To keep you informed of recent activities, below are several of the most significant federal and state events that have influenced the Consumer Financial Services industry over the past week:

Federal Activities

State Activities

Federal Activities:

• On October 11, the Federal Deposit Insurance Corporation (FDIC) published a request for comment on proposed corporate governance and risk management guidelines that would apply to all insured state nonmember banks, state-licensed insured branches of foreign banks, and insured state savings associations that are subject to Section 39 of the Federal Deposit Insurance Act with total consolidated assets of $10 billion or more, on or after the effective date of the final guidelines. For more information, click here.
• On October 11, the Federal Trade Commission (FTC) announced a new proposed rule to prohibit junk fees, which are hidden and bogus fees that can harm consumers and undercut honest businesses. The FTC has estimated that these fees can cost consumers tens of billions of dollars per year in unexpected costs. For more information, click here.
• On October 11, the Securities and Exchange Commission (SEC) informed the U.S. Court of Appeals for the Third Circuit that SEC staff had made a recommendation on how to respond to crypto exchange Coinbase’s petition for crypto rulemaking. In April, Coinbase petitioned the Third Circuit to compel the SEC to answer its July 2022 petition, which requested for the agency to promulgate crypto-specific regulations. In that petition, Coinbase complained that it had not received a response from the SEC — despite the agency continuing to bring enforcement actions against crypto firms, including Coinbase. The Third Circuit declined to force the SEC to answer Coinbase, but ordered the SEC to provide an update on its status on October 11, at which point, the agency disclosed the staff recommendation. For more information, click here.
• On October 11, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion concerning consumers’ requests for information regarding their accounts with large banks and credit unions. According to the CFPB, Section 1034(c) of the Consumer Financial Protection Act requires insured depository institutions that offer consumer financial products or services, and that have total assets of more than $10 billion, as well as their affiliates, to “comply in a timely manner with consumer requests for information concerning their accounts for consumer financial products and services, subject to limited exceptions.” For more information, click here.
• On October 11, an automotive management company settled claims by the Department of Justice (DOJ) alleging that the company had violated the False Claims Act by knowingly providing false information in support of its Paycheck Protection Program (PPP) loan forgiveness application. For more information, click here.
• On October 11, the CFPB released a special edition of its Supervisory Highlights focused on the agency’s efforts to protect consumers from illegal “junk fees.” This Supervisory Highlights special edition covers junk fees in the areas of bank account deposits, auto loan servicing, and remittances found during examinations between February and August 2023. For more information, click here.
• On October 11, the CFPB published its analysis regarding the nonsufficient fund (NSF) fee practices of a number of banks and credit unions. NSF fees are distinct from overdraft fees, which financial institutions charge when they pay, rather than decline, a payment when the account lacks sufficient funds. For more information, click here.
• On October 10, the North American Securities Administrators Association (NASAA) — an alliance of securities regulators across the states, Canada, and Mexico — supported the SEC’s claims that assets and services offered by crypto exchange Coinbase are investment contracts. In its amicus brief, NASAA pushed back on Coinbase’s motion for judgment on the pleadings, which sought to dismiss the SEC’s case with a ruling that Coinbase has not listed investment contracts based on the existing facts. Specifically, the NASAA brief argued, inter alia, that (1) the SEC’s theory regarding cryptocurrencies as “securities” is consistent with Congress definition of the term; (2) the SEC and state regulators have consistently taken the position that digital assets are investment contracts; and (3) it cannot be the law that an agency must have congressional authorization to apply existing law to new fact patterns. For more information, click here.
• On October 6, CFPB Director Rohit Chopra outlined steps the agency intends to take soon to increase CFPB oversight over digital currencies and payment systems. Chopra identified several of the key risks posed by private currencies issued by nonbanks, including the sudden devaluation of digital currencies, intrusive data surveillance, censorship, private regulations that favor the issuer, challenges with dispute resolution, and consumer fraud. To safeguard against these risks, Chopra proposed that the agency take the following measures: (1) require large technology platforms to acquire more data to better ascertain their business practices; (2) explore additional guidance on the applicability of the Electronic Fund Transfer Act with respect to private digital dollars; (3) conduct supervisory examinations of nonbanks operating consumer payment platforms, and (4) publish a proposed rule regarding financial data rights under the Consumer Financial Protection Act. For more information, click here.
• On October 6, the FTC published a Data Spotlight regarding social media and scammers. One in four people who reported losing money to fraud since 2021 said it started on social media.^[1]Reported losses to scams on social media during the same period hit a staggering $2.7 billion, far higher than any other method of contact. For more information, click here.

State Activities:

• On October 12, California’s Department of Financial Protection and Innovation (DFPI), announced, in its October bulletin, that final regulations to implement the Student Loan Servicing Act and the Student Loans Borrower Rights Law have been approved and will become effective January 1, 2024. The department made changes to the original proposed rules and modified the text twice to ensure the regulations were consistent with servicers’ operations and businesses. The department’s objective in drafting these new rules is to include all education financing products used to finance a student’s higher education, including income share agreements and installment contracts, within the definition of student loans subject to state law. The rules also include servicers of these products subject to the act and licensure. The benefits anticipated from this regulatory action include protective benefits to student loan borrowers with education financing products, improved department regulatory oversight of the servicer industry, and strengthened enforcement of the recent state laws regarding student loan servicing. For more information, click here.
• On October 11, B25-0449 was signed by Mayor Muriel Bowser (D). The legislation prevents any potential gap in the law and protects homeowners from foreclosures as they continue to await approvals and payments from the Department of Housing and Community Development (DHCD). For more information, click here.
• On October 10, D.C. Councilmember Matthew Frumin (D) introduced B25-0538, the Strengthening Probate Administration Amendment Act of 2023. The bill would amend Title 18 of the District of Columbia Official Code to allow, among other things, for the collection of personal property by affidavit. For more information, click here.
• On October 11, California Attorney General (AG) Rob Bonta issued a statement in response to Assembly Bill 1485 (AB 1485), which — effective January 1, 2024 — will permit the AG to automatically intervene without court permission in lawsuits brought by third parties for alleged violations of state housing laws. “When it comes to addressing our housing crisis, there’s not a moment to waste. Time is of the essence,” said Bonta. “AB 1485 recognizes that urgency. It will allow my office to represent the state’s interests more easily in lawsuits filed by third parties to enforce our housing laws.” At present, third parties, such as housing advocacy organizations and housing developers, are generally allowed to take legal action against cities or counties that violate state housing laws, and the office of the AG can only become involved in the third party’s litigation by filing a motion to intervene and asking the court for permission to represent the state’s interests. For more information, click here.
• On October 8, AB1756 was signed by California Governor Gavin Newsom (D). The bill requires that if the original full term of the conditional sale contract exceeds the original full term of the guaranteed asset protection (GAP) waiver as of the date the buyer purchased the waiver, the GAP agent would need to use a formula that includes figures relating to the period from the waiver termination date to the original full term date of the waiver, and to the original term of the GAP waiver. A willful violation of this provision would be considered a crime and this bill would impose a state-mandated local program. For more information, click here.
• On October 8, AB1119 was signed by Newsom. The bill amends existing law allowing a judgment creditor to apply for an order requiring the judgment debtor to appear before the court and provide information to aid in the enforcement of a money judgment. For more information, click here.
• On October 7, Newsom approved SB 362, which will impose regulations on data brokers by allowing consumers to request the deletion of their personal data that was collected. SB 362 will allow the California Privacy Protection Agency to create an “accessible deletion mechanism” to make a streamlined method for consumers to delete their collected information available by January 1, 2026. For more information, click here.
• On October 7, Bonta issued a statement in response to Senate Bill 478 (SB 478), which will prohibit hidden fees (also called ‘junk fees’) in California beginning on July 1, 2024. The state describes hidden fees as fees in which a seller uses an artificially low headline price to attract a customer and usually either discloses additional required fees in smaller print, or reveals additional unavoidable charges later in the buying process. “Today, California is eliminating hidden fees,” said Bonta. “With the signing of SB 478, California now has the most effective piece of legislation in the nation to tackle this problem. The price Californians see will be the price they pay.” For more information, click here.
• On October 7, Newsom signed SB 33 to continue to require covered providers offering commercial loans to disclose the total cost of financing expressed as an annualized rate indefinitely. Existing law currently required this disclosure only until January 1, 2024. For more information, click here.
• The Connecticut Banking Commissioner (commissioner), acting through the Consumer Credit Division of the Department of Banking, recently conducted an investigation into the Law Offices of David M. Katz, discovering that in 2018 and 2019 the firm had engaged in unlicensed collection activity involving about 10,000 Connecticut accounts with a total balance of $1.4 million, allegedly collecting about $81,000 of that amount. After an initial unfavorable order from the commissioner, the named attorney for the firm requested reconsideration of the ruling and ultimately entered into a consent order reducing the fine from $100,000 to $20,000. For more information, click here.