[co-author: Eric Maxwell]

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 May 1, President Biden announced that he was approving $6.1 billion in student debt cancellation for 317,000 borrowers who attended the Art Institutes. The Art Institutes allegedly falsified data, knowingly misled students, and cheated borrowers into taking on mountains of debt without leading to promising career prospects at the end of their studies. For more information, click here.
• On April 30, the Department of Justice (DOJ) announced that a federal grand jury indicted an early bitcoin investor and promoter Roger Keith Ver, known as the “Bitcoin Jesus,” on fraud on criminal tax charges. According to the release, Roger was arrested in Spain based on the U.S. criminal charges. In total, he is alleged to have caused a loss to the Internal Revenue Service (IRS) of at least $48 million. For more information, click here.
• On April 29, The U.S. Department of Commerce made several announcements related to President Biden’s Executive Order (EO) on the Safe, Secure and Trustworthy Development of AI, marking the 180-day milestone since its issuance. The Department’s National Institute of Standards and Technology (NIST) has released four draft publications intended to help improve the safety, security, and trustworthiness of artificial intelligence (AI) systems. NIST has also launched a challenge series that will support development of methods to distinguish between content produced by humans and content produced by AI. In addition to NIST’s publications, the Department of Commerce’s U.S. Patent and Trademark Office (USPTO) is publishing a request for public comment (RFC), seeking feedback on the potential impact of AI on evaluations of ordinary skills in the arts, which are used to determine patentability under U.S. law. Earlier this year, the USPTO released guidance on the patentability of AI-assisted inventions. For more information, click here.
• On April 26, the Federal Trade Commission (FTC) announced it finalized changes to the Health Breach Notification Rule (HBNR) that will strengthen and modernize the rule by clarifying its applicability to health apps and other similar technologies, and expanding the information that covered entities must provide to consumers when notifying them of a breach of their health data. For more information, click here.
• On April 26, the DOJ argued in motion papers against the creators of bitcoin mixer Tornado Cash that Financial Crimes Enforcement Network’s (FinCEN) 2019 guidance, which stated that developers of noncustodial wallets were not money services businesses, held “no authoritative effect.” For more information, click here.
• On April 25, the FTC announced that it is acting against bill payment company Doxo, alleging that the company uses misleading search ads to impersonate consumers’ billers and deceptive design practices to mislead consumers about junk fees. The FTC’s complaint notes that, even though Doxo immediately charges a consumer for payment, in many instances, the company then prints a paper check that is mailed to the biller — arriving days or sometimes weeks after the customer believes their bill is paid. For more information, click here.
• On April 25, the FBI warned Americans against using cryptocurrency money transmitting services that are not registered as Money Services Businesses (MSB) according to U.S. federal law (31 U.S.C. § 5330; 31 CFR §§ 1010; 1022) and do not adhere to anti-money laundering requirements. A few simple steps can prevent unintentional use of noncompliant services. For example, avoid cryptocurrency money transmitting services that do not collect know your customer (KYC) information from customers when required. For more information, click here.
• On April 24, the Securities and Exchange Commission (SEC) announced that it filed charges against Geosyn Mining, LLC, a Texas-based crypto asset mining and hosting company, and its co-founders, Caleb Ward and Jeremy McNutt, for engaging in an unregistered and fraudulent securities offering. According to SEC’s complaint, Geosyn raised around $5.6 million and told investors it would purchase, maintain, and operate crypto asset mining machines and then distribute mined crypto assets, such as bitcoin, to the investors for a fee. The SEC alleges, among other things, that the defendants made false statements and omissions, and misappropriated around $1.2 million for personal use. For more information, click here.
• On April 23, the Federal Deposit Insurance Corporation (FDIC) filed an amicus brief in support of Colorado Attorney General (AG) Phil Weiser, the named defendant in an action brought by several trade organizations challenging Colorado’s attempt to opt out of Section 521 of the federal Depository Institutions Deregulation and Monetary Control Act (DIDMCA). Among other things, Section 521 of the DIDMCA permits state banks to make loans charging interest at the maximum rate permitted by the state where the bank is located. Section 525 of the DIDMCA, however, empowers states to opt out of the interest rate parameters established by Section 521 with respect to loans made in that state. The FDIC’s brief argues that plaintiffs’ attempt to superimpose the definition of where a bank is “located” under Section 521 onto the definition of where a “loan is made” under Section 525 violates well-established principles of statutory construction. The FDIC goes on to argue that, for purposes of Section 525, an interstate loan is made in the state in which the borrower enters the transaction and the state in which the lender enters into the transaction. Accordingly, as the FDIC argues, either or both states can opt out of Section 521 pursuant to Section 525 of the DIDMCA, and once one state opts out, Section 521 does not apply to loans made in that state. Because a loan requires an offer by one party and acceptance by another, the FDIC argues that plaintiffs’ contention that the physical location of the borrower is irrelevant for purposes of determining where a loan is made is misplaced. Thus, the FDIC argues that if a borrower is physically present within the state of Colorado when entering a loan with an out-of-state creditor, then the loan is entered into in Colorado. On this basis, the FDIC argues that plaintiffs’ argument that Colorado’s opt-out statute would apply to loans that are not made in Colorado is incorrect. For more information, click here.
• Recently, the IRS announced that it will begin increasing its oversight of cryptocurrency transactions in 2025 by requiring brokers to report investor sales and exchanges tied to such transactions. For more information, click here.

State Activities:

• On April 30, the Arizona Court of Appeals (COA) rejected an industry challenge to the state’s Predatory Debt Collection Act. The law will remain in effect as a result of the decision. The law, which was approved by voters in 2022, protects individuals who earn less than $50,000 per year from wage garnishments, increases the homestead exemption from $150,000 to $400,000, and caps interest rates on medical debt at 3%. The law also increases the exemption threshold for garnishments from $300 to $5,000, which will have the effect of eliminating approximately 70% of garnishments in the state. In affirming the state court judge’s ruling, the COA held that the law is constitutionally sound and that it applies prospectively. For more information, click here.
• On April 29, Senators Elizabeth Warren and Roger Marshall announced they sent a bipartisan letter to the secretary of defense, secretary of Treasury, under secretary for terrorism and financial intelligence, national security advisor, and FinCEN director to relay their concerns about Russia’s use of crypto to evade sanctions and build its war machine. In the letter, they seek to push the administration for information on what authorities they need to neutralize the threat and express concern about rogue nations’ use of cryptocurrency to evade sanctions. For more information, click here.
• On April 29, Oklahoma Governor Kevin Stitt approved SB 1492, which modifies several definitions related to the state’s Secure and Fair Enforcement for Mortgage Licensing Act. Additionally, the bill establishes fees for mortgage broker and lender licenses that will be assessed annually based on loan volumes. The bill also makes adjustments to fees for mortgage loan originator licenses and increases the reimbursement cap for the state’s Mortgage Broker and Mortgage Loan Originator Recovery Fund. The bill also permits remote work for licensee employees under certain conditions. For more information, click here.
• On April 29, Gov. Stitt signed HB1696. The bill adds “nurse practitioners” to the list of people who can take advantage of the state’s medical loan repayment program. For more information, click here.
• On April 26, Florida Governor Ron DeSantis approved HB 1031, which relates to debt relief services. The bill amends a portion of the state’s credit counseling services law to exclude “debt relief services,” as that term is defined under the FTC’s Telemarketing Sales Rule, from the definition of “debt management services.” The bill also authorizes the Florida AG to bring certain actions for violations the federal Telemarketing and Consumer Fraud and Abuse Prevention Act and the Telemarketing Sales Rule. The bill will take effect on July 1. For more information, click here.
• On April 26, Governor Ron DeSantis signed S158. The bill increases the value of a motor vehicle owned by a natural person that is exempt from legal process from $1,000 to $5,000. The bill will take effect on July 1. For more information, click here.
• On April 25, Maryland Governor Wes Moore signed HB326. The bill authorizes only an interested person or unpaid claimant, rather than any person, to file an objection to the appointment of a personal representative of an estate of a decedent. For more information, click here.
• On April 25, California’s Department of Financial Protection and Innovation (DFPI) released its 2023 report highlighting increased investigations, public actions, and consumer outreach under the California Consumer Financial Protection Law (CCFPL). DFPI Commissioner Clothilde V. Hewlett expressed satisfaction with the progress made in consumer protection and fostering responsible financial innovation. Key results from the 2023 report include:
  • Experienced a 70% increase in CCFPL-related consumer complaints. Complaints against debt collectors were among the top two categories of complaints received;
  • Opened 734 CCFPL-related investigations and issued 181 public CCFPL actions;
  • Implemented a new consumer complaints portal to improve complaint management, data quality, and enhance the consumer’s experience;
  • Advanced two rulemaking packages, including protections for small businesses against unlawful, unfair, deceptive, or abusive acts and practices (UUDAAP); and new registration and reporting requirements for four previously unregistered products and services in California. These include earned wage access, debt settlement services, debt relief services, and private postsecondary education financing products; and
  • Promoted two statewide multilingual and multichannel communications campaigns generating 1.25 million clicks and reaching 30,000 consumers statewide through outreach and education events.
  For more information, click here.
• On April 24, DFPI announced it entered into a consent order with Higher Education Loan Authority of the State of Missouri (MOHELA) for allegedly failing to timely provide contact information for Californians with older student loans, whose last chance to qualify for debt relief ends on April 30. As part of the settlement, MOHELA agreed to pay administrative penalties of $27,500. For more information, click here.
• On April 24, Oklahoma Governor Kevin Stitt signed HB1611. The bill provides that, in an action filed and tried under the Small Claims Procedure Act, parties that are corporations, limited liability companies, partnerships, trusts, or other legal entities may appear by and through a corporate officer, member, manager, partner, trustee, or regular full-time employee, who shall be authored to execute the statutory affidavits and other filings with the court, and otherwise proceed as any other party who is an individual representing themself. For more information, click here.
• On April 23, Governor Kevin Stitt signed HB4150. The bill provides additional protections for individuals who declare bankruptcy. The bill ensures that the proceeds from various retirement plans and arrangements cannot be used to satisfy consumer debts in bankruptcy. For more information, click here.
• On April 23, Arizona Governor Katie Hobbs signed SB1431. The bill includes changes to the notice requirements before filing an action to foreclose on a property owner’s right to redeem, including a new mandatory statement informing property owners about the option to request an excess proceeds sale, among other things. For more information, click here.
• On April 22, Maine Governor Janet Mills signed LD 2112, an act that will replace the state’s existing Money Transmission Act with the Maine Money Transmission Modernization Act (act). The act was designed to (a) ensure that states can coordinate in all areas of regulation, licensing and supervision to eliminate unnecessary regulatory burden and use regulator resources more effectively; (b) protect the public from financial crime; (c) standardize the types of activities that are subject to licensing or otherwise exempt from licensing; and (d) modernize safety and soundness requirements to ensure customer funds are protected in an environment that supports innovative and competitive business practices. For more information, click here.
• On April 22, Tennessee Governor Bill Lee signed HB2504. The bill makes it an offense for a person, on behalf of a debt collector or inbound telemarketer service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information, including caller identification information that does not match the area code of the person or the debt collector or inbound telemarketer service the person is calling on behalf of, or is not a toll-free phone number, to a subscriber with the intent to induce the subscriber to answer. For more information, click here.
• On April 22, Governor Lee signed HB2075. The bill requires the state’s Department of Revenue to procure and implement an electronic lien and title system. For more information, click here.
• On April 20, New York Governor Kathy Hochul signed S8307. The bill requires hospitals to implement state-mandated changes to their financial assistance (FA) programs (including FA eligibility criteria and debt collection practices). It also necessitates changes to their practices related to consent forms, as well as patient use of credit cards and medical financial products. The bill includes the following with regards to financial assistance programs:
  • Defines “underinsured” as an individual with out-of-pocket medical costs accumulated in the past 12 months that amount to more than 10% of the individual’s gross income;
  • Expands the applicability of FA programs to such underinsured individuals;
  • Prohibits the use of immigration status in determining eligibility for FA;
  • Requires hospitals with 24-hour emergency departments to provide written notification about the availability of FA during the discharge process (e., not just during intake and registration); and
  • Limits installment plan payments of outstanding balances to no more than 5% of the patient’s gross monthly income, and interest rates of no more than 2%.
  With regards to debt collection practices, the bill includes the following provisions:
  • Permits patients to apply for FA at any time during the collection process;
  • Prohibits the denial of admission/treatment for services that are reasonably anticipated to be medically necessary because the patient has an unpaid medical bill;
  • Prohibits the sale of medical debt to a third party, unless the third party explicitly purchases the medical debt in order to relieve the patient’s debt; and
  • Prohibits commencement of a legal action to recover medical debt/unpaid bills against patients with incomes below 400% of the FPL.
  The bill will take effect on October 20. For more information, click here.
• On April 19, Kansas Governor Laura Kelly signed HB2560. The bill enacts, among other things, the Kansas Earned Wage Access Services Act, providing when applications under the state banking code are considered abandoned or expired, allowing an originating trustee to have such trustee’s principal place of business outside of Kansas, authorizing any person to become a depositor or lessor of a safe deposit box, providing methods in which bank deposits may be withdrawn by a depositor, and prohibiting banks from requiring a cosigner for an account of a child in the custody of the secretary for children and families, secretary of corrections, or a federally recognized Indian tribe. For more information, click here.
• On April 17, the Virginia legislature enacted HB906. The bill changes how public utilities in Virginia manage service disconnections and collections, particularly affecting residential customers. The bill outlines:
  • Restrictions on service disconnection during extreme weather conditions and specific days;
  • Provisions for reconnection of utility services without demanding fees as a condition;
  • Detailed notice requirements for utilities regarding nonpayment and disconnection;
  • Limits on the amount required for deposit to restore services for certain customers; and
  • Extensive data reporting requirements by utilities, including information on disconnections, reconnections, arrears, and engagement with third-party debt collectors.
  The bill will take effect on July 1. For more information, click here.
• On April 17, HB34 was enacted after being amended by Virginia Governor Glenn Youngkin (R). The bill provides that in any action upon any contract to collect medical debt, such an action is barred if not commenced within three years from the due date applicable to the first invoice for a health care service unless the contract with a hospital or health care provider is for a payment plan that allows for a longer period of time for the collection of debt by the hospital or health care provider. The bill specifies that such limitation shall not apply to medical debt arising from services provided by programs administered by the Department of Medical Assistance Services. For more information, click here.