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 28, the staff of the Federal Trade Commission (FTC) provided its annual report to the Consumer Financial Protection Bureau (CFPB) on its enforcement and related activities in 2023 on the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA). The report highlights the FTC’s enforcement actions and initiatives under these laws and their implementing regulations, including in the areas of automobile financing and leasing, payday lending, other credit and leasing, and electronic fund transfers. For more information, click here.
- On May 27, Acting Comptroller of the Currency Michael J. Hsu discussed recovery planning via livestream in remarks at the Entrepreneurship, Markets and Technology: Regulation’s Challenges in a Changing World Conference in Zurich, Switzerland. For more information, click here.
- On May 23, the U.S. House of Representatives passed the CBDC Anti-Surveillance State Act to prevent the Federal Reserve from issuing a central bank digital currency. The Act was introduced by Majority Whip Tom Emmer. Overall, 213 Republicans and three Democrats voted for the bill, while 192 Democrats voted against it. For more information, click here.
- On May 23, the Securities and Exchange Commission (SEC) gave a green light to spot Ether exchange-traded funds in the U.S. despite speculation that it has been investigating whether to label Ether as a security. The SEC approved the 19b-4 filings from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise, thereby approving the rule changes that allow spot Ether ETFs to be listed and traded on their exchanges. Although the 19b-4s have been approved, the SEC still needs to sign off on Ethereum issuer’s respective S-1 registration statements for the spot Ether exchange-traded funds to begin trading. For more information, click here.
- On May 22, the CFPB issued an interpretive rule confirming that Buy Now, Pay Later lenders are credit card providers. Accordingly, Buy Now, Pay Later lenders must provide consumers with some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a Buy Now, Pay Later loan. The CFPB launched its inquiry into the rapidly expanding Buy Now, Pay Later market more than two years ago and continues to see consumer complaints related to refunds and disputed transactions. For more information, click here.
- On May 22, the U.S. House of Representatives approved the Financial Innovation and Technology for the 21st Century Act, a wide-reaching bill to establish regulations for digital asset markets. The legislation would establish a regime to regulate the U.S. crypto markets, setting consumer protections, installing the Commodity Futures Trading Commission as a leading regulator of digital assets, and more clearly define what makes a crypto token a security or a commodity. This marks the first time a major crypto bill has cleared one of the chambers of Congress. The issue now heads to the U.S. Senate, where its future is uncertain because there’s no counterpart bill. For more information, click here.
- On May 20, the Federal Communications Commission (FCC) released a notification of suspected illegal traffic against Alliant Financial, which is a voice service provider (VSP) for allegedly originating illegal robocall traffic. The FCC reviewed 13 traceback calls from the approximately 78 million calls the company solicited between November 2023 and February 2024. Upon review, the FCC claimed that the VSP was the originating provider of these calls, and that the VSP did not contest the calls. For more information, click here.
- On May 20, Federal Deposit Insurance Corporation Chairman Martin Gruenberg announced his intention to resign. For more information, click here.
- On May 20, Ginnie Mae announced the roll out of recovery planning requirements for Issuers that are not subject to federal regulation by the agencies listed in Chapter 03, Part 8 §A(3)(a) whose portfolios are equal to or exceed a remaining principal balance (RPB) of $50 billion at the end of the calendar year. Covered Issuers with the requisite portfolio size as of December 31, 2024 will be required to prepare and submit recovery plans to Ginnie Mae no later than June 30, 2025 via email to GNMARecPln@hud.gov. Ginnie Mae is making this change as part of its holistic approach to program governance to assure the rapid and orderly servicing transfer in the case of an Issuer’s material distress or failure. These plans must contain all relevant material, as described in MBS Guide Appendix VI-23 of the Ginnie Mae Mortgage-Backed Securities Guide 5500.3, Rev-1 (MBS Guide). For more information, click here.
- On May 20, Ginnie Mae updated its All Participant Memorandum, providing:
In July of 2020, Ginnie Mae implemented its Digital Collateral Program Pilot to support the Department of Housing and Urban Development’s (HUD) Strategic Plan with respect to modernization and digitization of Ginnie Mae’s Mortgage-Backed Securities (MBS) program, as well as to respond to industry requests to optimize Issuer digital environments and align with current industry practices. During this time, Ginnie Mae refined processes to monitor growth in the new program and opened the program to allow any Issuer to apply to participate in June of 2022. To promote liquidity and increase participation in the Digital Collateral Program, Ginnie Mae will permit the securitization of Digital Collateral into the same pools as its traditional paper collateral (commingling) effective with June 1, 2024 issuances.
For more information, click here.
- On May 20, the CFPB took action against Western Benefits Group for allegedly charging illegal advance fees for student loan debt relief services and misrepresenting to consumers that advance fees would go toward paying down their loans. The CFPB is ordering Western Benefits to permanently cease operations and pay a $400,000 penalty to be deposited in the CFPB’s victims’ relief fund. The order also rescinds all existing agreements with consumers. For more information, click here.
- On May 15, the Office of Inspector General (OIG) for the Federal Reserve and the CFPB published a report: “The CFPB Can Enhance Certain Aspects of Its Examiner Commissioning Program.” The report assessed the CFPB’s examiner commissioning program and included recommendations to enhance the program. For more information, click here.
- On May 15, the CFPB held its Consumer Advisory Board Meeting to discuss broad policy matters related to the Bureau’s Unified Regulatory Agenda and general scope of authority. For more information, click here.
- On May 15, the Bipartisan Senate AI Working Group comprised of Majority Leader Charles Schumer (D-NY), Senator Mike Rounds (R-SD), Senator Martin Heinrich (D-NM), and Senator Todd Young (R-IN), released a roadmap for artificial intelligence policy in the U.S. Senate. For more information, click here.
State Activities:
- On May 23, the North Carolina Supreme Court ruled that North Carolina law supported a credit union’s unilateral amendment to its contract to include an arbitration provision and class action waiver. The decision was issued in a case, Canteen v. Charlotte Metro Credit Union, where the credit union, which held checking accounts for various parties, was sued in a class action alleging that the credit union improperly charged its customers overdraft fees. The credit union’s account agreement permitted the credit union to unilaterally amend the agreement upon providing notice to the account holder. The credit union amended the contract to include an arbitration provision and class action waiver and, when it was eventually sued, moved to compel arbitration of the claims. The plaintiff argued that such a revision of the parties’ agreement was a violation of the implied covenant of good faith and fair dealing implied by law into every contract. However, the North Carolina Supreme Court disagreed, noting that as long as unilateral amendments relate to “the universe of terms discussed and anticipated in the original contract,” the amendment is permissible. The Court was careful, however, to point out that its decision does not grant a party “free rein” to change a contract in any manner it desires. In this instance, according to the Court, because the contract’s choice of law provision raised the forum for disputes as a term of the contract, it was appropriate for the credit union to revise that term to require arbitration without offending the implied duty of good faith and fair dealing. For more information, click here.
- On May 21, South Carolina Governor Henry McMaster signed S700, the state’s Earned Wage Access Service Act (EWA), making South Carolina the fifth state to enact such legislation. Earned wage access is gaining momentum as a means of allowing employees to access their earned wages before a regularly scheduled payday. The EWA requires earned wage access providers to register annually with the state’s Department of Consumer Affairs for operation within the state. The EWA will also require such providers to disclose the fees that will be charged to an employee or employer for the EWA provider’s services. However, the EWA specifies that EWA services are not to be treated as loans and, therefore, EWA providers will not be viewed as lenders under the EWA, a divergence from some of the similar laws that have been enacted in other states. For more information, click here.
- On May 21, Minnesota Governor Tim Walz approved SF 4097, which will put the state’s Medical Debt Fairness Act (Act) into effect. The Act, which is being referred to some as “controversial,” will become effective in large part October 1 of this year, with certain provisions to take effect in April of next year. Among other things, the Act prohibits hospitals from sending a patient’s account to collections before either determining that the patient is ineligible for charity care or denying an application to charity care. Additionally, entities responsible for collecting medical debts are prohibited under the Act from reporting medical debt to credit reporting agencies. The Act also prohibits such entities from transferring the debt of a deceased patient to the patient’s spouse, and places numerous restrictions on the conduct of certain parties responsible for collecting medical debts. Among other things, such entities are prohibited from using or threatening to use methods of collection that would violate state law. Collection entities are also prohibited for communicating with debtors in a misleading or deceptive manner. For more information, click here.
- On May 20, Governor Walz approved HF 3438. The bill establishes as an unfair and deceptive trade practice advertising, displaying, or offering a price for goods or services while failing to include all mandatory fees or surcharges. “Mandatory fees” are defined to include a fee or surcharge that: (a) must be paid in order to purchase the goods or services being advertised; (b) is not reasonably avoidable by the consumer; or (c) a reasonable person would expect to be included in the purchase of the goods or services being advertised. The bill also carves out certain exceptions, such as fees related to the purchase of a motor vehicle and fees associated with settlement services as defined under the Real Estate Settlement Procedures Act. The bill will take effect on January 1, 2025. For more information, click here.
- On May 17, Colorado Governor Jared Polis signed HB24-1011. The bill will require mortgage servicers to disclose certain information to a borrower concerning the disbursement of insurance proceeds. Specifically, a mortgage servicer must, upon a borrower’s requests, promptly disclose the specific conditions under which the servicer will disburse insurance proceeds to the borrower in the event of a covered loss to the residential property that is the subject of a mortgage. In the event of a loss, the borrower must create a repair or rebuild plan for the residential property and submit the plan to the servicer for approval. The mortgage servicer must the approve or deny the plan within 30 days of receipt, and the plan must include specific milestones for disbursement of insurance proceeds. The bill also specifies how disbursements are to be made, depending on whether the borrower is less than or greater than 31 days delinquent in making payments on the subject mortgage. For more information, click here.
- On May 17, Colorado Governor Polis approved SB205. The bill requires a developer or a deployer of a high-risk artificial intelligence system to use reasonable care to avoid algorithmic discrimination in any high-risk system. Among other things, the bill provides consumers with an opportunity to correct any incorrect personal data that a high-risk artificial intelligence system processed in making a consequential decision. For more information, click here.
