Troutman Pepper Weekly Consumer Financial Services Newsletter - August 2022 # 3

Troutman Pepper

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 August 12, VantageScore announced that it completed an extensive analysis on how recent changes have impacted consumer credit score models to how medical collection accounts are reported, including changes brought by the COVID-19 pandemic. VantageScore decided to drop medical debt from its calculations. For more information, click here.
  • On August 11, the Consumer Financial Protection Bureau (CFPB) stated in a circular that financial companies may violate federal consumer financial protection law when they fail to safeguard consumer data. The circular provided guidance to consumer protection enforcers, including examples of when firms can be held liable for lax data security protocols. For more information, click here.
  • On August 11, the Federal Trade Commission (FTC) announced it will explore rules to crack down on harmful commercial surveillance and lax data security. Commercial surveillance denotes the business of collecting, analyzing, and profiting from information about people. Mass surveillance has heightened the risks and stakes of data breaches, deception, manipulation, and other abuses. The FTC’s Advance Notice of Proposed Rulemaking seeks public comment on the harms stemming from commercial surveillance and whether new rules are needed to protect people’s privacy and information. For more information, click here.
  • On August 10, the CFPB issued an interpretive rule, laying out when digital marketing providers for financial firms must comply with federal consumer financial protection law. Digital marketers involved in the identification or selection of prospective customers or the selection or placement of content to affect consumer behavior are typically considered service providers for purposes of the law. Digital marketers acting as service providers can be held liable by the CFPB or other law enforcers for committing unfair, deceptive, or abusive acts or practices, as well as other consumer financial protection violations. For more information, click here.
  • On August 10, U.S. Senators Elizabeth Warren (D-MA), Dick Durbin (D-IL), Sheldon Whitehouse (D-RI), and Bernie Sanders (I-VT) sent a letter to the Office of the Comptroller of the Currency (OCC), requesting that Acting OCC Michael Hsu rescind the previously issued cryptocurrency guidance and replace it with more comprehensive guidance in coordination with other prudential regulators. The lawmakers also asked for details regarding the extent to which banks currently engage in crypto-related activities. For more information, click here.
  • On August 10, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will require servicers to obtain and maintain fair lending data on their loans and for this data to transfer with servicing throughout the mortgage term. The fair lending data to be maintained includes borrowers’ age, race, ethnicity, gender, and preferred language. Servicers must implement this change starting on March 1, 2023. For more information, click here.
  • On August 9, the FTC issued an order, denying a petition to quash a civil investigative demand involving the FTC’s investigation into whether the operators of a cryptocurrency exchange engaged in deceptive, unfair, or otherwise unlawful acts or practices regarding the marketing and operating of BitMart currency exchange services in violation of FTC Act Section 5 (15 U.S.C. § 45) or the Gramm-Leach-Bliley Act (15 U.S.C. §§ 6801-27). For more information, click here.
  • On August 9, the Securities and Exchange Commission (SEC) issued a cease-and-desist order to Bloom Protocol LLC (Bloom) for its failure to register its Bloom tokens, a form a crypto asset, prior to selling the tokens in an initial coin offering. The SEC found that Bloom sold the tokens as securities, but did not register the offering, and that it did not qualify for any applicable exemption under the Security and Exchange Act of 1933 (Securities Act). The SEC did, however, accept Bloom’s settlement offer and set forth within its order several actions for Bloom to take to rectify its violations of Sections 5(a) and (c) of the Securities Act. For more information, click here.
  • On August 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned a virtual currency mixer accused of allegedly laundering more than $7 billion since its creation in 2019. For more information, click here.
  • On August 8, the Department of Justice (DOJ) resolved Servicemembers Civil Relief Act (SCRA) claims against two affiliated Virginia landlords for allegedly obtaining unlawful court judgments against military tenants. To settle the claims, the landlords agreed to pay restitution to affected servicemembers, a civil penalty to the United States, and various injunctive relief. This action represents the latest in aggressive SCRA enforcement by the DOJ, which since 2011 has obtained over $476 million in monetary relief for over 121,000 servicemembers. For more information, click here.
  • On August 5, President Biden signed the COVID-19 Economic Injury Disaster Loan Fraud Statute of Limitations Act (R.7334) and the Paycheck Protection Program and Bank Fraud Enforcement Harmonization Act (H.R.7352) into law. H.R.7334 establishes a 10-year statute of limitations for fraud by borrowers under the Small Business Administration’s (SBA) COVID-19 Economic Injury Disaster Loan programs, while H.R.7352 establishes a 10-year statute of limitations for fraud by borrowers under the SBA’s Paycheck Protection Program. For more information, click here.

State Activities:

  • On August 11, Michigan Attorney General Dana Nessel joined a coalition of 19 attorneys general in a comment letter, supporting a joint effort by the Federal Reserve Board of Governors, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency to revise and strengthen regulations under the Community Reinvestment Act (CRA). Attorney General Nessel stated: “Since its passage, the CRA has helped Michigan residents access capital for investments like mortgages and small business loans that have helped them transform their neighborhoods. However, the CRA can do more. That’s why I stand with my colleagues in asking that the rule implementing the legislation be strengthened to respond to the financial crises precipitated by COVID-19, a crisis that affects low-and-middle-income communities disproportionately.” For more information, click here.
  • On August 8, California Attorney General Rob Bonta issued a press release, urging Californians to take advantage of recent changes to the Public Service Loan Forgiveness (PSLF) and Temporary Expanded Public Service Loan Forgiveness (TEPSLF) programs. According to the press release, “[l]ast year, the Department of Education (ED) launched a limited-time PSLF Waiver Opportunity that runs through October 31, 2022, allowing eligible borrowers to receive credit for past payments made on loans that would otherwise not qualify under the PSLF program.” Attorney General Bonta stated: “Our public servants work day in and day out on behalf of the people of California as our nurses, teachers, first responders, state workers, and more. As students, they took out student loans only to find themselves weighed down by debt and denied the relief they were promised.” For more information, click here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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