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  • Minnesota amends health care provision in extensive new law

    Privacy, Cyber Risk & Data Security

    On November 9, the State of Minnesota enacted Chapter 70--S.F.No. 2995, a large bill to amend certain sections of its current health care provisions. The bill covers extensive changes to healthcare provisions, from prescription contraceptives, hearing aids, mental health, long COVID, and childcare, among many others.

    One of the significant new laws requires a hospital to first check if a patient’s bill is eligible for charity care before sending it off to a third-party collection agency. Further, the bill places new requirements on hospitals collecting on a medical debt before it can “garnish wages or bank accounts” of an individual. The Minnesota law also outlines how a hospital wishing to use a third-party collection agency, must first complete an affidavit attesting that it has checked if the patient is eligible for charity care, confirmed proper billing, given the patient the opportunity to apply for charity care, and, under certain circumstances, if the patient is unable to pay in one lump sum, offered a reasonable payment plan instead.

    Privacy Privacy, Cyber Risk & Data Security Minnesota Health Care Medical Debt Debt Collection

  • 2nd Circuit affirms dismissal of whistleblower lawsuit alleging FCA violations

    Courts

    On October 30, the U.S. Court of Appeals for the 2nd Circuit affirmed a district court order dismissing a whistleblower lawsuit alleging violations of the False Claims Act (FCA). The three-judge panel concluded that they did not need to “address the public disclosure bar because the [second amended complaint]… fails to state a claim for a violation of the FCA.” According to the panel, the plaintiff did not allege that the defendant knowingly made a misrepresentation material to the government’s decision and that “failure to adequately plead either of these requirements is fatal to a relator's claim." 

    The original whistleblower complaint, filed in 2014, alleged that the defendant covered losses on loans that it acquired by taking advantage of a shared loss agreement with the FDIC.  The complaint also stated that the defendant knowingly reported write-downs on loans already paid off, sold, or irrelevant to the portfolio. The FDIC declined to intervene, and the case was dismissed. The plaintiff appealed and oral arguments were heard on October 12; however, the order found that the plaintiff failed to identify a false claim or false record and did not establish scienter or motive to commit fraud. 

    Courts Second Circuit Whistleblower False Claims Act / FIRREA Appellate Consumer Finance Lending FDIC

  • Fed Governor Michelle Bowman gives speech discussing banking regulatory reforms and concerns

    On November 9, Federal Reserve Governor Michelle W. Bowman delivered a speech on the economy and prioritization of bank supervision and regulation. Governor Bowman highlighted recent developments in banking regulatory framework reform. Governor Bowman began by highlighting the proposed reforms to capital requirements for banks with more than $100 billion in assets. She mentioned the central concern raised is the potential inadequacy of the quantitative and analytical foundations of these reforms. Governor Bowman questioned whether Basel III reforms effectively address regulatory deficiencies and emphasized the need for a thorough understanding of both the benefits and costs of implementing such changes. Governor Bowman discussed the actions taken by the agencies, including an extended comment period and efforts to gather more information on the proposal's potential impact. Several areas are identified as necessary to address, such as redundancy in the capital framework, calibration of the Market Risk Capital Rule, the inefficiency of two standardized capital stacks, and the punitive treatment of fee income. Governor Bowman also highlighted the missed opportunity to review leverage ratio requirements, which could have implications for market functioning in times of stress.

    Shifting the focus to the CRA, Governor Bowman acknowledged the importance of improving access to credit, especially in low- and moderate-income (LMI) communities. However, the Governor mentioned concerns raised about the new final rule implementing the CRA. She explained some criticism for it being unnecessarily complex, overly prescriptive, and disproportionately burdensome for banks, especially community banks. It applies the same regulatory expectations to small and large banks, failing to recognize the differences among banks in terms of size, risk, and business models, she added. Governor Bowman’s remarks underscore the need for a balanced, data-driven, and risk-focused approach to regulatory reforms. 

    Bank Regulatory CRA Basel Bank Supervision

  • Fed releases third quarter SLOOS survey on bank lending practices

    On November 6, the Fed released its quarterly survey of Senior Loan Officer Opinion Survey (SLOOS) on bank lending practices. The report is administered to mostly domestic banks but includes some international banks.

    The findings are summarized based on each type of loan: commercial, real estate, and consumer. Regarding business loans, the Fed finds banks reported “tighter standards and weaker demand for commercial and industrial loans.” For commercial real estate loans, banks reported “tighter standards and weaker demand” as well. For household loans, banks reported that “lending standards tightened across all categories of residential real estate loans (other than government residential mortgages),” but demand weakened for all residential real estate loans. Similarly, but for HELOCs, banks reported “tighter standards and weaker demand.” For consumer loans, such as credit cards, and auto loans, among others, “standards reportedly tightened, and demand weakened on balance.”

    The Fed also asked questions related to banks’ comfort level in approving applications based on FICO scores; the Fed found that banks were “less likely to approve such loans for borrowers with FICO scores of 620 and 680 in comparison with the beginning of the year, while they were… about as likely to approve auto loan applications for borrowers with FICO scores of 720 over this same period.” Finally, the Fed inquired about reasons why banks tightened their lending standards in the third quarter. Banks explained that economic conditions created a “reduced tolerance for risk; deterioration in the credit quality of loans and collateral values; and concerns about funding costs.”

    Bank Regulatory Federal Issues Agency Rule-Making & Guidance Loans Banking

  • Fed Governor Cook on financial stability

    On November 8, Federal Reserve Governor Lisa D. Cook delivered a speech regarding financial stability at the Central Bank of Ireland. Governor Cook underscored the link between financial stability and the Fed’s stable process and maximum employment and focused on four key vulnerability categories: (i) asset valuations; (ii) business and household borrowing; (iii) financial-sector leverage; and (iv) funding risks. Governor Cook noted rising asset valuations in various markets, especially in the real estate sector, and the potential risks associated with high levels of borrowing by businesses and households. Additionally, she discussed the importance of monitoring financial sector leverage and funding risks, both in bank and nonbank financial institutions.

    Governor Cook also outlined near-term risks that could impact the resilience of the financial system. These risks included inflationary pressures, potential losses in the real estate market, banking-sector stress, and market liquidity strains. She emphasized the need for robust oversight and prudential requirements for nonbank financial institutions, as they are becoming increasingly interconnected with the banking sector.

    Finally, Governor Cook stressed the importance of remaining vigilant in identifying and addressing vulnerabilities within the global financial system to ensure its stability and, in turn, support the well-being of households, businesses, and the broader economy.

    Bank Regulatory Risk Management Federal Reserve

  • FTC, Florida AG settle with “chargeback mitigation” company

    Federal Issues

    On November 7, the FTC and the State of Florida settled with a chargeback company to prevent it from deceiving any consumers who seek to dispute credit card charges. Back in April 2023, the FTC and the State of Florida sued the chargeback company under Section 5 of the FTC Act, 15 U.S.C. § 45, and the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), Chapter 501, Part II, as previously covered by InfoBytes here. A chargeback is a system for consumers to get their money returned when they have a problem with a purchase. The proposed court order was agreed to by the defendants but, before it can go into effect, the order first must be approved by a federal judge.  The final judgment totals $150,000 and prevents the defendants from working with several high-risk clients.

    Federal Issues FTC State Attorney General Florida FTC Act Unfair Deceptive Credit Cards Chargeback

  • Bank of England and Financial Conduct Authority seek feedback on stablecoin regulatory proposals

    Securities

    On November 6, the Bank of England and the Financial Conduct Authority (FCA) requested feedback on their proposal to regulate a form of cryptocurrency known as stablecoins. Stablecoins are a cryptoasset that “maintain a stable value relative to a fiat currency by holding assets as backing” and fall within the UK Government’s plan to regulate them for future retail payment use. In addition to retail use, the Bank of England and FCA’s wish to regulate stablecoins is meant to “prevent money laundering… and safeguard financial stability.”

    The Bank of England published a handy road map with similar regulators on how to best navigate rolling out new technological payment innovations, such as the digital pound. Each of the financial regulators provided two white papers: (i) the FCA’s discussion paper outlines how the FCA can regulate cryptoassets under the Financial Services and Markets Act 2000, including providing information on backing assets, custody requirements, and allowing overseas stablecoins used as a form of tender in the UK; and (ii) the Bank of England’s discussion paper examines proposed regulations for sterling-dominated stablecoins in the hopes of becoming widespread for retail use. Furthermore, this paper details proposed regulations for everyday use, including money transfers and providing digital wallets.

    Both regulators’ comment period is open until February 6, 2024.

    Securities Of Interest to Non-US Persons Digital Assets Cryptocurrency Stablecoins

  • Healthcare providers reach $3.5 million settlement in FDCPA suit after eight years of litigation

    Courts

    On November 2, two healthcare providers settled with plaintiffs after eight years of litigation between the district court and the U.S. Court of Appeals for the 6th Circuit, stemming from alleged violations of the FDCPA, breach of contract, and violations of the Ohio Consumer Sales Practices Act, among other things. According to the order, the defendants allegedly contacted plaintiffs and their legal counsel, requesting that their legal counsel sign a letter to forego any legal settlement or judgment against the defendants to prevent plaintiffs’ accounts from being sent to collections, despite having plaintiffs’ health insurance information. While the defendants deny any fault, wrongdoing, or liability in connection with the claims, the parties agreed to a settlement amount of $3.5 million, with each claimant receiving a cash payment of $25. The class is comprised of 12,000 individuals with health insurance plans accepted by the healthcare provider who were patients at an Ohio facility from 2009 to 2023, and subsequently made payments or were asked to make payments for their treatment, excluding co-pays or deductibles. Additionally, certain class members will also receive a cash payment equal to fifty percent of the amount paid to the healthcare provider.

    Courts Class Action Debt Collection FDCPA Settlement Sixth Circuit

  • District Court grants payday lender's motion to stay CFPB case pending Supreme Court decision

    Courts

    On November 3, the U.S. District Court of Nevada granted a payday lender’s motion to stay a case brought by the CFPB, pending a SCOTUS’s decision in Community Financial Services Association of America v. Consumer Financial Protection Bureau (see InfoBytes here and here). The CFPB issued a civil investigative demand (CID) in late 2022 to the lender, as part of an investigation into its lending practices. The lender complied with the CID initially, but later requested a stay due to the impending SCOTUS decision regarding the constitutionality of the CFPB’s funding structure, which could impact the CFPB’s enforcement authority. Although the CFPB opposed the stay by arguing that the extensive delay could hinder its ability to investigate the lender, the court granted the lender’s motion, in line with other district courts that have faced similar issues.

    Courts CFPB Constitution U.S. Supreme Court Consumer Finance Consumer Protection CID Payday Lending

  • FTC sues fintech firm for deceiving users and making cancelations difficult

    On November 3, the FTC filed suit against a fintech firm within the U.S. Southern District Court of New York.  The FTC alleged the fintech mobile app misled customers, “violated Section 5 of the FTC Act[,] and made it hard to cancel services in violation of the Restore Online Shoppers’ Confidence Act (ROSCA).” However, the FTC and Defendant stipulated the entry of a proposed settlement order that includes a monetary judgment of $18 million for consumer refunds and requires Defendant to stop its deceptive marketing practices and end tactics that prevented customers from canceling services. The first time the FTC had collected civil penalties under ROSCA was in January 2023, as covered by InfoBytes here.

    The FTC’s complaint alleges that consumers were deceived into signing up for a $250 cash advance, but many users were unable to receive any money at all. Furthermore, consumers had to have first entered a $9.99 monthly membership––regardless of whether they qualified for the $250 or not. Further, if a user wished to cancel their monthly membership, the fintech firm employed “dark” and manipulative design tricks to “create a confusing and misleading cancellation process that prevented consumers from canceling their subscriptions.” The FTC’s proposed settlement order must first be approved by a federal judge before it can go into effect.

    Bank Regulatory FTC Consumer Finance Settlement

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