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 29, Acting Comptroller of the Office of the Comptroller of Currency (OCC) Michael J. Hsu delivered remarks at an event hosted by the University of Michigan School of Business, titled “What Should the U.S. Banking System Look Like? Diverse, Dynamic, and Balanced.” Hsu discussed whether the current U.S. banking system is optimal or whether it induces potential market imbalances. Further, Hsu disclosed that the OCC is taking action to improve the U.S.’ bank merger application processes and transparency to help promote a diverse and dynamic banking system. For more information, click here.
• On January 24, a report by Cornerstone Research revealed that the U.S. Securities and Exchange Commission (SEC) brought a record number of cryptocurrency-related enforcement actions in 2023, highlighting the commission’s growing focus on the digital asset sector. The report, titled “SEC Cryptocurrency Enforcement: 2023 Update,” showed that the SEC launched 46 cryptocurrency-related enforcement actions in 2023, a significant increase from 33 in 2022 and 24 in 2021. The actions, which involved 124 defendants, including nine celebrities, were primarily related to fraud and unregistered securities offerings. The SEC’s crypto enforcement activity has resulted in nearly $2.9 billion in civil monetary penalties since 2013, with $281 million collected in settlements in 2023 alone. The report also noted the SEC’s first-ever action related to nonfungible tokens (NFTs) in 2023. For more information, click here.
• On January 24, the Consumer Financial Protection Bureau (CFPB) proposed a rule that would prohibit covered financial institutions from charging fees, such as nonsufficient funds fees, when consumers initiate payment transactions that are instantaneously declined. According to the CFPB, charging such fees would constitute an abusive practice under the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices. For more information, click here.
• On January 24, the Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, announced its 2024 work program, focusing on monitoring vulnerabilities and promoting global cooperation in a rapidly changing environment. The FSB aims to enhance the resilience of nonbank financial intermediation (NBFI) and implement the Key Attributes of Effective Resolution Regimes for Financial Institutions across all sectors. This includes addressing lessons from the March 2023 banking turmoil. The FSB also plans to harness the benefits of digital innovation while managing its risks. This includes implementing its global regulatory and supervisory framework for crypto-asset activities and monitoring the financial stability implications of other digital innovations, such as tokenization and artificial intelligence (AI). Other priority areas include supporting global cooperation on financial stability, completing resolution reforms, enhancing the resilience of NBFI, improving cross-border payments, and addressing financial risks from climate change. The FSB will also focus on promoting the full implementation of effective resolution regimes, enhancing liquidity preparedness of nonbank market participants, and conducting new work on the functioning and resilience of repo markets. The FSB’s work program for 2024 also includes initiatives for the Brazilian G20 Presidency. For more information, click here.
• On January 24, the Federal Trade Commission (FTC) announced will host a virtual summit to discuss key developments in AI. For more information, click here.
• On January 23, Fannie Mae and Freddie Mac announced the launch of their Single-Family Social Bond Framework, along with updates to disclosures for the companies’ single-family mortgage-backed securities (MBS), aimed to further support access to credit and affordable housing as part of their mission and goals. For more information, click here.
• On January 23, FINRA reported that 70% of broker-dealer communications with retail customers potentially violated crypto-asset communication rules under FINRA Rule 2210. This rule requires communications to be fair, factual, and balanced. The examination, which reviewed more than 500 communications, revealed potential violations such as unclear distinctions about crypto-asset offerings, misleading comparisons and explanations, and misrepresentation of federal protections. In response, FINRA provided a list of questions for broker-dealers to consider when supervising their crypto-asset communications. For more information, click here.
• On January 18, the FTC announced that it filed a complaint against a Texas-based data aggregator for failing to fully inform consumers and obtain their consent before collecting and using their location data for advertising and marketing. Under the proposed order, the company will be prohibited from selling, licensing, transferring, or sharing any product or service that categorizes or targets consumers based on sensitive location data. For more information, click here.
• On January 18, Acting Comptroller of the OCC Michael J. Hsu delivered remarks to Columbia Law School at an event titled “Building Better Brakes for a Faster Financial World.” During the event, Hsu reflected on the bank failures that occurred during 2023, regulatory enhancements to help ensure updated liquidity risk management practices, and how adoption of faster payments and tokenization may impact liquidity risk management in the future. For more information, click here.
• On January 17, the FTC announced that it filed a complaint against Ganadores Online and Ganadores Inversiones Bienes Raíces, a business opportunity scam, which targeted Spanish-speaking consumers with brazen and false money-making pitches for online businesses and real estate investments. For more information, click here.
• On January 17, the CFPB proposed a rule that would amend Regulation E and Regulation Z to update regulatory exceptions for overdraft credit provided by very large financial institutions, thereby ensuring that extensions of overdraft credit adhere to consumer protections required of similarly situated products, unless the overdraft fee is a small amount that only recovers applicable costs and losses. For more information, click here.
• On January 16, Ginnie Mae announced its exploration of a new securitization product as part of its efforts to enhance and expand its existing Home Equity Conversion Mortgage (HECM) mortgage-backed securities (HMBS) program. For more information, click here.
• On January 12, the Financial Crimes Enforcement Network (FinCEN) republished frequently asked questions (FAQs) regarding the implementation of the Paycheck Protection Program (PPP), the requirements of the Bank Secrecy Act, and how lenders may adhere to those requirements when issuing a PPP loan. For more information, click here.
• On January 11, the BIS Innovation Hub Swiss Centre, the Swiss National Bank, and the World Bank announced their collaboration on Project Promissa, an initiative aimed at digitizing promissory notes. These financial instruments partly fund many international financial institutions, including multilateral development banks. The project aims to build a proof of concept for a platform for digital “tokenized” promissory notes. Using distributed ledger technology, Project Promissa intends to simplify the management of these notes and provide a comprehensive overview of all outstanding notes for all counterparties. The goal is to complete the proof of concept and testing by early 2025. In the future, the project could potentially extend to include payments associated with such notes by integrating tokenized payment systems based on private or public money. For more information, click here.

State Activities:

• On January 25, Maryland Attorney General Anthony Brown issued a consumer alert related to door-to-door sales scams. In the alert, General Brown identified several commons scams: (a) water filtration scams (imposters posing as representatives of the Environmental Protection Agency or other organization who perform a “free” water test to determine the level of contamination and deceive consumers into signing a loan agreement for the purchase of a water filtration system they do not need); (b) fake solar energy providers (trick consumers into signing “enrollment forms” or “applications” with the intent of stealing consumers’ personal information or committing other fraud); (c) fake utility representatives (imposters gain access to consumers’ homes by stating they have a need to inspect a “utility emergency” and once inside, steal consumer property or personal documentation); and (d) third-party energy supplier scams (Maryland law provides consumers the right to choose a third-party energy supplier and gives such suppliers the right to market directly to consumers; however, deceiving a consumer into switching suppliers can be violative of state law if the company is not providing accurate and complete information). The AG provides several helpful tips to help consumers avoid becoming victims of such scams. For more information, click here.
• On January 23, a decentralized finance crypto lending platform, its owners, and a Texas regulatory agency reached a settlement, putting an end to an emergency cease-and-desist action initiated in June 2023. The Texas State Securities Board had accused the respondents of securities fraud related to investment offers and sales, misleading denials of impending bankruptcy, unauthorized transfer of customer funds to a crypto exchange, and offering unregistered securities. As part of the settlement, the respondents agreed to inform clients about their asset return plan within a week, provide a week-long window for clients to withdraw assets via the app, maintain customer support, pay an administrative fine, and stop selling unregistered securities in Texas. The respondents neither admitted nor denied the allegations. The settlement also led to the dismissal of the emergency cease-and-desist order by Texas. For more information, click here.
• On January 22, The New York Department of Financial Services (NYDFS) released final guidance to the state’s banking organizations and nondepository financial institutions licensed or chartered under the state’s Banking Law or Financial Services Law. The guidance provides notices of NYDFS’s expectations regarding the financial institutions’ review and assessment of the character and fitness of their directors and senior officers at the onboarding stage and on an ongoing basis. According to NYDFS’s guidance, covered institutions are expected to: (a) update their policies and procedures to require vetting of designated persons at onboarding and on a regular ongoing basis; (b) inform NYDFS promptly if their character and fitness reviews determine that a designated person is no longer fit to perform their current function; (c) vet each designated person at the time they become a designated person at the institution, even if they have previously served as a designated person at another institution; and (d) define factors that warrant additional scrutiny. For more information, click here.
• Recently, the Illinois Department of Financial and Professional Regulation issued a set of proposed rules related to the state’s Community Reinvestment Act. According to the notice, the proposed rules are designed to “set forth the framework and procedures for examining and evaluating whether covered banks are meeting the financial services needs of the communities in which their offices, branches, and other facilities are maintained.” The rules generally cover an array of topics, which include, but are not limited to: (a) assessment factors; (b) performance tests, standards, and ratings, generally; (c) a community service test for wholesale or limited purpose banks; (d) effect of Community Reinvestment Act performance on application; (e) data collection, reporting, and disclosure; (f) very small credit union examination and procedures, (g) implementation period; and (h) enforcement. The proposed rules also aim to minimize the impact on small businesses by utilizing different test and performance standards depending on the asset size of the chartered state bank subject to examination. For more information, click here.