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 October 4, the U.S. Supreme Court granted certiorariin the case of McLaughlin Chiropractic Associates, Inc. v. McKesson Corporation. This case will address a critical question that has been a point of contention among various circuit courts: whether the Hobbs Act, which limits judicial review of Federal Communications Commission (FCC) “final orders” to appellate courts, requires district courts to accept the FCC legal interpretation of the Telephone Consumer Protection Act (TCPA). While the Supreme Court previously addressed whether the Hobbs Act applied in private litigation, it ultimately did not resolve whether a district court is required to follow a particular FCC order interpreting the TCPA. For more information, click here.
- On October 4, the Federal Deposit Insurance Corporation (FDIC) published its notice of proposed rulemaking aimed at enhancing recordkeeping for bank deposits received from fintech and other third-party, non-bank companies in the Federal Register. The proposed rule targets “custodial accounts with transactional features” held by FDIC-insured banks, other than those accounts specifically exempted under the rule. These accounts often involve funds from end users or other third parties that are originated through fintech companies, fintech intermediaries, and non-bank companies, and are held in a single custodial account at a bank. Under the proposed rule, FDIC-insured banks holding such accounts would be required to take specific steps to ensure accurate account records are maintained. The FDIC is accepting public comments until December 2, 2024. For more information, click here.
- On October 1, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion aimed at debt collectors and emphasizing their obligations under the Fair Debt Collection Practices Act (FDCPA) and Regulation F. The opinion specifically emphasizes the prohibitions on false, deceptive, or misleading representations, and unfair or unconscionable means to collect or attempt to collect medical debts. According to the CFPB, debt collectors will be strictly liable under the FDCPA and Regulation F for engaging in the following practices when collecting medical bills: attempting to collect amounts that have already been paid, either fully or partially, by the consumer, insurance, or a government payor; attempting to collect amounts that consumers are not legally obligated to pay under state or federal law; attempting to collect amounts above federal or state limits; attempting to collect for services that were not actually rendered; and misrepresenting the legal status of a debt. For more information, click here.
- On October 1, Lisa D. Cook, a member of the Board of Governors of the Federal Reserve System, delivered remarks at a conference organized by the Federal Reserve Banks of Atlanta, Boston, and Richmond. Cook discussed the implications of artificial intelligence (AI) and big data on productivity, emphasizing the potential for AI to significantly impact U.S. and global labor markets. She highlighted the uncertainty surrounding AI’s effects but expressed cautious optimism about its ability to enhance productivity and support economic growth. Cook also underscored the importance of careful research, policy decisions, and inclusive innovation to harness AI’s benefits while addressing its challenges. For more information, click here.
- On October 1, U.S. Representatives Don Bacon (R-NE) and Marie Gluesenkamp Perez (D-WA) introduced bipartisan legislation titled The Reporting Medical Debt Payments as Positive Consumer Credit Information Act of 2024. This bill aims to amend federal law to ensure that medical debt payments are reported positively on credit reports, thereby helping individuals build their credit scores. Currently, medical debt negatively impacts credit scores without any benefit for making payments. The proposed legislation seeks to rectify this by allowing medical payments to contribute positively to credit scores. For more information, click here.
- On September 27, the Federal Housing Finance Agency (FHFA) issued Advisory Bulletin AB 2024-03, providing guidance to Federal Home Loan Banks (FHLBanks) on member credit risk management. The bulletin emphasizes the importance of evaluating a member’s financial condition in underwriting and credit decisions, rather than relying solely on collateral. It addresses observed weaknesses in FHLBanks’ credit risk management and misconceptions about lending to financially distressed members. The guidance outlines expectations for credit risk governance, member credit assessment, and monitoring, as well as procedures for managing troubled members and coordinating with prudential regulators. For more information, click here.
- On September 26, the U.S. District Court for the Northern District of Illinois dismissed a proposed class action against the Bank of Orrick and Kendall Bank, which alleged violations of the Truth in Lending Act (TILA) and the Illinois Consumer Fraud and Deceptive Business Practices Act for failing to provide required repayment disclosures to borrowers. The court agreed with the CFPB’s position in its amicus brief and concluded that the banks were exempt from TILA’s repayment disclosure requirements for non-credit-card open-end credit accounts. For more information, click here.
- On September 25, Chairman Andy Barr (R-KY) led a House Financial Services Subcommittee hearing to examine the Basel III Endgame proposal and recent regulatory actions by the Federal Reserve, FDIC, and OCC. Representative Barr criticized the July 2023 Basel III Endgame proposal for its lack of thorough analysis and the negative feedback it received from various stakeholders. He expressed concerns about the proposal’s potential adverse effects on mortgage markets, tax credits, and financial products, as well as the overall uncertainty it creates for financial institutions and consumers. Representative Barr also highlighted the partisan nature of recent regulatory efforts and the need for regulators to prioritize the interests of constituents over political goals. For more information, click here and here.
State Activities:
- On September 29, California Governor Gavin Newsom signed Assembly Bill (AB) 1934 into law, marking a significant update to California’s Digital Financial Assets Law (DFAL). In addition to extending the compliance deadline for digital financial asset businesses, providing them with additional time to meet regulatory requirements and implement necessary operational changes, this new legislation includes significant modifications to the DFAL. The key provisions of AB 1934 are: the extension of the deadline for obtaining a license to engage in digital financial asset business activities from July 1, 2025 to July 1, 2026; more stringent record-keeping obligations on licensed entities; specific provisions regarding the handling of stablecoins; and the requirement that kiosk operators ensure that any person engaging in digital financial asset business activities via their kiosks holds a valid license. For more information, click here.
- On September 28, California Governor Gavin Newsom passed Assembly Bill 2935, which amends the Civil Code to enhance protections for foster children regarding consumer credit reports. The bill allows county welfare and probation departments to request security freezes on behalf of foster children and mandates that any credit history for foster children be promptly blocked if discovered. Additionally, it restricts the extension of security freezes beyond the child’s 18th birthday. For more information, click here.
- On September 27, Georgia’s Department of Banking and Finance approved Fiserv’s application for a merchant acquirer limited purpose bank. This approval marks a pivotal moment for fintech and nonbank entities seeking direct access to card networks. The approval of this charter now allows Fiserv to offer merchant payment processing services without the need for a sponsoring partner bank. For more information, click here.
- On September 24, California Governor Gavin Newsom signed into law Assembly Bill 3108, which amends the Financial Code and Penal Code to address mortgage fraud. The bill prohibits the filing of any document with a county recorder that contains a material misstatement, misrepresentation, or omission, and expands the definition of mortgage fraud to include certain actions by mortgage brokers and loan originators. For more information, click here.
