Troutman Pepper Weekly Consumer Financial Services Newsletter - July 2024 # 5

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 27, Senator Cynthia Lummis proposed a $67 billion strategic bitcoin reserve to bolster the U.S. dollar. Announced at the Bitcoin 2024 Conference, the plan aims to diversify into bitcoin, securing the dollar’s global reserve currency status. The proposal includes a 1-million-unit BTC purchase program, mirroring the size of U.S. gold reserves. This initiative comes as families struggle with inflation and national debt. The Republican Party appears to be actively courting the crypto vote ahead of the November election, while the Democratic Party remains largely silent on the issue. For more information, click here.
• On July 27, former President Donald Trump announced at the Bitcoin 2024 conference in Nashville that he plans to make the U.S. the “crypto capital of the planet” if elected. Trump expressed admiration for the bitcoin community and predicted bitcoin would surpass gold. He criticized Vice President Kamala Harris and promised to boost electricity production using fossil fuels. Trump emphasized his commitment to the crypto community, stating that if bitcoin is to thrive, it should be in America. For more information, click here.
• On July 26, the Consumer Financial Protection Bureau (CFPB) sued Acima and former CEO Aaron Allred for alleged illegal lending activities in connection with as many as five million consumer financing agreements. The CFPB alleges Acima used deceptive dark patterns and other tricks to trap consumers in high-cost credit agreements to finance the purchase of household goods. For more information, click here.
• On July 25, the CFPB released a report on payment processing companies that help school districts process children’s school lunch payments. These private companies process payments made by parents who may have limited or zero payment alternatives. These fees are widespread and often hit low-income families the hardest. Overall, parents and caregivers have no control over fee rates and lack opportunities to shop around for cheaper options. For more information, click here.
• On July 25, the Federal Reserve (Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) announced their second notice requesting comment to reduce regulatory burden. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires the Federal Financial Institutions Examination Council and federal bank regulatory agencies to review their regulations every 10 years to identify outdated or otherwise unnecessary regulatory requirements for their supervised institutions. For more information, click here.
• On July 25, the Fed, the FDIC, and the OCC issued a statement reminding banks of potential risks associated with third-party arrangements to deliver bank deposit products and services. For more information, click here.
• On July 25, the Fed, the FDIC, and the OCC requested additional information on a broad range of bank-fintech arrangements, including with respect to deposit, payments, and lending products and services. The agencies are seeking input on the nature and implications of bank-fintech arrangements and effective risk management practices. For more information, click here.
• On July 24, the CFPB issued a circular to law enforcement agencies and regulators explaining how companies may be breaking the law by requiring employees to sign broad nondisclosure agreements that could deter whistleblowing. The circular explains how imposing sweeping nondisclosure agreements that do not clearly permit communication with law enforcement may intimidate employees from disclosing misconduct or cooperating with investigations. This could impede investigations and potentially violate federal whistleblower protections. For more information, click here.
• On July 23, the launch of spot Ether ETFs in the U.S. drove substantial inflows, with CoinShares reporting a remarkable $2.2 billion, the largest since December 2022. This surge also led to a 542% increase in ETH exchange-traded products. However, this positive momentum was slightly offset by Grayscale’s Ethereum trust, which experienced $285 million in net outflows. Despite the offset, the debut of these ETFs marks a significant milestone for Ethereum investment products. For more information, click here.
• On July 23, Federal Trade Commission Chair Lina M. Khan, alongside international antitrust enforcers and the Department of Justice (DOJ), Antitrust Division, issued a statement affirming a commitment to protecting competition across the artificial intelligence (AI) ecosystem to ensure effective competition that provides fair and honest treatment for both consumers and businesses. For more information, click here.
• On July 18, the CFPB, the National Credit Union Administration, the Fed, the FDIC, and the OCC issued final guidance addressing reconsiderations of value (ROVs) for residential real estate transactions. The guidance advises on policies and procedures that financial institutions may implement to allow consumers to provide financial institutions with information that may not have been considered during an appraisal or if deficiencies are identified in the original appraisal. For more information, click here.
• On July 18, the Eighth Circuit for the U.S. Court of Appeals granted the State of Missouri’s emergency motion for an administrative stay to prevent President Biden’s student loan relief plan from taking effect. For more information, click here.
• On July 18, the OCC, the FDIC, and the Fed submitted a brief requesting that the U.S. Court of Appeals for the Fifth Circuit hold oral argument and reverse the U.S. District Court for the Northern District of Texas’ decision to preliminarily enjoin a recently issued final rule implementing the Community Reinvestment Act (CRA). For more information, click here.
• On July 17, Congressional Progressive Caucus (CPC) Chair Pramila Jayapal (WA-07) and 53 of her CPC colleagues wrote to Speaker Mike Johnson welcoming a debate and vote on H.J. Res. 122, which would invalidate the CFPB’s recently finalized Credit Card Penalty Fees Rule (Regulation Z), which lowers most late fees charged by big banks issuing credit cards from $32 to $8. For more information, click here.
• On July 17, Acting Comptroller of the Currency Michael J. Hsu discussed the increasing number and size of large banks, the complexity of bank-nonbank relationships, and the rise in polarization. Hsu described how the OCC is uniquely positioned to address each trend. For more information, click here.
• On July 16, Federal Communications Commission (FCC) Chairwoman Jessica Rosenworcel proposed new consumer protections against AI-generated robocalls. If adopted by a vote of the full commission at its August Open Meeting, this proposal would seek comment on the definition of AI-generated calls, requiring callers to disclose their use of AI-generated calls, supporting technologies that alert and protect consumers from unwanted and illegal AI robocalls, and protecting positive uses of AI to help people with disabilities utilize the telephone networks. For more information, click here.
• On July 15, the U.S. Department of Housing and Urban Development (HUD) announced that it has charged multiple entities with housing discrimination for issuing a biased appraisal and then denying a refinance loan application in Denver, CO. HUD’s charge against the appraiser, Maksym Mykhailyna; appraisal company, Maverick Appraisal Group; appraisal management company, Solidifi U.S. Inc.; and lender, Rocket Mortgage, LLC, alleges that the appraiser issued a discriminatory appraisal that undervalued a Black homeowner’s property on the basis of her race. The charge further alleges that, when the homeowner complained to Rocket Mortgage, Rocket Mortgage would only proceed with her refinance loan application based on the appraised value that she alleged was discriminatory. For more information, click here.
• On July 9, the Financial Action Task Force (FATF) released its fifth update on jurisdictions’ compliance with Recommendation 15 and its Interpretative Note, focusing on anti-money laundering and counter-terrorist financing measures for virtual assets and service providers. Recommendation 15, updated in 2019, mandates that countries apply these measures to virtual assets and virtual asset service providers. The report highlighted that while some progress has been made, global implementation remains insufficient, with 75% of jurisdictions only partially or noncompliant. Key issues include inadequate risk assessments, supervisory inspections, and implementation of the Travel Rule. Despite some positive developments, the FATF urges rapid adoption of its standards to mitigate illicit finance risks. For more information, click here.
• Earlier this summer, the OCC issued a form interpretive letter regarding the regulatory capital treatment of a bank’s exposures to a special purpose vehicle (SPV). Under its regulatory capital rule, the bank’s exposures to the SPV do not qualify as securitization exposures. For more information, click here.

State Activities:

• On July 26, California Attorney General (AG) Rob Bonta issued a reminder to city attorneys and county counsel, reminding them of new state law requirements related to inspections of apartments and other multifamily properties. The reminder relates to AB 548, which was signed into law in 2023 and requires local enforcement agencies to establish policies and procedures to inspect relevant portions of a building when a building inspection reveals substandard conditions or violations of state housing law. The law requires the enforcement agencies to develop such policies and procedures by January 1, 2025. For more information, click here.
• On July 24, New York AG Letitia James reached a multijurisdictional settlement with the owner of an advertising platform that allows companies to pay celebrities to endorse their products. The settlement resolves allegations that the company failed to ensure that advertisements presented to consumers were properly identified as paid endorsements, in violation of federal and state consumer protection laws. Under the settlement agreement, the company is to pay $100,000 in penalties, which includes $25,000 to New York state. The company must also implement a program that will ensure that all paid advertisements are properly labeled in the future. For more information, click here.
• On July 22, New Jersey Governor Phil Murphy signed A3861. The bill prohibits a consumer reporting agency from reporting a patient’s paid medical debt or a medical debt worth less than $500, regardless of the date the medical debt was incurred. The bill prohibits a medical creditor or medical debt collector from reporting a patient’s medical debt to any consumer reporting agency. The bill also provides that any portion of a medical debt furnished to a consumer reporting agency in violation of the bill will be void and that it will be a violation of the New Jersey Fair Credit Reporting Act for a medical debt collector or medical creditor to violate the medical debt provisions of the bill. For more information, click here.
• On July 11, Missouri Governor Mike Parson signed SB 1359 (bill), which modifies several statutory provisions relating to financial institutions. Among other things, the bill repeals the state’s Sale of Checks Law, replacing it with the Money Transmission Modernization Act of 2024 (MTMA). The MTMA prohibits any person from engaging in the business of money transmission without first obtaining a license, defines what activities are considered “money transmission” under the statute, and sets forth certain reporting obligations for licensees. The bill also creates to the Commercial Financing Disclosure Law, which requires individuals who complete more than five commercial financing transactions within one calendar year to a business located within the state to make certain disclosures, such as the total amount of funds provided to the business, the total amount to be paid to the provider pursuant to the commercial financing transaction agreement, and a statement of whether there are any costs or discounts associated with prepayment of the transaction. For more information, click here.