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Texas Bans Credit Card Surcharges
On May 27, Texas passed legislation that bans surcharges on credit card transactions. Existing Texas law prohibits businesses from increasing the price charged for goods or services for buyers who pay with a debit card or stored value card. With the passage of S.B. 560 , the prohibition on such surcharges will now extend to credit card transactions as well. The law takes effect September 1, 2017. Any person who violates the law can incur a civil penalty of up to $500 for each incident.
Alabama Enacts Law Regarding Refund Obligations
On May 26, Governor Kay Ivey signed into law HB 420, which authorizes and regulates the transactions of guaranteed asset protection (GAP) waivers related to vehicle loans. Importantly, the law requires that if the GAP waiver is cancelled due to early termination of the finance agreement, “the creditor shall provide, or cause the administrator or retail seller to provide, within 60 days of termination, any refund due to a borrower without requiring the borrower to request cancellation of the waiver.” Furthermore, cancellation refunds can be applied toward the amount owed under the finance agreement unless it has proven to be paid in full. The law goes into effect January 1, 2018.
First State Moratorium on Blockchain Taxes in Nevada
On June 5, the governor of Nevada signed into law legislation (SB 398) that prohibits local governments from taxing or establishing restrictions on blockchain use—making it the first state to outlaw blockchain taxes. In addition to taxes, the new law prohibits requiring a license, permit, or certificate or any other condition on the use of blockchain. The bill also states that blockchain data can now be submitted in situations where the law requires a record to be in writing.
Colorado Extends Fair Debt Collection Practices Act Through 2028
On June 1, Colorado Governor John Hickenlooper enacted legislation (SB 17-216) executing recommendations from the Department of Regulatory Agencies’ 2016 Sunset Report, and extending the Colorado Fair Debt Collection Practices Act (Act) an additional 11 years through September 1, 2028. The Act was originally set to be repealed on July 1, 2017. Specifically, the legislation will implement the following points:
- defines a “debt buyer” as an individual who “engages in the business of purchasing delinquent or defaulted debt for collection purposes,” regardless of whether the debt is collected by the debt buyer, a third-party, or through litigation. The Act applies to debt buyers who purchase consumer debts sold or resold on or after January 1, 2018;
- states that debt collectors or collection agencies that bring legal actions on debts must follow outlined requirements;
- defines collection agency expectations for the purchase, sale or attempted collection of a purchased debt;
- sets the statute of limitations for public actions brought by the administrator of the Act to two years and sets the limit to one year for private actions;
- requires the administrator to prepare a biannual report to address enforcement actions, complaint processing statistics, and significant legal filings, among other things, in addition to hosting biannual meetings to disseminate the findings.
SB 17-216 went into effect June 1, 2017 with the exception of certain provisions governing debt buyers, documentation for legal actions, and Uniform Consumer Credit Code Administrator reporting requirements that take effect January 1, 2018.
South Carolina Governor Amends Mortgage Lender, Broker Licensing Requirements
On May 19, South Carolina Governor Henry McMaster signed into law amendments (S 366) to the state’s Mortgage Lending Act, Mortgage Broker Act, and related laws to revise a variety of mortgage lending definitions, licensing procedures and requirements, and disclosure obligations. The legislation also adds license requirements for mortgage lenders who act as mortgage brokers on the majority of their mortgage loans. The amendments take effect September 16, 2017.
Texas Enacts Law Expanding Requirements for Holders of Debt Cancellation Agreements
On May 26, Texas Governor Greg Abbott signed into law SB 1052, which contains provisions related to retail installment contracts and debt cancellation agreements in the state. Notably, the revised and renumbered Section 354.007 of the Finance Code, “Refund for Debt Cancellation Agreements,” concerns the responsibilities of the holder or the administrator of the agreement. This section has been amended to add that if a debt cancellation occurs as a result of an early termination of the contract, the holder shall, within 60 days of the termination, “refund or credit an appropriate amount of the debt cancellation agreement fee” or refund or credit the appropriate amount of the fee through written instructions to the appropriate person. Revisions also dictate that the holder will ensure that the refund or credit of the debt cancellation agreement fee “made by another person” is also made no later than 60 days after the agreement terminates. Furthermore, the holder is now responsible for maintaining records pertaining to the refund or credit of the debt cancellation agreement fee, and likewise, must grant electronic access to the records per the terms of the provision. The law takes effect September 1, 2017.
Massachusetts Regulator Offers Interpretation of Mortgage Loan Originator Exclusivity Requirement
On May 10, the Division of Banks of the Massachusetts Office of Consumer Affairs and Business Regulations (Division) issued a letter determining that a professional employer organization (PEO) may provide limited human resources services to Massachusetts licensed mortgage lenders and brokers without violating an exclusivity requirement governing the employment of mortgage loan originators in the Commonwealth. The exclusivity requirement prohibits Massachusetts licensed mortgage loan originators from being employed by more than one “entity,” which, as defined by Massachusetts General Laws Chapter 255F, Section 4(b), effectively prohibits a mortgage loan originator from being employed by more than one mortgage lender or broker. The opinion letter stems from a request made last year from a Massachusetts-based human resources service provider (Service Provider) inquiring as to whether the exclusivity requirement prohibits Massachusetts licensed mortgage lenders and brokers employing mortgage loan originators from outsourcing human resource services. The Service Provider—operating as a PEO—stated that it provides human resources services to small business clients, and while it is deemed the “employer” of the client's employees solely for designated human resource functions, the client remains the employer for all other purposes. Because of this, and since the Service Provider offers functions that are unrelated to a loan originator's mortgage industry work, the Division asserted “that the exclusivity provision . . . operates to limit a mortgage loan originator to a single licensed mortgage broker or lender for purposes of the originator's mortgage industry work.” Accordingly, the Division concluded that the Service Provider may provide its services to Massachusetts licensed mortgage lenders and brokers without violating the exclusivity requirement.
DOJ Enters $18 Million Settlement with Healthcare Providers Following False Claims Act Whistleblower Action
On April 27, the Department of Justice announced that two Indiana-based healthcare providers agreed to settle allegations that financial arrangements between the two entities violated the federal and state False Claims Act and the federal Anti-Kickback Statute. DOJ alleged that one of the providers made available to the other an interest-free line of credit consistently in excess of $10 million, the balance of which such other provider “was allegedly not expected to substantially repay” as a means of inducing referrals for obstetrics and gynecology patients to seek medical attention at a particular hospital. The Anti-Kickback Statute prohibits “the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal health care program, such as Medicaid,” and claims that are submitted to federal health care programs in violation of the Anti-Kickback Statute can also constitute false claims under the False Claims Act. The settlement resolves a qui tam case filed by an individual under the whistleblower provisions of the False Claims Act. Under the terms of the settlement, the providers agreed to pay a total of $18 million, with each of them paying $5.1 million to the United States and $3.9 million to the State of Indiana.
Vermont Enacts Law Expanding Requirements for Certain Businesses Regulated by Department of Financial Regulation
On May 4, Vermont Governor Phil Scott signed into law H. 182, which amends a number of laws relating to businesses regulated by the state’s Department of Financial Regulation. Among other things, the law: (i) amends registration requirements for consumer litigation funding companies; (ii) amends the licensing requirements for licensed lenders, money transmitters, check cashers and currency exchangers, debt adjusters, and loan servicers; (iii) amends the mortgage loan originator prelicensing and relicensing education requirements; (iv) defines the term “virtual currency” under the Money Services chapter and provides that “virtual currency” is a permissible investment for licensees; and (v) sets forth requirements for money transmitters related to receipts and refunds. The law also creates new types of licenses (and other related requirements (e.g., disclosures, record retention)) for “loan solicitation” activity, which includes, among other things, lead generation. The law took effect May 4, 2017, with the exception of provisions relating to money transmitter receipts and refunds, lead generator disclosure requirements, and loan solicitor disclosure requirements, which take effect July 1, 2017.
Gov. Cuomo Announces New Title Insurance Regulations Target Business Gifts, Ancillary Fees and Transactions with Affiliates
On May 1, New York Governor Andrew M. Cuomo announced two new proposed regulations to “crack down on unscrupulous practices in the title insurance industry.” According to the Governor, the proposed measures were drafted in response to an investigation by the state Department of Financial Services (“NYDFS”), which found that “meals, entertainment, gifts” and other “inducements” provided in exchange for referring business to a title insurance company or agents, were charged to customers under the guise of “marketing expenses.” The first proposed regulation would, among other things, clarify the rules about “meals and entertainment” expenses, and other ancillary fees that title agents or title insurers may charge a customer. The second proposed regulation would require title insurance companies or agents that generate a portion of their business from affiliates to function separately and independently from any affiliate and obtain business from other sources. Importantly, a press release issued by NYDFS explains that “emergency” versions of both of these regulations have already been adopted by NYDFS (in response to the aforementioned investigation). As explained by NYDFS, the emergency rules, which are currently in effect, will remain in effect until final regulations are adopted.