regular software updates on all devices; (4) installing antivirus software; and (5) limiting the use of public networks. The California attorney general reminded businesses that they too can defend against cybersecurity threats. For instance, businesses can:
    • Train employees in data security principles;
    • Protect information, computers, and networks from cyberattacks;
    • Provide firewall security for your internet connection;
    • Secure your Wi-Fi networks;
    • Limit employee access to data and information; and
    • Change passwords and authentication regularly.

To read the full warning, click here.

  • On October 28, the PCI Security Standards Council (PCI SSC or Council) hosted its annual Global Payment Security Forum. The Council acknowledged the importance of the pandemic’s impacts on the payments ecosystem by including COVID-19-related challenges as one of this year’s main discussion topics. In a post-forum press release, the PCI SSC provided helpful resources to some of their COVID-19-related resources to show its continued “commitment to listening to industry and stakeholder feedback[.]” For instance, the Council highlighted its guidelines for remote work and performing remote assessments. To read the full press release, 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.