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 July 18, the Consumer Financial Protection Bureau (CFPB) released a notice of proposed interpretive rule to overturn its 2020 advisory opinion concerning the applicability of the Truth and Lending Act and Regulation Z to “earned wage products.” For more information, click here.
• On July 18, the Fifth Circuit Court of Appeals issued a letter to the CFPB requesting a response to a petition for rehearing en banc filed by the Community Financial Services Association of America (CFSA) plaintiff trade groups. In the petition, the plaintiff trade groups requested the Fifth Circuit to rehear arguments concerning the CFPB’s Payday Lending Rule, which the Fifth Circuit previously rejected before the Supreme Court ruled on the constitutionality of the CFPB’s funding structure. For more information, click here.
• On July 17, the Basel Committee on Banking Supervision of the Bank of International Settlements (BIS) finalized its disclosure framework for banks’ cryptoasset exposures. For more information, click here.
• On July 17, the CFPB, the Office of Comptroller of the Currency (OCC), the Fed, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration, and the Federal Housing Finance Agency adopted a final rule to implement the quality control standards mandated by the Dodd-Frank Wall Street for the use of automated valuation models (AVMs) by mortgage originators and secondary market issuers in determining the collateral worth of a mortgage secured by a consumer’s principal dwelling. Under the final rule, institutions involved in certain credit decisions or securitization determinations must adopt policies, practices, procedures, and control systems to ensure that AVMs used in these transactions to determine the value of mortgage collateral, adhere to quality control standards designed to ensure a high-level confidence in the estimates produced by AVMs; protect against the manipulation of data; seek to avoid conflicts of interest; require random sample testing and reviews; and comply with applicable nondiscrimination laws. For more information, click here.
• On July 17, the U.S. Department of Housing and Urban Development (HUD) issued a press release announcing a proposed rule to govern the sale of seriously delinquent single family mortgage loans insured by the Federal Housing Administration (FHA). For more information, click here.
• On July 16, the Financial Stability Board released its proposed recommendations to promote greater alignment in data frameworks related to cross-border payments and consistency in the regulation and supervision of bank and nonbank payment service providers. For more information, click here.
• On July 12, the Federal Trade Commission (FTC) released a policy statement, staff guidance, and issue spotlight to address its growing concern about unfair and deceptive practices by franchisors. For more information, click here.
• On July 12, the FDIC, the OCC, and the Fed released the 2024 list of distressed or underserved nonmetropolitan middle-income geographies where certain bank activities are eligible for Community Reinvestment Act credit. For more information, click here.
• On July 12, the Financial Industry Regulatory Authority (FINRA) issued a notice reminding registered persons and firms of the continuing education (CE) requirements under amendments FINRA Rule 1240, which became effective on January 1, 2023. For more information, click here.
• On July 10, the FTC and two international consumer protection networks announced the results of a review of selected websites and apps that showed a large percentage of the websites and mobile apps examined may use dark patterns, digital design techniques that may manipulate consumers in buying products or services or giving up their privacy. For more information, click here. To examine the results of the FTC’s review, click here.
• On July 10, Chairman of the Commodity Futures Trading Commission (CFTC) Rostin Behnam testified before the U.S. Senate Committee on Agriculture, Nutrition and Forestry’s Hearing on the Oversight of Digital Commodities and noted that “Congress must act quickly” to fill the regulatory void and “provide basic customer protections that are core to U.S. financial markets.” For more information, click here.
• On July 10, GOP congressional committee leaders issued 40 letters to members of the executive branch to reiterate the Supreme Court’s holding in Bright Enterprises v. Raimondo, which overruled the Chevron doctrine that permitted courts to defer to a federal agency’s interpretation of a rulemaking it promulgated. For more information, click here.
• On July 10, HDR Global Trading Limited, d/b/a BitMEX (BitMEX), a foreign digital asset exchange, pled guilty to one count of violating the BSA by failing to implement BSA-compliant anti-money laundering (AML) and know-your-customer (KYC) programs. Specifically, the complaint filed by the U.S. Department of Justice (DOJ) states that the founders of BitMEX “rejected adoption or implementation of BSA-compliant AML and KYC programs.” For more information, click here.
• On July 9, HUD released Mortgagee Letter 2024-13, which implements updates to the Section 203(k) program guidelines under the Rehabilitation Mortgage Insurance Program. The mortgage letter is effective for all FHA case numbers assigned on or after November 4, 2024. For more information, click here.
• On July 8, the DOJ issued a press release announcing that the co-founder and former chief technology officer of Paxful Inc., a peer-to-peer Bitcoin trading network, pleaded guilty to conspiracy for failing to maintain an effective AML program. For more information, click here.
• The Office of Information and Regulatory Affairs of the Executive Office of the President (Office of Information) is considering recommending that the Securities and Exchange Commission (SEC) repropose amendments to existing rules and/or adopt new rules under the Investment Advisers Act of 1940. According to the Office of Information’s webpage, a second edition of the SEC’s “Safeguarding Advisory Client Assets” proposed rulemaking is slated for release in October 2024. For more information, click here.

State Activities:

• On July 19, New York Attorney General (AG) Letitia James issued a reminder to New Yorkers that the state’s new legislation establishing deed theft as a crime and increasing the AG’s power to prosecute such crime took effect. James noted that deed theft “is a merciless crime that robs New Yorkers of their homes, communities, and financial stability.” Deed theft occurs when someone takes the title, or deed, to another person’s home without the homeowner’s knowledge or approval. According to the state’s statistical data, the crime disproportionately impacts elderly homeowners and homeowners of color. The law makes deed theft a form of grand larceny and extends the statute of limitations, which now requires that prosecution begin within five years of the theft or within two years after the rightful homeowner realizes their deed has been stolen, whichever is later. For more information, click here.
• On July 11, the New York Department of Financial Services (DFS) issued a circular letter (circular) to all insurers licensed to write insurance within the state regarding use of artificial intelligence systems (AIS) and external consumer data and information sources (ECDIS) in insurance underwriting and pricing. In January of this year, DFS published a proposed circular letter and, during the comment period, DFS received feedback from various stakeholders. Additionally, DFS targeted feedback from interested parties though its direct outreach efforts. Based on the feedback it received, DFS published the circular in its final form. Among other things, the circular (a) maintains the original definitions of AIS and ECDIS; (b) clarifies what proxy statements (which are required for insurers to demonstrate that ECDIS do not serve as a proxy for any protected classes that may lead to unfair or unlawful discrimination) might entail; (c) clarifies that insurers are not expected to collect additional data from or about individuals for quantitative assessments; and (d) assures insurers that DFS is committed to protecting their confidential information, intellectual property, and trade secrets (although DFS does not promise such confidentiality). For more information, click here.
• On July 10, the California Department of Financial Protection and Innovation (DFPI) announced that it issued an order revoking the California Financing Law license of a credit finance lending company. The company’s parent corporation filed for Chapter 11 bankruptcy earlier this year, which prevented many consumers from being able to access funds. The bankruptcy filing prompted DFPI to commence a regulatory examination to investigate the subsidiary credit finance lending company. However, the company failed to provide information that DFPI requested as a part of the examination, leading DFPI to ultimately issue a revocation order. The company is now no longer permitted to engage in financial lending in the state. For more information, click here.