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On February 11, a coalition of 22 Democratic state Attorneys General responded to the CFPB’s proposed policy on No-Action Letters (NAL) and a new federal product sandbox, pushing back on the Bureau’s efforts to provide relief to financial institutions looking to implement new consumer financial products or services. (InfoBytes coverage on the proposal available here.) The Attorneys General argued that the Bureau “has no authority to issue such sweeping immunity absent formal rulemaking” and urged the Bureau to rescind the proposals, which the Bureau had stated were exempt from the notice and comment procedures of the Administrative Procedures Act.
In addition to challenging the Bureau’s authority to establish these policies, the Attorneys General asserted specific concerns with the NAL proposal, including (i) the fact that the proposed NAL policy would make NALs binding on the CFPB indefinitely; (ii) the streamlined application process and 60-day decision window, potentially causing the Bureau to render hasty, uninformed decisions; and (iii) the proposed NAL policy’s purported deviations from the policies of other federal agencies, such as the SEC.
As for the new product sandbox, the Attorneys General viewed the proposed policy as “even more troubling” than the NAL proposal, as it provides immunity from “enforcement actions by any Federal or State authorities, as well as from lawsuits brought by private parties.” The Attorneys General rejected the Bureau’s contention that the statutory safe harbors in TILA, ECOA, and the EFTA grant the authority to provide the broad enforcement relief and accused the Bureau of “abandoning its critical role in monitoring the risk that new and emergency technologies post to consumers in the financial marketplace.”
On February 11, a bipartisan group of 29 state Attorneys General, the District of Columbia Attorney General, and an official from the Hawaii Office of Consumer Protection, responded to the FTC’s request for comment on whether the agency should make changes to its identity theft detection rules (the Red Flags Rule and the Card Issuers Rule), which require financial institutions and creditors to take certain actions to detect signs of identity theft affecting their customers. (Covered by InfoBytes here.)
In their response, the Attorneys General urge the FTC not to repeal the Rules, arguing that it “would place consumers at greater risk of identity theft, especially consumers in states that have not enacted” laws that complement the Rules. Instead, the response letter requests the FTC modify the Rules to “ensure their continued relevance” and “keep pace with the ingenuity of identity thieves.” The suggestions include: (i) that notices of changes to email addresses and cell phone numbers be sent to both the prior and updated addresses and phone numbers, an expansion of the current use of mailing addresses; (ii) the encouragement of more current forms of authentication, including multi-factor authentication, to replace examples which imply that knowledge-based authentication by itself is sufficient; and (iii) the addition of new suspicious activity examples related to the use of an account, such as a covered account accessed by unknown devices or IP addresses, an unauthorized user unsuccessfully trying to guess account passwords through multiple attempts, and attempts by foreign IP addresses to access multiple accounts in a close period of time.
D.C. act provides eviction and foreclosure relief to federal employees and contractors impacted by shutdown
On February 6, the Mayor of the District of Columbia signed Act 23-5 (B23-0080) to protect federal workers, contractors, and employees of the District of Columbia Courts from eviction and foreclosure during federal government shutdowns. Among other things, the D.C. Superior Court will have the ability to grant motions to stay foreclosure and eviction proceedings for eligible impacted workers or their household members. The temporary stay would run until the earlier of “(i) 30 days after the effective date of an appropriations act or continuing resolution that funds a federal worker’s government agency; or (ii) 90 days after the date of the federal worker’s first unpaid payday” for government employees, with analogous terms for contractors. The act is effective immediately and expires on May 7.
On January 31, NYDFS issued Supplement No. 2 to Insurance Circular Letter No. 1 (2003), which provides guidance to the title insurance industry following a January 15 unanimous decision by the Appellate Division of the New York State Supreme Court to uphold Insurance Regulation 208. The Appellate Division’s decision vacated the majority of a trial court order annulling Regulation 208, which limits title insurers’ ability to offer inducements to obtain business. (See previous InfoBytes coverage here.)
The NYDFS supplement highlighted three critical holdings from the Appellate Division’s decision. First, the court upheld Regulation 208’s ban on inducements for future title insurance business, recognizing that NYDFS had found that lavish gifts were routinely offered to intermediaries such as lawyers in anticipation of receiving business. Second, the appellate court held that Insurance Law § 6409(d), which prohibits a commission, rebate, fee, or “other consideration or valuable thing,” is not limited to a prohibition on quid pro quo exchanges for specific business. Third, the court annulled Regulation 208’s ban on certain closer fees and fees for ancillary searches.
New Jersey Department of Banking and Insurance adjusts maximum dollar amount of 2019 high-cost home loans
On January 31, as part of the annual review required under the Home Ownership Security Act of 2002 (the Act), the New Jersey Department of Banking and Insurance issued Bulletin 19-02, which addresses the definition of a “high cost home loan.” The bulletin adjusts the maximum principal amount of a loan that may be considered a “high cost home loan” from $487,618.86 to $498,610 and is effective for all completed loan applications subject to the Act received by a lender on or after January 1.
Linda Lacewell, New York Governor Andrew Cuomo’s nominee to replace outgoing Superintendent Maria Vullo as superintendent of NYDFS, is now listed on the department’s website as the acting superintendent. Ms. Lacewell—who previously served as chief of staff and counselor to the governor and served as both a state and federal prosecutor—built and implemented the state’s first system for ethics, risk and compliance in agencies and authorities, and has a history in ethics and law enforcement matters. According to published reports, Acting Superintendent Lacewell assumed her role on February 4.
On January 23, the Delaware Governor signed HB 2, effective immediately, to provide federal workers residing in the state a “temporary suspension of judicial and administrative proceedings in Delaware” if the worker’s ability to pay certain obligations are affected by a government shutdown. Under the act, furloughed federal workers may apply to a court or administrative agency “for a temporary stay, postponement, or suspension regarding any payment of rent, mortgage, tax, fine, penalty, insurance premium, judgment, or other civil obligation or liability.” The length of the temporary stay may be for the covered period (defined as the period that begins on the date the shutdown started and ends on the date 30 days after the date on which the shutdown ended) and 90 days thereafter, or for any part of that period. The court may also set installment payment terms and amounts “as is considered reasonable.”
Among other things, HB 2 also (i) prohibits the lapse, termination or forfeiture of the health, life, disability, or motor vehicle insurance policy of a federal worker without a court order; (ii) places limits on the maximum interest rate that can be imposed on debts incurred before the shutdown to six percent, and states that the interest rate limit applies to debts related to “a mortgage, trust deed, or other security in the nature of a mortgage” during the covered period and 90 days thereafter, but only applies during the covered period for all other obligations or liabilities; and (iii) provides the Attorney General with the power to enforce the act’s provisions, and allows courts to impose civil penalties of up to $10,000 per violation, with wilful violations to be assessed daily.
On January 25, New York City’s Department of Consumer Affairs (DCA) announced that the city’s largest used car dealership must pay more than $3 million in civil penalties after the city’s Office of Administrative Trials and Hearings concluded the dealership used deceptive and illegal practices to profit from low-income and minority consumers. According to the decision, DCA alleged that the dealership engaged in over 90,000 instances of deceptive trade practice in violation of various consumer protection laws, including, among other things, (i) falsifying consumers’ income and/or monthly rent obligations on credit applications; (ii) falsely advertising the financial terms of deals in print and online; (iii) failing to provide documents in Spanish to certain Spanish-speaking consumers; and (iv) misleading consumers about the history and condition of the used cars they purchased. The administrative law judge declined to revoke the dealership’s license, as originally sought by DCA.
This fine is in addition to the settlement agreement between DCA and the used car dealership that required the dealership to pay nearly $142,000 in restitution to 40 consumers and pay $68,000 to cover outstanding loans originated as a result of the allegedly deceptive actions.
Virtual currency is not considered “money” in Pennsylvania; platforms do not need money transmitter license
The Pennsylvania Department of Banking and Securities recently published guidance stating that virtual currency, including “Bitcoin,” is not considered “money” under the state’s Money Transmitter Act (MTA). According to the guidance, only “fiat currency,” or currency issued by the U.S. government is considered “money” under the MTA and that to transmit money under the MTA, (i) fiat currency must be transferred with or on behalf of an individual to a third party; and (ii) the money transmitter must charge a fee for the transmission. Because virtual currency trading platforms (along with virtual currency kiosks, ATMs, and vending machines) never directly handle fiat currency and there is no transfer of money from a user to a third party, they are not money transmitters under the MTA and therefore do not need a license in order to operate in the state.
On January 11, the Georgia Department of Banking and Finance (Department) announced the issuance of a Final Order taken against a Florida-based money transmitter and two of its officers for allegedly failing to, among other things, timely file suspicious activity reports (SARs) or conduct required background checks on covered employees. Following a hearing, the Department issued the Final Order on January 9 to revoke the company’s money transmitter license and order the officers to cease and desist. According to the Order, the officers’ failure to timely file SARs related to four cancelled money transmission transactions violated Georgia’s Rules and Regulations 80-3-1-.03(3), which obligate money transmitters to “comply with the recordkeeping requirements, currency transaction reporting, and suspicious activity reporting set forth in the Bank Secrecy Act.” Moreover, the Department further asserted that the officers materially misrepresented why the filings were delayed, and therefore deemed the officers “incompetent or untrustworthy to engage in the money transmission business.”
- Kathryn L. Ryan to discuss "NMLS usage" at the NMLS Annual Conference & Training
- Jeffrey S. Hydrick to discuss "State legislative update" at the NMLS Annual Conference & Training
- Kathryn L. Ryan to speak at the "Business model primer" at the NMLS Annual Conference & Training
- Daniel P. Stipano to discuss "Dynamic customer due diligence and beneficial ownership from KYC to ongoing CDD and the new rule implementation" at the Puerto Rican Symposium of Anti-Money Laundering
- Michelle L. Rogers to discuss "Preparing for servicing exams in the current regulatory environment" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jon David D. Langlois to discuss "Regulatory risks of convenience fees" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- APPROVED Webcast: NMLS Annual Conference & Ombudsman Meeting: Review and recap
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Melissa Klimkiewicz to discuss "Servicing super session" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Daniel P. Stipano to discuss "Lessons learned from recent high profile enforcement actions" at the Florida International Bankers Association AML Compliance Conference
- Moorari K. Shah to provide "Regulatory update – California and beyond" at the National Equipment Finance Association Summit
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program