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 July 7, the Consumer Financial Protection Bureau (CFPB), U.S. Department of Health and Human Services (HHS), and the U.S. Department of the Treasury (Treasury) launched an inquiry into specialty financial products, such as medical credit cards and installment loans, that consumers can use to pay for medical care. Per the press release, the request for information “is part of the CFPB’s research on medical payment products and medical billing and collections” in addition to other actions by the CFPB and federal agencies. The three agencies seek information about the prevalence of these products, patients’ experiences with them, and health care providers’ incentives to offer these high-cost products to patients, which may include avoiding the insurance claims process and financial assistance programs. For more information, click here.
• On July 6, the Federal Trade Commission (FTC) announced that, in cooperation with the state of Florida, it will send refunds to consumers nationwide allegedly defrauded by a telemarketing financial services company, and related companies, into paying for credit card interest rate reduction and debt elimination programs. According to the FTC’s June 2016 complaint, brought jointly with the Florida attorney general, the defendants called consumers via robocalls to sell credit card interest rate reduction services. The CFPB further alleged that the defendants made guarantees about lowering consumers’ credit card interest rates. Customers made up-front payments, but per the complaint, rarely got the promised services. The defendants also pitched a credit card debt elimination service, and alleged that they could access funds from the government or from a lawsuit against the credit card industry to pay off consumers’ credit card debt. A June 2019 court order, as part of a law enforcement effort to halt illegal robocalls, partially settled the FTC’s complaint by permanently barring the defendants from engaging in telemarketing and debt relief services and requiring them to pay money to provide refunds to defrauded consumers. For more information, click here.
• On July 6, an FTC lawsuit against telemarketing scam operators who called hundreds of thousands of consumers nationwide pitching “extended automobile warranties” will result in a lifetime ban from any outbound telemarketing business and from any involvement with extended automobile warranty sales. For more information, click here.
• On July 6, U.S. Senators Sherrod Brown, Bob Menendez, Jack Reed, and Tina Smith sent a letter to the CFPB, asking it to enact regulations to protect consumers from voice cloning technology potentially used to fraudulently access the consumers’ financial accounts. For more information, click here.
• On July 6, the CFPB published a blog post, describing how the CFPB is distributing more than $3.5 million to consumers who were allegedly charged illegal fees to reduce or eliminate their federal student loans. In July 2020, the CFPB settled with a student loan debt-relief services company for violating the Telemarketing Sales Rule. From 2016 through October 2019, the CFPB alleged that the company used telemarketing campaigns to convince people with federal student loans to pay up to $699 in fees to file paperwork to reduce or eliminate their monthly payments through loan consolidation, forgiveness, or income-driven repayment plans. The U.S. Department of Education, however, offers these options to student loan borrowers for free. Under the Telemarketing Sales Rule, it is illegal to request or receive any fees for debt-relief services sold through telemarketing before the terms of the debt are altered or settled, and the consumer has made at least one payment under the new arrangement (Section 310.4 Abusive Telemarketing Acts or Practices). In this case, the company violated the rule because it requested and received payments from consumers within a few days, or at the latest within 30 days of their enrollment, before the terms of the debts were altered. For more information, click here.
• On July 3, the Biden administration announced its intent to nominate Republicans Andrew Ferguson and Melissa Holyoak to serve as FTC commissioners. The nominees will fill two empty seats left by FTC Commissioners Noah Phillips and Christine Wilson, also Republicans. Ferguson currently acts as the Virginia solicitor general, while Holyoak serves as the Utah solicitor general. FTC Chairwoman Lina Khan issued a statement congratulating Ferguson and Holyoak on their nominations, noting that the FTC “operates best at full strength,” and the nominees “would bring key skills, experiences, and expertise to the Commission as we work to promote fair competition and protect Americans from unfair or deceptive practices.” For more information, click here.
• On June 30, President Joe Biden (D) announced his administration would take action to provide debt relief for student loan borrowers, including asking the secretary of education to initiate a rulemaking intended to open an alternative path to debt relief, using the secretary’s authority under the Higher Education Act and finalizing a repayment plan that borrowers can take advantage of “this summer — before loan payments are due.” This plan would help the typical borrower save “more than $1,000 a year.” For more information, click here.
• On June 29, the FTC announced it has finalized an updated version of its endorsement guides, which provide agency guidance to businesses and others to ensure that advertising using reviews or endorsements are truthful. Last revised in 2009, the endorsement guides advise businesses on what practices may be unfair or deceptive in violation of the FTC Act. For more information, click here.

State Activities:

• On July 7, California AG Rob Bonta announced his endorsement of the CFPB’s April 3 policy statement on abusive conduct in consumer financial markets under the Dodd-Frank Act. The AG joined several other AGs in submitting a comment letter to the CFPB, commending the agency for providing a clear analytical framework for what constitutes abusive acts or practices, for using its existing enforcement actions as examples of illegal abusive conduct, for emphasizing flexibility and guidance — rather than definitions and limitations — throughout its policy statement, and for accounting for the realities of modern consumer markets. For more information, click here.
• On June 28, Louisiana Governor John Bel Edwards (D) signed SB109 (now Act No. 453), effective August 1. The bill provides for balance billing requirements for out-of-network emergency ambulance services and reimbursement for emergency ambulance service providers by health insurance issuers. For more information, click here.
• The Connecticut Department of Banking recently fined a collection company $30,000 and barred it from operating within the state for three years. This action comes as a part of a consent agreement reached between the department and the company, resolving allegations that the company engaged in collection activity without the proper licensing. The company also allegedly failed to deposit funds it collected or received from consumers in a trust account, failed to maintain the tangible net worth requirements established by state law, failed to notify the banking commissioner that it fell below the net worth minimum, made false or misleading statements in a document filed with the commissioner, and conducted business in manner that prevented the commissioner from ascertaining the financial responsibility, character, and integrity of the company. For more information, click here.
• The New York Innovation Center (NYIC), in collaboration with members of the U.S. financial services sector, participated in a proof of concept that experimented with the concept of a regulated liability network (RLN). The NYIC bridges the worlds of finance, technology, and innovation, and is housed within the New York Federal Reserve (NY Fed). The RLN concept envisions a theoretical payment infrastructure designed to support the exchange and settlement of regulated digital assets using distributed ledger technology (DLT). After concluding this experiment with major banks this past week, the NY Fed announced that centralized blockchain payments could help address pain points in the settlement process. The current mechanism design does “not enable the interoperable transfer and settlement of digital assets between regulated financial institutions,” the NY Fed said. The NY Fed further stated that the proof of concept used a RLN to create “a theoretical payment infrastructure designed to support the exchange and settlement of regulated digital assets using distributed ledger technology.” The experiment’s perceived successful conclusion comes after a group of private institutions announced the launch of their own blockchain network. The NY Fed said it has not yet established any plans to expand its RLN network or continue development. The “NYIC has not committed to any future phases of work connected to this proof of concept,” the NY Fed statement read. “The findings highlight areas for further research and analysis on potential enhancements to critical payment infrastructures supporting the functioning of the global economy.” For more information on this topic, click here, here, and here.