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 February 16, the Consumer Financial Protection Bureau (CFPB) issued a procedural rule updating how financial institutions can appeal supervisory findings, including those relating to compliance with the Fair Credit Reporting Act. The updated rule broadens the CFPB officials eligible to evaluate appeals, the options for resolving an appeal, the matters subject to appeal, and makes additional clarifying changes. For more information, click here.
• On February 16, the CFPB reported on the first set of results from the newly updated Terms of Credit Card Plans survey. The report alleges that large banks are offering worse credit card terms and interest rates than small banks and credit unions, regardless of credit risk. Among the allegations, the CFPB argues that large issuers “offered worse rates across credit scores.” For more information, click here.
• On February 16, the Federal Trade Commission (FTC) announced that a federal court issued an order banning the operators of an alleged mortgage relief scam from the telemarketing and debt relief businesses and requiring them to turn over $19 million as a result of a lawsuit filed by the FTC and the California Department of Financial Protection and Innovation (DFPI). The court found that the defendants falsely promised to reduce homeowners’ mortgage payments and prevent foreclosures, defrauding distressed homeowners out of millions of dollars. Per the original complaint, the FTC and DFPI alleged that “[a]s a consequence, many consumer’s [sic] credit ratings have been negatively affected.” The scheme allegedly harmed more than 3,000 people nationwide. The court’s orders bar the individuals and their companies from directly or indirectly engaging in telemarketing, debt relief services, and making any misrepresentations or unsubstantiated claims about any product or service. For more information, click here.
• On February 15, the CFPB published a blog recounting its action against a student loan debt relief business and a debt-settlement company. The CFPB alleged that the defendants charged thousands of consumers with federal student loans approximately $9.2 million in illegal upfront fees and used deceptive sales tactics to sign consumers up for debt relief services. The CFPB also alleged that the companies failed to provide required disclosures and have consumers execute settlement agreements, in violation of the Telemarketing Sales Rule. In 2022, a district court entered an order that imposed civil penalties on the companies and required that redress be paid to harmed consumers. The order permanently bans the student loan company from debt-relief services and permanently enjoins the debt settlement company from obtaining referrals from companies purporting to make or arrange loans. For more information, click here.
• On February 15, the FTC issued a Supplemental Notice of Proposed Rulemaking, seeking public comment on its proposal to amend the Rule on Impersonation of Government and Businesses (Impersonation Rule or Rule), that is being finalized by the FTC today, to add a prohibition on the impersonation of individuals. The amendment would also extend liability for violations of the Impersonation Rule to parties who provide goods and services with knowledge or reason to know that those goods or services will be used in illegal impersonations. The FTC stated the impetus for the amendment is the surging number of complaints it has received around impersonation fraud, including “deepfakes” generated using artificial intelligence (AI). For more information, click here.
• On February 15, the Federal Reserve Board released the hypothetical scenarios for its annual stress test, which helps ensure that large banks can lend to households and businesses even in a severe recession. Additionally, for the first time, the board released four hypothetical elements designed to probe different risks through its “exploratory analysis” of the banking system. The exploratory analysis will not affect bank capital requirements. For more information, click here.
• On February 13, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) to keep criminals and foreign adversaries from exploiting the U.S. financial system and assets through investment advisers. This proposed rule, which complements Treasury’s other recent actions to combat the illicit finance risks from anonymous companies and all-cash real estate transactions, will add further transparency to the U.S. financial system and help assist law enforcement in identifying illicit proceeds entering the U.S. economy. For more information, click here.
• On February 13, Securities and Exchange Commission (SEC) Chair Gary Gensler delivered a speech, “AI, Finance, Movies, and the Law” at Yale Law School, discussing crossovers among artificial intelligence (AI) and finance, system-wide risks on a macro-scale, AI offering deception, AI washing, and hallucinations, among other topics. For more information, click here.
• On February 13, Acting Comptroller of the Currency Michael J. Hsu discussed the importance of eliminating appraisal bias in the financial industry in remarks at an Appraisal Subcommittee (ASC) Hearing. The ASC is a subcommittee of the Federal Financial Institutions Examination Council (FFIEC), of which the Office of the Comptroller of the Currency is a member. For more information, click here.
• On February 12, FFIEC issued a statement of principles related to valuation discrimination and for member entities to consider in their consumer compliance and safety and soundness examinations. The principles aid member entities in assessing whether their supervised institutions’ compliance and risk management practices are appropriate to identify and mitigate discrimination or bias in their residential property valuation practices. For more information, click here.
• On February 9, in a letter to Senator Elizabeth Warren (D-MA), Sean Patrick Maloney, ambassador to the Organization for Economic Cooperation and Development (OECD), recused himself from participating in the OECD’s decision-making processes regarding cryptocurrency and digital assets policy, including the Crypto-Asset Reporting Framework and other cryptocurrency and digital asset-related initiatives. For more information, click here.
• On February 9, the Department of Veterans Affairs (VA) issued a circular to consolidate updates related to VA’s disaster modification and loan deferment options. Effective February 9, the circular reiterates the options for disaster modifications and loan deferment and extends the options available for borrowers affected by COVID-19 through May 31, 2024. For more information, click here.
• On February 8, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing titled “The Financial Stability Oversight Council Annual Report to Congress” with testimony provided by U.S. Treasury Secretary Janet Yellen. For more information, click here.
• On February 8, the FCC announced the unanimous adoption of a declaratory ruling that recognizes calls made with AI-generated voices are “artificial” under the Telephone Consumer Protection Act (TCPA). The declaratory ruling notes that the TCPA prohibits initiating “any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party” unless certain exceptions apply. For more information, click here.
• On February 6, the Department of Justice (DOJ) announced that a federal grand jury indicted Frank Richard Ahlgren III for filing false tax returns that underreported or did not report the sale of $4 million worth of bitcoin in which he had substantial gains. According to the DOJ, Ahlgren allegedly used the proceeds from the sale of approximately $3.7 million worth of bitcoin to purchase a residence. In additional to filing false tax returns, the indictment also charges that after selling some of his bitcoin to an individual in exchange for cash, Ahlgren made a series of bank deposits in amounts less than $10,000 each to avoid triggering currency transaction reporting requirements. For more information, click here.
• On February 5, the SEC adopted two rules that require market participants who engage in certain dealer roles, in particular those who take on significant liquidity-providing roles in the markets, to register with the SEC, become members of a self-regulatory organization (SRO), and comply with federal securities laws and regulatory obligations. For more information, click here.

State Activities:

• On February 14, California Attorney General Rob Bonta announced a near-$5 million settlement with a diagnostic laboratory company, resolving claims that the company unlawfully disposed of hazardous waste, medical waste, and protected health information at its facilities throughout the state. The settlement will require the company to pay nearly $5 million in penalties, costs, and supplemental environmental projects and make changes to its business operations and practices going forward. For more information, click here.
• On February 9, the Virginia House of Delegates passed House Bill (HB) 418, which will now be sent to the Senate for consideration. Virginia is one of only two states that does not allow class-action lawsuits in its courts. However, that could change soon as HB 418, originally introduced on January 10, 2024, seeks to create a class-action framework loosely modeled on the Federal Rules of Civil Procedure. For more information, click here.
• Recently, the Hawaii Department of Commerce and Consumer Affair Division of Financial Institutions (DFI) and the Hawaii Technology Development Corporation (HTDC) jointly determined that the activities of digital currency companies do not align with the concept of money transmission as the term is defined in the state’s money transmitter law. Accordingly, digital currency companies will, therefore, be allowed to transact as unregulated business in the state; however, they will still be required to comply with applicable federal licensing and registration requirements. For more information, click here.
• On February 7, the California Department of Financial Protection and Innovation (DFPI) announced that it has entered a $1.5 million settlement with TradeStation Crypto, Inc. (TradeStation) to resolve the DFPI’s securities investigation into TradeStation’s crypto interest-earning program. The enforcement action against TradeStation is part of a multistate settlement initiated by the North American Securities Administrators Association task force of eight state securities regulators including California, Washington, Alabama, Mississippi, North Carolina, Ohio, South Carolina, and Wisconsin. For more information, click here.