InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Tennessee amends consumer debt proceeding requirements and garnishment exemptions
On May 3, the Governor of Tennessee signed into law HB 2320 (the “Act”), which will amend pleading requirements for consumer debt suits and garnishment exemptions. The Act would require that, in a civil suit or arbitration requesting judgment on a consumer debt, the plaintiff creditor would provide the following in the initial pleading: (i) if the debtor’s agreement does not exist, then provide written evidence of the debtor’s agreement or a document provided to the debtor while the account was active; (ii) a statement that the debt has been transferred or assigned; (iii) the date of the transfer or assignment; (iv) the name of any prior holders of the debt; and (v) the name or a description of the original creditor. Additionally, the Act will amend Tennessee’s garnishment provisions to automatically exempt them from execution, seizure, or attachment funds up to $2,500 in a debtor’s deposit account with a bank or financial institution. The Act will go into effect on July 1.
Tennessee amends caller ID law
On April 22, Tennessee enacted HB 2504 (the “Act”), which amends the Tennessee Consumer Protection Act of 1977 to specify that it is illegal for: (i) “[a] person, in connection with a telecommunications service or an interconnected VoIP service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information to a subscriber with the intent to defraud or cause harm to another person or to wrongfully obtain anything of value”; and (ii) “[a] person, on behalf of a debt collector or inbound telemarketer service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information, including caller identification information that does not match the area code of the person or the debt collector or inbound telemarketer service the person is calling on behalf of, or that is not a toll-free phone number, to a subscriber with the intent to induce the subscriber to answer.”
The Act is effective on July 1.
Tennessee prevents lenders from discriminating against specific factors
On April 22, the Governor of Tennessee signed into law HB 2100 (the “Act”) which amended the state consumer protection codes to prevent financial institutions and insurers (collectively, institutions) from discriminating in the provision or denial of services based on certain enumerated factors. Specifically, institutions will not be allowed to discriminate based on, among others: (i) a person’s political opinions, speech, or affiliations; (ii) a person’s religious beliefs, exercise, or affiliations; (iii) any factor that is not a quantitative, impartial and risk-based standard; or (iv) a “social credit score” that is based on certain identified factors, including the lawful ownership of a firearm, engagement in fossil fuel-related business, support of the state or federal government’s efforts to combat illegal immigration, or a person’s failure to meet environmental, social governance, corporate board composition, social justice, or diversity, equity, and inclusion standards so long as the person is in compliance with applicable state or federal law. The Act provides that engaging in the prohibited forms of discrimination constitutes an unfair trade practice. The Act will go into effect on July 1.
Bank to pay $1.9 million to resolve redlining suit
On January 17, the DOJ announced a $1.9 million settlement with a national bank resolving allegations that the bank engaged in unlawful redlining in Memphis, Tennessee by intentionally not providing home loans and mortgage services to majority-Black and Hispanic neighborhoods, thereby violating the Fair Housing Act, ECOA, and Regulation B. In the complaint, the DOJ alleged that from 2015 through at least 2020, the bank (i) concentrated marketing and maintained nearly all its branches in majority-white neighborhoods; (ii) was aware of its redlining risk and failed to address said risk; (iii) generated disproportionately low numbers of loan applications and home loans during the relevant period from majority-Black and Hispanic neighborhoods in Memphis, compared to similarly-situated lenders; (iv) maintained practices that denied equal access to home loans for those in majority-Black and Hispanic neighborhoods, and otherwise “discouraged” those individuals from applying; and others.
Under the consent order, which is subject to court approval, the bank will, among other things, invest $1.3 million in a loan subsidy fund to enhance home mortgage, home improvement, and home refinancing access in the specified neighborhoods. The bank will also allocate $375,000 in advertising, outreach, and financial counseling to specified neighborhoods, and allocate $225,000 to community partnerships for services boosting residential mortgage credit access in the specified areas. Additionally, the bank will assign at least two mortgage loan officers to serve majority-Black and Hispanic neighborhoods in the bank’s service area and appoint a Director of Community Lending who will oversee the continued development of lending in communities of color.
Tennessee becomes 8th state to enact comprehensive privacy legislation
On May 11, the Tennessee governor signed HB 1181 to enact the Tennessee Information Protection Act (TIPA) and establish a framework for controlling and processing consumers’ personal data in the state. Tennessee is now the eighth state in the nation to enact comprehensive consumer privacy measures, following California, Colorado, Connecticut, Virginia, Utah, Iowa, and Indiana. TIPA applies to any person that conducts business in the state or produces products or services targeted to residents and, during a calendar year, (i) controls or processes personal data of at least 100,000 Tennessee residents or (ii) controls or processes personal data of at least 25,000 Tennessee residents and derives 50 percent of gross revenue from the sale of personal data. TIPA provides for several exemptions, including financial institutions and data governed by the Gramm-Leach-Bliley Act and certain other federal laws, as well as covered entities governed by the Health Insurance Portability and Accountability Act. Highlights of TIPA include:
- Consumers’ rights. Under TIPA, consumers will be able to access their personal data; make corrections; request deletion of their data; obtain a copy of their data in a portable format; request what categories of information were sold or disclosed; and opt out of the sale of their data.
- Controllers’ responsibilities. Data controllers under TIPA will be responsible for, among other things, (i) responding to consumers’ requests within 45 days unless extenuating circumstances arise and providing requested information free of charge, up to twice annually for each consumer; (ii) establishing an appeals process to allow consumer appeals within a reasonable time period after a controller’s refusal to take action on a consumer’s request; (iii) limiting the collection of data to what is required and reasonably necessary for a specified purpose; (iv) not processing data for reasons incompatible with the specified purpose; (v) securing personal data from unauthorized access; (vi) not processing data in violation of state or federal anti-discrimination laws; (vii) obtaining consumer consent in order to process sensitive data; (viii) ensuring contracts and agreements do not waive or limit consumers’ data rights; and (ix) providing clear and meaningful privacy notices. TIPA also sets forth obligations relating to contracts between a controller and a processor.
- No private right of action but enforcement by state attorney general. TIPA explicitly prohibits a private right of action. Instead, it grants the state attorney general excusive authority to enforce the law and seek penalties of up to $15,000 per violation and treble damages for willful or knowing violations. The attorney general may also recover reasonable expenses, including attorney fees, for any initiated action.
- Right to cure. Upon discovering a potential violation of TIPA, the attorney general must give the data controller written notice. The data controller then has 60 days to cure the alleged violation before the attorney general can file suit.
- Affirmative defense. TIPA establishes an affirmative defense for violations for controllers and processors that adopt a privacy program “that reasonably conforms” to the National Institute of Standards and Technology Privacy Framework and complies with required provisions. Failing “to maintain a privacy program that reflects the controller or processor's data privacy practices to a reasonable degree of accuracy” will be considered an unfair and deceptive act or practice under Tennessee law.
TIPA takes effect July 1, 2024.
FDIC announces California and Tennessee disaster relief
On April 13, the FDIC issued FIL-15-2023 to provide regulatory relief to financial institutions and help facilitate recovery in areas of California affected by severe winter storms, straight-line winds, flooding, landslides, and mudslides that began February 21 and continue to affect the region. The FDIC acknowledged the unusual circumstances faced by affected institutions and encouraged those institutions to work with impacted borrowers to, among other things: (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements and instructs institutions to contact the San Francisco Regional Office for consideration. The same day, the FDIC issued FIL-16-2023 to provide similar regulatory relief to financial institutions and help facilitate recovery in areas of Tennessee affected by severe storms, straight-line winds, and tornadoes between March 31 and April 1.
Tennessee enacts Money Transmission Modernization Act
On April 4, the Tennessee governor signed HB 316 / SB 268 to enact the Money Transmission Modernization Act, the money transmitter model law created by industry and state experts. Provisions under the Act amend Tennessee Code Annotated, Title 45, and are intended to (i) reduce regulatory burden by promoting coordination among the states in areas of regulation, licensing, and supervision; (ii) protect the public from financial crime; (iii) standardize activities that are subject to, or otherwise exempt from, licensure; and (iv) modernize safety and soundness requirements to protect customer funds while supporting innovative and competitive business practices. Under the Act, persons may not engage in the business of money transmission, or advertise, solicit, or hold themselves out as providing money transmission without being licensed. In addition to exempting federal and state agencies and financial institutions organized under the laws of any state or the United States, the Act now exempts “authorized delegates”—persons designated by a licensee to engage in money transmission on behalf of the licensee, and persons that fall within an outlined exemption, including persons appointed as an agent of the payee.
The Act also provides the commissioner of financial institutions with the authority to exercise various powers, including the use of the Nationwide Multistate Licensing System and Registry, and the ability to participate in multistate supervisory processes coordinated through the Conference of State Bank Supervisors, Money Transmitter Regulator Association, and others for all licensees that hold licenses in Tennessee and other states. While retaining the ability to conduct examinations of licensees, the commissioner may now examine or investigate an authorized delegate. The Act also updates licensee liability requirements related to net worth assets and surety bonds and make various other changes related to audit reports and disclosure permissions. The Act further provides that “[a] person shall not engage in the business of money transmission on behalf of a person not licensed under this chapter or not exempt pursuant to § 45-7-104,” and stipulates that “[a] person that engages in such activity provides money transmission to the same extent as if the person were a licensee, and is jointly and severally liable with the unlicensed or nonexempt person.” The Act takes effect January 1, 2024.
HUD announces disaster relief for homeowners in several states
On March 16, HUD announced disaster assistance for certain areas in Virginia and Tennessee (see here and here) impacted by severe winter storms. The disaster assistance follows President Biden’s major disaster declarations on March 11. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
On March 18, HUD announced disaster assistance for certain areas in Maine impacted by a severe storm and flooding. The disaster assistance follows President Biden’s major disaster declarations on March 15. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
FDIC announces Tennessee disaster relief
On January 19, the FDIC issued FIL-06-2022 to provide regulatory relief to financial institutions and facilitate recovery in areas of Tennessee affected by severe storms, straight-line winds, and tornadoes. The FDIC acknowledged the unusual circumstances faced by institutions and their customers affected by the weather and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans, so long as these measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
HUD announces Alaska and Tennessee disaster relief
On January 19, HUD announced disaster assistance for certain areas in Alaska and Tennessee impacted by severe storms, straight-line winds, flooding, landslides, mudslides, and tornados. (See here and here.) The disaster assistance follows President Biden’s major disaster declarations on January 14 and 15. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair, through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibilities and waivers for community planning and development grantees and public housing authorities. For Alaska specifically, flexibilities and waivers are extended to tribes and tribally designated housing entities.