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Financial Services Law Insights and Observations

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  • State AGs urge CFPB to reconsider proposed changes to HMDA

    State Issues

    On October 15, a coalition of 13 state attorneys general submitted a comment letter in response to the CFPB’s Advance Notice of Proposed Rulemaking issued last May seeking information on the costs and benefits of reporting certain data points under HMDA. (Previously covered by InfoBytes here.) In the comment letter, the AGs argue, among other things, that the proposed rule would reduce transparency and “undermine the ability of local public officials to investigate unfair and discriminatory mortgage lending practices.” The AGs assert that the Bureau’s proposal to limit the data financial institutions are required to report to the CFPB under HMDA will open the door for financial institutions to engage in discriminatory lending, pointing to the 2018 national HMDA loan-level data released on August 30 (InfoBytes coverage here), which, according to the AGs, show “disturbing trends” that demonstrate the additional data fields are helping to achieve HMDA’s objectives. Specifically, the AGs cite to (i) disparities in manufactured home lending; (ii) racial and ethnic data that points to potential disparities in lending; (iii) the importance of collecting all data on denial reasons; (iv) loan pricing data as an indicator of fair lending; and (v) the importance of collecting debt-to-income and combined loan-to-value ratios.

    The New York AG’s office also sent a second letter the same day in response to a Notice of Proposed Rulemaking (NPRM) issued last May by the Bureau that would permanently raise coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the HMDA rules. (Previously covered by InfoBytes here.) The AG’s office argues that increasing the reporting threshold “would exempt thousands of lenders from reporting data” and would “inhibit the ability of communities and state and local law enforcement to ensure fair mortgage lending in New York and elsewhere, and violate the Administrative Procedure Act” since it fails to consider the full cost of the proposed rule on the states. Specifically, the AG’s office contends that the NPRM will (i) exempt a large number of depository institutions leading to significance loss of data on a local level; (ii) leave discriminatory lending in the rural and multifamily lending markets unchecked; and (iii) guarantee predatory lending if the threshold for open-end reporting is permanently set at 200 loans.

    State Issues State Attorney General CFPB Mortgages HMDA Fair Lending

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  • California caps rate on installment loans

    State Issues

    On October 10, the California governor signed AB 539, known as the “Fair Access to Credit Act,” which amends the California Financing Law (CFL) to limit the rate of interest on certain installment loans. Specifically, for installment loans with a principal amount between $2,500 and $10,000, lenders are prohibited from charging an annual simple interest rate exceeding 36 percent plus the federal funds rate, excluding an administrative fee (not to exceed $50). Moreover, for loans between $2,500 and $10,000, the bill establishes a minimum 12-month loan term. Among other things, the bill also (i) requires lenders to report each borrower’s payment performance of these installment loans to at least one national credit reporting agency; (ii) requires lenders to offer an approved credit education program or seminar approved by the Commissioner of Business Oversight before disbursing the proceeds to the borrower; and (iii) prohibits lenders from charging or receiving any penalty for prepayment for loans made pursuant to the CFL that are not secured by real property. The bill is effective January 1, 2020.

    State Issues State Legislation Usury Interest Rate Installment Loans

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  • California governor signs CCPA amendments

    State Issues

    On October 11, the California governor signed several amendments to the California Consumer Privacy Act (CCPA) and other privacy-related bills. As previously covered by a Buckley Special Alert, AB 874, AB 1355, AB 1146, AB 25, and AB 1564 leave the majority of the consumer’s rights intact in the CCPA and clarify certain provisions—including the definition of “personal information.” Other exemptions were added or clarified regarding the collection of certain data that have a bearing on financial services companies. Notable revisions to the CCPA include the (i) “personal information” definition; (ii) FCRA exemption; (iii) employee exemption; (iv) business individual exemption; (v) verification and delivery requirements; (vi) privacy policy and training requirements; (vii) collection of information; and (viii) vehicle/ownership information exemption. The various amendments are effective on January 1, 2020, the same day the CCPA becomes effective.

    Additionally, on October 10, the California attorney general released the highly anticipated proposed regulations implementing the CCPA. See the Buckley Special Alert for details of the proposed regulations.

    State Issues Privacy/Cyber Risk & Data Security State Legislation State Attorney General FCRA State Regulation

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  • California: Mortgage debt now included under Rosenthal Fair Debt Collection Practices Act

    State Issues

    On October 7, California’s governor signed SB 187, which amends the state’s Rosenthal Fair Debt Collection Practices Act and provides that consumer debt under the act now includes mortgage debt. SB 187 also removes the exception for an attorney or counselor at law from the definition of debt collector, and makes other nonsubstantive changes. The amendments take effect January 1, 2020.

    State Issues State Legislation Debt Collection Mortgages

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  • NYDFS creates Student Debt Advisory Board as student loan legislation takes effect

    State Issues

    On October 9, NYDFS announced the creation of the Student Debt Advisory Board, which will advise on consumer protection, student financial products and services, as well as issues facing communities significantly impacted by student debt. The new advisory board is a part of NYDFS’s “Step Up for Students” initiative intended to “safeguard student loan borrowers from discriminatory or predatory practices by student loan servicers.” The announcement comes the same day legislation to protect student borrowers takes effect in the state. As previously covered by InfoBytes, the law requires student loan servicers to comply with requirements set forth in amendments to the state’s banking law and be licensed by NYDFS in order to service student loans owned by residents of New York. Additionally, servicers must adhere to standards similar to regulations that govern mortgages and other lending products.

    State Issues NYDFS Student Lending Student Loan Servicer

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  • New York AG sues student loan servicer for alleged PSLF and IDR failures

    State Issues

    On October 3, the New York attorney general announced an action filed against a national student loan servicer for allegedly failing to properly administer the Public Service Loan Forgiveness (PSLF) program and mishandling income driven repayment (IDR) plans. In the complaint, the attorney general asserts that, in violation of the Consumer Financial Protection Act (CFPA) and New York law, the servicer, among other things, (i) failed to accurately count borrower’s PSLF-qualifying payments; (ii) failed to provide timely explanations to borrowers for PSLF payment count determinations; (iii) failed to process IDR repayment plan paperwork accurately and timely; and (iv) lacked clear policies and procedures for addressing errors, resulting in inconsistent treatment of borrowers. As a result of the servicer’s alleged actions, the attorney general argues that borrowers’ loan balances increased, time was extended on repayment plans, and improper denials of PSLF were issued. The attorney general is seeking injunctive relief, restitution, and civil money penalties.

    State Issues State Attorney General Student Lending CFPA

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  • New York launches online whistleblower submission system

    State Issues

    On October 2, New York’s Office of the Attorney General launched an online, open-source whistleblower submission system designed to enable witnesses to report information without compromising their identity. The N.Y.A.G. Whistleblower Portal allows whistleblowers to securely and anonymously submit information, while protecting individuals’ identity, location, and information provided. Whistleblowers will also be able to engage in two-way anonymous communications with the attorney general’s office through the portal. According to the press release, the attorney general’s office “is the first governmental agency in the United States to offer whistleblowers the capability to directly transmit documents and send and receive communications electronically without their identity being traceable.”

    State Issues State Attorney General Whistleblower

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  • California DBO issues cannabis banking guidance

    State Issues

    On October 3, the California Department of Business Oversight (DBO) issued guidance for state-chartered financial institutions that serve cannabis-related businesses. The guidance, which is intended to help financial institutions manage risks appropriately, addresses cannabis program governance and compliance with the Bank Secrecy Act (BSA), as well as cannabis banking guidance issued in 2014 by the Financial Crimes Enforcement Network (FinCEN). As previously covered by InfoBytes, FinCEN’s guidance—which includes federal law enforcement priorities still in effect that were taken from a now-rescinded DOJ memo—details the necessary elements of a customer due diligence program, ongoing monitoring and suspicious activity report filing requirements, and priorities and potential red flags. Notably, the DBO states that while it will not bring regulatory actions against state-chartered financial institutions “solely for establishing a banking relationship with licensed cannabis businesses,” it expects all financial institutions to comply with FinCEN’s BSA expectations and guidance to make appropriate risk assessments. The DBO also referred bank examiners to its September Cannabis Job Aid, which is intended to assist with the examination of financial institutions that may be banking cannabis-related businesses.

    State Issues Cannabis Banking CDBO FinCEN Bank Secrecy Act Examination

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  • California cities allowed to form public banks

    State Issues

    On October 2, the California governor signed AB 857 to authorize the creation of “public banks” in the state to support local economies, community development, and address infrastructure and housing needs for localities. Under AB 857, public banks are defined as “a corporation, organized as either a nonprofit mutual benefit corporation or a nonprofit public benefit corporation for the purpose of engaging in the commercial banking business or industrial banking business, that is wholly owned by a local agency, as specified, local agencies, or a joint powers authority.”

    Among other things, cities who submit applications to the California Department of Business Oversight (DBO) to obtain a certificate of authorization will be required to provide a viability study, as well comply with “[a]ll provisions of law applicable to nonprofit corporations” and obtain deposit insurance through the FDIC. AB 857 also requires “a local agency that is not a charter city to obtain voter approval of a motion to submit an application to the [DBO].” The number of new public bank licenses the DBO is authorized to approve is limited to two per calendar year, with no more than 10 public banks operating at any time. In addition, public banks may only offer products to retail customers through partnerships with existing financial institutions, and are barred from competing with local financial institutions. AB 857 expires seven years after regulations under this law are promulgated.

    State Issues State Legislation CDBO

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  • California addresses robocall spoofing

    State Issues

    On October 2, the California governor signed SB 208, the “Consumer Call Protection Act of 2019,” which requires telecommunications service providers (TSPs) to implement specified technological protocols to verify and authenticate caller identification for calls carried over an internet protocol network. Specifically, the bill requires TSPs to implement “Secure Telephone Identity Revisited (STIR) and Secure Handling of Asserted information using toKENs (SHAKEN) protocols or alternative technology that provides comparable or superior capability by January 1, 2021. The bill also authorizes the California Public Utilities Commission and the Attorney General to enforce certain parts of 47 U.S.C. 227, making it unlawful for any person within the U.S. to cause any caller identification service to knowingly transmit misleading or inaccurate caller identification information with the intent to defraud, cause harm, or wrongfully obtain anything of value.

    As previously covered by InfoBytes, in June 2019, the FCC adopted a Notice of Proposed Rulemaking (NPRM) requiring voice providers to implement the “SHAKEN/STIR” caller ID authentication framework. The FCC argued that once “SHAKEN/STIR” is implemented, it would “reduce the effectiveness of illegal spoofing and allow bad actors to be identified more easily.” 

    State Issues State Legislation State Attorney General FCC Robocalls Federal Issues Privacy/Cyber Risk & Data Security

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