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 December 1, U.S. Rep. Tom Emmer (R-MN), ranking member on the House Financial Services Subcommittee on Oversight and Investigations, issued a letter to Susan Collins, president of the Federal Reserve Bank of Boston (Boston Fed), about “Project Hamilton,” an exploratory research initiative between the Boston Fed and the Massachusetts Institute of Technology that studies the potential risks and benefits associated with implementation of a U.S. central bank digital currency (CBDC). According to Emmer, “any U.S. CBDC must be open, permissionless, and private,” and private firms engaging in Project Hamilton should not receive an “unfair competitive advantage” over other private competitors who intend to develop CBDC products in the future. For information related to the press release of Emmer’s letter, click here. To read Emmer’s letter, click here.

• On November 30, the Federal Trade Commission (FTC) announced that it has temporarily shut down a credit card debt relief program and its affiliated companies that allegedly took millions from consumers by falsely promising to eliminate or substantially reduce their credit card debt. In its complaint, the FTC alleges that the operators engaged in several deceptive and unlawful tactics, including deceptive telemarketing, making phony debt relief promises, and charging deceptive upfront fees. For more information, click here.

• On November 30, in remarks at the Futures Industry Association’s Asia Derivatives Conference in Singapore, CFTC Commissioner Christy Goldsmith Romero proposed potential crypto-related consumer protection initiatives to mitigate the risks revealed by the collapse of FTX. Romero emphasized the catastrophic risks associated with “the commingling of customer funds with company funds,” and how the user agreements of two of the world’s leading cryptocurrency exchanges, Coinbase, Inc. and Kraken, authorize the commingling of customer cryptocurrency deposits with cryptocurrency owned by the exchanges. Notably, Romero advocated for a two-tiered approach to reducing consumer harm in the crypto markets:
  1. Redefining the definition of a “retail investor” to include two categories of retail customers: (1) household retail; and (2) professional and high net worth individuals. This bifurcation would enable the CFTC to devise specific customer protections relevant to the different risks imposed on each category of customer.
  2. Heightened supervision of cryptocurrency exchanges, which would entail frequent examinations, an increased focus on cybersecurity, conflicts of interest, and a safety and soundness financial review.

For more information, click here.

• On November 30, U.S. Sen. Sherrod Brown (D-OH), chair of the Senate Banking Committee, issued a letter to U.S. Treasury Secretary and Chair of the Financial Stability Oversight Committee (FSOC) Janet Yellen about the consumer, investor, and financial stability risks of crypto assets and how the collapse of FTX was precipitated by “three of the most common hazards in financial markets,” each of which contributed to the demise of the Lehman Brothers in 2008: leverage; illiquid holdings; and extreme concentration. Brown’s letter requests the U.S. Treasury to collaborate with other financial regulators to refine and implement the recommendations promulgated by FSOC in its October 2022 report discussing the need for a regulatory framework for crypto-related entities. For more information, click here.

• On November 29, the Office of the Comptroller of the Currency (OCC) announced revisions to its civil money penalty (CMP) manual, which the OCC will begin using on January 1, 2023. The OCC’s CMP manual summarizes the agency’s policies and procedures governing the imposition of civil money penalties against national banks, other OCC-regulated institutions, and their institution-affiliated parties. OCC Acting Comptroller Michael J. Hsu noted that the “revised CMP matrix for OCC institutions will strengthen the effectiveness and fairness” in the OCC’s enforcement actions. For more information, click here.

• On November 28, 2022, U.S. Sen. Ron Wyden (D-OR), chair of the Senate Finance Committee, issued a letter to Coinbase, Inc. inquiring into the policies and procedures Coinbase has in place to protect its customers’ assets in the event of bankruptcy. Wyden’s letter comes after the bankruptcy of FTX and corresponding reports of widespread corporate mismanagement and misappropriation of consumer cryptocurrency deposits held by FTX on its exchange platform. Wyden’s letter primarily focuses on the need for consumer protection assurances in the cryptocurrency industry and requests Coinbase to provide responses to certain questions by December 12, 2022. Notably, one of the questions posed in Wyden’s letter concerns whether Coinbase will publish proof-of-reserves of both its working capital and equity. After the collapse of FTX, many industry stakeholders have begun to implore crypto-related entities to adopt a proof-of-reserves auditing practice, which reveals whether a custodial exchange has sufficient liquidity to cover all customer withdrawals and provides transparency to customers. For more information, click here.

State Activities:

• On December 1, the New York State Department of Financial Services (NYDFS) announced that it is seeking public comment on a proposed regulation that will permit the agency to charge the cryptocurrency companies it regulates for the costs associated with their oversight. Rules currently in place permit NYDFS to charge other non-crypto financial institutions for these expenses. NYDFS Superintendent Adrienne Harris explained that “[t]he ability to collect supervisory costs will help the department continue protecting consumers and ensuring the safety and soundness of this industry.” The proposed regulation is subject to a 10-day pre-proposal comment period, which began December 1, followed by a 60-day comment period upon publication in the State Register. For more information, click here.

• On November 23, New York Gov. Kathy Hochul signed S.6522A/A.7363A to protect patients with significant medical debts. The legislation amends current laws to prohibit health care providers from securing a lien against an individual’s primary residence or garnishing an individual’s wages to collect on medical debt. This legislation furthers the goals Hochul outlined in her 2022 State of the State Address to protect the state’s consumers and improve their financial health, in part, by addressing medical debt and shielding them from abusive and punitive practices that create financial stress. “No one should face the threat of losing their home or falling into further debt after seeking medical care,” Hochul said, adding, “I’m proud to sign legislation today that will end this harmful and predatory collection practice….” For more information, click here.