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

Federal Activities

State Activities

Federal Activities:

• On April 21, the Federal Reserve issued initial findings from its 2022 triennial payments study, showing how consumers and businesses chose to make noncash payments via checks, different types of cards, and the automated clearinghouse. For more information, click here.
• On April 20, the Federal Reserve announced again that it plans to discontinue its cross-border ACH payments service to Europe and Canada later this year. For more information, click here.
• On April 18, Federal Trade Commission (FTC) Chair Lina M. Khan and Commissioners Rebecca Slaughter and Alvaro Bedoya testified before the House Energy and Commerce Subcommittee on Innovation, Data, and Commerce on the agency’s efforts to protect consumers from unfair or deceptive practices and unfair methods of competition. The hearing addressed the agency’s 2024 budget request, as well as topics focused on rulemaking authority, junk fees, robocalls, fraud, and privacy initiatives, among others. For more information, click here.
• On April 19, the Federal Housing Finance Agency announced that it requested comment on a proposed rule, formalizing many of the agency’s existing practices and programs on fair housing and lending oversight of its regulated entities. For more information, click here.
• On April 18, Federal Reserve System Governor Michelle Bowman delivered remarks at the Georgetown University McDonough School of Business Psaros Center for Financial Markets and Policy on evolving money and payments landscape, as well as central bank digital currencies. For more information, click here.
• On April 17, the FTC stopped a multinational payment processing company and its CEO and chief strategy officer from serving as a facilitator for tech support scammers through credit card laundering. The defendants agreed to court orders, prohibiting them from any further payment laundering, while requiring them to closely monitor other high-risk clients for illegal activity. For more information, click here.
• On April 17, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra said the CFPB is focusing on finding ways to increase competition and reduce costs as credit card debt continues to rise and interest rates increase. To increase competition, Director Chopra stated that the CFPB proposes to amend a 2010 Federal Reserve Board of Governors rule provision used by credit card issuers to sidestep a congressional prohibition on unreasonable or out-of-proportion penalty fees. Director Chopra explained that in a competitive market, credit card companies will compete upfront on the interest rates they charge, rather than build a business model on back-end fees. Chopra further stated that the existing loophole allows some credit card issuers to charge big fees even when a borrower is just a day late. The proposal would permit credit card issuers to charge a penalty of $8 or an amount in line with their costs. Director Chopra also stated that the CFPB is making it easier for small credit card issuers to challenge bigger players by updating the CFPB credit card database powered by a survey of credit issuers that reveals terms and pricing. Chopra explained that the upgrades to the survey and database intend to create a neutral data source that can facilitate comparison shopping, which will be especially useful for those looking to refinance their credit card debt and for small players in the market offering lower rates. The neutral data source also will help to power comparison shopping on third-party websites, rather than relying on “pay-to-play” marketing arrangements. Chopra further stated that these do not represent the CFPB’s only initiatives — the CFPB is conducting a broader review of credit card industry practices and accepting public feedback until April 24. For more information, click here.
• On April 17, the Department of Justice filed a complaint on behalf of the FTC against a multinational payment processing company and its CEO and CSO for violating the FTC Act and the Telemarketing Sales Rule (TSR) by allegedly engaging in credit card laundering for tech support scams. The FTC’s complaint against the company (and several of its subsidiaries and an associated company) and its CEO and CSO alleges that the defendants were at the center of several offshore tech support scams, processing tens of millions of dollars in charges and giving the scammers access to the U.S. credit card network. The complaint explained that the company’s relationships with tech support scammers in which the company acquired credit card merchant accounts and then used those accounts to collect money from consumers on behalf of the scammers. The complaint further alleges that the CEO and CSO knew that their tech support clients were scammers and directly received numerous complaints about the companies. The proposed court orders impose monetary judgments of $16.5 million and also prohibit the defendants from engaging in credit card laundering through merchant accounts; require the defendants to screen and monitor any high-risk clients and take action if clients should charge consumers without authorization or violate the TSR; and prohibit the defendants from engaging in payment processing or assisting tech support companies that engage in false or unsubstantiated telemarketing or advertising. For more information, click here.
• On April 17, CFPB Director Rohit Chopra issued a blog post on credit card debt and the CFPB’s efforts to increase competition and reduce costs. For more information, click here.
• On April 15, the U.S. House Financial Services Committee published a draft version of a potential landmark stablecoin bill, with proposals including a moratorium on stablecoins backed by other cryptocurrencies and a request to study a central bank digital currency. The draft bill also, among other things, creates definitions for payment stablecoin issuers and requires these issuers to have reserves that back the digital assets on an “at least one-to-one basis.” The draft bill can be found here.
• On April 14, the CFPB submitted a statement of interest to the U.S. District Court for the Southern District of Florida, arguing that the Equal Credit Opportunity Act’s (ECOA) prohibition on discrimination covers every aspect of an applicant’s dealings with a creditor, not just specific loan terms like the interest rate or fees. This statement shows that the CFPB continues to press its position for a broad view of the ECOA’s scope, notwithstanding that another federal district court recently rebuffed the CFPB’s position. For more information, click here.
• On April 14, in a 3-2 vote with Republicans opposed, the U.S. Securities and Exchange Commission (SEC) reopened the comment period for a proposal to change the definition of an exchange and published additional information on how the agency thinks securities laws apply to crypto exchanges and decentralized finance systems. The commission believes that some crypto-asset securities trade on systems that would qualify as exchanges under the new proposal, and some systems may be decentralized finance trading systems or use distributed ledger or blockchain technology. According to the SEC, the reopened release reiterated the applicability of existing rules to platforms that trade crypto-asset securities, including so-called “DeFi” systems, and provided supplemental information and economic analysis for systems included in the new, proposed exchange definition. “I believe this supplemental release will help address comments on the proposal from various market participants, particularly those in the crypto markets,” said SEC Chair Gary Gensler. Gensler further stated that “many crypto trading platforms already come under the current definition of an exchange and thus have an existing duty to comply with the securities laws,” and “investors in the crypto markets must receive the same time-tested protections that the securities laws provide in all other markets.”

State Activities:

• On April 20, Texas Attorney General Ken Paxton filed suit against a couple and the couple’s company, alleging violations of the state’s Deceptive Trade Practices Act. Specifically, the lawsuit alleged that the couple engaged in a $75 million deceptive scheme wherein they supposedly purchased large quantities of SIM cards from wireless internet providers, reprogrammed them, and then repackaged the equipment for resale. The couple allegedly misrepresented their relationship with the reputable wireless internet providers, inducing consumers to purchase expensive monthly internet service plans, which were interrupted when the service providers terminated the SIM cards upon detection of the unauthorized use. Many consumers were left without internet service as a result. The AG seeks a temporary injunction and a freeze of the company’s assets to preserve funds for consumer restitution. For more information, click here.
• On April 19, New York Attorney General Letitia James released a guide intended to help businesses adopt effective data security measures. Based on the AG’s experience investigating and prosecuting cybersecurity breaches, the guide offers several recommendations to help companies avoid future security breaches. Among other things, the guide urges business to (1) maintain controls for secure authentication; (2) encrypt sensitive customer information; (3) ensure their service providers use reasonable security measures; (4) know where consumer information is stored; (5) guard against automated attacks; and (6) provide prompt and accurate notice to consumers of a data breach. Since March 2022, the AG’s office has recovered approximately $1.6 million from businesses to settle claims related to poor cybersecurity. For more information, click here.
• On April 19, the California Department of Financial Protection and Innovation announced it issued desist-and-refrain orders against five entities to stop fraudulent investment schemes tied to artificial intelligence. The orders found that the named entities and individuals violated California securities laws by offering and selling unqualified securities and making material misrepresentations and omissions to investors. The entities solicited funds from investors by claiming to offer high-yield investment programs that generate incredible returns by using AI to trade crypto-assets. As part of their solicitations, they used multilevel marketing schemes that reward investors for recruiting new investors. For more information, click here.
• On April 18, Arizona Attorney General Kris Mayes announced the resolution of an administrative complaint against a mortgage company for alleged violations of the state’s Fair Housing Act (AFHA) based on sexual orientation. The AFHA prohibits sex-based housing discrimination, including discrimination based on sexual orientation and gender identity. As a part of the settlement, the company agreed to, among other things, pay monetary damages to the aggrieved parties. Additionally, the company agreed to rectify credit requests at issue and consented to injunctive relief, which included the company’s agreement not to engage in discrimination or retaliation of any kind against any person. For more information, click here.
• On April 17, New York Superintendent of Financial Services Adrienne A. Harris announced that the New York State Department of Financial Services (DFS) adopted a final regulation, establishing how companies holding a DFS-issued Bitlicense will be assessed for costs of their supervision and examination. The adopted regulation effectuates a New York State FY23 Budget provision, giving DFS the authority to collect supervisory costs from licensed virtual currency businesses similar to other DFS-regulated licensees. This regulation would allow the DFS to continue adding top talent to its virtual currency team to maintain efficient and effective regulatory oversight. For more information, click here.