[co-author: Jennifer Ciccarelli]

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 January 19, the Federal Deposit Insurance Corporation (FDIC) issued cease-and-desist letters to five entities for making false and misleading statements about FDIC deposit insurance. According to the FDIC, the entities made misrepresentations about whether they themselves were FDIC-insured and whether the financial products they offered were FDIC-insured. For more information, click here.
• On January 19, the Federal Court of Appeals for the Third Circuit ordered the bankruptcy court adjudicating the bankruptcy of FTX to appoint an examiner to investigate the collapse of the digital asset exchange. For more information, click here.
• On January 19, the Biden-Harris administration announced the approval of $4.9 billion in additional student loan debt relief for 73,600 borrowers. These discharges are the result of fixes to income-driven repayment (IDR) forgiveness and public service loan forgiveness (PSLF) made by the administration. The debt relief is broken down into the following categories:
• $1.7 billion for 29,700 borrowers through administrative adjustments to IDR payment counts that have brought borrowers closer to forgiveness and address longstanding concerns with the misuse of forbearance by loan servicers. Including the January 19 announcement, the Biden-Harris administration has now approved $45.7 billion in IDR relief for 930,500 borrowers.
• $3.2 billion for 43,900 borrowers through PSLF. This includes borrowers who have benefitted from the Biden-Harris administration’s limited PSLF waiver as well as regulatory improvements made to the program by the administration. Total relief through PSLF is now $56.7 billion for 793,400 borrowers since October 2021. Prior to the Biden-Harris administration’s fixes to PSLF, only about 7,000 borrowers had ever received forgiveness.

For more information, click here.

• On January 18, the Council of the European Union and the European Parliament reached a provisional agreement on reforms to strengthen the EU’s anti-money laundering and counter-terrorism financing framework. The new rules aim to close regulatory loopholes and ensure illicit money from criminal activities and terrorism cannot be laundered through Europe’s financial system. For more information, click here.
• On January 18, the Federal Trade Commission (FTC) issued an order postponing the effective date of the Combatting Auto Retail Scams (CARS) Rule while a legal challenge against the rule is pending. According to the FTC, the CARS Rule will save consumers more than $3.4 billion and an estimated 72 million hours each year shopping for vehicles by targeting persistent and illegal bait-and-switch scams and junk fees in the car buying process. For more information, click here.
• On January 17, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule seeking request for public commentto amend exemptions to Regulation Z so the Truth in Lending Act (TILA)/Regulation Z would apply to certain overdraft “credit” provided by insured financial institutions with more than $10 billion in assets, in furtherance of the bureau’s crusade on “junk fees.” At a high level, the CFPB’s proposed rule would provide covered financial institutions with two options for offering overdraft “credit”: (1) a “courtesy” overdraft service with “breakeven” fees exempt from TILA/Regulation Z; or (2) a “covered overdraft credit” line/loan in connection with debit card or routing/account number transactions with “above breakeven” fees subject to TILA/Reg. Z. Under the proposal, an institution subject to the rule would have to provide full TILA disclosures and comply with other substantive TILA requirements for overdraft fees if they exceed costs or a low CFPB safe harbor amount. For more information, click here.
• On January 17, the U.S. Department of Justice announced that Patriot Bank agreed to pay $1.9 million to resolve allegations that the bank engaged in a pattern or practice of lending discrimination by redlining majority-Black and Hispanic neighborhoods in Memphis, TN. The department alleged that from at least 2015 through at least 2020, Patriot avoided providing mortgage services to majority-Black and Hispanic neighborhoods in Memphis and discouraged people seeking credit in those communities from obtaining home loans. For more information, click here.
• On January 16, the U.S. Treasury Department and the Internal Revenue Service (IRS) announced the delay of the requirement for persons engaged in a trade or businesses to report information related to the receipt of digital assets on IRS Form 8300, Report of Cash Payments Over 10,000 Received in a Trade or Business. For more information, click here.
• On January 11, the Biden-Harris administration announced that next month it will start providing forgiveness after as few as 10 years of payments for borrowers on the Saving on a Valuable Education (SAVE) Plan who originally took out $12,000 or less for college. Borrowers enrolled in SAVE who are eligible for early forgiveness will have their debts canceled immediately starting next month, with no action on their part. To help as many borrowers as possible benefit from this action, the U.S. Department of Education is kicking off an outreach and email campaign to encourage borrowers who are not currently enrolled in SAVE to sign up to benefit from this shortened repayment period. For more information, click here.
• On January 9, the Financial Crimes Enforcement Network (FinCEN) issued a Financial Trend Analysis on information linked to identity-related suspicious activity in Bank Secrecy Act reports filed during 2021. FinCEN’s analysis found that approximately 1.6 million reports (42% of the reports filed that year) related to identity — indicating $212 billion in suspicious activity. For more information, click here.
• On January 8, the Commodity Futures Trading Commission’s Digital Asset and Blockchain Technology Subcommittee of the Technology Advisory Committee released a report titled, “Decentralized Finance.” The report presents detailed recommendations to mitigate risks to investors, consumers, market integrity, financial stability, and to combat illicit finance. For more information, click here.

State Activities:

• On January 17, the New York Department of Financial Services (NYDFS) issued a proposed circular letter addressing the use of artificial intelligence (AI) by licensed insurers. According to the superintendent, “[t]echnological advances that allow for greater efficient in underwriting and pricing should never come at the expense of consumer protection.” The letter provides NYDFS’s expectations for how insurers develop and manage use of external consumer data and information sources, AI systems, and other predictive models to reduce harm to consumer. According to the letter, NYDFS expects that insurers will (a) analyze the data for unfair and unlawful discrimination; (b) demonstrate the actuarial validity of the predictive models and data; (c) maintain a corporate governance framework that will provide sufficient oversight of the insurer’s use of external data and information sources and AI systems; and (d) maintain sufficient transparency, risk management, and internal controls. NYDFS notes that while such technology can be instrumental in simplifying underwriting, the use of AI may “increase the risks of unfair or unlawful discrimination,” that has a disparate impact on vulnerable community, which NYDFS is seeking to avoid. For more information, click here.
• On January 17, attorneys general (AGs) from 26 different states filed a letter with the Federal Communications Commission (FCC) that contends AI tools that mimic human voices are a form of an artificial voice as defined under the Telephone Consumer Protection Act (TCPA). For more information, click here.
• On January 14, New York released its proposed executive budget legislation for the 2024-2025 state fiscal year, aimed at enacting “major components of legislation necessary to implement the state transportation, economic development and environmental conservation budget” into law. The bill includes legislation titled the Buy Now Pay Later Act (the act) that will amend the current banking law. The act requires a buy-now-pay-later lender to first obtain a license by submitting an application “in writing, under oath, and in the form,” and containing information that may be required by the NYDFS superintendent. Additionally, the act requires an applicant to submit an affidavit of financial solvency with its application. The act also gives the superintendent the power to conduct an investigation to determine whether a buy-now-pay-later lender (or any other person) has violated the provisions of the article or engaged in conduct that would warrant revocation of its license. For more information, click here.
• On January 12, California’s Department of Financial Protection and Innovation (DFPI) published its January bulletin, covering the following items:
• Proposed DCLA Regulations – Comment Deadline January 15: The commissioner invites interested parties to submit comments on the second draft of proposed regulations for the Debt Collection Licensing Act (DCLA), including a description of the potential financial impact of the draft regulations.
• 2023 Annual Reports for DCLA Due in March: All licensees under the DCLA must submit an annual report to the DFPI by March 15, per Financial Code Section 100021(a) (1) – (4), (6), and (7).
• REMINDER: Banks and Credit Unions to Report Fee Income from NSF and Overdraft Charges: State-chartered banks and credit unions are required to report the revenue received from fees on nonsufficient funds and overdraft charges during the calendar year, annually to the DFPI. The requirement is per Financial Code section 521. These reports are due by March 1 so the DFPI can publish the information on its website by March 31.

For more information, click here.

• Recently, the DFPI announced that the public comment period for its proposed rulemaking regarding registration requirements for covered persons under the California Consumer Financial Protection Law (CCFPL); requirements for exemption from registration for licensees under the California Financial Law (CFL), California Deferred Deposit Transaction Law, and Student Loan Servicing Act; and regulation of certain advances under the CFL, ends on Tuesday, February 6. For more information, click here.
• Recently, 19 state AGs submitted a comment letter supporting the CFPB’s proposed rule that would expand the agency’s supervisory authority to regulate nonbank fintech firms that offer digital payment services. The AGs emphasized the importance of regulating nonbank financial institutions, including popular digital payment applications. For more information, click here.