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  • NYDFS encourages financial institutions to assist Puerto Rico

    State Issues

    On February 5, the New York governor announced measures to assist with disaster relief for hurricane and earthquake-ravaged Puerto Rico. In an Industry Letter, NYDFS informed state-regulated financial institutions that they may receive Community Reinvestment Act (CRA) credit for “community development activities that revitalize or stabilize designated disaster areas” in Puerto Rico. The letter included the Federal Reserve Bank of New York’s Investment Connection program as one way for New York financial institutions to earn CRA credit. The announcement also mentioned the Guidance to New York State Regulated Banks and Credit Unions Regarding the Earthquakes in Puerto Rico issued on the same day by NYDFS. The guidance urged financial institutions with customers based in Puerto Rico to “consider all reasonable and prudent steps to assist such customers affected by the recent earthquakes in Puerto Rico.” Some of the specific suggestions included (i) waiving ATM fees, overdraft fees, and late payment fees; (ii) increasing ATM daily withdrawal limits and credit card limits; and (iii) working with customers to defer payments or extend payment due dates on loans. The NYDFS guidance also encouraged state-regulated financial institutions to assist in collecting charitable donations and in notifying their customers how they can donate to help Puerto Rico to recover.

    State Issues NYDFS State Regulators Disaster Relief CRA Consumer Finance

  • NYDFS to take action against check cashing companies for BSA/AML violations

    State Issues

    On February 3, NYDFS announced it intends to take enforcement action through an administrative proceeding against several check cashing entities for alleged violations of New York Banking Law and federal laws and regulations related to the business of check cashing. According to NYDFS, examinations revealed multiple concerns related to the entities’ Bank Secrecy Act/anti-money laundering (BSA/AML) program and transaction monitoring, including (i) inaccurate books and records; (ii) cashing post-dated checks; (iii) insufficient BSA/AML compliance; and (iv) inadequate risk-assessment procedures and customer identification and Know Your Customer programs. NYDFS also stated that management at the identified entities failed to implement effective controls to mitigate and manage BSA/AML compliance programs and Office of Foreign Assets Control risks despite “repeated criticism of the entities’ performance.”

    NYDFS conducted a subsequent investigation, which found additional alleged violations that circumvented Federal and state banking laws, such as (i) hiring undisclosed employees who were paid “off the books”; (ii) conducting an unlicensed mobile check-cashing business; and (iii) and engaging in an illegal check-cashing scheme that structured transactions and falsified business records to give the appearance that checks were cashed on multiple dates, when in fact they were all cashed on a single date. The administrative proceeding to revoke the entities’ licenses and seek civil penalties will begin February 24.

    State Issues State Regulators NYDFS Enforcement Compliance Anti-Money Laundering Bank Secrecy Act OFAC

  • Colorado announces roadmap to cannabis banking

    State Issues

    On February 3, the Colorado governor announced plans to create a regulatory landscape to provide guidance and clarity for state-chartered financial services industries that serve, or wish serve, legal cannabis-related businesses. The Roadmap to Cannabis Banking & Financial Services—primarily driven by the state’s Division of Banking and the Division of Financial Services—is intended to increase the number of financial service providers in the state who serve cannabis-related businesses and cultivate opportunities for cannabis-related businesses that currently do not have access to banking services. According to the announcement, the roadmap outlines seven primary areas of focus, which include “providing clear regulatory guidance, encouraging new and emerging technologies in the banking and financial services space, reducing barriers while upholding consumer protection guardrails, and demonstrating state support for financial businesses wishing to explore cannabis banking.” The press announcement noted that the governor was joined by the lead sponsor of the federal SAFE Banking Act (H.R. 1595), which, as previously covered by InfoBytes, passed the House last September and currently awaits action in the Senate.

    State Issues State Regulators Cannabis Banking

  • Massachusetts AG reaches $1.25 million settlement with online lender

    State Issues

    On January 21, the Massachusetts attorney general announced a $1.25 million settlement with an online marketplace lender to resolve allegations that it violated the state’s Small Loan Statute by facilitating the origination of loans with excessive interest rates to Massachusetts borrowers. According to an assurance of discontinuance (AOD) filed in the Suffolk Superior Court, the company allegedly facilitated personal loans to Massachusetts residents with interest rates exceeding the statutory interest rate cap set by the Small Loan Statute, which regulates terms for consumer loans of $6,000 or less. “Small loans” are defined by the statute as those where the disbursed amount is $6,000 or less.  To determine whether a loan is a “small loan,” the Small Loan Statute provides that if, after all deductions or payments (whether on account of interest, expenses, or principal made substantially contemporaneously with the making of the loan), the amount retained by the borrower is $6,000 or less, the transaction will be deemed to be a loan in the amount of the sum retained by the borrower after deductions or payments, notwithstanding that the loan was nominally for a greater sum (the “deduction provision”).  Among other things, the AG’s office claimed the company facilitated “small loans” with interest rates above the maximum permitted rate for non-licensed small loan companies, and that after the company obtained a small loan company license, it allegedly facilitated loans that exceeded the maximum permitted rate for licensed small loan companies based in part on its reading of the Act’s “deduction provision.” The company admitted no liability, agreed to pay $1.25 million to the Commonwealth, comply with Massachusetts law, and stop facilitating small loans to state residents with interest rates that exceed the maximum permissible rate based on the AG’s reading.

    State Issues Consumer Finance State Attorney General Interest Rate Online Lending Courts Enforcement Settlement Small Dollar Lending

  • Miami voluntarily dismisses FHA suits against banks

    State Issues

    On January 30, the city of Miami dismissed fair housing lawsuits against four of the largest banks in the U.S. (see orders here, here, here and here). The suits—filed in 2013—claimed that redlining by the banks led to a high rate of mortgage loan defaults, foreclosures, and property vacancies, causing property values to go down, which resulted in reduced tax revenues to the city. As previously covered by InfoBytes, in May, the U.S. Court of Appeals for the Eleventh Circuit determined that Miami made plausible claims that the lending practices of two of the banks violated the Fair Housing Act (FHA) and eventually reduced property tax revenues. Philadelphia recently reached a settlement with a large bank after making similar allegations regarding discriminatory mortgage lending practices. (Covered by InfoBytes here.)

    State Issues Courts FHA Fair Housing Act Redlining Fair Lending Mortgage Lenders Mortgages Foreclosure

  • Maryland, Hawaii, and Virginia are latest states to introduce privacy legislation

    State Issues

    Recently, Maryland, Hawaii, and Virginia introduced privacy legislation designed to strengthen consumer access and control over personal data, joining efforts by Washington and New York to pass privacy bills containing provisions that differ from those in the California Consumer Privacy Act (CCPA), which took effect January 1. (See InfoBytes coverage on Washington here, New York here, and the CCPA here.)

    On January 17, Maryland introduced HB 249 to amend the state’s Commercial Law by adding a section titled “Consumer Personal Information Privacy.” Under the proposed bill, consumers would be provided the right to opt-out of the disclosure of their personal information to third parties. HB 249 defines “disclosure” as “a transfer of a consumer’s personal information by a business to a third party, including selling, renting, releasing, disseminating, making available, transferring, or otherwise communicating by any means.” The bill clarifies that disclosure does not include (i) a transfer of personal information to a service provider by a business for an operational purpose; (ii) identification of a consumer who has opted-out to alert third parties; and (iii) a transfer of personal information to a third party “as an asset that is part of a transaction in which the third party assumes control of all or part of the business.” The bill also stipulates requirements for businesses related to the consumer opt-out process, and states that a violation of the bill’s provisions would constitute an unfair or deceptive trade practice under Maryland’s Consumer Protection Act.

    The same day, SB 2451 was introduced in the Hawaii Senate to add a new section to Chapter 487J of the Hawaii Revised Statutes, which stipulates that third parties cannot use or sell personal information purchased from a business unless a consumer receives explicit notice, provides express written consent, and chooses not to opt-out after given the opportunity to do so. The proposed bill also provides consumers the opportunity to, at any time, opt-out of the sale of their personal information to third parties. Among other things, the bill outlines provisions related to the sale of personal information for consumers less than 16 years of age, as well as specific compliance requirements for businesses when providing notice to consumers. SB 2451 also defines a third party as one that is (i) not a “business that collects personal information from consumers”; or (ii) not a person who receives personal information from a business for a business purpose pursuant to a written contract that restricts further use of the personal information.

    Earlier, on January 3, HB 473, known as the “Virginia Privacy Act,” was introduced. Among other things, the bill requires data controllers to be transparent about their processing activities and be responsible for, upon verified request from the consumer, (i) confirming the uses of personal data; (ii) correcting inaccuracies; (iii) deleting unnecessary personal data or data for which the consumer has withdrawn consent; (iv) limiting the processing of personal data to what is required and relevant for a specified purpose; and (v) obtaining consumer consent in order to process sensitive data. HB 473 also provides consumers the right to object at any time to the processing of personal data, including the sale of data to third parties for targeted advertising, and stipulates that third parties must honor objection requests received from third-party controllers. The bill also requires controllers to conduct risk assessments for all processing activities that involve personal data, and conduct additional assessments each time a processing change occurs that “materially increases the risk to consumers.” If enacted, violations of HB 473 would “constitute a prohibited practice” pursuant to Virginia Consumer Protection Act (VCPA) Section 59-1-200 and violators would be subject to any and all of the VCPA’s enforcement provisions.

    State Issues Privacy/Cyber Risk & Data Security State Legislation Consumer Protection Virginia Consumer Protection Act

  • Colorado reminds entities of retail credit seller UCCC notification requirements

    State Issues

    On December 27, the Colorado Department of Law issued an advisory stating that consumers may not be obligated to pay finance charges on consumer credit transactions that are purchased, acquired, or otherwise assigned to retail credit sellers that have not filed applicable notifications required by the Colorado Uniform Consumer Credit Code (UCCC). According to the advisory, in these situations, entities may be “required to re-apply all payments so that the consumer is not assessed any finance charges and issue refunds to the consumer of any resulting credit balance.” The UCCC regulates the terms and conditions of consumer credit in the state, including payday loans, automobile loans, second mortgages, state-issued credit cards, and signature loans. A current list of retail credit sellers that have notifications on file with the office can be accessed here.

    State Issues State Attorney General Contracts Consumer Finance Consumer Protection Credit Sellers

  • NYDFS provides additional time on LIBOR transition plans

    State Issues

    On January 27, NYDFS announced an update to its industry letter, previously covered by a Buckley Special Alert, pushing back the response deadline. Regulated entities will now have until March 23 (45 additional days) to deliver their transition plans. According to the updated request, the deadline was extended after NYDFS received a number of requests to add additional time to respond.

    State Issues State Regulation NYDFS Consumer Protection LIBOR

  • Payday lender settles with North Carolina AG for $825,000

    State Issues

    On January 27, the North Carolina attorney general announced that a Florida-based payday lender (lender) agreed to pay $825,000 to settle allegations of usury, lending without a license, unlawful debt collection and unfair and deceptive practices in violation of state consumer protection laws. According to the announcement, though the lender was not licensed in the state, it advanced “more than 400 loans online to financially distressed North Carolina consumers at interest rates between 78 to 252 percent,” which is markedly higher than the state interest rate limit of 30 percent. The AG claimed that the lender tried to skirt North Carolina laws by requiring some borrowers to collect their loan funds outside of the state. The AG also alleged that the lender required borrowers to secure the loans with their vehicle titles, which enabled the lender to repossess and sell the borrowers’ vehicles when they defaulted or were late on payments. In the settlement, without admitting to the AG’s allegations, the lender agreed to return to North Carolina borrowers (i) all fees and interest paid on the loans by the borrowers; (ii) all the auction proceeds exceeding the loan principal to borrowers whose vehicles were repossessed and sold at auction; and (iii) cars owned by borrowers that were repossessed but not sold at auction. Among other things, the lender will also be permanently barred from making loans to, and collecting payments from, North Carolina borrowers, and is prohibited from putting liens on and repossessing vehicles owned by borrowers.

    State Issues State Regulation Payday Lending Consumer Protection Fintech Debt Collection Enforcement Usury Licensing UDAP State Attorney General Settlement Interest Rate Repossession

  • Michigan establishes provisions for credit services organizations

    State Issues

    On January 27, the Michigan governor signed HB 4411, which establishes provisions for credit service organizations. Among other things, HB 4411 prohibits persons engaged in credit service activities from (i) charging or receiving money from a buyer seeking a loan, extension of credit, or other valuable consideration before closing; (ii) charging a buyer or receiving from a buyer money or other valuable consideration before completing all agreed upon services, or “for referral to a retail seller that will or may extend credit to the buyer if the credit that is or may be extended to the buyer is substantially the same as that available to the general public”; (iii) making or using false or misleading representations, or engaging in a fraudulent or deceptive act or practice connected with the offer or sale of a credit services organization, stating that the organization has the ability to delete adverse credit history, or guaranteeing that the organization can obtain an extension of credit regardless of the buyer’s credit history; (iv) failing to perform the agreed upon services within 90 days after the contract is signed by the buyer; (v) advising a buyer to make untrue or misleading statements to certain entities, including a consumer credit reporting agency; (vi) assisting in the removal of adverse credit information that is accurate and not obsolete, or assisting a buyer in creating a new credit record using alternative personal information; and (vii) submitting buyer disputes to consumer credit reporting agencies without a buyer’s knowledge. The act is effective immediately.

    State Issues State Legislation Consumer Finance Credit Furnishing Credit Reporting Agency Credit Repair Credit Report Credit Services Business

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