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 May 1, the Consumer Financial Protection Bureau (CFPB) proposed a rule to implement a congressional mandate to establish consumer protections for residential Property Assessed Clean Energy (PACE) loans. PACE loans, secured by a property tax lien on the borrower’s home, are often promoted as a way to finance clean energy improvements, such as solar panels. The proposed rule would require lenders to assess a borrower’s ability to repay a PACE loan, as well as provide a framework for how these loans will be treated under the Truth in Lending Act. For more information, click here.
• On April 29, U.S. Representative Patrick McHenry (R-NC) and U.S. Senator Cynthia Lummis (R-WY) stated their belief that President Biden will sign the first comprehensive cryptocurrency regulatory scheme into law within the next year. Speaking at the Consensus 2023 conference, Senator Lummis stated that the next installment of her bill — the Responsible Financial Innovation Act — will be presented to the Senate within eight weeks. Previously introduced in June 2022, the bill fortified its provisions regarding national security and cybercrime — a concern top regulators continue to express about digital assets. However, due to partisanship in the Senate, Senator Lummis believes her bill is unlikely to pass before the House Financial Service Committee’s bill is introduced. The committee’s bill, scheduled for completion in the next two months, will similarly create a regulatory framework for digital assets, with provisions allowing such assets to evolve from highly regulated securities into commodities. The bill additionally leaves room for assets that don’t fit neatly into either category. Regardless of which bill ultimately passes first, both policymakers remain confident that President Biden will sign a bill before the 2024 election. For more information, click here.
• On April 28, Mastercard announced “Mastercard Crypto Credential,” a service that it says establishes a common set of standards and infrastructure to help attest trusted interactions among consumers and businesses using blockchain networks. The service’s first use case will address cross-border asset transfers, allowing digital asset wallets to be identified in compliance with the Financial Action Task Force’s “travel rule.” The travel rule requires crypto service providers to share a transmitter’s personally identifiable information to the recipient’s crypto service provider for transactions greater than $1,000. Overall, the service seeks to ensure that those interested in interacting across the Web3 environment meet defined standards for the activities they would like to pursue. For more information, click here.
• On April 28, Venmo announced that users of the mobile payment service will offer expanded cryptocurrency-related capabilities. Beginning in May 2023, the service will allow its users to transact on public blockchains, thereby enabling users to send cryptocurrency to other blockchain participants, regardless of whether their counterparty uses Venmo or not. As part of these expanded services, Venmo also intends to implement a “crypto address QR code,” allowing users to send cryptocurrency to others to wallet addresses originating from a QR code. For more information, click here.
• On April 28, the CFPB issued an interim final rule, amending the agency’s 2021 LIBOR transition rule. The interim final rule contains updates to reflect the subsequent enactment of the Adjustable Interest Rate (LIBOR) Act and issuance of an implementing regulation by the Board of Governors of the Federal Reserve Board System. This interim final rule will further facilitate the orderly transition of those consumer loans that currently use the LIBOR index to other indices in anticipation of the planned cessation U.S. Dollar (USD) LIBOR after June 30. For more information, click here.
• On April 27, Federal Trade Commission (FTC) Chair Lina M. Khan appeared before the House Appropriations Subcommittee on Financial Services and General Government to discuss its FY 2024 budget request and the agency’s ongoing work. For more information, click here.
• On April 27, the U.S. Senate Committee on Banking held a full committee hearing, titled “Oversight of the Credit Reporting Agencies.” Chairman Sherrod Brown (D-OH) described consumer credit reports as “riddled with errors.” Brown argued that medical debt “correlates with illness,” not with credit risk. In his opening statement, Ranking Member Tim Scott (R-SC) hoped that consumer financial companies continue taking “the subjective nature out of lending.” For more information, click here.
• On April 26, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation issued guidance to banks to address the risks associated with overdraft protection programs. Overdraft protection programs can present a variety of risks, including compliance, operational, reputation, and credit risks. Specifically, this guidance discusses certain practices that may present heightened risk of violating prohibitions against unfair or deceptive acts or practices. The guidance also describes practices that may assist banks with managing overdraft protection program risks. For more information, click here.
• On April 26, the CFPB issued an advisory opinion, reminding the industry that a debt collector who brings or threatens to bring a foreclosure action to collect a time-barred mortgage debt may violate the Fair Debt Collection Practices Act. According to the CFPB, the impetus for issuing the advisory opinion was “a series of actions by debt collectors attempting to foreclose on silent second mortgages, also known as zombie mortgages, that consumers thought were satisfied long ago and that may be unenforceable in court.” While prompted by activity in the mortgage space, the CFPB noted that the prohibition applies to all time-barred debt. For more information, click here.
• On April 26, the CFPB published a report, examining the effects to consumer credit reports after the three nationwide consumer reporting companies removed medical collections under $500 from consumer credit reports on April 11. For more information, click here.
• On April 26, Franklin Templeton, a global asset manager with over $1.4 trillion assets under management, said that the Ethereum network now supports its “OnChain U.S. Government Money Market Fund.” Specifically, the fund has implemented Ethereum’s layer 2 blockchain to “tokenize” one share of the fund into one “BENJI” token, thereby allowing faster transaction processing and share ownership recordation, while simultaneously leveraging the Ethereum network’s security. The fund, which announced its blockchain integration during Consensus 2023, invests at least 95.5% of its total assets in U.S. government securities, cash, and repurchase agreements collateralized by U.S. government securities, and seeks to provide current income consistent with preservation of shareholder capital. For more information, click here.
• On April 26, South Korean legislators completed a first-phase review of proposed digital asset regulations that provide the nation’s Financial Services Commission with the authority to investigate financial activity related to cryptocurrencies and other digital assets. The proposed bill, which has bipartisan support, additionally implements stipulations governing the sale, storage, and trading of digital assets. The bill also strongly focuses on consumer protection measures. Under the bill’s provisions, cryptocurrency exchanges (and similar service providers) cannot commingle customer assets, must carry insurance, and must maintain adequate reserves in the event of market-related losses. The bill also imposes severe penalties for digital asset-related crimes resulting in losses, with crimes resulting in losses greater than $3.75 million being punished by a prison sentence ranging from five years to life. Notably, this legislation was announced one month after the collapse of Terra Luna, a failed cryptocurrency ecosystem whose collapse resulted in 10 South Koreans being indicted by South Korean officials. For more information, click here.
• On April 26, the FTC, the commonwealth of Pennsylvania, and debt collection company International Credit Recovery, Inc. agreed to International Credit Recovery’s permanent ban from the debt collection industry after it engaged in a telemarketing scheme against businesses and nonprofits. For more information, click here.
• On April 26, the CFPB, noting a rise in credit card delinquencies, released a new blog post analyzing civil judgments, the final recourse for creditors to collect on unsecured debt. According to the CFPB, civil judgments are “both common and unevenly distributed.” For more information, click here.
• On April 26, the Texas Bankers Association and Rio Bank sued the CFPB, challenging the CFPB’s final rule on the collection of small business lending data. The CFPB’s final rule requires financial institutions to collect and provide data to the CFPB on lending to small businesses with gross revenue under $5 million in their last fiscal year. For more information, click here.
• On April 25, a top U.S. regulatory official claimed that cryptocurrencies enable fraud and cybercrime. These comments came from CFTC Commissioner Christy Goldsmith Romero at a City Week Conference in London. Commissioner Romero added that it is “essential for governments and particularly the industry to address … the allure of anonymity,” and compliant crypto companies must be able to show they have internal controls that prevent money laundering and terrorism financing. For more information, click here.
• On April 25, Coinbase, the sole publicly traded cryptocurrency exchange in the United States, brought a narrow action against the Securities and Exchange Commission (SEC,) requesting that the agency respond to Coinbase’s previously filed rulemaking petition. In July 2021, Coinbase asked the SEC to propose and adopt rules that would identify the application of securities laws to digital assets. To date, the SEC has not responded to the petition, prompting Coinbase to ultimately file the suit. According to the company, the suit does not seek to “instruct the agency how to respond[,]” but simply “requests that the Court order the SEC [to] respond.” Coinbase has previously stated that the lack of formalized decision-making from the agency creates uncertainty for the company, potentially prompting it to relocate to a jurisdiction with clearer regulations. For more information, click here.
• On April 25, officials from the FTC, the CFPB, the Civil Rights Division of the U.S. Department of Justice (DOJ), and the U.S. Equal Employment Opportunity Commission (together, the agencies) issued a joint statement, warning against the potential for automated systems, including artificial intelligence (AI), used in credit decisions, housing, and employment opportunities to “perpetuate unlawful bias,” “automate unlawful discrimination,” and produce other “harmful outcomes.” To combat these perceived risks, the agencies resolve to monitor the development and use of automated systems and promote responsible innovation, while underscoring that “[e]xisting legal authorities apply to the use of automated systems and innovative new technologies just as they apply to other practices.” For more information, click here.
• On April 24, the Department of the Treasury’s Office of Foreign Assets Control sanctioned three individuals for providing support to the Democratic People’s Republic of Korea (DPRK) through illicit financing and malicious cyber activity. The DPRK launders stolen virtual currency and deploys information technology workers to fraudulently obtain employment to generate revenue in virtual currency to support the regime and its unlawful weapons of mass destruction and ballistic missile programs. These actions have been taken in close coordination with the Republic of Korea. For more information, click here.
• On April 24, the U.S. DOJ unsealed an indictment, charging two U.S. citizens and a South African national with conspiring to manipulate the market for HYDRO, a virtual asset created by the Hydrogen Technology Corporation. Two other individuals were also charged in the Southern District of Florida in separate charging documents for their roles in the scheme. For more information, click here.
• On April 20, Transunion announced a new partnership that it says will bring anonymized consumer credit information to decentralized applications. The partnership between consumer credit company TransUnion and decentralized technology companies Spring Labs and Quadrata will see TransUnion’s credit data delivered to DeFi and Web3 applications through Spring Labs technology. The delivery will occur at the consumer-borrower’s request, and upon requesting the data, the user then can share the information with a decentralized application. The entire process occurs without compromising the user’s identity by utilizing Quadrata’s decentralized identity technology. The service purports to offer DeFi lenders, who lend to anonymous borrowers, the opportunity to make better decisions through the utilization of anonymized credit data, which “provide[s] lending opportunities to a new group of consumers” … “at a time “lenders are seeking to establish a more inclusive lending environment.” For more information, click here.
• In April 2023, the U.S. Internal Revenue Service issued Notice 2023-34, which modifies Notice 2014-21 “by revising a sentence in the Background section of that Notice to remove the statement that virtual currency does not have legal tender status in any jurisdiction and to make other changes.” For more information, click here.

State Activities:

• On April 25, California Attorney General Rob Bonta, alongside 15 attorneys general, submitted a letter, urging the FTC to strengthen its “Guides for Use of Environmental Marketing Claims” (Green Guides). States like California use the Green Guides to hold marketers accountable and protect consumers. In the letter, the AGs push for several updates to the Green Guides, which include recommending that: (1) voluntary carbon offsets should ensure a reduction in greenhouse gas emissions in addition to any reduction that likely would have occurred without the purchase of the offset; (2) the definition of “compostable” be revised to include both scientific standards and the known practical limitations of composting at scale; (3) the FTC make explicit that “recycle” is defined to mean that when a consumer properly disposes of a “recyclable” item, it is actually recycled as a matter of course; and (4) a renewable injury claim be underwritten by actual environmental benefit (e.g., marketers making renewable energy claims must procure and use renewable energy). For more information, click here.
• On April 25, Oklahoma Governor J. Kevin Stitt approved HB1927, which provides, among other things, that any person in possession of certain motor vehicles that renders any service to the owner (furnishing storage, rental space, material, labor or skill for the protection, improvement, safekeeping, towing, right to occupy space, storage, or carriage) has a special lien due to such person from the owner for such service. For more information, click here.
• On April 24, California Attorney General Rob Bonta filed a brief, defending the state’s Age-Appropriate Design Code Act against challenges levied against its enforcement by an online trade association. The act, which was signed into law in 2022 and modeled after United Kingdom’s Age Appropriate Design Code, requires businesses involved in trading consumers’ personal information and that offer products, services, and features likely to be accessed by children to proactively protect their young users’ information, and prohibits certain acts involving the collection and use of that information. The AG’s brief argues that efforts to block the act’s enforcement should prevail because (1) the law does not violate the companies’ first amendment rights; (2) the law is not preempted by federal law; and (3) an injunction would inflict irreparable harm on the state by preventing enforcement of a statute enacted by representatives of the people. According to the AG, “children’s childhood experience should not be for sale,” and “it’s time to elevate and protect children’s privacy and safety.” For more information, click here.
• On April 28, New York Governor Kathy Hochul announced that the New York Green Bank, a division of the New York State Energy Research and Development Authority and the state’s clean energy and sustainable infrastructure financing entity, launched a $250 million community decarbonization fund (CDF). The CDF will provide low-cost capital to certain lenders for local clean energy and to build electrification projects, with a goal of reducing greenhouse gas emissions in disadvantaged communities. The bank has been actively supporting projects in historically marginalized communities and as of December 2022, and it had made commitments of more than $216.5 million to projects in disadvantage communities. New York Green Bank will host a webinar on May 11, 2023 at 10:00 a.m. to share more detail about the CDF, its intended purpose, and eligible recipients. For more information, click here.