[co-author: Jennifer Ciccarelli]

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 July 18, the Federal Trade Commission (FTC), in conjunction with 101 federal and state law enforcers, announced “Operation Stop Scam Calls,” a joint-agency crackdown on telemarketers, lead generators, and Voice over Internet Protocol (VoIP) service providers responsible for making or facilitating billions of illegal telemarketing calls. For more information, click here.
• On July 17, the Financial Stability Board (FSB) published its proposed global regulatory framework for crypto-asset activities, including stablecoins. The FSB’s framework consists of (1) high-level recommendations for the regulation, supervision, and oversight of crypto-asset activities and markets, and (2) revised high-level recommendations for the regulation, supervision, and oversight of “global stablecoin” arrangements. The FSB’s framework is founded on three principles: (1) “same activity, same risk, same regulation”; (2) high-level and flexible; and (3) technology neutral. Due to the functional similarities of crypto-asset activities and traditional finance, the FSB has strengthened both sets of high-level recommendations in three areas: (1) safeguarding of client assets; (2) conflicts of interest; and (3) cross-border cooperation. During September 2023, the FSB and the International Monetary Fund (IMF) are expected to release a joint paper that synthesizes the policy findings from IMF work on macroeconomic and monetary issues and the FSB’s work on supervisory and regulatory issues. For more information, click here.
• On July 17, Director of the Consumer Financial Protection Bureau (CFPB) Rohit Chopra, and Commissioner for Justice and Consumer Protection of the European Commission Didier Reynders, announced the start of an informal dialogue between the CFPB and the European Commission on a range of critical financial consumer protection issues. For more information, click here.
• On July 14, in a long-awaited decision in SEC v. Ripple Labs, Inc., a U.S. District Judge of the Southern District of New York held that Ripple Labs, Inc.’s (Ripple) XRP token is not, in and of itself, a security requiring registration. Although the decision is being regarded by many as a victory for both Ripple and the crypto industry, the nuances in the decision may result in an appeal from both sides. For more information, click here.
• On July 13, the FTC announced a proposed settlement to resolve allegations that a crypto platform engaged in unfair and deceptive acts or practices in violation of the FTC Act. The FTC also alleged that the defendants violated the Gramm-Leach-Bliley Act (GLBA) by acquiring customer information from a financial institution regarding another individual by providing false or misleading statements. This is a groundbreaking move by the FTC for two reasons. First, it marks the first time that the agency has filed suit against a digital asset based-company. Second, the FTC’s request for civil money penalties is predicated on a novel theory under the GLBA. For more information, click here. Alongside the FTC, the Department of Justice filed criminal charges against ex-CEO Alexander Mashinsky. Specifically, New York federal prosecutors announced criminal charges against the founder and former CEO of the crypto platform for allegedly misleading customers about core aspects of the company’s business. For more information, click here.
• On July 13, the CFPB joined with several state attorneys general and a state regulator to take action against Prehired for allegedly using deceptive marketing and debt collection practices related to student lending. For more information, click here.
• On July 12, the Commodity Futures Trading Commission (CFTC) announced that the U.S. District Court for the Southern District of Florida issued a default judgment granting a permanent injunction against a Florida resident and four digital exchange companies he controlled. The related press release states that the defendant and his companies attempted to manipulate the price of the Digitex Futures native token DGTX, illegally offered futures transactions on a platform other than a designated contract market, failed to register with the CFTC, and failed to implement a customer information program, Know Your Customer policies, and anti-money laundering procedures. The order bans the defendant and his companies from trading in any CFTC-regulated markets or registering with the CFTC. It also requires him to pay $3,912,220 in disgorgement and a $11,736,660 civil monetary penalty. For more information, click here.
• On July 12, U.S. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) reintroduced legislation, titled the Responsible Financial Innovation Act that would establish a comprehensive regulatory framework for crypto assets. This legislation places crypto assets within the regulatory perimeter, requires all crypto asset exchanges to register, addresses decentralized finance, safeguards consumers through enhanced disclosures and limits on crypto asset lending, closes the wash sale loophole, and codifies the criteria to determine which crypto assets are securities or commodities. The legislation also combats the use of crypto assets in illicit finance, imposes new penalties for willfully violating money laundering laws, requires stablecoins to be issued by depository institutions, and provides appropriations to federal agencies to implement the policies within the bill. For more information, click here.
• On July 11, Senate Finance Committee Chairman Ron Wyden (D-OR) and Finance Committee Ranking Member Mike Crapo (R-ID), launched an effort to address uncertainties surrounding the tax treatment of digital assets with an open letter seeking input from experts, stakeholders, and interested parties. The letter states that the “rapid emergence of digital assets has raised novel regulatory issues, including the appropriate treatment under our federal tax law,” and that the tax code “draws distinctions between types of property, with no straightforward classification for digital assets.” The letter further states that “[t]his uncertainty creates complex reporting issues for taxpayers, and warrants examining how the [tax code] can provide clearer guidance for taxpayers on the treatment of digital asset transactions”. For more information, click here.
• On July 11, a blockchain-based content sharing and publishing company announced that it was closing its business for good after a U.S. District Judge of the District of Delaware permanently barred the platform from the crypto industry and ordered it to pay a civil penalty of around $100,000 for failing to register its digital token with the U.S. Securities and Exchange Commission. For more information, click here.
• On July 11, a former security engineer for an international technology company was arrested for defrauding a decentralized cryptocurrency exchange. Specifically, the U.S. attorney for the Southern District of New York, the special agent in charge of the San Diego Field Office of Homeland Security Investigations, and the special agent in charge of the Los Angeles Field Office of the Internal Revenue Service – Criminal Investigation, announced the unsealing of an indictment, charging the related defendant with wire fraud and money laundering in connection with his attack on a decentralized cryptocurrency exchange. For more information, click here.
• On July 11, the Bank of International Settlements (BIS) published a report that discusses, in its view, the key elements of the crypto ecosystem and their purported structural flaws. The report has three takeaways. First, the crypto ecosystem is subject to a high degree of fragmentation and is characterized by congestion and high fees. Second, crypto and decentralized finance (DeFi) often feature de facto centralization. Third, DeFi does not finance any activity in the real world, but it amplifies known risks. For more information, click here.
• On July 11, the U.S. Government Accountability Office published a report titled, “Small Business Administration: Exploring Potential Use of Blockchain.” The report clarifies that although blockchain technology has been heralded for its financial use cases, it also has a wide range of nonfinancial applications. Further, the report reveals that “[m]ultiple federal agencies have explored blockchain’s potential to enhance their operations,” and the “need for a distributed ledger with full transaction history, and transparency among multiple parties are among the factors the [Small Business Administration] might consider in assessing their potential use of blockchain.” For more information, click here.
• On July 11, Chopra issued remarks at the CFPB hearing on medical billing and collections. For more information, click here.
• On July 11, the Federal Housing Administration (FHA), published Mortgagee Letter (ML) 2023-15, Modifications to FHA Home Equity Conversion Mortgage (HECM) Requirements Related to Secretary Payment of Borrower Disbursements Due to Mortgagee Default. This ML considered industry feedback received on the draft ML posted on the Single Family Drafting Table and announced in FHA INFO 2023-41. For more information, click here.
• On July 10, BIS published a paper that summarizes the findings of a recent BIS survey that asked 86 central banks whether they were working on a retail, wholesale, or both types of a central bank digital currency (CBDC). According to BIS, nearly 60% of respondent central banks said that the emergence of digital assets and stablecoins has accelerated their work on CBDCs. For more information, click here.
• On July 10, the European Commission adopted its adequacy decision for the EU-U.S. Data Privacy Framework. The decision concludes that the U.S. ensures an adequate level of protection — comparable to that of the European Union — for personal data transferred from the EU to U.S. companies under the new framework. Based on the new adequacy decision, personal data can flow safely from the EU to U.S. companies participating in the framework, without having to put in place additional data protection safeguards. For more information, click here.
• On July 7, the Federal Housing Finance Agency (FHFA) announced that it is seeking comment on a proposed rule that would amend the Suspended Counterparty Program (SCP) regulation. For more information, click here.

State Activities:

• On July 14, California Attorney General (AG) Rob Bonta announced an investigative sweep aimed at determining whether several large employers within the state are in compliance with the state’s Consumer Privacy Act. As of January 1, “covered businesses,” as the term is defined within the act, are required to comply with the act’s privacy protections as they relate to the protection of employee data. This sweep is one of many that the AG has initiated to ensure compliance with the act’s provisions. For more information, click here.
• On July 13, Oregon Governor Tina Kotek (D) signed SB424. The bill prohibits postsecondary education institutions that are based in Oregon from refusing to provide a transcript to any current or former student because the student owes a debt to the institution. For more information, click here.
• On July 13, Kotek signed HB3320. The bill requires, among other things related to patient billing, that a hospital suspend debt collection activities on debts found to have been eligible to be paid, either in part or in full, by a statutorily required financial assistance program at the time of service. For more information, click here.
• On July 12, Massachusetts AG Andrea Joy Campbell announced a $3.5 million settlement with Penske Truck Leasing Co., LP and six of its inspectors. The settlement resolves claims that Penske, a national truck rental company, violated the Massachusetts Clean Air Act’s Motor Vehicle Inspection Program, the Massachusetts Inspection and Maintenance Act, and the Massachusetts Consumer Protection Act by failing to lawfully conduct 189 safety and emissions inspections on fleet trucks and trucks rented and leased by the company for commercial use. Pursuant to the consent judgment, Penske is to pay $3 million up front and another $500,000 if the company fails to comply with the other terms of the agreement, which include requirements that Penske provide enhanced training for certain inspectors and hire a third party to complete audits of its vehicle inspections for six months. Additionally, the inspectors who allegedly completed the unlawful inspections are barred indefinitely from performing motor vehicle inspections. For more information, click here.
• On July 10, North Carolina AG Josh Stein issued a plea for the support of stronger protections for airline customers in the Federal Aviation Administration Reauthorization Act of 2023. Specifically, the AG encouraged support of a proposed amendment to the act that would permit state attorneys general to enforce federal law when the airline industry engages in unfair and deceptive practices or unfair methods of competition. The AG’s plea comes amid a generalized increase in consumer complaints about airlines in the past year. For more information, click here.
• On July 10, the U.S. attorney for the Southern District of New York and the acting assistant director in charge of the New York Field Office of the Federal Bureau of Investigation, announced the unsealing of a four-count indictment charging the related defendant for a scheme to impersonate the OpenSea marketplace in order to obtain unauthorized access to cryptocurrency and nonfungible tokens (NFTs). It is alleged that the defendant stole approximately $450,000 worth of cryptocurrency and NFTs from a victim in Manhattan. For more information, click here.
• On July 7, Missouri Governor Mike Parson signed SB101 into law, which repealed several sections of the previous version of the act, replacing those sections with 15 new provisions related to property and casualty insurance, with a penalty provision and a delayed effective date for certain sanctions. One of the new provisions under the act deals with insurers and insurance producers engaged in any transaction involving lender-placed insurance, which the act defines as “insurance obtained by a lender or servicer when a mortgagor does not maintain valid or sufficient insurance upon mortgaged real property as required by the terms of the mortgage agreement.” Among other things, the act provides that lender-placed insurance becomes effective “no earlier than the date of lapse of insurance upon mortgaged real property subject to the terms of a mortgage agreement or any other state or federal law requiring the same.” The act also prevents a lender or servicer from charging a mortgagor for lender-place insurance for a term that exceeds the scheduled term of the lender-placed insurance, and further prevents charging a mortgagor for lender-placed insurance before the effective date of such insurance. For more information, click here.
• Hawaii Governor Josh Green recently signed HB 1027, amending the state’s Money Transmitters Modernization Act (MTMA). The amendment revises the definitions of the terms “money,” “receiving money or monetary value for transmission,” and “tangible net worth,” as those terms are used under the MTMA. Additionally, the enactment also revises the definitions of “money transmission” and the term “stored value,” along with several other definitions under the MTMA. Prior to this amendment, the MTMA contained several exclusions, to which the amendment adds several new exclusions. One such exclusion exempts an operator of a payment system from the provisions of the MTMA to the extent that the operator provides processing, clearing, or settlement services between or among persons exempted under the MTMA. The MTMA also now permits the commissioner to require any person claiming exemptions from licensing to provide further documentation to show that the person qualifies for the claimed exemption. For more information, click here.