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 November 1, ACA International, LLC and Collection Bureau Services, Inc. filed a complaint in the U.S District Court for the District of Columbia against the Consumer Financial Protection Bureau (CFPB) and its director, Rohit Chopra. The plaintiffs seek declaratory and injunctive relief, challenging the CFPB’s October 1, 2024, advisory opinion on the collection of past-due healthcare bills. They argue that the CFPB’s new rules, which include requirements for debt collectors to review account-level documents, apply a reasonableness standard to debt amounts, redefine “default” for medical debts, and mandate medical procedure audits, constitute legislative rulemaking that bypassed the Administrative Procedure Act. The plaintiffs claim these rules impose undue burdens on debt collectors and the health care billing industry, lack evidentiary basis, and were issued without public input. They also contend that the CFPB exceeded its statutory authority, and that the advisory opinion should be set aside due to the CFPB’s unconstitutional funding mechanism. The complaint seeks to enjoin the enactment and enforcement of the advisory opinion in its entirety. For more information, click here.
- On October 31, the CFPB and the Centers for Medicare & Medicaid Services (CMS) issued a joint statement aimed at protecting millions of low-income Medicare recipients from unlawful medical billing. The statement targets health care providers, Medicare Advantage plans, and debt collectors, emphasizing that federal law prohibits billing Qualified Medicare Beneficiaries (QMBs) for cost-sharing expenses such as co-pays or deductibles. The agencies warned that improper billing could lead to sanctions or legal liability. CMS is also releasing new resources to ensure health care providers refund any improper charges, even if they received incorrect information about a recipient’s QMB status. For more information, click here.
- On October 30, the U.S. Attorney’s Office for the District of Massachusetts announced that Liu Zhou pleaded guilty to conspiracy to commit market manipulation and wire fraud in federal court in Boston. Zhou, the founder and primary operator of “MyTrade,” a financial services firm known as a “market maker” in the cryptocurrency industry, admitted to orchestrating a scheme to manipulate cryptocurrency markets on behalf of client companies. MyTrade allegedly provided services, including wash trading, to artificially inflate trading volumes and prices of client cryptocurrencies. The scheme was uncovered through an undercover law enforcement operation involving a fictitious cryptocurrency company, NexFundAI. As part of his plea, Zhou agreed to cease MyTrade’s “Volume Support” services and deactivate its wash trading bots. Sentencing is scheduled for February 27, 2025, and Zhou faces up to five years in prison, supervised release, fines, restitution, and forfeiture. For more information, click here.
- On October 28, Freddie Mac announced the nationwide expansion of its performing loan repurchase alternative pilot, set to begin in the first quarter of 2025. This initiative introduces a new fee-only option for performing loans, allowing lenders to obtain immediate representations and warranties relief instead of repurchasing defective loans under the traditional framework. Freddie Mac also committed to greater transparency and reporting on repurchases. The expanded pilot uses a fee-based structure to incentivize high-quality loan origination and mitigate credit risk. Lenders with a non-acceptable quality rate above 2% will face fees based on the unpaid principal balance of loans delivered. The new structure provides an alternative to the traditional single loan repurchase remedy, with options for lenders to choose their preferred path annually. Additionally, Freddie Mac will publish quarterly repurchase data reports starting next year to help lenders assess their performance against industry standards. For more information, click here.
- On October 28, the Federal Housing Finance Agency (FHFA) and the U.S. Department of Housing and Urban Development (HUD) announced the expansion of the Uniform Appraisal Dataset to include appraisal data from loan applications submitted to HUD’s Federal Housing Administration. This update aims to provide a more comprehensive view of home valuation trends by incorporating data beyond loans backed by Fannie Mae and Freddie Mac. The initiative supports the Interagency Task Force on Property Appraisal and Valuation Equity in addressing appraisal bias and promoting fairness in home valuations. For more information, click here.
- On October 28, the U.S. Attorney’s Office for the Southern District of Indiana announced that a federal grand jury had returned a superseding indictment against Maximiliano Pilipis. Pilipis is charged with five counts of money laundering and two counts of willfully failing to file a tax return, related to his operation of AurumXchange, an unlicensed virtual currency exchange. From 2009 to 2013, AurumXchange facilitated the exchange of Bitcoin and other virtual currencies for U.S. dollars and other currencies, conducting more than 100,000 transactions worth more than $30 million. A portion of these funds allegedly originated from Silk Road, a dark web marketplace. Pilipis is accused of laundering the proceeds and failing to report substantial income in 2019 and 2020. If convicted, he faces up to 10 years in federal prison and a fine of up to $250,000. For more information, click here.
- On October 24, FINRA’s Office of Financial Innovation released a report titled “The Metaverse and the Implications for the Securities Industry,” exploring the potential impact of the metaverse on the financial sector. The report defines the metaverse as immersive and interactive virtual worlds enabled by advancements in hardware and software, with significant growth projected in gaming, e-commerce, and other business applications. The global metaverse revenue opportunity is estimated to reach $800 billion in 2024, with a potential contribution of more than $3 trillion to global GDP by 2031. Financial institutions are beginning to explore the metaverse to engage future generations of investors and enhance operations. The report, based on engagements with more than two dozen stakeholders, provides an overview of market trends, potential applications, challenges, and regulatory considerations for the securities industry. For more information, click here.
- On October 22, the U.S. District Court for the Southern District of Florida issued a Second Amended Sealed Ex Parte Temporary Restraining Order against Ecom Genie Consulting LLC and other defendants, following a complaint by the Federal Trade Commission (FTC). The case involves allegations that the defendants used deceptive earnings claims to entice consumers into investing tens of thousands of dollars, often borrowed against their homes and retirement funds, in what was advertised as a guaranteed business opportunity. The defendants claimed that purchasers would earn substantial passive income from e-commerce stores managed by them, backed by a “track record of success” and a “money-back guarantee.” Allegedly, the promised earnings rarely materialized, resulting in significant financial losses for most consumers. The defendants also allegedly failed to comply with the Business Opportunity Rule, which requires accurate earnings claims and key disclosures. Since 2022, the defendants have allegedly taken at least $12.1 million from consumers. The court’s order includes an asset freeze, the appointment of a temporary receiver, and other equitable relief measures to prevent further harm and preserve assets for potential restitution. For more information, click here and here.
- On October 21, the Office of the Comptroller of the Currency (OCC) issued its final guidelines, amending enforceable recovery planning guidelines to apply to insured national banks, insured federal savings associations, and insured federal branches of foreign banks with average total consolidated assets of $100 billion or more. The amendments incorporate a testing standard and clarify the role of nonfinancial risks, including operational and strategic risks, in recovery planning. These guidelines, effective January 1, 2025, aim to ensure that large, complex financial institutions are better prepared to respond to severe financial stress, thereby reducing the risk of failure and enhancing the stability of the financial system. The guidelines require covered banks to develop recovery plans that include indicators of severe stress, a range of credible recovery options, and assessments of how these options would impact the bank. For more information, click here.
- On October 21, the Board of Governors of the Federal Reserve System, the Washington Department of Financial Institutions, U & I Financial Corp., and UniBank entered into a written agreement to address deficiencies identified in recent examinations. The agreement mandates U & I Financial Corp. and UniBank to take several corrective actions to strengthen board oversight, corporate governance, consumer compliance, lending administration, credit risk management, and liquidity risk management. The agreement also requires the development of a comprehensive capital plan and adherence to enhanced policies on conflicts of interest. The bank must submit periodic progress reports and ensure compliance with all applicable federal and state laws. For more information, click here.
- On October 15, the Financial Crimes Enforcement Network (FinCEN) announced the renewal of its geographic targeting orders (GTOs), which mandate U.S. title insurance companies to identify the natural persons behind shell companies involved in nonfinanced purchases of residential real estate. Effective from October 16, 2024, to April 14, 2025, these GTOs cover specific counties and major metropolitan areas across 14 states and the District of Columbia. The purchase price threshold remains $300,000 for most areas, except for Baltimore, where it is $50,000. The renewal aims to continue gathering data to track illicit funds and inform regulatory efforts. Additionally, a final rule issued in August 2024 will establish a nationwide reporting framework for nonfinanced real estate transfers to legal entities or trusts, effective December 1, 2025, replacing the GTOs. For more information, click here.
- On October 7, the OCC announced a call for academic research papers on the use of artificial intelligence (AI) in banking and finance, with submissions due by December 15. Selected authors will be invited to present their papers at the OCC Headquarters in Washington, D.C., on June 6, 2025. The OCC is particularly interested in research addressing potential bias and disparate impacts in AI/ML lending, the regulatory landscape, algorithmic underwriting, consumer financial behavior, financial stability risks, fraud detection, and developing trustworthy AI frameworks. For more information, click here and here.
State Activities:
- On October 29, New Jersey Attorney General (AG) Matthew Platkin and the state’s Division on Civil Rights (DCR) released a report detailing the findings of a multiyear investigation into Republic First Bank (Republic) and its alleged mortgage redlining practices. According to the report, the investigation revealed that Republic engaged in a pattern or practice of redlining against Black, Hispanic, and Asian communities in New Jersey, in violation of the New Jersey Law Against Discrimination. Republic entered the residential mortgage lending business in 2016 but was closed by the Pennsylvania Department of Banking and Securities in April 2024 due to the bank’s “unsafe and unsound condition.” In August 2024, New Jersey filed a claim against Republic with the Federal Deposit Insurance Corporation, which has assumed most of Republic’s liabilities, to obtain monetary relief for New Jersey residents harmed by Republic’s redlining practices. For more information, click here.
- On October 16, the New York State Department of Financial Services (NYDFS) issued an industry letter to entities regulated by NYDFS providing guidance addressing the cybersecurity risks associated with the use of AI. The guidance purportedly aims to assist covered entities in understanding and assessing cybersecurity risks associated with threats arising from the use of AI by cybercriminals and the controls that may be used to mitigate those risks. The NYDFS emphasizes that this new guidance does not impose any new requirements on covered entities, but rather it provides an outline for meeting existing compliance obligations under the NYDFS Cybersecurity Regulation, 23 NYCRR Part 500, in light of the advancements in AI technology. For more information, click here.
