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Financial Services Law Insights and Observations

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  • California enacts installment loan rate cap

    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 several amendments to the California Consumer Privacy Act

    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: Consumer debt now includes mortgage debt 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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  • Special Alert: California attorney general releases proposed CCPA regulations

    Privacy, Cyber Risk & Data Security

    Buckley Special Alert

    Last week, the California attorney general released the highly anticipated proposed regulations implementing the California Consumer Privacy Act (CCPA). The CCPA — which was enacted in June 2018 (covered by a Buckley Special Alert), amended several times and with the most recent amendments signed into law on Oct. 11, and is currently set to take effect on Jan. 1, 2020 — directed the California attorney general to issue regulations to further the law’s purpose.

    * * *

    Click here to read the full special alert.

    If you have any questions about the CCPA or other related issues, please visit our Privacy, Cyber Risk & Data Security practice page, or contact a Buckley attorney with whom you have worked in the past.

    Privacy/Cyber Risk & Data Security State Issues CCPA State Attorney General State Regulators Special Alerts

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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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  • California attorney general releases proposed CCPA regulations

    Privacy, Cyber Risk & Data Security

    On October 10, the California attorney general released the highly anticipated proposed regulations implementing the California Consumer Privacy Act (CCPA). The CCPA—which was enacted in June 2018 (covered by a Buckley Special Alert), amended in September 2018, amended again in October 2019 (pending Governor Gavin Newsom’s signature), and is currently set to take effect on January 1, 2020 (Infobytes coverage on the amendments available here and here)—directed the California attorney general to issue regulations to further the law’s purpose. The proposed regulations address a variety of topics related to the law, including:

    • How a business should provide disclosures required by the CCPA, such as the notice at collection of personal information, the notice of financial incentive, the privacy policy, and the opt-out notice;
    • The handling of consumer requests made under the CCPA, such as requests to know, requests to delete, and requests to opt-out;
    • Service provider classification and obligations;
    • The process for verifying consumer requests;
    • Training and recordkeeping requirements; and
    • Special requirements related to minors.

    The California attorney general will hold four public hearings between December 2 and December 5 on the proposed regulations. Written comments are due by December 6.

    Notably, the Notice of Proposed Rulemaking states that “the adoption of these regulations may have a significant, statewide adverse economic impact directly affecting business, including the ability of California businesses to compete with businesses in other states” and requests that the public consider, among other things, different compliance requirements depending on a business’s resources or potential exemptions from the regulatory requirements for businesses when submitting comments on the proposal.   

    Buckley will follow up with a more detailed summary of the proposed regulations soon.

    Privacy/Cyber Risk & Data Security State Issues State Attorney General CCPA State Legislation Agency Rule-Making & Guidance

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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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  • District Court: New York’s interest on escrow law not preempted by National Bank Act

    Courts

    On September 30, the U.S. District Court for the Eastern District of New York held that the National Bank Act (NBA) does not preempt a New York law requiring interest on mortgage escrow accounts. According to the opinion, plaintiffs brought a pair of putative class actions against a national bank seeking interest on funds deposited into their mortgage escrow accounts, as required by New York General Obligation Law § 5-601. The bank moved to dismiss both complaints, arguing that the NBA preempts the state law. The district court disagreed, concluding that the plaintiffs’ claims for breach of contract can proceed, while dismissing the others. The court concluded there is “clear evidence that Congress intended mortgage escrow accounts, even those administered by national banks, to be subject to some measure of consumer protection regulation.” As for the OCC’s 2004 preemption regulation, the court determined that there is no evidence that “at this time, the agency gave any thought whatsoever to the specific question raised in this case, which is whether the NBA preempts escrow interest laws,” citing to and agreeing with the U.S. Court of Appeals for the Ninth Circuit’s decision in Lusnak v. Bank of America (which held that a national bank must comply with a California law that requires mortgage lenders to pay interest on mortgage escrow accounts, previously covered by InfoBytes here). Lastly, the court applied the preemption standard from the 1996 Supreme Court decision in Barnett Bank of Marion County v. Nelson, and found that the law does not “significantly interfere” with the banks’ power to administer mortgage escrow accounts, noting that it only “requires the Bank to pay interest on the comparatively small sums” deposited into the accounts and does not “bar the creation of mortgage escrow accounts, or subject them to state visitorial control, or otherwise limit the terms of their use.”

    Courts State Issues National Bank Act Escrow Preemption Ninth Circuit Appellate U.S. Supreme Court Mortgages

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  • Washington Supreme Court: No reliance required under state securities act for RMBS claims

    Courts

    On October 3, the Washington Supreme Court reversed the dismissal of an action against two international banks, concluding that the Securities Act of Washington (the Act) does not require a plaintiff to prove reliance on misleading statements during the purchase of residential mortgage-backed securities (RMBS). According to the opinion, a Seattle Federal Home Loan Bank (FHL Bank) purchased over $900 million in RMBS from two international banks in 2005 and 2007, and in 2009, brought separate actions against the banks for allegedly making untrue or misleading statements in connection with the RMBS in violation of the Act. Specifically, the FHL Bank argued that the banks (i) made false statements concerning the loan-to-value ratios of the mortgage loans pooled in the RMBS; (ii) misrepresented the quality of their underwriting standards; and (iii) made false statements about the occupancy status of the mortgaged properties in the pool. The trial court granted summary judgment in favor of both banks, and the Court of Appeals affirmed, concluding that reasonable reliance on the misleading statements was required under the Act and that the FHL Bank did not rely on the statements from one bank and unreasonably relied on statements of the other. The FHL Bank appealed both decisions.

    The Supreme Court consolidated the actions and disagreed with the appeals court conclusions in both. Specifically, the Court determined that the plain language under the Act is clear and “unambiguously does not require reliance.” The Court emphasized that the refusal to “read reliance into the statue” furthers the Act’s foal of protecting investors, ensuring “that those harmed when a seller misrepresents material facts can recover.”

    In dissent, one state Justice argued that the Court’s opinion undermines nearly “50 years of case law and legislative acquiescence,” noting that federal courts “frequently resolve state securities fraud claims, and they too have consistently treated reliance as an element of our state-law claim.”

    Courts State Issues RMBS Securities

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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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