Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • NAAG establishes cyber training center to help states understand emerging and evolving technologies

    Privacy, Cyber Risk & Data Security

    Recently, the National Association of Attorneys General (NAAG) established a new center dedicated to the development of programs and resources for supporting states’ understanding of emerging and evolving technologies. The Center on Cyber and Technology will also assist with cybercrime investigations and prosecutions and “serve as an information clearinghouse for the attorney general community on trending technology issues.” Faisal Sheikh will serve as the Center’s first director, and “will be responsible for developing programming on cybersecurity, cybercrime, and new and emerging technologies, as well as forming strategic partnerships with other government agencies, academic institutions, nonprofit organizations, and private sector entities that focus on these issues.” According to NAAG Executive Director Chris Toth, “digital evolution has highlighted the need for a sustained approach to addressing cyber and technology issues.”

    Privacy/Cyber Risk & Data Security State Issues State Attorney General Enforcement National Association of Attorneys General

  • California Supreme Court: FTC Holder Rule does not limit attorney’s fees

    Courts

    On May 26, the California Supreme Court affirmed a trial court’s ruling that the FTC’s Holder Rule does not limit liability for attorney’s fees. According to the opinion, the plaintiff bought a used vehicle from the dealership (defendant) pursuant to an installment sales contract, which was subsequently assigned to a bank that became the “holder” of the contract. The plaintiff filed suit against the defendant and the bank, alleging misconduct by the dealership in the sale of the car regarding advertised features she needed due to a disability. A jury found for the plaintiff on one of her causes of action — breach of the implied warranty of merchantability under the Song-Beverly Consumer Warranty Act and awarded her $21,957.25 in damages. The plaintiff filed a posttrial motion seeking attorney’s fees in the amount of $169,602 under the Song-Beverly Act. The bank argued that it could not be liable for attorney’s fees based on the provision of the Holder Rule limiting recovery to the “amount[] paid by the debtor.” The trial court disagreed and granted the plaintiff’s motion.

    The California Supreme Court granted review to resolve a split among the appellate courts on whether ‘“recovery’ under the Holder Rule includes attorney’s fees and limits the amount of fees plaintiffs can recover from holders to amounts paid under the contract.” The opinion noted the divide among the state’s appellate courts on this issue, citing on the one hand Pulliam v. HNL Automotive Inc. (holding that the Holder Rule does not limit the attorney’s fees a plaintiff may recover), and on the other hand, Lafferty v. Wells Fargo Bank, N.A. (stating that a debtor cannot recover damages and attorney fees for a Holder Rule claim that collectively exceed the amount paid by the debtor under the contract) and Spikener v. Ally Financial, Inc., (finding that the Holder Rule preempts California Civil Code section 1459.5, which authorizes a plaintiff to recover attorney fees on a Holder Rule claim even if it results in a total recovery that exceeds the amount the plaintiff paid under the contract, covered by InfoBytes here).

    On appeal, the California Supreme Court unanimously concluded that “the Holder Rule does not limit the award of attorney’s fees where, as here, a buyer seeks fees from a holder under a state prevailing party statute,” as opposed to seeking fees under the Holder Rule itself.  Specifically, “[t]he Holder Rule’s limitation extends only to ‘recovery hereunder.’” The California Supreme Court continued that “[t]his caps fees only where a debtor asserts a claim for fees against a seller and the claim is extended to lie against a holder by virtue of the Holder Rule. Where state law provides for recovery of fees from a holder, the [Holder] Rule’s history and purpose as well as the Federal Trade Commission’s repeated commentary make clear that nothing in the Rule limits the application of that law.”

    Courts State Issues Holder Rule FTC Attorney Fees

  • District Court preliminarily approves $2 million debt collection settlement over garnishment issuance fees

    Courts

    On May 24, the U.S. District Court for the District of Oregon preliminarily approved a class action settlement resolving claims concerning a debt collection agency’s $45 garnishment “issuance fee.” According to the plaintiffs, the defendant issued garnishments to debtors’ employers and banks through its in-house attorneys to collect revenue for outstanding debts. While Oregon law allows debt collectors to charge fees as a means of compensating for the expense of hiring attorneys who issue such garnishments, the plaintiffs contended that the defendant’s “$45 fee is an abuse of the cost recovery statute because using in-house attorneys relieves defendant from ever incurring such an expense.” The plaintiffs alleged violations of the FDCPA, Oregon’s Unlawful Trade Practices Act, and Oregon’s Unlawful Debt Collection Practices Act. While the defendant denied any wrongdoing as part of the preliminarily approved settlement, it has agreed to pay $2 million to settle the claims. Class members, defined as more than 10,000 Oregonians allegedly injured by the $45 issuance fees between January 2018 and September 2019, will each receive “an amount three times greater than the actual damages caused originally by Defendant’s issuance fees.”

    Courts State Issues Settlement FDCPA Debt Collection Class Action Consumer Finance Fees

  • Arizona passes money transmitter licensure legislation

    On May 20, the Arizona governor signed SB 1580, which revises provisions related to money transmitters. The bill, among other things, provides that “a person may not engage in the business of money transmission or advertise, solicit or hold itself out as providing money transmission unless the person is licensed." The provision does not apply to “a person that is an authorized delegate of a person licensed under this article that is acting within the scope of authority conferred by a written contract with the licensee,” and to exempt persons provided the person “does not engage in money transmission outside the scope of the exemption.” The bill also creates provisions related to consistent licensure, application for licensure, and information requirements for certain individuals.

    Licensing State Issues State Legislation Arizona Money Service / Money Transmitters

  • Florida amends consumer finance loan provisions

    On May 20, the Florida governor signed SB 546, which amends certain provisions related to the making of consumer finance loans. The provisions allow persons applying for a license to make and collect loans under the Florida Consumer Finance Act (FCFA) “to provide certain documents in lieu of evidence of liquid assets,” including a surety bond, certificate of deposit, or irrevocable letter of credit. The bill also prohibits licensees from charging borrowers a prepayment penalty for paying all or part of a loan’s principle before the payment due date. Additionally, provisions related to the grounds for denying a license or taking disciplinary action for certain violations for the FCFA are modified to include “[f]ailure to maintain liquid assets of at least $25,000 or a surety bond, certificate of deposit, or letter of credit in the amount required by s. 516.05(10) at all times for the operation of business at a licensed location or proposed location.” SB 546 takes effect October 1.

    Licensing State Issues State Legislation Florida Consumer Finance

  • DFPI says debt collection licenses “unavoidably delayed”

    On May 23, the California Department of Financial Protection and Innovation (DFPI) sent a notice to applicants and prospective applicants announcing unforeseen delays in the issuance of licenses under the Debt Collection Licensing Act. The FBI informed DFPI that new changes are needed to state agency protocols for requesting federal background checks. Prospective licensees are encouraged to continue submitting applications through the Nationwide Multistate Licensing System. DFPI stated that during this delay (which “is necessary to enable the Department to effectuate the licensing background check required under the Debt Collection Licensing Act”), “applicants may continue to engage in business, and the Department will not take action for unlicensed activity against applicants who filed their applications after December 31, 2021.” DFPI will reach out to applicants with instructions for submitting fingerprints for background checks when the process becomes available, and advised licensees that “[f]or purposes of including California debt collector license numbers when contacting or communicating with debtors as required under Civil Code section 1788.11, an applicant who has filed its application through NMLS may indicate “license number pending” or similar verbiage until a license is issued.” DFPI will notify applicants when it begins issuing licenses and encourages applicants to check the Department’s website for updates.

    Licensing State Issues California DFPI State Regulators NMLS Debt Collection Licensing Act Debt Collection

  • NYDFS commits to mitigating virtual currency risks

    State Issues

    On May 20, NYDFS Superintendent Adrienne A. Harris emphasized the role regulation plays in protecting consumers from cybercriminals in the virtual currency marketplace. According to Harris, NYDFS is committed to mitigating risks in this space by guarding against sanctions evasion and illicit activity and making sure corporate infrastructure and consumer data are well protected from bad actors. Harris stressed that NYDFS “will continue to improve upon [its] regulation and supervision; engage with key stakeholders on important trends and issues; collaborate with state, federal and international regulators; and strive to be a forward-looking, innovative regulator, including through [its] VOLT initiative,” which supports the department’s efforts to increase transparency and enhance supervision related to virtual currency.

    State Issues Digital Assets Virtual Currency State Regulators NYDFS New York Consumer Protection Financial Crimes Fintech

  • NYDFS issues industry letter on reverse mortgage lending

    State Issues

    On May 17, NYDFS announced an industry letter to establish its expectations for all institutions engaged in reverse mortgage lending in the State on cooperative apartment units (coop-reverse mortgages) once newly enacted Section 6-O*2 of the New York Banking Law takes effect May 30. The letter noted there is a comprehensive regulatory framework that addresses the marketing, origination, and servicing of reverse mortgages in New York and stated that most of the existing requirements apply equally to coop-reverse mortgages. This includes Title 3 of the New York Code of Rules and Regulations Part 79 (3 NYCRR 79), which establishes various requirements relating to the marketing, origination, servicing, and termination of reverse mortgage loans in New York, and Title 3 of the New York Code of Rules and Regulations Part 38 (3 NYCRR 38), which addresses issues involving, among other things, commitments and advertising for mortgage loans generally. Even so, the letter noted that NYDFS is considering amending its existing regulations to specifically address coop-reverse mortgages, or issuing a separate regulation governing this as a new product. Finally, the letter explained that “institutions that seek to originate, or service coop-reverse mortgages are directed to comply with the provisions of 3 NYCRR 79, and 3 NYCRR 38 in originating or servicing such mortgages” (subject to described clarifications, modifications, and exclusions). However, NYDFS stated that “in the event of any inconsistency between the provisions of Section 6-O*2 and provisions of either 3 NYCRR 79 or 3 NYCRR 38, the provisions of Section 6-O*2 will govern; and in the event of any inconsistency between the provisions of 3 NYCRR 79 and 3 NYCRR 38, provisions of 3 NYCRR 79 will govern.”

    State Issues NYDFS Mortgages New York Reverse Mortgages State Regulators

  • Oklahoma establishes telephone solicitation restrictions

    State Issues

    On May 20, the Oklahoma governor signed HB 3168, which establishes the Telephone Solicitation Act of 2022. The bill, among other things, prohibits (i) certain sales calls without the prior express written consent of the called party; (ii) commercial telephone sellers or salespersons from using certain technology to conceal their true identity; and (iii) commercial telephone sellers or salespersons from using automated dialing or recorded messages to make certain commercial telephone solicitation phone calls. The bill also establishes a time frame during which a commercial telephone seller or salesperson may make commercial solicitation phone calls. The bill is effective November 1.

    State Issues State Legislation Oklahoma Robocalls Consumer Protection

  • Connecticut amends banking statutes

    On May 17, the Connecticut governor signed S.B. 268, which makes various revisions to state banking statutes. Among other things, the bill establishes that a money transmission license is not transferable or assignable, but a licensee may be acquired under certain circumstances. The bill also establishes that the commissioner cannot approve a state-bank’s loan production office to be established unless the commissioner has considered the out-of-state bank's record of compliance. Additionally, the bill establishes certain definitions, including the meaning of “control”, “control person,” “key individual,” and “passive investor.” The bill is effective October 1.

    Licensing State Issues State Legislation Connecticut Money Service / Money Transmitters

Pages

Upcoming Events