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California attorney general settles with crypto-asset company
On September 4, California Attorney General (AG) Rob Bonta announced a settlement with a cryptocurrency trading platform for allegedly failing to comply with state cryptocurrency laws. According to the settlement, the company failed to allow customers to withdraw cryptocurrency from accounts and failed to disclose certain aspects of its trading and order handling procedures. Under the terms of the settlement, the company has agreed, among other things, to (i) permit customers to withdraw their cryptocurrency assets to external wallets in accordance with applicable law; (ii) ensure the accuracy of written representations to customers about trading and order handling practices; and (iii) update its customer agreement to address potential delays in transaction settlements.
Additionally, the company has agreed to pay $3.9 million allocated to: (i) fees and costs incurred by the AG in connection with the investigation; (ii) fees and costs to be incurred in connection with monitoring and enforcing the settlement agreement; (iii) any litigation relating to monitoring and enforcing the settlement; and (iv) all potential claims to be released by the AG under the settlement.
NYC issues new rules for debt collectors
On August 12, the New York City Department of Consumer and Worker Protection (DCWP) issued a Notice of Adoption regarding amendments to debt collection rules. According to the DCWP, the amendments, effective December 1, will enhance consumer protections and align with changes in federal regulations and industry practices.
Among other things, the amendments will include requirements for debt collectors to provide specific disclosures when collecting on time-barred debt, to maintain comprehensive records of communications, consumer complaints, and other relevant documents, and to obtain consumer consent for electronic communications and provide clear opt-out options. The amendments will also impose restrictions on the frequency and methods of communication with consumers, including the use of email and social media. There will also be enhanced procedure requirements for verifying disputed debts and responding to consumer disputes. The DCWP will also establish specific rules for collecting medical debt, such as prohibiting the reporting of medical debt to consumer reporting agencies.
The notice stated feedback was garnered from public hearings and comments from various stakeholders, including industry associations, consumer advocacy groups, and legal services organizations were reflected in the rules. The DCWP also issued Corresponding FAQs.
Court upholds California’s daily transaction limit for crypto asset kiosks
On August 30, the Superior Court for the State of California dismissed a lawsuit challenging the California Digital Financial Asset Law’s (DFAL) $1,000 daily transaction limit. The plaintiff, an alliance for cryptocurrency terminals, argued that the daily transaction limit was unreasonable and exceeded legislative authority, but the court found it to be a reasonable measure to prevent fraud.
The DFAL, signed into law by the Governor on October 13, 2023, requires companies to be licensed by the California DFPI to engage in digital financial asset business activity in California and is effective starting July 1, 2025. Besides the daily transaction limit, the DFAL imposes several other requirements on kiosk operators. From January 1, kiosk operators had to provide the DFPI with a list of all kiosk locations and adhere to a $1,000 daily transaction limit per customer. By January 1, 2025, kiosk operators must also provide pre-transaction disclosures to customers and limit fees based on the transaction’s dollar equivalent.
The court’s decision reinforced the DFPI’s authority to implement and enforce the DFAL, ensuring that the regulatory framework is in place to protect consumers from fraudulent transactions and illicit activities.
DC AG takes action against four title insurance companies for unlawful insurance kickback schemes
On August 29, the Attorney General for the District of Columbia (DC AG) released four assurances of voluntary compliance against several real estate companies for allegedly using “illegal kickback schemes” in the title insurance market. The DC AG stated in each assurance that it sought injunctive relief, consumer restitution, civil penalties, costs and attorneys’ fees for violations of DC’s Consumer Protection Procedures Act (CPPA). Although only recently published, two of the settlements were executed in 2023.
In the first assurance, the DC AG alleged that the company — which provided title insurance, escrow, and closing services to DC consumers — created subsidiary agents to receive profits from their own referral business. Noting that DC law prohibits “[a] title insurer or other person” from “giv[ing] or receiv[ing]… any consideration for the referral of title insurance business or escrow… provided by a title insurer,” the DC AG found that the company’s business practices constituted unfair and deceptive trade practices under the CPPA and imposed a $1.9 million civil penalty on the company. Regarding the second assurance, the DC AG took action against a provider of title insurance and settlement services whose employees’ were compensated for the referral of title insurance business in violation of DC law. The DC AG claimed the same violations and an injunction and fined the company $1 million. In the third and fourth assurances, the companies provided title insurance services to DC consumers by establishing joint ventures with local real estate agents, which the DC AG found the companies created to refer title insurance business and share the profits. The companies were respectively fined $325,000 and $65,000 to resolve the claims.
New York Attorney General sues rent-to-own financing company
On August 14, New York State Attorney General (AG) Letitia James filed a complaint in New York State court against a company (the defendant) offering financing products using Retail Purchase Agreements (RPAs). An RPA is a rent-to-own agreement where consumers select merchandise and the financing company “buys” it from a retailer, then leases it to the consumer on a periodic basis. The consumer “owns” the product only after completing the specified periodic payments.
The New York AG alleged the RPAs offered by the defendant violated New York’s Personal Property Law (PPL) Article 11 in several ways, including because consumers cannot return a product if they no longer wish to rent it. The AG noted that a legally compliant rent-to-own (RTO) transaction must allow consumers to return a product if they no longer wish to rent it. According to the AG’s complaint, however, the defendant’s return rate was reportedly between 0.11 and 0.17 percent. Further, because the AG alleged the RPAs do not comply with RTO laws, the RPAs were actually loans under New York State law. The AG asserted the RPAs were thus void under New York State law, because they were loans that charged annual interest rates over 100 percent, violating New York’s usury cap of 16 percent set by General Obligations Law § 5-501 and Penal Law § 190.40.
The New York AG further alleged the company failed to follow other laws applicable to rent-to-own agreements. Specifically, the AG alleged that, among other practices, the company failed to comply with e-signature laws, misrepresented the cost of its financing, failed to offer early payment options, failed to disclose prices, failed to name its retailers, charged consumers for damaged or lost merchandise, fabricated delays and harvested fees, misled consumers on returns, and obstructed their right to terminate, among other violations. Through these alleged practices, the New York AG claimed the company engaged in “fraudulent, deceptive, and illegal conduct” in violation of Executive Law § 63(12), General Business Law §§ 349-350 and 601, and PPL Article 11.
The AG’s complaint prayed the court permanently enjoin the company from engaging in these behaviors and issue an order declaring all RPAs with New York consumers void. The AG also sought restitution for all injured consumers, disgorgement of profits illegally obtained, and civil penalties, among other remedies.
State AGs submit response to Treasury RFI on using AI in finance
On August 12, a coalition of 15 Republican State Attorneys General sent a letter addressed to the Secretary of the Treasury, Janet Yellen, in response to the the Treasury’s Request for Information (RFI) on the uses, opportunities and risks of AI in the financial services industry.
The State AGs emphasized potential benefits of the implementation of AI by financial services firms including improved customer interactions through AI chatbots, expedited credit risk evaluations, enhanced investment management, and improved fraud detection. The AGs urged the Department to avoid heavy-handed regulation that might stifle innovative uses of AI, noting that enforcement should be limited to deceptive acts or practices or direct harms to competition. The AGs also noted that existing consumer protection laws were already well-positioned to address potential harms arising from these technologies.
The letter also admonished against the politicization of AI regulation, suggesting that any regulation implemented by the Treasury must focus solely on risks to financial reliability and consumer protection. The AGs expressed a concern that, in their view, recent Treasury regulations used financial oversight as a guise to advance non-financial goals, such as environmental regulation, racial equity and other ideological agendas. The AGs asserted that such non-financial purposes were improper justification for Treasury regulations and that any AI regulation should be limited to addressing concerns relating to financial stability.
The letter further advised the Treasury to be mindful of the impact of AI regulations on competition, warning against regulations that could stifle innovation and harm the ability of smaller entities to compete. The AGs also advocated for regulations that complement state laws and that do not preempt existing state enforcement mechanisms, emphasizing the role of State AGs in pursuing recent and successful consumer protection actions.
California’s Attorney General supports CFPB medical debt rule
On August 12, the California Attorney General (AG) submitted a comment letter in support of the CFPB’s proposed rule to ban using medical information for credit eligibility determinations. As covered by InfoBytes, the proposed rule would amend the FCRA to remove the medical financial information exception and limit credit reporting of medical debt. The AG noted how the CFPB’s efforts aligned with California’s SB 1061, which also targeted the exclusion of medical debt from credit scores.
This was not the first time the AG supported medical payment reforms; he previously wrote to federal agencies urging them to adopt consumer protections for patients using medical credit cards and installment loans to pay for healthcare-related bills (covered by InfoBytes here). The AG suggested the CFPB expand the definition of “medical information” to include all forms of medical bill payments made by or on behalf of patients for medical care, services, or devices. He argued this broader definition would ensure that all medical-related expenses, regardless of the payment method, were excluded from consumer credit reports.
The proposal also addressed the feasibility of financial institutions distinguishing between medical and non-medical debt. Credit card companies can exclude medical debt from credit reports through their merchant systems, suggesting these proposed changes might be implemented more easily.
Illinois enacts the Uniform Money Transmission Modernization Act
On August 9, the Governor of Illinois signed SB 3412 (the “Act”) into law, creating a new regulatory framework for money transmission. This Act, named the Uniform Money Transmission Modernization Act, replaces the previous Transmitters of Money Act. The Act aims to standardize and modernize the regulation, licensing, and supervision of money transmission activities across states. The Act protects the public from financial crimes, reduces regulatory burdens, and ensures the safety of customer funds. The Act introduces specific licensing requirements, such as applicants providing detailed financial and operational information. It mandates that licensees maintain a tangible net worth and permissible investments to safeguard customer funds. Additionally, it outlines the roles and responsibilities of authorized delegates, ensuring compliance with state and federal laws.
Licensees must submit regular reports, including audited financial statements and records of money transmission activities. The Act grants the Secretary of Financial and Professional Regulation the authority to conduct compliance examinations. It includes provisions for a transition period, allowing current licensees to continue operating under the new regulations upon license renewal. The Act also establishes the Transmitters of Money Act (TOMA) Consumer Protection Fund to provide restitution to consumers who suffer monetary losses due to violations. The new regulations take effect immediately, with certain provisions becoming effective on January 1, 2026.
Utah consumer credit notification transfers to NMLS
On August 2, the Utah Department of Financial services sent a letter to all consumer credit notification filers notifying them that the state will transition all consumer credit notification to the NMLS. The letter cited a newly enacted law, SB 25, which stated that a company that would be required to file a Utah Consumer Credit Notification must be managed on the NMLS (covered by InfoBytes here). The letter outlined two steps licensees should take by August 26 to prepare for the transition: (i) companies must create a company record in the NMLS; and (ii) companies must complete the company (MU1) and Individual (MU2) forms.
New Jersey bans medical debts in credit reporting
On July 22, the Governor of New Jersey signed into law A 3861 (the “Act), also known as the Louisa Carman Medical Debt Relief Act, which codified the protection of consumers from “predatory medical debt collectors,” including by prohibiting certain credit reporting of medical debts. Section 3 of the Act prohibits medical debt collectors from reporting a patient’s medical debt to any consumer reporting agency for health care services performed on or after the effective date. Section 3 also prohibits consumer reporting agencies from including a patient’s paid medical debt or outstanding medical debt of less than $500. The provisions of Section 3 went into immediate effect upon approval of the bill.
Section 5 of the Act prohibits a medical debt collector from charging an interest rate of more than 3 percent per year, garnishing the wages of someone who makes less than six times the federal poverty level to collect any owed medical debts, or placing a lien on an individual’s primary residence or personal property to collect medical debt owed by that person. The provisions of section 5 of the Act will go into effect one year following enactment: July 22, 2025.
New Jersey became the latest state to bar consumer reporting agencies from including a patient’s medical debt in credit reports, following Connecticut (here) and New York (here).