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California amends its criminal code to include mortgage fraud and consumer protections
On September 24, the Governor of California approved AB 3108 (the “Act”), amending the Financial Code and Penal Code to address mortgage fraud and consumer protections. The Act prohibits knowingly filing any document with a county recorder that contains material misstatements, misrepresentations or omissions. It expands the definition of mortgage fraud to include actions by mortgage brokers who knowingly allow borrowers to sign documents with misleading loan terms. Additionally, the Act mandates that mortgage brokers ensure borrowers can repay their loans based on their income and financial resources, other than the equity in their homes.
The Act also amends the Penal Code under Section 532f, specifying that mortgage fraud includes making deliberate misrepresentations during the mortgage lending process. It criminalizes instructing borrowers to sign personal loan documents under the guise of business loans. In addition, the Act introduces a consumer counseling notice requirement for loans covered under the Act. Specifically, this notice must inform borrowers that they could lose their homes if they fail to meet their loan obligations and advise them to consult with a qualified independent credit counselor.
California enacts new mortgage foreclosure procedures
On September 20, the Governor of California signed AB 2424 (the “Act”), which enacts new mortgage foreclosure procedures. The Act mandates mortgage servicers, trustees and beneficiaries provide borrowers with enhanced notices and opportunities to avoid foreclosure. This includes the right for a third party — such as a family member, HUD-certified housing counselor or attorney — to receive copies of any notice of default and notice of sale. Additionally, the Act requires a 45-day postponement of foreclosure sales if the trustee receives a listing agreement or purchase agreement from the borrower at least five days before the scheduled sale date.
The Act also stipulates that the mortgagee or beneficiary must provide the fair market value of the property at least 10 days before the initial sale date, and the property cannot be sold for less than two-thirds of this value at the initial trustee’s sale. If the property remains unsold, the sale must be postponed for at least seven days before proceeding and sold thereafter to the highest bidder. These changes aim to provide borrowers with additional time and resources to avoid foreclosure and ensure properties are sold at fair market values.
California bans medical debt in credit reporting determinations
On September 24, the Governor of California approved SB 1061 (the “Act”), which prohibits consumer credit reporting agencies from including medical debt in consumer credit reports. In addition, a consumer reporting agency may no longer furnish (i) bankruptcies older than 10 years, (ii) suits and judgements, paid tax liens, collection accounts, arrest records and “any other adverse information” older than seven years, and (iii) unlawful detainer actions.
Effective July 1, 2025, the Act mandates that any contract creating medical debt must include this specific term: “A holder of this medical debt contract is prohibited… from furnishing any information related to this debt to a consumer credit reporting agency…” and prohibits the furnishing of information related to the debt to a credit reporting agency, rendering the debt void if violated.
As previously covered by InfoBytes, the California Attorney General submitted a comment letter supporting the CFPB’s proposed rule (Prohibition on Creditors and Consumer Reporting Agencies Concerning Medical Information (Regulation V)) to ban medical information in credit eligibility determinations. Besides the CFPB’s proposed rule, California will be the latest state to ban medical debts in credit reporting, joining the tri-state area of New Jersey (here), Connecticut (here), and New York (here), and other states.
California bans state banks and credit unions from charging NSF fees
On September 24, the Governor of California signed AB 2017 (the “Act”) into law, prohibiting state-chartered banks and credit unions from charging NSF fees when consumers initiate transactions that are instantaneously or near instantaneously declined because of insufficient funds. The Act aims to protect consumers from abusive financial practices, adding Chapter 5.5 to Division 1 of the Financial Code, specifically Section 530. The law should go into effect on January 1, 2025.
The Act’s analysis highlighted that the Act attracted support in both the Senate and the Assembly. The Act, modeled after the CFPB’s proposed overdraft fee rule (covered by InfoBytes here) eliminates NSF fees charged by banks without labeling them as “abusive.” The analysis emphasized that the Act aims to protect financially vulnerable consumers from being charged fees for transactions that are declined almost instantly, as these fees are considered disproportionate to the actual costs incurred by financial institutions.
California’s DFPI takes action against advance fees for student loan debt relief services
On September 17, the California DFPI announced enforcement actions against three companies for allegedly making false representations regarding student loan debt relief and charging fees for providing student loan debt relief services before performing any work. According to the orders, which can be found here, here and here, the companies’ actions violated the California Consumer Financial Protection Law, the federal Telemarketing Sales Rule, GLBA and the FTC’s recent Impersonation Rule.
The announcement highlighted three enforcement actions targeting companies that are alleged to have charged consumer advance fees in connection with providing student debt relief services and were engaged in an unlawful student loan debt relief practice. The companies were ordered to cease and desist from soliciting and collecting advance fees before providing services. Additionally, the companies were directed to rescind all outstanding contracts with California consumers, issue refunds and pay penalties.
California Attorney General secures preliminary injunction against realty companies
On September 17, California Attorney General Rob Bonta announced that a preliminary injunction order against affiliated Florida-based realty companies (the defendants) was issued by the Superior Court of California for the County of Los Angeles. According to the order, California alleged the defendant targeted financially vulnerable homeowners with its “Homeowner Benefit Program,” a program that promised cash payments to consumers for the right to act as the homeowners’ real estate agent if they sold their homes within the next 40 years. California alleged that in offering this program, among other things, the defendants engaged in misleading advertising and illegal telemarketing to consumers on the National Do Not Call Registry.
In issuing the injunctive relief, the court determined the defendant’s practices, which allegedly included recording liens on homeowners’ properties without proper disclosure and using unlicensed individuals to sign real estate contracts, likely violated California’s False Advertising Law, its Unfair Competition Law, and its Real Estate Law, and found that California was more likely to suffer greater injury from the denial of the injunction than defendants would if the injunction is granted. The order requires defendants to remove liens that have been recorded on California properties within 30 days or within five days of notification from any homeowner needing the termination for a property transaction. Additionally, defendants will be prohibited from recording any new liens on the property of California homeowners related to the program and from enforcing any existing agreements with such homeowners for the duration of the litigation.
California enacts mortgage law on co-borrowing with divorces
On September 22, the Governor of California signed AB 3100 into law (the “Act”) which will change the requirements for conventional home mortgage loans in the state. The legislation will require any conventional home mortgage loan originated on or after January 1, 2027, secured by an owner-occupied residential property with up to four dwelling units, to include provisions allowing any existing borrowers to purchase another borrower’s property interest. This sale would assume the seller’s portion of the mortgage in the event of a divorce, legal separation or property settlement (provided the assuming borrower qualifies for the loan).
The Act will align California with federal guidelines under the Garn-St. Germain Depository Institutions Act, which restricts the enforcement of due-on-sale clauses in cases of property transfers because of divorce or other family-related transactions. By codifying these guidelines into state law, the Act will require lenders to explain the loan assumption process in the loan documents given to borrowers.
California enacts bill on assessing license fees in deferred deposit transactions
On September 14, the Governor of California approved AB 3148 (the “Act”), amending the California Deferred Deposit Transaction Law (CDDTL) to change the formula for determining annual fee licenses as required to pay to the Commissioner of the DFPI to cover all costs and expenses reasonably incurred in the administration of the CDDTL and any deficit incurred in the program’s administration. Previously, the amount of this pro rata fee was based on the number of locations a licensee operated. Going forward, this fee will be determined by the proportion of a licensee’s total dollar amount of deferred deposit transactions relative to the aggregate total amount made by all licensees as shown by specified annual reports to the commissioner. The bill also sets a minimum assessment fee, ensuring licensees do not pay less than $500 per licensed location per year. The commissioner must notify each licensee of the assessed amount by May 20 each year, with payments due within 30 days. Failure to pay on time may result in penalties or the suspension or revocation of the licensee’s certificate. The Act will apply to the calculation of next year’s annual fee.
California attorney general settles with crypto-asset company
On September 4, California Attorney General (AG) Rob Bonta announced a settlement with a cryptocurrency trading platform for allegedly failing to comply with state cryptocurrency laws. According to the settlement, the company failed to allow customers to withdraw cryptocurrency from accounts and failed to disclose certain aspects of its trading and order handling procedures. Under the terms of the settlement, the company has agreed, among other things, to (i) permit customers to withdraw their cryptocurrency assets to external wallets in accordance with applicable law; (ii) ensure the accuracy of written representations to customers about trading and order handling practices; and (iii) update its customer agreement to address potential delays in transaction settlements.
Additionally, the company has agreed to pay $3.9 million allocated to: (i) fees and costs incurred by the AG in connection with the investigation; (ii) fees and costs to be incurred in connection with monitoring and enforcing the settlement agreement; (iii) any litigation relating to monitoring and enforcing the settlement; and (iv) all potential claims to be released by the AG under the settlement.
NYC issues new rules for debt collectors
On August 12, the New York City Department of Consumer and Worker Protection (DCWP) issued a Notice of Adoption regarding amendments to debt collection rules. According to the DCWP, the amendments, effective December 1, will enhance consumer protections and align with changes in federal regulations and industry practices.
Among other things, the amendments will include requirements for debt collectors to provide specific disclosures when collecting on time-barred debt, to maintain comprehensive records of communications, consumer complaints, and other relevant documents, and to obtain consumer consent for electronic communications and provide clear opt-out options. The amendments will also impose restrictions on the frequency and methods of communication with consumers, including the use of email and social media. There will also be enhanced procedure requirements for verifying disputed debts and responding to consumer disputes. The DCWP will also establish specific rules for collecting medical debt, such as prohibiting the reporting of medical debt to consumer reporting agencies.
The notice stated feedback was garnered from public hearings and comments from various stakeholders, including industry associations, consumer advocacy groups, and legal services organizations were reflected in the rules. The DCWP also issued Corresponding FAQs.