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 April 29, the Consumer Financial Protection Bureau (CFPB) released research showing that 15 million Americans still have medical bills on their credit reports. This is the CFPB’s second analysis of the changes made by the three national credit reporting companies to reduce the number of medical bills on credit reports. For more information, click here.
• On April 26, a California federal judge ruled in favor of Binance, allowing the company to arbitrate a proposed class action that accuses Binance of failing to disclose that TerraUSD was an unregistered security. Specifically, the plaintiff alleged that Binance misrepresented the stability of TerraUSD, an “algorithmic stablecoin.” The judge rejected the plaintiff’s argument that he was an “unsophisticated consumer” who could not delegate the question of arbitrability to the arbitrator. The judge noted that the plaintiff, an orthodontist and experienced crypto investor, did not fit the profile of an unsophisticated consumer. For more information, click here.
• On April 25, Consensys Software Inc., a company that develops software products for the Ethereum blockchain, filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) in Texas federal court. The lawsuit challenges the SEC’s classification of the Ethereum network’s “ether” token as a security. Consensys received a Wells notice indicating that the SEC intends to recommend enforcement action over its products. The company is seeking a court declaration that ether transactions are not securities transactions and wants to halt any investigation or enforcement action related to them. Consensys argues that the SEC’s stance on ether contradicts previous positions and lacks fair notice. The lawsuit accuses the SEC of exceeding its statutory authority, violating the due process clause, and violating the Administrative Procedure Act. For more information, click here.
• On April 25, the SEC filed a complaint against Geosyn Mining LLC, its CEO Caleb Joseph Ward, and former COO Jeremy George McNutt, alleging they defrauded approximately 64 investors through an unregistered securities offering that raised $5.6 million. The SEC claims that Geosyn’s contracts, which were sold as securities, promised to use investor funds to purchase and operate crypto asset mining machines and distribute the mined assets to investors for a fee. However, the SEC alleges that the company failed to fulfill these promises, did not have operational mining equipment, and in some cases, did not purchase the equipment at all. The SEC also alleges that Ward and McNutt spent about $1.2 million of the funds raised on personal expenses. For more information, click here.
• On April 24, the CFPB released a special edition of its Supervisory Highlights report focusing on examinations of the residential mortgage servicing market that were completed between April 1, 2023 and December 31, 2023. According to the report, the CFPB found instances of mortgage servicers charging illegal fees, such as prohibited property inspection fees, and sending deceptive notices to homeowners. Examiners also found servicers violating Regulation X’s loss mitigation rules. For more information, click here.
• On April 24, federal prosecutors in New York arrested the co-founders of Samourai Wallet, a crypto mixing service, alleging they facilitated more than $2 billion in illegal transactions. The indictment accuses CEO Keone Rodriguez and CTO William Lonergan Hill of conspiracy to commit money laundering and operate an unlicensed money transmitting business. Prosecutors claim the service was used for large-scale money laundering and sanctions evasion, particularly from dark web markets. Rodriguez and Hill allegedly knew their service was being used for criminal activity. The charges carry a maximum sentence of 25 years. Authorities have also seized Samourai’s web servers and domain. For more information, click here.
• On April 23, the FTC released a final rule titled the “Non-Compete Clause Rule,” in a 570-page release, to “categorically ban” noncompete clauses in employment contracts with all workers after the effective date of the rule pursuant to the FTC’s UDAP authority, by rendering such clauses an unfair method of competition pursuant to Section 5 of the FTC Act. The final rule also renders most existing noncompete clauses unenforceable after the effective date of the final rule, with an exception for existing noncompete clauses for senior executives, which remain enforceable. For more information, click here.
• On April 23, the Crypto Freedom Alliance of Texas and the Blockchain Association filed a lawsuit against the SEC to challenge its expanded definition of the term “dealer” under securities laws. The industry groups argue that the SEC exceeded its authority and engaged in arbitrary rulemaking by not exempting the digital assets industry or explaining how the rule applies to these markets. The expanded rule, approved in February, could potentially include all digital asset market participants, subjecting them to registration, reporting, recordkeeping, and minimum capital requirements. The groups claim that the SEC violated the Administrative Procedure Act by adopting the rule without adequately addressing the crypto industry’s concerns or clarifying its application to crypto participants. The SEC plans to defend the rule in court. For more information, click here.
• On April 22, the Federal Housing Finance Agency (FHFA) sent the Federal Register a notice of a proposed new product from Freddie Mac to begin purchasing certain single-family closed-end second mortgages. According to the proposal, Freddie Mac would purchase certain closed-end second mortgage loans from approved and active sellers and on properties for which Freddie Mac already owns the first mortgage, subject to additional product and term limitations. FHFA’s stated goal is to offer borrowers a second mortgage at a lower interest rate than other financing alternatives given the higher interest rate environment, and increased competition among second mortgage lenders. FHFA requested comments on nine questions, with comments to be received by May 22. For more information, click here.
• On April 18, Republican members of the House Financial Services Committee sent a letter to CFPB Director Rohit Chopra to express concern over the lack of clarity regarding the implementation timeline of the CFPB’s small business data collection rule, referenced as the 1071 Rule.
• On April 18, FHFA Director Sandra L. Thompson addressed the U.S. Senate Committee on Banking, Housing, and Urban Affairs, discussing FHFA’s role in promoting access to affordable housing for homebuyers and renters nationwide through the regulation and supervision of its regulated entities to ensure they meet their housing mission. For more information, click here.
• On April 18, the CFPB filed a Petition for Panel Rehearing in the U.S. Court of Appeals for the Fifth Circuit seeking reconsideration of its earlier decision to grant a petition for a writ of mandamus requiring the U.S. District Court for the Northern District of Texas to claw back its earlier transfer of industry’s challenge to the CFPB’s credit card late fee rule to Washington, D.C. The CFPB urges the Fifth Circuit to grant a panel rehearing, suggesting that the panel’s earlier decision rested on “flawed factual premises” and would be “unworkable for courts.” For more information, click here.
• On April 15, the U.S. Department of Justice submitted a brief to the U.S. Court of Appeals for the Eleventh Circuit in support of an appeal of a summary judgment from the Northern District of Alabama that found the Corporate Transparency Act (CTA) unconstitutional. For more information, click here.
• On April 15, FinCEN and the Department of State released a notice on the rise of counterfeit use of U.S. passport cards at financial institutions. The notice aims to help financial institutions identify and report suspicious activity by promoting three areas: (i) providing an overview of common scenarios and typologies; (ii) highlighting several red flags in areas of concern; and (iii) reminding financial institutions of their Bank Secrecy Act obligations. For more information, click here.

State Activities:

• On April 24, the California Department of Financial Protection and Innovation (DFPI) entered into a consent order with a federal student loan servicer, Higher Education Loan Authority of the State of Missouri (Mohela), that allegedly failed to provide the DFPI with timely access to requested borrower data. In late April 2022, the U.S. Department of Education announced a one-time revision of income-driven repayments to address past inaccuracies. To take advantage of this adjustment, the Department of Education required borrowers to submit a loan consolidation application by April 30, 2024. For more information, click here.
• On April 22, Tennessee Governor Bill Lee signed HB 2504 into law. The bill makes it an offense for a person to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information on behalf of a debt collector or inbound telemarketer service. As drafted, the bill precludes use of caller identification information that does not match the area code of the person, debt collector, or inbound telemarketer service on behalf of which the person is calling. For more information, click here.

• On April 22, Tennessee Governor Bill Lee signed HB 2100 into law. The bill requires financial institutions and insurers to make determinations about the provision or denial of services based on an analysis of certain risk factors specific to each current or prospective customer. Additionally, the bill prohibits financial institutions and insurers from denying or canceling services to a person, or discriminating against a person, based upon the use of a social credit score or other factors. For more information, click here.
• On April 22, the Securities Commission of the State of Texas issued an Emergency Cease and Desist Order pursuant to the Texas Securities Act against a group of respondents for allegedly offering investments in a digital gold vault that “purportedly secured physical gold and generates passive income using fintech and blockchain technology,” and are therefore subject to the Securities Act. For more information, click here.
• On April 17, Nebraska Governor Jim Pillen signed LB 1074 into law, which establishes the state’s Consumer Data Privacy Act (act). Among other things, the act grants consumers the right to (a) confirm whether a controller is processing the consumer’s personal data and to access the personal data; (b) correct inaccuracies in the consumer’s personal data; (c) delete personal data provided by or obtained about the consumer; (d) obtain a copy of the consumer’s personal data in a format that allows the consumer to transmit the data to another controller without hindrance, if the data is available in a digital format and processing is completed by automated means; and (e) opt out of the processing of personal data for targeted advertising, the sale of personal data, or profiling in furtherance of a decisions that produces a legal or similarly significant effect concerning the consumer. For more information, click here.
• On April 17, the Virginia legislature enrolled HB 1519, pertaining to the Virginia Consumer Protection Act (VCPA). The bill makes it a violation of the VCPA to charge a transaction or processing fee, or any similar surcharge, for the purchase of a good or service through the use of an electronic fund transfer. The bill also prohibits landlords subject to the Virginia Residential Landlord and Tenant Act from charging transaction or processing fees for the payment of a security deposit, rent, or any other amounts payable. For more information, click here.