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 April 5, the Consumer Financial Protection Bureau (CFPB) issued a new report finding that more borrowers paid “discount points” upfront as overall interest rates rose. The percentage of homebuyers paying discount points roughly doubled from 2021 to 2023. The increase was even greater among borrowers with lower credit scores. While discount points may provide advantages to some borrowers, the financial tradeoffs are complex. The CFPB is monitoring these increases and potential risks to consumers. For more information, click here.
• On April 5, the CFPB issued a Data Spotlight highlighting trends in the housing market. The CFPB found that a majority of recent borrowers paid discount points, more borrowers paid discount points as interest rates increased, and borrowers with lower credit scores were more likely to pay discount points. For more information, click here.
• On April 5, Terraform Labs and its founder, Do Kwon, were found liable for securities fraud by a Manhattan federal jury. The U.S. Securities and Exchange Commission (SEC) accused them of misleading investors about the stability and business prospects of the bankrupt cryptocurrency startup. The SEC claimed Terraform falsely promoted its cryptocurrency, UST, as stable and lied about the usage of its LUNA coins. The jury verdict means that civil penalties for Terraform and Kwon will be determined in the coming weeks. Kwon, who is under criminal indictment in the U.S. and South Korea, was not present at the trial. For more information, click here.
• On April 4, Acting Comptroller of the Currency Michael J. Hsu discussed the importance of fairness in remarks given at the National Community Reinvestment Coalition Just Economy Conference 2024. Hsu highlighted bank progress in overdraft protection program reforms since the OCC issued guidance last April and provided an update on Project REACh accomplishments regarding credit invisibles, minority depository institutions and affordable housing. Additionally, he discussed the importance of ensuring fairness as it relates to artificial intelligence and fraud. For more information, click here.
• On April 4, the CFPB issued a report examining the growth of financial transactions in online video games and virtual worlds. These platforms increasingly resemble traditional banking and payment systems that facilitate the storage and exchange of billions of dollars in assets, including virtual currencies. However, consumers report being harmed by scams or theft on gaming platforms and not receiving the protections they would expect under federal law. The CFPB will be monitoring markets where financial products and services are offered, including video games and virtual worlds, to ensure compliance with federal consumer financial protection laws. For more information, click here.
• On April 3, Board of Governors of the Federal Reserve System Member Michelle Bowman delivered a speech on “Bank Liquidity, Regulation, and the Fed’s Role as Lender of Last Resort.” She discussed how the Fed supported liquidity in the banking system, the broader framework that supported bank liquidity, and the challenges the Fed faced in implementing liquidity tools. For more information, click here.
• On April 1, the Federal Reserve Bank of Kansas City won a lawsuit against crypto-focused Custodia Bank regarding a master account. A Wyoming federal judge ruled that Custodia’s interpretation of the law did not prove it is statutorily entitled to such an account. The judge stated that the Federal Reserve never issued a final agency action on Custodia’s request for a master account, which could be challenged. Custodia argued that an email stating the Federal Reserve had “no concerns” with the Kansas City Fed’s intent to deny the application constituted a final agency action. However, the judge disagreed, stating the email was not a final action. For more information, click here.
• On April 2, CFPB Director Rohit Chopra gave prepared remarks at the White House on consumer data protection and national security. Per Chopra’s remarks, the CFPB is aiming to propose rules this year to ensure that data brokers comply with the Fair Credit Reporting Act (FCRA). The rules would restrict certain business practices and ensure higher levels of accountability for companies engaged in this business model. The proposals under consideration would define a data broker that sells certain types of consumer data as a “consumer reporting agency” to “better reflect today’s market realities.” Under such a proposal, a company’s sale of data regarding, for example, a consumer’s payment history, income, or criminal records would generally be a consumer report, triggering requirements for ensuring accuracy and handling disputes of inaccurate information, as well as prohibiting misuse of such data. For more information, click here.
• On April 2, the U.S. Court of Appeals for the Fifth Circuit issued an order staying the district court’s decision to transfer the lawsuit challenging the CFPB’s credit card late fee rule from the Northern District of Texas to the District Court for the District of Columbia (D.D.C). As discussed here, on March 28, 2024, the district court had transferred the case to D.D.C. finding an “attenuated nexus” to the Fort Worth Division since, according to the district court, only one of the six plaintiffs had even a remote tie to the division. The Fifth Circuit’s stay was in effect until 5p.m. on Friday, April 5. For more information, click here.
• On March 29, the Financial Crimes Enforcement Network (FinCEN), in consultation with staff at the OCC, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Board of Governors of the Federal Reserve System (Board), published a request for information and comment from interested parties regarding the Customer Identification Program (CIP) Rule requirement for banks to collect a taxpayer identification number (TIN), among other information, from a customer who is a U.S. person, before opening an account. Comments close on May 8, 2024. For more information, click here.
• On March 28, the FDIC issued its Consumer Compliance Supervisory Highlights is a publication that features articles of interest to the banking industry. Topics include supervisory observations related to consumer protection laws, examples of practices that may be useful to institutions in mitigating risks, regulatory developments, consumer compliance resources, and an overview of consumer complaint trends. For more information, click here.
• On March 27, a Circular issued by the CFPB warned that remittance transfer providers can be held liable under the Consumer Financial Protection Act if the marketing is deceptive. Specifically, according to the CFPB, providers may be liable under the CFPA for deceptive marketing practices if they market: remittance transfers as being delivered within a certain time frame when transfers actually take longer; remittance transfers as “no fee” when in fact the provider charges fees; promotional fees or promotional exchange rates for remittance transfers without sufficiently clarifying when an offer is temporary; and remittance transfers as “free” if they are not in fact free. For more information, click here.
• On March 26, the U.S. Justice Department indicted global cryptocurrency exchange KuCoin and its founders for Bank Secrecy Act and unlicensed money transmission offenses. The indictment alleges that KuCoin failed to implement an anti-money laundering program compliant with the BSA, facilitating the laundering of over $5.39 billion. Prosecutors are seeking the forfeiture of all properties associated with the alleged violations, demonstrating the significant consequences of non-compliance with U.S. anti-money laundering requirements. For more information, click here.
• On March 21, the Federal Trade Commission (FTC) announced that it will hold a virtual informal hearing on April 24, 2024, on its proposed Rule on Unfair or Deceptive Fees, commonly known as junk fees. During the hearing, which will be open to the public and viewable on the FTC’s website, interested organizations will have the opportunity to provide oral statements. For more information, click here.

State Activities:

• On April 4, Oregon Governor Tina Kotek signed SB1595. The bill increases the protections for debtors by raising the value of certain properties that are exempt from execution and modifying the laws regarding garnishment of a debtor’s earnings and funds in a financial institution. It also amends and repeals several sections of the Oregon Revised Statutes related to debt collection practices.
  • Increases in Exemptions from Garnishment and Execution
    • The bill increases the value of certain properties that are exempt from execution;
    • The value of books, pictures, and musical instruments exempt from execution has been increased to $600;
    • The value of wearing apparel, jewelry, and other personal items exempt from execution has been raised to $1,800;
    • The tools, implements, apparatus, team, harness, or library necessary for the debtor to carry on their trade, occupation, or profession are exempt up to a value of $5,000; and
    • The value of a vehicle exempt from execution has been increased to $10,000, or $3,000 if the debtor owes a debt that arises out of a child support or spousal support obligation or a money award judgment that includes restitution.
  • Modifications to Unfair Debt Collection Practices
    • Stipulate that 75% of the disposable earnings of an individual are exempt from execution;
    • Increases the minimum net disposable earnings that an individual can retain after a garnishment; and
    • Provides that funds exempt from execution under certain Oregon Revised Statutes remain exempt when deposited in a financial institution, as long as the exempt funds are reasonably identifiable.
  • For more information, click here.
• On April 2, Idaho Governor Brad Little signed HB576. The bill, among other things, updates provisions regarding the enforcement of liens. Per the bill, an operator can dispose of the personal property found in a storage facility without liability if the lessee fails to remove the personal property from the leased space after the end of the rental agreement and the rental agreement advises the lessee that any property remaining after the rental agreement has ended will be disposed of in the operator’s discretion. For more information, click here.
• On April 2, HB86 was signed by Virginia Governor Glenn Youngkin (R). The bill provides that a court may not enter an order of possession unless the plaintiff has presented a copy of a proper termination notice issued to the defendant and the court has entered such notice into evidence. For more information, click here.
• On April 2, Gov. Youngkin signed SB576, the Unfair Real Estate Service Agreement Act. The bill provides for the following, related to liens:
  • Prohibiting real estate service agreements from creating liens, encumbrances, or security interests on residential property;
  • Making such agreements that violate this prohibition void and unenforceable;
  • Restricting the recording of these agreements if they violate specified terms;
  • Disallowing assignment or transfer of rights under these agreements without consent; and
  • Providing legal remedies for affected parties, including voiding recorded agreements and recovering damages.
  • For more information, click here.
• On April 2, attorneys general from nine states – Illinois, Indiana, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Tennessee, Washington, and Wisconsin – and the District of Columbia, joined a multistate lawsuit against a personal lending company over alleged violations of multiple consumer protection laws. The suit alleges that the lender charged consumers for hidden add-on products that consumers were not fully informed about or, in some instances, did not agree to purchase. In doing so, the lender illegally added hundreds or sometimes thousands of dollars to the amount’s consumers owed the company. The lawsuit further alleges that in the year 2019 alone, the lender imposed charges amounting to $121.7 million nationwide, in the form of premiums and fees for these ancillary products. The lending company is also accused of employing “illegal, aggressive sales tactics” to extend credit to new borrowers. Tennessee’s attorney general argues that these kinds of predatory sales practices “can lead consumers into a cycle of debt that’s hard to overcome.” For more information, click here.
• On April 1, attorneys general from 16 states – California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New York, North Carolina, Oregon, Pennsylvania, Washington – and the District of Columbia submitted a comment letter supporting the CFPB’s proposed overdraft fee rule, amending Truth in Lending Act (TILA) regulations. The proposed rule would require large banks to apply consumer protections, including interest rate disclosures, to overdraft fees. In the letter, the attorney generals endorsed the proposed rule and requested that the CFPB set the benchmark overdraft fee at $3, which would not trigger TILA disclosures and reduce overdraft fees for consumers. The attorney generals also urged the CFPB to consider expanding the proposed rule to small financial institutions, arguing that many are among the most frequent chargers of costly overdraft fees. For more information, click here.
• On April 1, 10 state attorneys general filed a lawsuit in the U.S. District Court for the District of Kansas against President Biden, the Secretary of Education, and the Department of Education seeking to block the enactment of the SAVE Plan. The SAVE Plan was an income-driven repayment plan intended to calculate payments based on a borrower’s income and family size, rather than the loan balance, and forgave balances after several years since repayment. According to the complaint, the government released a rule for the new SAVE Plan intended to eliminate at least $156 billion in student debt as the second step in a three-part loan forgiveness initiative. For more information, click here.
• On March 29, Kansas Governor Laura Kelly signed HB 2247. The bill modifies certain terms, definitions, deadlines and provisions contained in the Uniform Consumer Credit Code (UCCC) and transfers mortgage provisions form the UCCC to the state’s Mortgage Business Act. For more information, click here.
• On March 27, West Virginia Governor Jim Justice approved HB 4837. Among other things, the bill modifies banks’ duties with respect to records retention and limits bank liability for routine destruction of documents. The bill also creates uniformity between the statute of limitations and presumption of abandonment under the state’s Uniform Unclaimed Property Act (UUPA). Additionally, the bill establishes a presumption of payment by the bank with respect to any demand, savings, or time deposit, where the property qualifies as abandoned property under the UUPA. For more information, click here.
• On March 27, the Oregon Division of Financial Regulation (DFR) settled its claims against cryptocurrency asset platform Abra for violating state securities regulations by allegedly offering interest-bearing cryptocurrency depository products. As part of the settlement, Abra must notify all Oregon consumers with open accounts to move their crypto assets from the platform as it winds down U.S. operations. Assets remaining after seven days will be converted to fiat. Abra and its CEO, Bill Barhydt, will enter a consent order with DFR to cease offering or selling unregistered securities in Oregon and pay an administrative penalty, suspended if they return all assets owned by Oregon consumers before April 25, 2024. For more information, click here.
• On March 26, West Virginia Governor Jim Justice signed HB 5326, which relates to prohibition of unfair real estate service agreements and is titled the Unfair Real Estate Services Agreements Act. Among other things, the law makes it a “deceptive act” if a person enters into an unfair real estate agreement with a consumer. The act also prohibits recording of agreements violative of its provisions to prevent public records from being clouded. The law creates a private right of action for any consumer with an interest in real property that is the subject of an unfair real estate service agreement. For more information, click here.
• On March 26, Gov. Justice signed SB 613, which amends several statutes related to the licensure and regulation of mortgage brokers, lenders, and loan originators. Among other things, the bill also eliminates several statutory provisions that have been deemed “outdated” and authorizes emergency rulemaking. Additionally, the bill allows the Commissioner of Financial Institutions to participate in the multistate licensing and examination process and updates net worth requirements to use generally accepted accounting principles. For more information, click here.
• On March 25, Washington State Governor Jay Inslee signed SB 6025. The bill expands the definition of the term “loan” under the state’s Consumer Loan Act (CLA) to include money or credit to a borrower in exchange for a borrower to agree to a set of terms. Additionally, the bill makes any attempt to circumvent the provision of the CLA a violation of the act. For more information, click here.
• On March 25, Maine Governor Janet Mills signed HP 1433, which will make it a violation for telephone solicitors to fail to use the reassigned numbers databased to verify a consumer’s telephone number has not been reassigned prior to initiating a call to that consumer. The reassigned numbers database was created and is maintained by the Federal Communications Commission. For more information, click here.