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 March 13, the Federal Trade Commission (FTC) announced it is sending more than $4.1 million in refunds to victims of student loan debt relief scammers who allegedly lured consumers with fraudulent claims of loan forgiveness. The FTC filed a complaint against the operators in 2019, alleging they deceived consumers into paying hundreds to thousands of dollars in upfront fees in exchange for falsely promising to lower consumers’ monthly student loan payments. The defendants also allegedly manipulated consumers into sending their monthly student loan payments directly to them by falsely claiming to take over the servicing of their loan. Only a minimal number of payments were applied toward the consumers’ student loans, and in numerous instances, no payments were applied at all. Instead, the defendants allegedly appropriated the consumers’ funds for their personal use. For more information, click here.
• On March 13, in a speech at the Financial Data Exchange Global Summit, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra discussed the current state of open banking in the U.S., and emphasized the importance of standard-setting organizations in the transition. He noted that these organizations play a crucial role in ensuring that the system is open and interoperable but warned against the potential of using standard-setting in an anti-competitive manner to benefit dominant firms. For more information, click here.
• On March 12, the U.S. Department of Justice (DOJ) announced that a federal jury in Washington, D.C. convicted Roman Sterlingov, founder of digital asset mixer Bitcoin Fog, of money laundering conspiracy and sting money laundering. Each of these charges carries a maximum penalty of 20 years in prison. Additionally, Sterlingov was accused of operating an unlicensed money transmitting business in the District of Columbia, which carries a maximum penalty of five years in prison. For more information, click here.
• On March 12, a plaintiff filed a putative class action lawsuit in a federal court in Florida against the U.S. Department of Housing and Urban Development (HUD), alleging that HUD improperly withheld “hundreds of millions of dollars” from homeowners by failing to reimburse unearned mortgage insurance premiums upon termination of the homeowners’ FHA-insured mortgages. The complaint alleges that HUD failed to identify borrowers who were eligible for a refund and imposed “unnecessary bureaucratic hurdles” that prevented borrowers from obtaining a refund. The complaint, which seeks damages in excess of $5 million, asserts that the lawsuit “is a fight for transparency, accountability, and fairness.” For more information, click here.
• On March 12, while delivering remarks at the Institute of International Bankers Annual Washington Conference, Acting Comptroller of the Currency Michael J. Hsu addressed the importance of operational resiliency, which he explained is the “ability of a bank to prepare for, adapt to, and withstand or recover from disruptions.” Hsu spoke about disruptions (natural disasters, malicious actors, and global conflicts, among others) that threaten to inhibit provision of financial services or otherwise adversely impact financial systems. Hsu provided several considerations for strengthening operation resiliency, noting that collaboration is key. For more information, click here.
• On March 12, the Federal Housing Finance Agency (FHFA) adopted a proposed rule amending its regulation that restricts its regulated entities (the Federal National Mortgage Association — Fannie Mae, the Federal Home Loan Mortgage Corporation — Freddie Mac, and the Federal Home Loan Banks) “from purchasing, investing in, accepting as collateral, or otherwise dealing in mortgages on properties encumbered by certain types of private transfer covenants, or related securities, subject to certain exceptions.” The final rule includes an additional exception that allows the above-mentioned regulated entities to engage in such transactions if the loans meet certain requirements. For more information, click here.
• On March 11, HUD Secretary Marcia L. Fudge issued a statement, announcing her resignation effective March 22. Fudge noted that she has “mixed emotions” about leaving the position and took some time to highlight several of HUD’s accomplishments during her tenure. Among the accomplishments mentioned, Fudge noted that HUD helped more than two million families avoid foreclosure and keep their homes, made mortgages more affordable by reducing the mortgage insurance premium for FHA loans, and served or permanently housed more than 1.2 million people experiencing homelessness. For more information, click here.
• On March 11, the CFPB reminded student loan borrowers that they have an opportunity to have their loans canceled or receive credit toward cancellation; however, they must act before April 30. For more information, click here.
• On March 11, while delivering remarks at the Mercatus Center on Banking’s Next Chapter, Vice Chairman of the Federal Deposit Insurance Corporation (FDIC) Board of Directors Travis Hill discussed the potential benefits, risks, and challenges of tokenizing a variety of traditional assets, including demand deposits, government and corporate bonds, money market fund shares, gold, and real estate. For more information, click here.
• On March 11, the Biden administration issued a fact sheet which, among other things, discussed President Biden’s proposed elimination of tax subsidies for digital asset transactions to primarily eliminate wash trading, which involves selling a digital asset for a loss to reduce one’s tax burden only to rebuy the digital asset within a short span of time. For more information, click here.
• On March 8, the Federal Reserve Board announced a final rule that updates risk requirements for certain financial market utilities subject to the Board’s supervision. The final updates clarify the existing requirements as they pertain to four critical areas of operational risk management: (a) incident management and notification; (b) business continuity management and planning; (c) third-party risk management; and (d) review and testing of operational risk management procedures. For more information, click here.
• On March 8, the Second Circuit Court of Appeals reversed a district court’s dismissal of a class action lawsuit filed by a group of digital asset investors against Binance and its ex-CEO, Changpeng Zhao. In the district court, the plaintiffs asserted that by making digital assets available for purchase on its platform, Binance violated two securities statutes, the Securities Act of 1934 (Securities Act) and the Securities Exchange Act of 1934 (Exchange Act) by failing to file a registration statement with the Securities and Exchange Commission (SEC). The district court did not reach the merits of whether the plaintiffs alleged cognizable claims under the Securities Act and Exchange Act. Instead, the district court dismissed the plaintiffs’ lawsuit as barred by the applicable statutes of limitation and extraterritoriality, or Binance’s lack of ties to the U.S. On appeal, the Second Circuit held that the plaintiffs adequately alleged that their transactions on Binance’s platform were domestic and the application of federal and state securities laws were not impermissibly extraterritorial. Additionally, the Second Circuit concluded that the plaintiffs’ federal claims were timely because they accrued within one year before the plaintiffs filed the lawsuit against Binance. For more information about the Second Circuit’s opinion, click here. For more information about the district court’s initial opinion, click here.
• On March 8, the FTC confirmed two new commissioners, Andrew N. Ferguson and Melissa Holyoak. Ferguson and Holyoak were nominated by President Biden in July 2023. Ferguson most recently served as the solicitor general of the Commonwealth of Virginia and Holyoak as the solicitor general with the Utah Attorney General’s Office. The FTC also confirmed Commissioner Rebecca Kelly Slaughter for her second term. For more information, click here.
• On March 8, the Federal Reserve, the OCC, and the FDIC (regulators) submitted a brief opposing a plaintiff’s motion for a preliminary injunction to prevent the final rule relate to the Community Reinvestment Act (CRA) from taking effect. The regulators argue that the plaintiff’s request seeks to write into the CRA two exceptions that are not otherwise found within the regulation. First, plaintiffs seek an exclusion of geographic areas where a bank conducts retail lending from the scope of a bank’s “entire community.” Second, plaintiffs seek an exclusion of a bank’s deposit activities from the scope of the assessment as to whether a bank is meeting its entire community’s credit needs. The regulators argue that the court may not entertain such an attempt to redraft the CRA. Additionally, the regulators argue that the plaintiffs cannot prove irreparable harm, as is required for them to be entitled to injunctive relief. For more information, click here.
• On March 7, President Biden delivered the State of the Union address, announcing that his administration is “cracking down” on corporations that engage in “price gouging or deceptive pricing from food to health care to housing.” Additionally, President Biden also announced that his administration is “getting rid of junk fees,” which he explained are “those hidden fees added at the end of your bills without your knowledge.” A related fact sheet notes that the Biden administration is, in the face of decreasing supply chain costs, urging corporations to pass the savings on to consumers. Additionally, the fact sheet indicates that Americans pay $90 million per year in junk fees, noting that the Biden administration is “using every tool available to combat these fees.” For more information, click here.
• On March 7, the House Financial Services Committee held a hearing titled, “Politicized Financial Regulation and its Impact on Consumer Credit and Community Development.” The hearing aimed to explore recent actions and proposals by federal financial regulatory agencies to limit financial options and restrict consumers’ access to financial services by imposing mandated fee caps and government price fixing. The committee noted concerns that the Biden administration “is using independent regulators as political agents to circumvent Congress and force ‘politically popular’ changes to financial regulations that are ultimately harmful to consumers and communities.” For more information, click here.
• On March 7, the FTC announced a final rule that extends telemarketing fraud protections to businesses. The final rule also amends the recordkeeping requirements in light of technological and marketplace developments. Additionally, the FTC announced a proposed rule that would equip the agency with new tools to combat tech support scams. For more information, click here.
• On March 7, the Department of Veterans Affairs (VA) issued a supplemental notice of proposed rulemaking related to its November 1, 2022 proposed amendments to its regulation of VA-backed interest rate reduction refinancing loans. The supplemental notice proposes an amendment to the recoupment standard and seeks public comments with respect to the change. Comments must be received on or before May 6. For more information, click here.
• On March 6, the CFPB published a notice and request for comment related to the CFPB’s proposal for two new surveys aimed at identifying factors that influence a consumer’s decision to use the complaint process. The first, a pilot survey, will center around consumers who have experienced issues with their credit cards. This survey will include a sample of people who have used the CFPB’s complaint process and will also include another sample of people who experienced similar issues but did not file a complaint. The second survey will address other products about which consumers may submit complaints to the CFPB. Together, the surveys will amass data about what factors play into a consumer’s decision to submit a complaint. The comment period ends May 6. For more information, click here.

State Activities:

• On March 14, a New Jersey state appeals court upheld the dismissal of a class action lawsuit implicating the state’s Consumer Finance Licensing Act (CFLA). The lawsuit accused a debt buyer of unlawfully purchasing the plaintiff’s (and others’) debt without first obtaining a license to operate as a consumer lender or finance company pursuant to the CFLA. The debt buyer filed a lawsuit to recover the balance of the plaintiff’s credit card debt and obtained a default judgment. The debt buyer then moved to garnish the plaintiff’s wages, which resulted in full repayment of the plaintiff’s debt. The plaintiff subsequently filed the class action, alleging that the debt buyer did not have the proper licensing to conduct business as it had. However, the trial court dismissed the action, finding that the plaintiff’s claims were barred by res judicata and the state’s controversy doctrine. The appeals court ultimately agreed with the trial court and upheld the dismissal. For more information, click here.
• On March 13, California’s Department of Financial Protection and Innovation (DFPI) published its March bulletin. Highlights include:
  • As of March 1, the Debt Collector Licensing Program has begun the Fingerprint and Background Investigation necessary prior to submitting an application. Failure to provide fingerprints may result in revocation of a conditional license;
  • Student loan servicers are required to file an annual report with the DFPI on or before March 15, per Financial Code Section 28146(a) of the Student Loan Servicing Act (SLSA). All student loan servicers licensed prior to January 1, 2023, must file the report, even if no business was conducted. Failure to submit the Annual Report by the due date may result in penalties pursuant to Financial Code Section 28154; and
  • All licensees under the Debt Collection Licensing Act (DCLA) must submit an Annual Report to the DFPI by March 15, per Financial Code Section 100021(a) (1) – (4), (6), and (7).

For more information, click here.

• On March 13, SB5589 was signed by Washington Governor Jay Inslee. The bill provides for the following concerning probate, among others:
  • Any homestead or other property exempt from attachment, execution, and forced sale immediately before a decedent’s death remains exempt from attachment, execution, and forced sale for the debts of the decedent and the debts of the community composed of the decedent and the decedent’s spouse or registered domestic partner that arose before the decedent’s death;
  • If the decedent resided or was domiciled in the state of Washington when the decedent died, and either (a) no homestead or other property was exempt from attachment or execution; or (b) the total value of the property exempted from the claims of creditors or under the laws of another state is less than the amount specified; then the court shall designate other property of the estate, either community or separate;
  • Any one or more of a decedent’s surviving spouse, surviving registered domestic partner, and dependent children may commence a judicial proceeding for an award from the decedent’s separate property and from the community property of the decedent and the decedent’s spouse or registered domestic partner that are exempt from attachment, execution, and forced sale;
  • If a claimant proves by a preponderance of the evidence that an award of property exempt from the claims of creditors to the claimant would fulfill one or more of the purposes of this chapter, the court may grant the claimant an award that the court determines to be equitable;
  • Any and all homestead or other property exempt from attachment, execution, and forced sale immediately before the decedent’s death shall be included in the basic award; and
  • The court may not make an award to a claimant under this chapter until the expenses of administration, funeral expenses, expenses of last sickness, and wages due for labor performed within 60 days immediately preceding the decedent’s death have been paid or provided for.

For more information, click here.

• On March 13, Utah Governor Spencer Cox signed HB99. The bill provides that when a consumer credit services organization provides a credit report to a buyer, the credit services organization shall provide a written disclosure to the buyer that identifies the following:
  • The consumer reporting agency providing the information;
  • The name of the credit score model used by the credit reporting agency to calculate the score; and
  • The minimum and maximum possible scores under the credit score model used by the credit reporting agency in the report.

The bill takes effect on May 1. For more information, click here.

• On March 13, HB174 was signed by Governor Cox. The bill addresses automatic renewal contract requirements by requiring:
  • A person who offers a contract with an automatic renewal provision to disclose certain information to the consumer regarding the renewal and cancellation of the contract; and
  • A person who offers a trial period to disclose certain information to the consumer regarding the expiration of the trial period and purchase obligations upon expiration.

For more information, click here.

• On March 13, the Court of Appeals of Indiana upheld a lower court’s ruling that a debt buyer that purchased defaulted student loans and then placed one of the accounts with a collection agency meets the statutory definition of a “debt collector” under state law and the Fair Debt Collection Practices Act. For more information, click here.
• On March 8, Wyoming Governor Mark Gordon signed HB0145 into law. The bill relates to open banking, which allows banks to share customer data with third-party financial service providers at the customer’s request when the customer seeks to purchase a product or service from the third party. The bill amends existing law to (a) clarify that a customer is a natural person or an agent, trustee, or representative action on behalf of a natural person, and (b) clarify that banks participating in opening banking are required to limit the customer data made available to third parties to the data necessary for the customer to receive the third party’s product or service. The bill will take effect on July 1. For more information, click here.
• On March 8, HB880 was signed by Virginia Governor Glenn Youngkin. The bill affects foreclosures in common interest communities by:
  • Stipulating the conditions under which a lien for unpaid assessments by a common interest community can be enforced against a property, particularly focusing on primary residences and monetary thresholds;
  • Detailing both judicial and nonjudicial foreclosure processes for enforcing liens, including timelines for action and the prioritization of liens;
  • Clarifying the rights of associations to access records, enforce liens, and conduct foreclosure sales, including the procedural requirements for such sales; and
  • Establishing provisions for notifying homeowners prior to lien enforcement actions and requirements for associations regarding record-keeping and financial transparency.

For more information, click here.

• On March 8, the California Privacy Protection Agency (CPPA) updated its proposed regulations governing automated decisionmaking technology (ADMT). The revisions (1) clarify that ADMT executes a decision, replaces human decisionmaking, or substantially facilitates human decisionmaking; (2) clarify which types of technologies are not ADMT (g., web hosting, domain registration, networking caching, website-loading, data storage, firewalls, anti-virus, anti-malware, spam- and robocall-filtering, spellchecking, calculators, databases, spreadsheets, or similar technologies); and (3) reorganize the definition of ADMT to improve readability. The revisions also update several other defined terms contained within the regulations, such as “profiling,” “significant decision,” “artificial intelligence (AI),” and “behavioral advertising.” Additionally, the revisions require businesses to conduct risk assessments when selling or sharing personal information, processing sensitive personal information, using ADMT for a significant decision or extensive profiling, and when training ADMT or AI that is capable of certain uses (e.g., making a significant decision concerning a consumer or generation of a deepfake). For more information, click here.