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 June 2, President Biden announced his intent to extend the tenures of two Republicans serving on the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission: Mark Toshiro Uyeda and Summer Mersinger, respectively. For more information, click here.
• On June 2, Chairman of the House Financial Services Committee Patrick McHenry and Chairman of the House Committee on Agriculture Glenn Thompson released a discussion draft of legislation intended to provide a comprehensive regulatory framework for the digital asset market. Notably, the bill excludes from the Securities Act of 1933’s disclosure requirement blockchain protocols that certify to the SEC that they become “decentralized networks.” The bill defines a “decentralized network,” in relevant part, as a protocol that “no person, acting on the person’s own, had the unilateral authority, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, to control or materially alter the functionality or operation of the blockchain network… .” Section 204 of the bill carves out a process by which the SEC may rebut a protocol’s assertion that it is sufficiently decentralized and not subject to the act’s reporting requirements. For more information, click here.
• On June 2, digital asset trade associations Blockchain Association and DeFi Education Fund filed a joint amicus brief in support of Coin Center’s lawsuit regarding the U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanction of open-source software Tornado Cash. In the brief, the trade associations argued that OFAC’s sanction of Tornado Cash “reflects a basic misunderstanding” and “[l]ike any tool — indeed, like the internet itself — software like Tornado Cash can be misused for illicit purposes.” For more information, click here.
• On June 1, the Federal Reserve (Fed) and the California Department of Financial Protection and Innovation (DFPI) entered against Silvergate Bank (Silvergate) a consent order requiring, among other things, Silvergate to seek the Fed’s and DFPI’s approval before “engag[in] in any expansionary activities, new lines of business, or establish[ing], any new branches or other offices… .” For more information, click here.
• On June 1, six federal regulatory agencies, including the Consumer Financial Protection Bureau (CFPB), requested public comment on a proposed rule designed to ensure the credibility and integrity of models used in real estate valuations. In particular, the proposed rule would implement quality control standards for automated valuation models (AVMs) used by mortgage originators and secondary market issuers in valuing real estate collateral securing mortgage loans. For more information, click here.
• On June 1, the CFPB published an issue spotlight on digital payment apps heavily used by consumers and businesses. The analysis finds that funds stored on these apps may not be safe in the event of financial distress, since the funds may not be held in accounts with federal deposit insurance coverage. The CFPB also issued a consumer advisory for customers holding funds in these apps and how they can make sure their funds remain safe. For more information, click here.
• On May 31, the Department of Housing and Urban Development (HUD) published FHA INFO 23-44, which announced the posting of the Draft Mortgagee Letter (draft ML), Payment Supplement Partial Claim. Through the proposed policy provided in this draft ML, the Federal Housing Administration (FHA) proposes to create a new loss mitigation option to assist struggling borrowers that are delinquent on their mortgage payments. This option is targeted to assist borrowers in default, who are unable to obtain a significant payment reduction through other loss mitigation options. For more information, click here.
• On May 31, the European Banking Authority (EBA) launched a public consultation on amendments to its guidelines on money laundering and terrorist financing (ML/TF) risk factors. The proposed changes extend the scope of these guidelines to crypto-asset service providers (CASPs). The consultation runs until August 31. For more information, click here.
• On May 31, the Justice Department announced that ESSA Bank & Trust has agreed to pay more than $3 million to resolve allegations that it engaged in a pattern or practice of lending discrimination by redlining majority-Black and Hispanic neighborhoods in and around Philadelphia. For more information, click here.
• On May 30, the Commodity Futures Trading Commission Division of Clearing and Risk (DCR) issued a staff advisory on the risks associated with the expansion of Derivatives Clearing Organization (DCO) clearing of digital assets. In the past several years, DCR has observed an increased interest by DCOs and DCO applicants in expanding the types of products cleared, as well as business lines, clearing models, and services DCOs offer, including those related to digital assets. For more information, click here.
• On May 25, U.S. Representative Alex X. Mooney (R-WV) introduced H.R. 3712 titled the Digital Dollar Pilot Prevention Act to prohibit the Fed from establishing, approving, or otherwise carrying out any proof-of-concept programs intended to test the practicability of issuing a central bank digital currency (CBDC). For more information, click here.
• On May 25, the World Economic Forum released a white paper titled, “Pathways to Crypto-Asset Regulation: A Global Approach,” which examines the needs for a global approach to regulate digital assets, and analyzes the challenges of a global approach. For more information, click here.
• On May 25, the Office of the Comptroller of the Currency (OCC) announced revisions to its policies and procedures manual on bank enforcement actions to reflect its consideration of actions against banks that exhibit or fail to correct persistent weaknesses. For more information, click here.
• On May 24, the CFPB issued a blog post discussing mortgage rates paid by consumers varying across lenders. For more information, click here.
• On May 23, the Acting Comptroller of the Currency Michael J. Hsu discussed the OCC’s commitment to a fair and inclusive financial system in remarks at the Bank On National Conference. For more information, click here.
• On May 23, Prometheum Ember Capital LLC announced it has received a first-of-its-kind approval from the Financial Industry Regulatory Authority (FINRA) to operate as a special purpose broker-dealer (SPBD) for digital asset securities. This approval permits Prometheum Capital to custody digital asset securities on behalf of retail and institutional clients. For more information, click here.
• On May 22, HUD released Mortgage Letter (ML) 2023-11 to update previously issued guidance on loss mitigation options for non-borrowers, who acquire a title through an exempted transfer. For more information, click here.
• On May 20, the Federal Trade Commission filed an amicus brief in a case on appeal before the U.S. Court of Appeals for the Ninth Circuit, arguing that the Children’s Online Privacy Protection Act does not preempt state laws that are consistent with the federal statute’s treatment of regulated activities. For more information, click here.

State Activities:

• On May 27, Texas Governor Greg Abbott signed SB 768, amending the state’s data breach notification statutes. Under the amended law, a security breach must be disclosed to the attorney general “as soon as practicable and not later than the 30th day after the date on which the person determines that the breach occurred.” This amendment reduces the amount of time for disclosure down from 60 days. The act also requires that the notice be submitted via an electronic form. For more information, click here.
• On May 25, while delivering testimony before the New York State Assembly, Superintendent of the New York State Department of Financial Services (NYDFS) Adrienne Harris asserted that the NYDFS’ BitLicense regime has “cement[ed] the [NYDFS] as the leading global prudential regulator for virtual currency business activity.” For more information, click here.
• On May 25, New York Attorney General Letitia James recovered $300,000 from an online sporting goods retailer following the company’s failure to adequately safeguard consumers’ personal data. The company’s inadequate security measures left it vulnerable to a cybersecurity attack in 2021 that affected consumers private information, including credit card information and email addresses. The company agreed to pay $300,000 in penalties and further agreed to strengthen its cybersecurity policy to better protect consumers’ private information. For more information, click here.
• On May 24, Minnesota Governor Tim Walz signed AF 2744, a bill that amends several of the state’s statutes concerning financial institutions. Among other things, the bill revises the definition of “annual percentage rate” as it pertains to small consumer loans to “include[] all interest, finance charges, and fees,” and requires that the annual percentage rate “be determined in accordance with either the actuarial method or United States Rule method.” With respect to a consumer short-term loan, the bill provides that a short-term loan lender may charge an annual percentage rate of up to 50% but prohibits any other charges or payments in connection with a consumer short-term loan. Loans that exceed 36% annual percentage rate must also comply with certain other provisions. For more information, click here.
• On May 24, Florida Governor Ron DeSantis signed HB 1185, which, among other things, permits mortgage loan originators to work from remote locations if certain conditions are met. Some of the conditions set forth in the act are: (a) the licensee has written policies and procedures for the supervision of loan originators working from remote locations; (b) access to company platforms and customer information complies with the licensee’s comprehensive written information security plan; (c) an in-person interaction with a customer does not occur at the originator’s residence unless such residence is a licensed location; (d) physical records are not kept at a remote location; (e) customer interactions and conversations about consumers comply with applicable state and federal information security requirements; (f) the originator must use a virtual private network or system that ensures secure connectivity when access the company’s secure systems or documents from a remote location; (g) the licensee ensures all appropriate security updates are installed and maintained; (h) the licensee is able to remotely lock/erase company-related contents of any device; and (i) the registry’s record designates the originator’s principal place of business as the originator’s registered location. For more information, click here.
• On May 23, New York Attorney General Letitia James recovered $550,000 from a medical management company for failing to properly shield New Yorkers’ personal information, including health records. The company’s networks were left susceptible to a cyberattack when the company failed to timely update its software, affecting more than 1.2 million individuals across the nation. The security failures violated state law and the federal Health Insurance Portability and Accountability Act (HIPAA). The company has agreed to pay $550,000 in penalties, strengthen its security measures with regard to safeguarding data, and offer consumers free credit monitoring services. For more information, click here.
• Recently, the New York branch of the U.S. Central Bank published the Phase II report of Project Cedar, an ongoing pilot with the goal of improving cross-border payments using distributed ledger technology. According to a press release, among other things, the report discusses findings related to interlinking simulated central bank currency ledgers; “atomic settlement” where “transactions were only settled if all legs in the cross-currency payment chains were executed successfully”; and “near real-time settlement” where a “simulated payment scenario achieved end-to-end settlement in under 30 seconds on average. 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 May 30, the United States, in coordination with the G7 and other international partners, announced that it is strengthening the unprecedented global sanctions and other restrictive economic measures to further degrade the Russian Federation’s capacity to wage war against Ukraine. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is implementing new commitments made at the G7 Leaders’ Summit to hold Russia accountable for its war. For more information, click here.
• On May 26, the European Central Bank published two reports on its market research and prototyping exercise, which were both conducted as part of the investigation phase of the digital euro project. For more information, click here.
• On May 23, the Consumer Financial Protection Bureau (CFPB) announced it had reached a settlement to resolve allegations that a large bank violated consumer financial protection laws and rules protecting individuals when they dispute credit card transactions. The CFPB alleges that the bank failed to properly manage and respond to customers’ credit card disputes and fraud claims. For more information, click here.
• On May 23, the CFPB published a report examining data, suggesting that overdraft/NSF revenues are down nearly 50% versus pre-pandemic levels. For more information, click here.
• On May 23, OFAC and South Korea’s Ministry of Foreign Affairs (MOFA) imposed sanctions against North Korea’s 110^th Research Center and its parent agency, the Technical Reconnaissance Bureau, for supporting the activities of units that steal cryptocurrencies through hacking. OFAC and MOFA also sanctioned Chinyong Information Technology Cooperation Company, and its employee, Sang Man Kim, for their role in helping North Korean IT professionals find contract work overseas. These groups obtain proceeds through illicit activities and return the funds to North Korea to support its weapons development programs. For more information, click here.
• On May 23, the International Organization of Securities Commissions (IOSCO), the global standard setter for securities markets, released draft policy recommendations for the cryptocurrency and digital asset markets. In a major initiative designed to improve global standards of regulation of crypto-assets, IOSCO has set out recommendations regarding how clients should be protected and how crypto trading should meet the standards that apply in public markets. For more information, click here.
• On May 22, the Federal Trade Commission (FTC) announced it would send payments totaling more than $557,000 to consumers who paid money to a Florida-based telemarketing company that allegedly promised credit card interest rate reductions. The FTC and the State of Florida sued the telemarketing company and its owners in July 2020, alleging that they charged consumers as much as $3,995 for their debt relief services, making claims that they were affiliated with major credit card companies and could save consumers thousands of dollars by securing reduced interest rates. The FTC alleges that most consumers did not see the advertised benefit from the company’s services, and were left with more debt and no measurable improvement to their credit scores. The company’s operators agreed to settlements that the court entered in November 2021 permanently banning them from the debt relief industry and requiring them to surrender assets. For more information, click here.
• On May 22, Freddie Mac announced enhancements to its ground-breaking automated income assessment tool that allows lenders to assess a homebuyer’s income paid through direct deposit, to also include the borrower’s digital paystub data. This detailed information can help lenders calculate income faster and more precisely to improve loan quality, simplify the mortgage process and, most importantly, expand access to credit. For more information, click here.
• On May 19, the Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a supplemental joint alert urging continued vigilance on the part of U.S. financial institutions for potential attempts by Russia to evade U.S. export controls. For more information, click here.
• On May 18, the FTC announced that it is seeking comment on proposed changes to the Health Breach Notification Rule (HBNR) that include clarifying the rule’s applicability to health apps and other similar technologies. For more information, click here.
• On May 18, the Office of the Comptroller of the Currency released new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations. For more information, click here.
• On May 17, the Department of Justice filed a complaint on behalf of the FTC against a health app for violating the Health Breach Notification Rule (HBNR) by allegedly sharing users’ sensitive personal information with third parties, disclosing sensitive health data, and failing to notify users of these unauthorized disclosures. For more information, click here.
• On May 17, CFPB Director Rohit Chopra announced that the agency is currently reviewing several of its rules and guidance documents in an effort to eliminate unnecessary complexities and create more durable rules that don’t over-rely on single entities. For more information, click here.
• On May 17, the Federal Housing Administration (FHA) announced new policies that will allow for faster payment of funds to mortgagees when they assign a Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, to U.S. Department of Housing and Urban Development (HUD). The changes permit people with FHA mortgages to submit a request for Preliminary Title Approval earlier in the process and with fewer documents. Combined, these changes will reduce the time between a loan’s eligibility for assignment to HUD and the payment of claim funds to the mortgagee. For more information, click here.
• On May 16, the U.S. and the European Union announced that they are working more closely on sanctions as a key tool to addressing shared foreign policy goals. From April 26–28, the OFAC, the European External Action Service (EEAS), and the European Commission Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) concluded a multiday technical meeting in Brussels. For more information, click here.
• On May 15, the Federal Housing Finance Agency (FHFA) issued a Request for Input (RFI) on Fannie Mae and Freddie Mac’s single-family pricing framework. The RFI solicits public feedback on the goals and policy priorities that FHFA should pursue in its oversight of the pricing framework. For more information, click here.

State Activities:

• On May 29, Texas Governor Greg Abbott signed a bill into law that will require hospitals and health care facilities to send patients a written, understandable itemized invoice prior to placing the account with a debt collector. The law is scheduled to go into effect on September 1. For more information, click here.
• On May 18, New York Attorney General Letitia James announced a settlement with a Brooklyn-based cryptocurrency company to resolve claims that it defrauded investors. James alleged that the company charged investors “exorbitant and undisclosed fees” to store cryptocurrency in an account, despite being advertised as a free service on the company’s website. The fees charged were allegedly so high that they emptied investors’ accounts. James also alleged that the company failed to register as a commodity broker dealer for a period of time and failed to file a registration statement. The company is required to pay $508,910 in restitution to the state and provide full restitution to investors. The company will also provide monthly status updates to James, and will limit the fees charged for using its wallet services for at least five years. For more information, click here.
• On May 19, Arizona Governor Katie Hobbs signed HB2010 into law. The bill revises sections of the state’s statutes relating to the Department of Insurance and Financial Institutions. Under the new law, a licensee can avoid a license renewal investigation by paying the prescribed fees. The bill also changes several statutory provisions related to, among other things, accounting practices and retention of records for mortgage brokers, mortgage bankers, and commercial mortgage bankers. For more information, click here.
• On May 11, Governor Kim Reynolds signed HF675, revising various provisions of the state’s Uniform Money Transmission Modernization Act. Set to take effect July 1, the revised act eases regulatory restrictions and makes the act more congruent with similar laws enacted in other states. The act revises the definition of several terms, including the term “money transmission,” which now expressly excludes the provision solely of online or telecommunications services or network access. Additionally, the act carves exemptions from licensing for various entities and organizations, including, for example, a delayed deposit services business, as that term is defined elsewhere within the act. For more information, click here.
• On May 8, the California Department of Financial Protection and Innovation (DFPI) released an opinion addressing whether a company’s handling of certain payments was exempt from the licensure requirement of the state’s Money Transmission Act (MTA). In response to the company’s inquiry, DFPI granted the company an exemption for the payments it receives from another company’s collection attorneys, which the inquiring company then remits to the company to which the payments are due. With respect to tax payments services offered by the inquiring company, DFPI agreed with the inquiring company that the agent of payee exemption set forth in the MTA applied to such transactions because of certain language appointing the company as the contractor’s limited agent for the sole purpose of collecting the payments. Last, DFPI further agreed that the agent of payee exemption applied to the inquiring company’s processing of payments for fees and tax payments to government entities, again based on contractual language, creating a limited agency relationship between the inquiring company and the governmental entities to which the payments are owed. For more information, click here.
• Earlier this month, Solo Funds Inc. entered separate consent orders with California, Connecticut, and the District of Columbia to resolve allegations claiming that it disguised interest charges as tips and donations connected to loans offered through 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 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.