Search auto data

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

Federal Activities

State Activities

Federal Activities:

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

State Activities:

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

On December 7, the Consumer Financial Protection Bureau (CFPB) released a report entitled Protecting Those Who Protect Us. The report sought to quantify, for the first time, the use of the Servicemembers Civil Relief Act (SCRA) interest rate reduction benefit. According to the CFPB’s research, between 2007 and 2018, fewer than 10% of eligible auto loans and 6% of personal loans received a reduced interest rate. Additionally, members of the reserve component also infrequently benefit from interest rate reductions for credit cards and mortgage loans. The report identified several strategies (previously “codified” via consent orders) to increase servicemember access to SCRA protections, including automatically applying interest rate reductions and applying reductions for all accounts held at an institution if a servicemember invokes protections for a single account.

The SCRA applies to active-duty members of the Army, Marine Corps, Navy, Air Force, Space Force, and Coast Guard as well as reservists or members of the National Guard serving for more than 30 consecutive days for the purpose of responding to a national emergency. The law also applies to active duty commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration. The SCRA provides multiple legal and financial protections to active duty servicemembers, including: (1) the ability to reduce the interest rate on any pre-service obligations or liabilities to a maximum of 6 percent; (2) protections against repossession of certain property, including motor vehicles, without a court order; (3) protections against default judgments in civil cases; (4) protections against certain home foreclosures without a court order; and (5) the ability to terminate certain residential housing and automobile leases early without penalty.

The CFPB’s report focused only on the interest rate reduction benefit and protection against repossession. To receive the interest rate reduction, a servicemember must notify their lender in writing with a copy of their orders to active-duty service or any other appropriate indicator of military service. Creditors may also proactively grant the interest rate reduction by retrieving information from the Defense Manpower Data Center SCRA website to determine active-duty status in lieu of written notification.

The report used data from the CFPB’s Consumer Credit Panel from 2007 to 2018 matched to activation data from the Department of Defense. Key findings from the report include:

  • Fewer than one in ten members of the reserve component with eligible auto loans, and only 6% of those with eligible personal loans, received an interest rate reduction from 2007 to 2018.
    • These missed interest rate reduction opportunities represent about $100 million in foregone savings.
  • Members of the reserve component also infrequently benefit from the rate reduction benefit for credit cards and mortgage loans.
    • Although the CFPB could not apply the same method to credit cards (in part because they are open-end credit) and home mortgages (in part because their payments often include taxes and insurance), it estimated the foregone savings of these rate reduction opportunities could amount to between $1,890 and $5,670 per activation, which is much larger than the savings for auto and personal loans.
  • Reserve component servicemembers are more likely to obtain a reduced interest rate during longer periods of activation.
    • Even among the longest periods of activation (about a year or more), however, the likelihood of an interest rate reduction remains under 16% for auto and personal loans.
  • Reserve component servicemembers are less likely to experience reported repossessions during an activation.
    • During activated periods, auto loans are two-thirds less likely to be reported in repossession, compared to non-activated periods.

In conclusion, the CFPB recommended that creditors take the following steps, consistent with practices that have been required as a practical matter by consent orders resolving SCRA violations, to increase utilization of the SCRA rate reduction:

  • Apply SCRA interest rate reductions enterprise-wide if a servicemember invokes protections for a single account.
    • If widely adopted, this measure will increase interest rate reduction utilization, reduce the duplication necessary to invoke the SCRA interest rate reduction for multiple accounts, and address complexity that may be hindering utilization.
  • Explore ways to automatically apply the SCRA interest rate reduction.
    • When the SCRA interest rate reduction benefit is automatically applied, as has been done for many student loans, eligible servicemembers are substantially more likely to benefit than if they are required to submit proper written notification.
  • Develop comprehensive and periodic indicators of SCRA benefit utilization.
    • A comprehensive and periodic review of SCRA rate reduction utilization would provide beneficial information to evaluate future efforts to expand servicemembers’ financial protections.

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

Federal Activities

State Activities

Federal Activities:

  • On November 23, the Federal Reserve Board and the Federal Deposit Insurance Corporation announced the results of their joint review of the resolution plans — also known as “living wills” — submitted by the eight largest and most complex domestic banking organizations in 2021. Resolution plans must describe a financial company’s strategy for rapid and orderly resolution in bankruptcy in the event of its material financial distress or failure. The agencies have provided feedback letters to each of the firms, which note continued development of the firms’ resolution strategies and capabilities and the expectation that work will continue. The feedback letters also note the expectation that the next plan review will include expanded testing of the firm’s resolution capabilities. For more information, click here.
  • On November 22, the U.S. Department of Education announced an extension of the pause on student loan repayment, interest, and collections. The extension will alleviate uncertainty for borrowers as the Supreme Court reviews lower court orders, preventing the department from providing debt relief for tens of millions of Americans. Payments will resume 60 days after the department is permitted to implement the program or the litigation is resolved, which will give the Supreme Court an opportunity to resolve the case during its current term. If the program is not implemented and the litigation is not resolved by June 30, 2023, payments will resume 60 days thereafter. For more information, click here.
  • On November 22, the Federal Trade Commission (FTC) joined the Consumer Financial Protection Bureau (CFPB) in filing an amicus brief with the U.S. Court of Appeals for the Eleventh Circuit in Louis v. Bluegreen Vacations Unlimited, Inc. The brief asks the appeals court to overturn a lower court decision that denied servicemembers the right to sue to invalidate a contract that they allege violates the Military Lending Act. The brief argues that the district court’s erroneous ruling could undermine Military Lending Act enforcement. For more information, click here.
  • On November 21, the Federal Communications Commission (FCC) issued a declaratory ruling and order, finding that companies must obtain consent before sending a “ringless voicemail” to a consumer’s phone since it constitutes a “call” made using an artificial or prerecorded voice and is subject to Telephone Consumer Protection Act provisions. “Ringless voicemails” are messages sent directly to voicemail inboxes without first triggering a call ringtone. The FCC found the calls should be regulated under the artificial or prerecorded voice prong of the statute, mooting any inquiry as to whether the “ringless voicemails” are sent with an automatic telephone dialing system. For more information, click here.
  • On November 21, the FTC released the National Do Not Call Registry Data Book for Fiscal Year 2022, which allows consumers to add their phone number to opt out of receiving most legal telemarketing calls. In the last fiscal year, over 2.5 million people signed up with the DNC Registry, bringing the total to more than 246 million phone numbers. For more information, click here.
  • On November 18, the Consumer Financial Protection Bureau (CFPB) published a blog post, outlining its recent initiative to share consumer complaint data with cities and counties, so they can “increase their efforts to protect consumers at the local levels.” According to the CFPB, collecting and responding to consumer complaints constitutes one of the major ways it regulates consumer financial products and protects consumers from unfair practices. The complaints it receives informs the CFPB’s regulatory priorities and enforcement activities. The CFPB recently launched an initiative to increase the impact of its complaint data by sharing it with local governments. The CFPB claims this will help protect as many consumers as possible from predatory lending, barriers to credit, and other consumer harms. For more information, click here.

State Activities:

  • On November 22, the California Department of Financial Protection and Innovation (DFPI) entered an order officially suspending SALT Lending LLC’s California financing law license for 30 days. Earlier this month, DFPI issued its notice of intent to suspend SALT’s license on the heels of the company’s announcement that its business operations were impacted by the collapse of cryptocurrency exchange FTX Trading Ltd. Having received no hearing request from SALT, DFPI made the suspension official. For more information, click here.
  • On November 22, New York Attorney General Letitia James objected to legislation that would permit investing retirement funds in digital assets, such as cryptocurrencies, urging members of Congress to instead adopt measures that would protect Americans’ savings. In her 10-page letter to congressional leaders, James criticized digital assets, citing volatility concerns as evidenced by recent crypto market crashes and other disruptions. Specifically, James referenced the crash of TerraUSD in May 2022 and the recent collapse of FTX Trading Ltd. to underscore her concern that “[i]nvesting Americans’ hard-earned retirement funds in crashing cryptocurrencies could wipe away a lifetime’s worth of hard work.” Moreover, James also argued that digital assets create “breeding ground for fraud, crime, and theft,” citing an FTC report that more than 46,000 people reported losing more than $1 billion to scams. For more information, click here.
  • On November 21, the Federal Reserve Bank of New York’s Center for Microeconomic Data released updated results from its Survey of Consumer Expectations Credit Access Survey. The Credit Access Survey, which provides information pertaining to consumers’ expectations about credit demand and access, is released annually in November. The most recent Credit Access Survey shows an overall decline in consumer credit demand in 2022, with a rise in credit card applications. According to the Credit Access Survey, households project that over the next year, they are less likely to apply for auto loans, mortgages, or mortgage refinance loans and more likely to apply for credit cards or a credit card limit increases. For more information, click here.
  • On November 21, California Attorney General Rob Bonta urged the FTC to follow the state’s lead and enhance consumer privacy protection against commercial surveillance and harmful data security practices. Using California’s Consumer Privacy Act as a point of reference, Bonta highlighted several critical areas for regulatory action. Bonta set forth several recommendations for how the FTC could improve privacy protections for consumers, which include (1) outlining clear standards for protecting sensitive personal information (e.g., geolocation and biometric information); (2) allowing consumers the right to opt out of the sale of their personal data; (3) preventing companies from tracking and selling data from users who have enabled privacy controls; (4) requiring more stringent verification process for online services and products likely to be utilized by children; (5) requiring businesses that collect or maintain health information to have reasonable security; and (6) protecting vulnerable patients from health care and insurance industry practices that tend to perpetuate unfair discrimination. For more information, click here.

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

Federal Activities

State Activities

Federal Activities:

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

State Activities:

  • On November 16, the California Department of Financial Protection and Innovation (DFPI) issued a notice to suspend SALT Lending LLC’s California Financing Law license for 30 days pending the DFPI’s investigation into SALT’s recent announcement to pause client withdrawals on its platform. Although the extent of the impact has yet to be determined, SALT, a crypto-lending platform, was affected by the recent collapse of cryptocurrency exchange FTX. For more information, click here.
  • On November 15, the city council of Toledo, Ohio (Council) and the county commissioners for Lucas County (Commissioners), where Toledo is located, combined forces to put $1.6 million toward purchasing residents’ medical debt. The Council decided to use $800,000 of the $180 million it received from the federal government as part of the American Rescue Plain Act. The Commissioners agreed to match the city’s funding. The ordinance that will enable the Council and the Commissioners to carry out this plan of eliminating up to $200 million in past due medical expenses for Toledo residents is expected to be the first attempt by government at any level, to aid residents in managing unpaid medical debt. The individuals seeking to have their debt forgiven must earn less than four times the federal poverty level or have unpaid medical debts that exceed 5% of their annual income. For more information, click here.
  • On November 15, New York Department of Financial Services Superintendent Adrienne Harris keynoted a Brookings Institute event, titled “Digital Asset Regulation: The State Perspective.” During her speech, Harris called on Congress to develop a federal digital asset regulatory framework that resembles New York’s state regulatory regime. For more information, click here.
  • On November 15, the Federal Reserve Bank of New York’s Innovation Center announced that it will launch a 12-week pilot program for a central bank digital currency (CBDC) to “explore the feasibility of an ‘interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger.'” This pilot program follows the initial phase of the CBDC trial, which examined foreign exchange spot trades to determine whether a blockchain solution could enhance the speed, cost, and access to cross-border wholesale payments. Notable banking institutions and financial services providers will be participating in the pilot project. Although federal regulators have not agreed on whether to launch a digital dollar in the country, several agencies and individuals in the private sector have been experimenting with the possibility. For more information, click here.
  • On November 11, the California DFPI issued notice of its intent to suspend a cryptocurrency lender’s license for 30 days while DFPI investigates the lender’s recent announcement that it will limit some of its platform activity. The lender made the announcement on its social media page, acknowledging that is unable to “operate business as usual” due to lack of clarity regarding the status of several crypto asset platforms. The cryptocurrency lender has reportedly terminated its loan offerings in California and has asked its clients not to make deposits to its platform. For more information, click here.

On November 15, the Consumer Financial Protection Bureau (CFPB) issued two reports, highlighting what the CFPB perceives to be forms of errors that frequently occur in tenant background checks and the impacts the CFPB believes that those errors can have on potential renters.

The “Tenant Background Check Markets Report” (Market Report) provides a description of the rental housing landscape and an overview of the tenant screening industry, largely drawn from market participants’ own marketing materials, filed lawsuits, and other regulatory enforcement actions. The “Consumer Snapshot: Tenant Background Checks” highlights common consumer complaints, identifying that renters submitted approximately 26,700 complaints related to tenant screening from January 2019 through September 2022, and complaint volumes increased year-over-year. In January 2019, the CFPB received approximately 300 complaints per month and by September 2022, the CFPB received almost 700 complaints per month related to tenant screening. The vast majority of complaints were related to allegedly incorrect information appearing on a prospective renter’s report. This was followed by complaints regarding obstacles faced trying to get companies to fix their alleged errors.

In its press release, the CFPB described its positions on the impact screening reports can have on tenants. “The reports describe how errors in these background checks contribute to higher costs and barriers to quality rental housing. Too often, these background checks — which purport to contain valuable tenant background information — are filled with largely unvalidated information of uncertain accuracy or predictive value. While renters bear the costs of errors and false information in these reports, they have few avenues to make tenant screening companies fix their sloppy procedures.”

As a result, the CFPB pledged, among other priorities, to continue to work closely with the Federal Trade Commission (FTC) to take action on those issues.

Consumer Reports

The Markets Report details how the creation and use of tenant screening reports are regulated by a patchwork of federal, state, and local government laws. While tenant screening companies sometimes access information directly from an original source, such as eviction filings or criminal records, the CFPB notes that such companies often purchase information from third-party vendors. The CFPB noted its view that applicants often have little to no visibility into the information contained in the reports, and applicants may not be provided the full list of data sources used for their report, further limiting their ability to fix errors or inaccuracies. The CFPB also identified what it viewed to be issues with the processing of consumer disputes and the reappearance of disputed information, whether in another company’s screening report or even by the same company.

Probity of Eviction Proceedings, Criminal History, and Credit Information Questioned

The CFPB found that eviction records are one of the most commonly marketed, yet widely criticized, elements of tenant screening reports. The legal basis for an eviction and whether that basis must be stated in the initial court records varies by jurisdiction. The CFPB also noted that many cases may be dismissed or ultimately decided in the tenant’s favor. According to one study cited by the CFPB of 3.6 million eviction court records from an industry advocacy group, 22% of state eviction cases “are ambiguous or false” records.

Based on the context, the CFPB stated that landlords may place too much weight on eviction history, despite the nuances and complexities of eviction proceedings. These practices may also exacerbate concerns about the discriminatory impact of tenant screening reports on certain demographic groups. Some jurisdictions have recently considered or passed laws to seal or limit access to eviction filings in certain instances, such as situations in which the landlord does not follow through with an eviction or the matter is not decided in the landlord’s favor. California, Oregon, Florida, Massachusetts, Connecticut, and Ohio, for instance, all have passed or considered legislation to seal or expunge eviction records. The CFPB also reported many examples of tenant screening reports appearing to include statutorily prohibited obsolete information, such as eviction records that are more than seven years old.

The CFPB also concluded that there is limited evidence that individuals with criminal records, including arrests, are categorically more problematic tenants. In response to these concerns, the CFPB noted that a handful of jurisdictions have recently passed “ban-the-box” laws that either prohibit the collection and use of criminal history information in rental decisions, or only permit collection and use for individualized assessments after the landlord has determined the tenant otherwise qualifies. A growing number of jurisdictions around the country, such as New Jersey, San Francisco, and Cook County, IL (which includes Chicago), have limited the ability of landlords to screen prospective tenants based on their criminal records. New York City continues to consider legislation in this area too. The CFPB endorsed those processes.

The CFPB also identified that tenant screening reports often include a third-party credit score or portions of a person’s credit report. The CFPB report concluded that credit history is a limited predictor of one’s likelihood to pay rent, given that the majority of tradelines furnished to the national credit reporting agencies are from financial services providers and related to bank loans, credit cards, and insurance.

The CFPB further stated the opinion that the one credit reporting variable it considers to be most relevant for rental housing — rent payment history — is not well-populated since the CFPB estimated that only 1.7% to 2.3% of adults who live in rental housing have rent tradelines in their credit files. That statement also could be seen as an endorsement of the greater population and use of that data and similar data (e.g., utility payment data).

Risks of Relying on Computer Generated Tenant Risk Scores Highlighted

The CFPB also focused on algorithmic processes that are used during the tenant screening process. The CFPB noted that some tenant screening companies generate overall tenant risk scores based on their own proprietary models that purport to estimate the likelihood of an eviction, missed payment, or lease renewal. The CFPB found that while rental risk scores and decision recommendations can simplify the landlord’s decision-making process, they can also conceal inaccuracies in the underlying data. The CFPB also stated the concern that automated scoring and algorithmic screening can obfuscate the underlying reasons for adverse rental application decisions and create risks for landlords. As a result, landlords may reject qualified applicants and may not be able to provide enough information to allow applicants to challenge the results, correct inaccurate information, or provide relevant mitigating information. The CFPB believes that these algorithmic processes can result in further legal risk to landlords, including through violations of the Fair Housing Act.

The CFPB’s Focus on Consumer Reporting and Its Pledged Action Going Forward

The CFPB concluded its report by pledging to continue to monitor and conduct research to understand the tenant screening market and its impacts on prospective renters, including to: (1) identify guidance or rules that that CFPB can issue to ensure that the background screening industry adheres to the law; (2) determine how to require the background screening industry to develop and maintain appropriate and accurate consumer reporting practices in accordance with applicable law; (3) coordinate law enforcement efforts with the FTC to hold tenant screening companies accountable for having reasonable procedures to “assure accurate information in the consumer reporting system”; and (4) coordinate with federal and local government agencies to ensure tenants receive information about potential inaccuracies in their reports in a timely fashion and that adequate adverse action notices are provided.

The FTC also weighed in on the issue in the press release regarding the CFPB’s publications: “FTC enforcement investigations have identified serious problems with tenant background check reports. We will continue to work with the CFPB to ensure that firms compiling these reports are following the law,” said FTC Bureau of Consumer Protection Director Samuel Levine.

These latest CFPB publications represent a continued emphasis by the FTC and CFPB on issues relating to credit reporting and tenant screening. Under the Biden administration, the FTC and CFPB have issued multiple advisory statements, reports, and opinions critical of certain aspects of the consumer reporting process, often without giving any weight to the interests of users of consumer reports, without providing any specific direction to consumer reporting agencies, and without any formal opportunity for notice and comment by industry actors. The CFPB’s publications in this regard will also be of specific interest to housing providers and property managers as they consider the use of tenant screening tools.

Troutman Pepper will continue to monitor these regulatory development and publications as they are made.

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

Federal Activities

State Activities

Federal Activities:

  • On November 4, the Federal Reserve Board invited public comment of a proposed rule to publish a periodic list of depository institutions that have access to Federal Reserve accounts, also known as “master accounts.” For more information, click here.
  • On November 2, the Consumer Financial Protection Bureau (CFPB) released a blog post, exploring the potential impact of student loan payment reinstatement. The CFPB found that student loan borrowers are increasingly likely to struggle once their monthly student loan payments are reinstated. However, the CFPB also found that student debt cancellation may substantially reduce the number of borrowers at risk when the payment suspension ends. Overall, the CFPB found that “despite worsening credit outcomes … the cancellation of some student loan debt means that fewer student loan borrowers are likely to be at risk of payment difficulties when federal student loan payments resume in January 2023 than they otherwise would be.” For more information, click here.
  • On November 2, CFPB Director Rohit Chopra delivered remarks at the Consumer Advisory Board meeting, which included a discussion on the fast-growing buy now, pay later market. For more information, click here.
  • On November 1, Deputy Secretary of the Treasury Wally Adeyemo delivered remarks at the semi-annual joint session of the Financial and Banking Information Infrastructure Committee and Financial Services Sector Coordinating Council where he discussed Treasury’s efforts to bolster public-private relationships to protect the department and financial sector from cyber threats. These include modernizing Treasury’s IT systems with an elevated cybersecurity threat focus, as well as ramping up partnerships with the financial and regulatory sectors. For more information, click here.
  • On October 31, the Financial Crimes Enforcement Network (FinCEN) informed U.S. financial institutions that the Financial Action Task Force (FATF), an intergovernmental body that establishes international standards for anti-money laundering, countering the financing of terrorism, and countering the financing of proliferation of weapons of mass destruction (AML/CFT/CPF), issued public statements, updating its lists of jurisdictions with strategic AML/CFT/CPF deficiencies following its plenary meeting this month. U.S. financial institutions should consider the FATF’s stance toward these jurisdictions when reviewing their obligations and risk-based policies, procedures, and practices. For more information, click here.
  • On October 31, the U.S. Department of Education released final regulations that streamline and improve the rules for major targeted debt relief programs. The regulations expand eligibility, remove barriers to relief, and encourage automatic discharges for borrowers who are eligible for loan relief because their school closed, they have a total and permanent disability, or their loan was falsely certified. The rules also establish a fairer process for borrowers to raise a defense to repayment, while preserving the borrowers’ day in court by preventing institutions of higher education (institutions) from forcing students to sign away their legal rights using mandatory arbitration agreements and class-action waivers. For more information, click here.
  • On October 31, the CFPB announced that it will re-open the public comment period for 30 days and add additional questions for six large technology and peer-to-peer platforms that operate payment services to provide information about their business practices, including their data collection and use, their policies for removing individuals or businesses from their platforms, and their policies and practices for adhering to key consumer protections like addressing disputes and errors. For more information, click here.
  • On October 31, the Federal Trade Commission announced that it is taking action against an education technology provider for its lax data security practices that exposed sensitive information about millions of its customers and employees, including Social Security numbers, email addresses, and passwords. The provider allegedly failed to fix problems with its data security despite experiencing four security breaches since 2017. The FTC’s proposed order requires the company to bolster its data security, limit the data the company can collect and retain, offer users multifactor authentication to secure their accounts, and allow users to access and delete their data. For more information, click here.
  • On October 27, the American Bankers Association expressed concern regarding a proposal currently being considered by the CFPB that would shift liability from consumers to banks for scams involving peer-to-peer (P2P) payments. This would include requiring banks to reimburse consumers for P2P payments made but later identified by consumers as payments to a scammer. For more information, click here.
  • On October 27, the Office of the Comptroller of the Currency (OCC) announced it will establish an Office of Financial Technology early next year to bolster the agency’s expertise and ability to adapt to a rapidly changing banking landscape. The Office of Financial Technology will build on and incorporate the Office of Innovation, which the OCC established in 2016 to coordinate agency efforts to support responsible financial innovation. For more information, click here.
  • On October 27, the Federal Financial Institutions Examination Council announced an update to its 2018 Cybersecurity Resource Guide for Financial Institutions. The guide includes updated references and now includes ransomware-specific resources. The FDIC is amplifying this resource in recognition of Cybersecurity Awareness Month, which highlights the importance of safeguarding our nation’s critical infrastructure from malicious cyber activity and protecting citizens and businesses from ransomware and other cyberattacks. For more information, click here.
  • On October 26, FinCEN announced the renewal and expansion of its Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in non-financed purchases of residential real estate. FinCEN renewed the GTOs that cover certain counties within the following major U.S. metropolitan areas: Boston, Chicago, Dallas-Fort Worth, Las Vegas, Los Angeles, Miami, New York City, San Antonio, San Diego, San Francisco, Seattle, the District of Columbia, Northern Virginia, and Maryland (DMV) area, as well as the city and county of Baltimore, the county of Fairfield, CT, and the Hawaiian islands of Honolulu, Maui, Hawaii, and Kauai. For more information, click here.
  • On October 26, the Congressional Research Service issued a report, discussing the ongoing development of AML/CFT policy since the release of President Biden’s Executive Order 14067 (Ensuring Responsible Development of Digital Assets). The report mainly addressed the Biden administration’s next steps for addressing illicit finance concerns related to digital assets:
    • Evaluating potential legislative proposals to amend the Bank Secrecy Act and laws related to unlicensed money transmitters;
    • Authorizing the DOJ to prosecute digital asset crimes in any jurisdiction where a victim of those crimes is located;
    • Conducting illicit finance risks assessment of decentralized finance (by the end of February 2023) and of non-fungible tokens (by July 2023);
    • Increasing dialogue with private sector on the illicit financing risks associated with digital assets and compliance with AML/CFT obligations;
    • Continuing to hold misusers of digital assets accountable for their actions through law enforcement action and node analysis.

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

State Activities:

  • On November 4, the Federal Reserve Bank of New York (New York Fed) issued a report on the Phase 1 results of Project Cedar, a multiphase research effort to develop a technical framework for a theoretical wholesale central bank digital currency (wCBDC) issued by the Federal Reserve. A wCBDC is designed primarily for the settlement of interbank payments and would be available only to those parties with master account access at a central bank. Phase 1 of Project Cedar involved cross-border settlement of FX spot trades, which generally take at least two days to settle. By leveraging a permissioned blockchain network, the New York Fed substantially reduced the historical settlement time of FX spot trades since the results of Phase 1 of Project Cedar revealed blockchain-enabled payments systems settle transactions in fewer than 10 seconds. For more information, click here.
  • On November 3, the Massachusetts Division of Banks issued a cease-and-desist order to a debt collector believed to have been operating within the state for more than six years without the requisite state licensure. The debt collector originally obtained licensing in 2010, but its license expired in 2012 and was terminated less than six months later. The order requires the collector to cease all collection activities within the state until properly licensed, provide a record of the funds it collected from consumers in the state from January 2019 through November 3, 2022, and provide an itemization of the accounts of consumers from whom it is currently attempting to collect. For more information, click here.
  • On November 3, Pennsylvania Attorney General Josh Shapiro announced that his office filed a lawsuit against New York-based Fluent, Inc. — a company that connects advertisers to potential new customers through the consumers’ personal data — for its and its subsidiaries’ role in allegedly causing hundreds of thousands of unwanted robocalls to be placed to Pennsylvania consumers. Fluent and its subsidiaries Fluent LLC, CAC, American Prize Center LLC, Deliver Technology LLC, Rewardzone USA LLC, and Samples & Savings USA LLC, collected personal information, including telephone numbers, then sold them to telemarketing companies. This included the personal information of thousands of consumers on Pennsylvania’s Do Not Call List. For more information, click here.
  • On October 31, Connecticut state regulators levied a $4.5 million fine against a utility company accused of trying to garnish customers’ wages during the COVID-19 pandemic without complying with state law. Specifically, the utility company failed to adhere to a pandemic-related plan implemented by the state’s Public Utilities Regulatory Authority, which required companies to offer a payment program option to customers seeking financial assistance or whenever a customer missed his or her first payment. The state regulators’ eight-month investigation unearthed evidence that the utility company filed more than 200 applications for wage garnishments against customers who did not pay their bills during the pandemic. Additionally, the utility company allegedly engaged a collection agency with knowledge that the agency reported customer information to consumer reporting agencies without first notifying the customers, as required by state law. State regulators are seeking the maximum fine of $10,000 per violation against the utility company. For more information, click here.
  • On October 27, the California Department of Financial Protection and Innovation (DFPI) announced that it intends to begin issuing conditional licenses to companies that have applied under the state’s debt collection licensing law. Additionally, the agency will end the safe harbor provision, which currently permits companies that have applied for a license to continue collecting debt within the state. These changes are being implemented as a means of offsetting anticipated delays in the licensing process as DFPI continues to develop a system for performing background checks and collecting fingerprints that meets the standards set forth by the Federal Bureau of Investigation. So far, the agency has received approximately 1300 applications. For more information, click here.

At the Money 20/20 fintech conference, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra announced his intent to move forward with the CFPB’s rulemaking under Section 1033 of the Consumer Financial Protection Act as part of the financial services industry’s movement toward “open banking,” a concept that involves the use of APIs that provide direct access to a financial institution’s data, enabling third-party developers to build applications and services around such data. Specifically, Chopra stated that the upcoming CFPB rules will likely contain provisions: (1) requiring financial institutions that offer transaction accounts to set up secure methods, like APIs, for data sharing; (2) stopping incumbent institutions from improperly restricting access when consumers seek to control and share their data; and (3) exploring safeguards to prevent excessive control or monopolization by a handful of firms. Today, the CFPB released an Outline of Proposals and Alternatives Under Consideration for industry participants to weigh in on the Section 1033 rulemaking. The CFPB will be accepting written feedback from stakeholders through January 25, 2023.

Chopra described the impetus for the new rule as part of an intentional shift by the CFPB away from “fine print” privacy notices and toward procompetitive regulation. “While not explicitly an open banking or open finance rule, the rule will move us closer to it, by obligating financial institutions to share consumer data upon consumer request, empowering people to break up with banks that provide bad service, and unleashing more market competition. If successful, it will also reduce the ability for incumbents to build moats and for middlemen to serve as gatekeepers. It will provide big advantages to those who provide the best products, service quality, and rates.”

According to Chopra, the benefits of moving toward open banking include:

  • More bargaining leverage for individuals and nascent firms;
    • Individuals who want to switch providers would be able to transfer their account history to a new company.
    • Nascent firms would be able to use data permissioned by consumers to improve upon and customize, to provide greater access, and to develop products and services.
  • Better security of personal financial data;
    • If a firm is required to make a person’s financial information available to them, or to a third-party acting on the consumer’s behalf, via a secure method, some privacy problems like screen scraping could be mitigated.
  • More switching and incentives for better service;
    • Individuals could walk away from their financial provider for whatever reason without worrying about the hassle of resetting direct deposits or automatic payments.
    • A competitive market would lead to unbundling where companies compete on individual products, rather than relying on captive customers.
  • More switching would lead to greater efforts by firms to maintain or win customer loyalty.
    • When consumers authorize transfers of their personal financial data, new providers would immediately know the products and services that could best fit their new customers’ needs.
    • Large incumbents would find their customers to be less “sticky” and easier to “poach.” They’d also find it harder to impose “junk fees” and harvest personal financial data for their exclusive use.
  • The ability for financial companies to find new ways to underwrite and score with less bias.
    • Lending could move back to real-world data about someone’s ability to pay back a loan and this could eliminate bias and reliance on credit scores and other proxies.

The proposed rules will be limited to deposit accounts, credit cards, digital wallets, prepaid cards, and other transaction accounts, but Chopra noted that, “while we expect to cover more products over time, we are starting with these ones.” Chopra hopes that the new rule “will be able to facilitate new approaches to underwriting, payment services, personal financial management, income verification, account switching, and comparison shopping.” Chopra also indicated that the new rule may reach beyond consumer access to financial records, but could touch on areas, including data monetization restrictions, purpose limitations, data deletion requirements, data ownership, as well as replacing existing privacy regimes, such as the Gramm-Leach-Bliley Act.

The proposed rules being considered, amongst other things, would:

  • Require a defined subset of Dodd-Frank Act covered persons that are data providers to make consumer financial information available to a consumer or an authorized third-party.
  • Require a potential “authorized third-party” to: (1) provide an “authorization disclosure” to inform the consumer of key terms of access; (2) obtain the consumer’s informed, express consent to the key terms of access contained in the authorization disclosure; and (3) certify to the consumer that it will abide by certain obligations regarding collection, use, and retention of the consumer’s information.
  • Require covered data providers to make available the following categories of information with respect to covered accounts:
    • Periodic statements;
    • Information regarding prior transactions and deposits that have not yet settled;
    • Information about prior transactions not typically shown on periodic statements or online financial account management portals;
    • Online banking transactions that the consumer has set up but that have not yet occurred;
    • Account identity information; and
    • Other information, including consumer reports obtained and used by the covered data provider in deciding whether to provide an account or other financial product or service to a consumer; fees that the covered data provider assesses on its consumer accounts; bonuses, rewards, discounts, or other incentives that the covered data provider provides to consumers; and information about security breaches that exposed a consumer’s identity or financial information.
  • Ensure that data providers transmit consumer information accurately through third-party access portals, by requiring covered data providers to implement reasonable policies and procedures to ensure data accuracy, establish performance standards, and prohibit covered data provider conduct that would adversely affect the accurate transmission of consumer information, or some combination of the above.
  • Limit third-parties’ collection, use, and retention of consumer information to what is reasonably necessary to provide the product or service the consumer has requested.
    • Authorized third-parties would be required to provide consumers with a simple way to revoke authorization at any point, consistent with the consumer’s mode of authorization.
    • The CFPB is considering proposals that would limit third-parties’ secondary use of consumer-authorized information and would require deletion of consumer information that is no longer reasonably necessary to provide the consumer’s requested product or service.
    • The CFPB is also considering proposals to require authorized third-

parties to implement data security standards and maintain reasonable policies and procedures to ensure the accuracy of the data that they collect and use.

Consumer Bankers Association (CBA) President and CEO Lindsey Johnson issued a statement in support of the proposed rulemaking: “CBA long has supported expanding consumers’ access and control of their personal financial data. We look forward to continuing to work with the Bureau on developing a well-founded, durable final rule that promotes competition, spurs innovation, and provides consumers the certainty of knowing their financial data is safe and secure.” In August 2022, the CBA joined other industry trade groups in petitioning the CFPB to “ensure that data aggregators and data users that are larger participants in the aggregation services market — not just banks and credit unions — are examined for compliance with applicable federal consumer financial law, especially the requirements of the forthcoming 1033 rulemaking, including the substantive prohibitions on the release of confidential commercial information.”

In addition to considering any written feedback, the CFPB will be convening a panel of small businesses to hear from small banks and financial companies who will be providers of data, the small banks and financial companies who will ingest the data, and the intermediary data brokers that will facilitate data transfers. Following these discussions, a report about the input received will be published during the first quarter of 2023, which will inform the proposed rule that Chopra plans to issue later in 2023. According to the timeline laid out by Chopra, the CFPB will move forward with implementation when the final rule is issued in 2024.

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

Federal Activities

State Activities

Federal Activities:

  • On October 21, the Federal Trade Commission (FTC) issued “Protecting Older Consumers, 2021-2022, A Report of the Federal Trade Commission” to Congress on protecting older adults. The report highlights key trends based on fraud reports by older adults, as well as the FTC’s efforts to combat the problem through law enforcement actions, rulemaking, and outreach and education programs. For more information, click here.
  • On October 21, the Eighth Circuit temporarily blocked President Joe Biden’s student loan forgiveness program. For more information, click here.
  • On October 20, while at the Brookings Institute’s The Prudential Regulation of Crypto-Assets event, Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg discussed policy considerations for stablecoins and the FDIC’s likely role in regulating bank-related, crypto-asset activity. Notably, Chairman Gruenberg believes stablecoins should be (1) issued through a bank subsidiary; (2) backed in a 1:1 ratio by short-dated U.S. Treasury assets; and (3) transacted on permissioned distributed ledger technology where authorization is a prerequisite to validate network transactions. For more information, click here.
  • On October 20, Supreme Court Justice Amy Coney Barrett, who oversees Seventh Circuit emergency matters, rejected an emergency request to stop President Biden’s student loan forgiveness program. For more information, click here.
  • On October 20, the Consumer Financial Protection Bureau (CFPB) issued guidance to consumer reporting agencies about their obligation to screen for and eliminate what the CFPB describes as “obviously false ‘junk data'” from consumers’ credit reports. The guidance states that consumer reporting agencies need to take steps to reliably detect and remove inconsistent or impossible information from consumers’ credit profiles. For more information, click here.
  • On October 19, the U.S. Department of Justice (DOJ), on behalf of the U.S. Department of Treasury and the Financial Crimes Enforcement Network (FinCEN), filed a lawsuit in the District of Columbia against Larry Dean Harmon, the founder of digital currency mixers Helix and Coin Ninja. In 2020, FinCEN assessed a civil money penalty of $60 million against Harmon for failing to implement an effective anti-money laundering program and report suspicious activity while operating Helix and Coin Ninja, which constitute money transmitters under the Bank Secrecy Act. Between 2014 and 2017, FinCEN alleged Helix conducted over 1,225,000 mixing transactions, and Harmon received commissions totaling approximately 356,000 bitcoins. In 2021, Harmon pled guilty to DOJ’s charges, and as part of his plea, he must forfeit more than 4,400 bitcoin valued at more than $200 million at the time. Harmon has not yet been sentenced. The DOJ’s 2022 lawsuit seeks to recover the $60 million civil penalty FinCEN imposed on Harmon in 2020. For more information, click here.
  • On October 19, two Massachusetts men were sentenced for an extensive scheme to take over victims’ social media accounts and steal their cryptocurrency using techniques, such as “SIM swapping,” computer hacking, and other methods. For more information, click here.
  • On October 19, the Fifth Circuit ruled that the CFPB’s funding structure is unconstitutional, finding that the CFPB funding structure created by Congress violated the Constitution’s appropriations clause, which provides that “no money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” For more information, click here.
  • On October 19, the Department of Housing and Urban Development published a proposed rule in the Federal Register, seeking public comment on transitioning existing FHA-insured forward and home equity conversion mortgage adjustable rate mortgages from LIBOR to a spread-adjusted Secured Overnight Financing Rate index after the one-year and one-month LIBOR indices cease to be published on June 30, 2023. The proposed rule includes removing LIBOR and adding SOFR as an approved index for newly originated forward ARMs. Comments are due by November 18. For more information, click here.
  • On October 19, the CFPB released its issue brief, “Overdraft Fees and Economically Insecure Older Adults,” which examines the economic effects of overdraft fees on economically insecure older adults. For more information, click here.
  • On October 18, the FTC reached a $3.38 million settlement with Passport Automotive Group (Passport) and two of its officers over allegations that the automotive group violated the Equal Credit Opportunity Act and the FTC Act by adding “junk fees” onto the cost of its vehicles and discriminating against Black and Latino consumers by charging them higher financing costs and fees than non-Latino white consumers. In addition to the fine, the proposed settlement order includes a remediation plan, changing how Passport, which operates nine car dealerships in the Washington, D.C. metropolitan area, will operate going forward. For more information, click here.
  • On October 18, the FDIC issued a final rule to incorporate updated accounting standards in the risk-based deposit insurance assessment system applicable to all large and highly complex insured depository institutions. The final rule amends the assessment regulations to include a new term, “modifications to borrowers experiencing financial difficulty,” in two financial measures — the underperforming assets ratio and the higher-risk assets ratio — used to determine deposit insurance assessments for large and highly complex insured depository institutions. For more information, click here.
  • On October 18, the FDIC’s board of directors approved the publication of an Advance Notice of Proposed Rulemaking (ANPR) concerning potential new resolution-related resource requirements for large banking organizations to improve the prospects for the orderly resolution of large banks in the U.S. should they fail. The ANPR is proposed jointly by the FDIC and the Federal Reserve System Board of Governors. For more information, click here.
  • On October 18, the FDIC adopted a final rule to increase initial base deposit insurance assessment rate schedules uniformly by two basis points, beginning in the first quarterly assessment period of 2023. After consideration of comments received and updated analysis and projections, the FDIC adopted as final and without change, the increase in assessment rates as proposed on June 21. For more information, click here.
  • On October 18, the FDIC announced its solicitation for further comment on proposed amendments to its “Guidelines for Appeals of Material Supervisory Determinations.” In response to comments received, the proposed amendments would expand and clarify the role of the agency’s ombudsman in the supervisory appeals process; require that materials considered by the Supervision Appeals Review Committee be shared with both parties to the appeal, subject to applicable legal limitations on disclosure; and allow insured depository institutions to request a stay of a material supervisory determination while an appeal is pending. For more information, click here.
  • On October 18, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a finding of violation to an international financial entity located in Puerto Rico for violating the Venezuelan Sanctions Regulations (VSR) and the Reporting, Penalties, and Procedures Regulations (RPPR). VSR violations concern the entity’s voluntary self-disclosure of three unlicensed transactions in which an individual on OFAC’s List of Specially Designated Nationals and Blocked Persons had an interest. RPPR violations reflect its failure to maintain full and accurate records regarding the handling of blocked property and its inaccurate reporting of the blocked property to OFAC. For more information, click here.
  • On October 18, the CFPB filed a complaint against a payment processing service platform for allegedly violating the Consumer Financial Protection Act and the Electronic Funds Transfer Act by engaging in deceptive and abusive acts and practices. For more information, click here.
  • On October 17, Freddie Mac announced that it will increase homeownership opportunities by including a review of a borrower’s bank account data to identify a history of positive monthly cash flow activity as part of its technology’s loan purchase eligibility assessments. Mortgage lenders nationwide can access this tool through Freddie Mac’s automated underwriting system, Loan Product Advisor, beginning November 6. For more information, click here.
  • On October 17, the Department of Veterans Affairs (VA) published a proposed rule in the Federal Register related to the Loan Guaranty Service. The proposed rule concerns the expansion of the VA’s incentivized loss mitigation options currently available to servicers assisting veterans whose VA-guaranteed loans are in default. Comments are due by January 17, 2023. For more information, click here.
  • On October 4, the Brown County Taxpayers Association filed a lawsuit against President Biden in the U.S. District Court for the Eastern District of Wisconsin, alleging that the student loan forgiveness program is unconstitutional. For more information, click here.

State Activities:

  • On October 20, Texas, Alabama, New Jersey, and Kentucky securities regulators filed coordinated enforcement actions against Slotie, a virtual metaverse-styled non-fungible token (NFT) casino, for allegedly offering unregistered securities in the form of NFTs. The NFTs called “Slotie NFTs” and “Slotie Junior NFTs” purportedly provide investors the right to passively share revenues generated by an online slots game offered on Slotie’s platform, as well as ownership interests in online casinos located on Slotie’s platform. For a copy of the cease-and-desist order issued by the Alabama Securities Commission, click here.
  • On October 19, Virginia Attorney General Jason Miyares announced that members of a multistate coalition, including 19 attorneys general, have served six major American banks with civil investigative demands “asking for documents relating to the companies’ involvement with the United Nations’ (UN) Net-Zero Banking Alliance (NZBA).” NZBA-member banks must set emissions reduction targets in their lending and investment portfolios to reach net zero by 2050. According to Attorney General Miyares, the NZBA “punishes Virginia farmers and Virginia companies that deal with fossil fuel-related activities” that “are not subject to UN business standards.” The AGs are investigating why financial are “ceding authority to a foreign body.” For more information, click here.
  • On October 19, the DOJ unsealed a 12-count indictment in federal court in Brooklyn, NY, charging five Russian nationals — Yury Orekhov, Artem Uss, Svetlana Kuzurgasheva (aka “Lana Neumann), Timofey Telegin, and Sergey Tulyakov — with various charges related to a global procurement, smuggling, and money laundering network. Also charged were Juan Fernando Serrano Ponce (aka “Juanfe Serrano) and Juan Carlos Soto who brokered illicit oil deals for Venezuelan state-owned oil company Petroleos de Venezuela S.A. (PDVSA) as part of the scheme. For more information, click here.
  • On October 18, California Attorney General Rob Bonta joined a coalition of 35 attorneys general in filing an amicus brief in the U.S. Court of Appeals for the Tenth Circuit to support Oklahoma’s authority to regulate pharmacy benefit managers (PBMs). According to the press release, “PBMs act as a middleman between pharmacies, drug manufacturers, health insurance plans, and consumers,” and “[t]his position allows them to have a significant impact on consumers’ access to affordable prescription drugs.” Attorney General Bonta stated: “The expanded power of PBMs in the pharmaceutical industry has had an outsized, negative impact on drug pricing and the availability of pharmacies in vulnerable communities. States have a responsibility to regulate PBMs to curb the rising cost of lifesaving prescription drugs.” For more information, click here.
  • On October 18, the New York Department of Financial Services (DFS) Superintendent Adrienne Harris announced that a licensed health insurance company will pay a $4.5 million penalty to New York state for violating DFS’s Cybersecurity Regulation (23 NYCRR Part 500) that contributed to the exposure of hundreds of thousands of consumers’ sensitive, nonpublic, personal health data, including data concerning minors. For more information, click here.
  • On October 14, the Pennsylvania Attorney General Josh Shapiro announced a settlement with the owners of Dominion Management of Delaware, which operated as CashPoint, a now defunct auto title loan business. CashPoint made thousands of unlawful loans to Pennsylvania borrowers at annual interest rates exceeding 200%. As a result of this settlement, the owners will refund more than $1.5 million in unlawful interest charges to consumers who fell victim to their scheme. These refunds are in addition to the $3.2 million in debt cancellation victims already received as a result of an October 2021 court order. For more information, click here.
  • California Governor Gavin Newsom recently signed Senate Bill 1311, the Military and Veteran Consumer Protection Act of 2022, into law. This law goes into effect on January 1, 2023 and takes direct aim at, among other things, the Military Lending Act’s exceptions for loans obtained to purchase motor vehicles and other forms of personal property. For more information, click here.

On October 4, the White House Office of Science and Technology Policy released a set of five principles, known as the Blueprint for an AI Bill of Rights, designed to protect the rights of Americans in the age of artificial intelligence (AI). Developed over the course of a year, the principles are intended to help guide the design, use, and deployment of automated systems. While the principles are not binding, the White House hopes they will convince tech companies to deploy AI more responsibly and limit the use of surveillance.

“In America and around the world, systems supposed to help with patient care have proven unsafe, ineffective, or biased. Algorithms used in hiring and credit decisions have been found to reflect and reproduce existing unwanted inequities or embed new harmful bias and discrimination. Unchecked social media data collection has been used to threaten people’s opportunities, undermine their privacy, or pervasively track their activity — often without their knowledge or consent. These outcomes are deeply harmful — but they are not inevitable.”

The White House intends to apply the key principles to: 1) automated systems that 2) have the potential to meaningfully impact people’s rights, opportunities, or access to critical resources or services.

  • First Principle — the public should be protected from unsafe or ineffective systems.
    • Automated systems should be developed with consultation from diverse communities and experts to identify concerns, risks, and potential system impacts.
    • Systems should undergo pre-deployment testing, risk identification and mitigation, and ongoing monitoring that demonstrate they are safe and effective based on their intended use.
    • Americans should be protected from inappropriate or irrelevant data use in the design, development, and deployment of automated systems.
  • Second Principle — automated systems should be used and designed in an equitable way to prevent algorithmic discrimination.
    • Algorithmic discrimination occurs when automated systems contribute to unjustified different treatment or impacts disfavoring people based on their race, color, ethnicity, sex (including pregnancy, childbirth, and related medical conditions; gender identity, intersex status, and sexual orientation), religion, age, national origin, disability, veteran status, genetic information, or any other classification protected by law.
    • Developers of automated systems should take proactive and continuous measures, including equity assessments and algorithmic impact assessments, to protect individuals and communities from algorithmic discrimination.
  • Third Principle — protection against purported abusive data practices.
    • Developers of automated systems should seek permission in the collection, use, access, transfer, and deletion of data where possible, and, where not possible, should use default privacy by design safeguards.
    • All consent requests should be brief and understandable in plain language.
  • Fourth Principle — the public should be aware that an automated system is used, and understand how and why it contributes to outcomes that impact individuals.
    • Developers of automated systems should provide a plain language description of how the system functions and the role automation plays in the system, including when an algorithmic system is used to make a decision impacting an individual.
  • Fifth Principle — consumers should have the ability to opt-out of automated systems and have access to a person who can quickly remedy issues.
    • Consumers should have timely access to a person via a fallback or escalation process if an automated system fails, produces an error, or to contest a decision.

In 2019, the European Commission published a similar set of principles called the Ethics Guidelines for Trustworthy AI. The European Parliament is currently in the process of drafting the EU Artificial Intelligence Act, a legally enforceable adaptation of the guidelines.

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 30, the Commodity Futures Trading Commission (CFTC) filed an enforcement action against crypto futures and spot market exchange Digitex and its founder and CEO Adam Todd. The CFTC alleged that Digitex violated the Commodity Exchange Act by failing to register as a futures commission merchant. The complaint also alleged the failure to implement know-your-customer and customer information program procedures required by the Bank Secrecy Act. Additionally, the CFTC alleged that Digitex attempted to manipulate the value of its token DGTX by using noneconomic trading activity to artificially pump the price of DGTX. For more information, click here.
  • On September 30, the Securities and Exchange Commission (SEC) filed an enforcement action against Arbitrade Ltd. and Cryptobontix, Inc. for allegedly engaging in a pump-and-dump scheme regarding a crypto-asset security named “Dignity,” which Arbitrade and Cryptobontix falsely represented to investors was backed by $10 billion in gold bullion the entities obtained through a purchase transaction. For more information, click here.
  • On September 29, U.S. Senator Bill Hagerty (R-TN) introduced a crypto-related bill in the Senate. If enacted, the bill would provide a two-year safe harbor exemption from SEC-initiated enforcement actions to entities that facilitate transactions of cryptocurrencies that the SEC deemed as securities. The text of the bill is currently unavailable. For more information, click here.
  • On September 29, a federal Houston judge unsealed a complaint the SEC previously filed on September 19 against Mauricio Chavez and Giorgio Benvenuto and their company CryptoFX LLC. The SEC alleged that Chavez functioned as an unregistered investment adviser in violation of federal securities law, and together, he and Benvenuto raised over $12 million from approximately 5,000 investors. Notably, the SEC alleged that Chavez misappropriated the majority of investor funds to finance his unrelated real estate company and extravagant lifestyle, while also maintaining the illusion of CryptoFX’s prosperity through significant Ponzi payments. For more information, click here.
  • On September 29, the Consumer Financial Protection Bureau (CFPB) released a special edition of Supervisory Highlights on recent examination findings, covering the practices of student loan servicers and schools that lend to students directly. The exams found that these schools had improper blanket policies of withholding transcripts to force students to make payments. These findings come after the CFPB announced earlier this year that it would examine the operations of colleges that operate lending businesses. For more information, click here.
  • On September 29, an independent examiner was appointed in the Celsius bankruptcy case. For more information, click here.
  • On September 28, the SEC filed an enforcement action against the Hydrogen Technology Corporation (Hydrogen), its former CEO Michael Ross Kane, and Moonwalkers Trading Limited (Moonwalkers) CEO Tyler Ostern, alleging that Hydrogen offered and sold unregistered crypto-asset securities called “Hydro” in violation of federal securities laws. Additionally, the SEC alleged Hydrogen privately hired Moonwalkers to fraudulently manipulate the price and volume of Hydro tokens traded on crypto-asset trading platforms, so Hydrogen could sell its Hydrogen tokens at a greater profit. For more information, click here.
  • On September 28, U.S. Senators Cynthia Lummis (R-WY) and Marsha Blackburn (R-TN) introduced a bill, titled the Cryptocurrency Cybersecurity Information Sharing Act. If enacted, the bill would amend the Cybersecurity Information Sharing Act of 2015 to include voluntary information sharing of cyber threat indicators among cryptocurrency companies. For more information, click here.
  • On September 27, CFTC Commissioner Caroline Pham delivered a keynote address at CordaCon 2022 in London. Commissioner Pham discussed her 10 fundamentals for responsible digital asset markets — the first of which is to determine whether a particular financial instrument constitutes a “security” or a different type of financial product. For more information, click here.
  • On September 26, the Federal Trade Commission (FTC) issue blog post “Buy now, pay later — and comply with the FTC Act immediately,” regarding the marketing of payment plans known as Buy Now, Pay Later (BNPL). It reminds businesses that if they offer BNPL payment options as a retailer or BNPL company, then the FTC Act’s basic consumer protection ground rules apply. For more information, click here.
  • On September 26, Representative French Hill introduced H.R. 8985 — the Credit Access and Inclusion Act of 2022 — as a companion bill to the bill Senator Tim Scott introduced to the Senate in 2021. H.R. 8985 would allow public housing authorities, utility, and telecommunications companies to furnish payment information for things like utility bills and phone payments to credit reporting agencies to help consumers enhance their credit scores. H.R. 8985 has been referred to the House Committee on Financial Services for its consideration. For more information, click here.
  • On September 23, while delivering remarks at the Brookings Institute, Under Secretary for the U.S. Department of Treasury (Treasury) of Domestic Finance Nellie Liang discussed, among other things, the Treasury’s concerns with crypto assets, including operational failures, market manipulation, frauds, thefts, and scams. Notably, based on these concerns, Under Secretary Liang remarked that the Treasury recommends federal regulatory agencies continue to “aggressively pursue” enforcement efforts in the crypto-asset sector. For more information, click here.
  • On September 22, Senate Banking Committee and House Financial Services Committee members, led by Senator Cynthia Lummis (R-WY), filed an amicus brief in support of Custodia Bank, the first U.S. digital asset bank that sued the Federal Reserve Board and the Federal Reserve Bank of Kansas City on June 27. In its complaint filed, Custodia Bank alleged that the Federal Reserve improperly failed to act upon Custodia Bank’s application for a master account with the Federal Reserve. For more information, click here.
  • On September 22, the Treasury issued a fact sheet, summarizing the key takeaways from its report “Crypto-Assets: Implications for Consumers, Investors, and Businesses,” published by the Treasury in accordance with President Joe Biden’s Executive Order 14067 on “Ensuring Responsible Development of Digital Assets.” For more information, click here.
  • On September 22, a federal grand jury in the District of Utah charged James Wolfgramm and two of his businesses, Bitex LLC and Ohana Financial Capital, Inc., with wire fraud and money laundering. The indictment alleged, among other things, that Wolfgramm and Bitex collected approximately $1.7 million from two victims by purporting to sell a high-powered crypto mining machine that did not exist. For more information, click here.
  • On September 1, compliance data firm Dynamic Securities Analytics, Inc. (DSA) published its analysis of CFPB consumer cryptocurrency complaints over a three-year period, which entailed comparing CFPB data against cryptocurrency complaints filed with the FTC and FBI, as well as suspicious activity reports filed with FinCEN. Between January 1, 2020 and August 26, 2022, the CFPB received 2,734 confirmed crypto-related consumer complaints against digital-asset-centric companies in its public database. For more information, click here. For more information on the research analysis conducted by DSA, click here.

State Activities:

  • On September 30, Massachusetts Attorney General Maura Healy joined 10 other attorneys general in a letter, supporting the three major credit card companies’ adoption of a new merchant category code for the sale of firearms and ammunition. The letter — led by New Jersey Attorney General Matthew Platkin, District of Columbia Attorney General Karl Racine, and Delaware Attorney General Kathy Jennings — highlighted the belief that such codes will improve available data to aid state and federal law enforcement with tracking and preventing illegal sales of firearms and ammunition. New merchant code opponents cited Second Amendment concerns, among other reasons, to explain why the codes should not have been adopted. For more information, click here.
  • On September 28, the Delaware Department of Justice’s Investor Protection Unit issued a cease-and-desist summary order against 23 entities and individuals involved in a cryptocurrency scam known as the “pig butchering scam” — a scam that entails a scammer building trust with a victim only to persuade the victim to deposit his/her crypto assets into a wallet controlled by the scammer. For more information, click here.
  • On September 27, Governor Gavin Newsom signed the Military and Veteran Consumer Protection Act of 2022 (SB 1311) into law to enhance consumer protections for military service members. Among other things, the bill (1) imposes an additional civil penalty of $2,500 for each violation of California’s Unfair Competition Law perpetrated against service members and veterans; (2) creates a right to appear remotely, or through another military member, for small claims matters that seek return of improperly withheld security deposits; (3) clarifies existing law to prevent interest accrual on guard and reserve members’ deferred mortgage obligations during the period of deferment; (4) prohibits businesses from conditioning military discounts on the member or veteran waiving certain rights under federal or state law; and (5) provides additional rights for service members seeking termination of an auto lease due to reassignment or deployment. For more information, click here.
  • On September 27, the California Department of Financial Protection (CA-DFPI) announced that it issued desist-and-refrain orders to 11 different crypto-related trading entities, each of which allegedly used investor funds to pay profits to other investors, in a manner of a Ponzi scheme. For more information, click here.
  • On September 26, the CA-DFPI joined seven state regulators in filing suit against Nexo, a crypto-related platform that offers lending, borrowing, and exchange services to retail investors. In its desist-and-refrain order, the CA-DFPI concluded that accounts relating to Nexo’s “Earn Interest Product,” which enables retail investors to earn interest upwards of 36% APR on crypto assets deposited onto Nexo’s platform by the investor, constitute the unqualified sale of securities in the form of investment contracts in violation of California law. For more information, click here.
  • On September 26, New York Attorney General Letitia James joined seven state regulators in filing suit against Nexo, Inc. (Nexo), a crypto-related platform that offers lending, borrowing, and exchange services to retail investors. In its complaint, the attorney general’s office (AGO) alleged Nexo violated New York law by failing to register with the AGO as a securities and commodities broker or dealer prior to offering interest-bearing, crypto-asset accounts to New York residents. For more information, click here.
  • On September 23, California Governor Gavin Newsom vetoed AB 2269. If enacted, the bill would have required virtually any entity engaging in digital financial asset business activities to obtain a license from the CA-DFPI to permissibly engage in such business activities. In his letter to California State Assembly members, Governor Newsom noted that imposing a licensing regime on crypto-related businesses without an established federal cryptocurrency regulatory framework was “premature.” For more information, click here.