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Financial Services Law Insights and Observations


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  • Student loan servicer fined $1.8 million by Massachusetts Attorney General

    State Issues

    On January 11, the Massachusetts Attorney General (AG) announced a $1.8 million settlement with a student loan servicer, to resolve allegations that the company did not properly communicate Income-Driven Repayment (IDR) plan renewals to borrowers. According to the settlement, IDR plans are a “helpful tool for managing unaffordable federal student loan debt and avoiding the consequences of default… [and respondent] is required to follow specific procedures intended to ensure that borrowers are able to successfully navigate the enrollment and annual recertification processes required for IDR.” The AG alleged that the respondent violated state law by sending written notices that did not meet regulatory requirements and failed to send required notices.

    Under the terms of the settlement, respondent will (i) pay $1.8 million; (ii) include certain disclosures in renewal notice correspondence to borrowers; (iii) comply with requirements for FFELP loans owned by the DOE and enrolled in certain repayment plans; (iv) clearly disclosure to certain borrowers that failure to timely provide certain information about income or family size will result in increased monthly payments; and (v) retain copies of each written communication that it sends to borrowers regarding their IDR plans. The student loan servicer enters into this agreement for settlement purposes only (without admission).

    State Issues Massachusetts Student Loan Servicer Settlement Student Loans State Attorney General Income-Driven Repayment Lending Enforcement

  • NYDFS orders digital currency trading company to pay $8 million

    State Issues

    On January 12, NYDFS announced that it had entered into a consent order with a digital currency trading company after an investigation that found the company responsible for compliance failures that violated NYDFS’s virtual currency and cybersecurity regulations, leaving the company vulnerable to illicit activity and cybersecurity threats.  

    NYDFS found that the company failed to meet its compliance obligations due to (i) deficiencies in the company’s AML program; (ii) failure to file compliant suspicious activity reports; (iii) failure to conduct required OFAC screening; and (iv) failure to maintain an adequate cybersecurity program. In connection with the settlement, the company will surrender its BitLicense, the license required to be held by any company conducting virtual currency business in New York state and pay an $8 million penalty. 

    State Issues NYDFS Digital Currency Cyber Risk & Data Security Bank Secrecy Act Anti-Money Laundering Cryptocurrency OFAC Enforcement

  • OCC releases January enforcement actions

    On January 17, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included is a notice of charges seeking cease and desist orders against three subsidiary banks of the same bank holding company (see here, here, and here), which alleged that each bank engaged in unsafe or unsound practices relating to an investment strategy concentrated in long-term securities. The unsafe practices, the OCC explained, exposed each bank to excessive interest rate risk without adequate sources of contingency funding and contingency capital. The OCC further alleged that each bank failed to mitigate such risk in a timely manner. 

    Bank Regulatory Federal Issues OCC Enforcement Cease and Desist

  • DFPI fines online platform for omitting convenience fee disclosures

    State Issues

    On January 9, DFPI issued a consent order against an online platform (respondent) that enables merchants to provide installment contracts to customers. The consent order resolved alleged violations of the California Consumer Financial Protection Law (CCFPL) arising from the convenience fees assessed by a third-party service provider when consumers opt to pay their installments online or by phone. According to the consent order, since 2021 respondent guaranteed that consumers entering into contracts on its platform had a fee-free payment method. However, for a time respondent failed to disclose potential optional convenience fees in the initial contract. Although the third-party servicer disclosed the convenience fees to consumers, DFPI took issue with the respondent’s failure to disclose these fees before transferring consumers to the third-party servicer to enter into the contracts. In other words, consumers only became aware of both the existence and amounts of these fees after entering into contractual obligations. DFPI accused respondent of deceiving consumers by failing to disclose this information first.

    Under the terms of the consent order, respondent must pay a $50,000 penalty and must disclose information about the potential convenience fees that may be assessed by a servicer.

    State Issues California DFPI CCFPL Enforcement Disclosures Third-Party Consumer Finance

  • Title lender reaches settlement with Pennsylvania AG

    State Issues

    On January 10, Pennsylvania AG Michelle Henry announced a settlement with a national auto title lending company, resolving alleged violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law and the Loan Interest and Protection Law (LIPL). According to the settlement, since 2016, the lender made thousands of vehicle title loans to Pennsylvania residents, with interest rates exceeding 100 percent without the necessary license required by the Consumer Discount Company Act.

    The AG also noted that some of the loans resulted from leads that they bought from third parties who purported to have physical offices in Pennsylvania, when in fact, neither the lender nor its lead generators were in Pennsylvania. The AG also said that most Pennsylvania-based borrowers drove to one of the lender’s Delaware locations. Nonetheless, the AG said, “Pennsylvania usury laws apply because [the lender] collected money from Pennsylvania consumers and repossessed vehicles in Pennsylvania.” In the settlement, the lender denies all allegations of unlawful conduct, including the assertion that it knowingly acquired leads from third parties leading to loans for Pennsylvania residents. The lender explained its position that until the U.S. Court of Appeals for the Third Circuit rendered its opinion in another matter in January 2022, it held a “good faith and reasonable belief” based on then-existing law, particularly the Commerce Clause of the U.S. Constitution, that its operations were lawful.

    Among other things, the settlement (i) requires the lender to pay $2.2 million in consumer restitution; (ii) requires the lender to cancel approximately $3.7 million in existing loans; (iii) enjoins and prohibits the lender from violating the LIPL; and (iv) requires the lender to return any repossessed vehicles at no charge and refund consumers of all repossession fees previously charged.

    State Issues Settlement Enforcement Pennsylvania State Attorney General Lending Title Loans Interest

  • FTC acts against fintech app for misrepresentations made about cash advances

    Federal Issues

    On January 2, the FTC issued a complaint and stipulated order against a personal finance mobile application that offers its users short-term cash advances through “floats.” According to the complaint, the defendant misrepresented its claims to induce users into enrolling in a subscription plan. Specifically, the defendant advertised that its users could instantly receive a cash advance larger than available, claimed cash advance limits would increase over time, and promised to make cash available “instantly” for no extra fee.

    According to the complaint, employees have admitted that the defendant company “lie[s]” to users. Users allegedly received misleading advertisements that stated how cash advances or “floats” constitute “free money” when there is actually a $1.99 subscription fee listed in tiny font. Additionally, the defendant advertised that users would receive “money in minutes” for “free” with “no hidden fees” despite having to pay a hidden $4 fee to receive their money instantly. The FTC alleges from user responses that many of them would have not enrolled in this program had they known they would be advanced less than promised. Further, the FTC alleges the defendant discriminates against consumers by categorically refusing to provide cash advances to consumers who receive public assistance benefits or derive income from gig work––even after they pay subscription fees.

    Under this order, the FTC found the defendant violated the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA), as well as ECOA and its implementing rule, Regulation B. The stipulated order, which names the company’s cofounders in addition to the company itself, prohibits the company from further misrepresentations, requires implementation of a fair lending program, requires a simple cancellation mechanism, and provides for a monetary judgment of $3 million.

    Federal Issues FTC Enforcement ROSCA FTC Act ECOA Regulation B

  • FTC, Connecticut file complaint against auto dealer for deceptive and unfair practices

    Federal Issues

    On January 4, the FTC and the State of Connecticut issued a joint complaint against an auto dealer and its owner for alleged violations of the FTC Act and the Connecticut Unfair Trade Practices Act. According to the complaint, the dealership allegedly imposed additional fees, including certification fees, add-on charges, and government charges, without consumers’ explicit consent. The FTC alleged that the dealership made misrepresentations regarding advertised prices, charging consumers additional fees when they would attempt to purchase vehicle, and charged customers for certification fees for vehicles that had been advertised as “certified.” The complaint also alleged that the dealership would charge consumers for add-ons, such as GAP insurance, service contracts, maintenance contracts, and total loss protection with or without express consent, and at times after the consumer specifically declined the add-on. The complaint further alleged that the dealership often stated in advertisements that a vehicle was certified but did not report the sale of that vehicle or pay the certification fee to the manufacturer, so consumers did not receive the actual benefits. The complaint seeks consumer redress, disgorgement of ill-gotten money, civil penalties, and a permanent injunction.

    Federal Issues State Issues FTC Connecticut Deceptive Enforcement FTC Act

  • FDIC releases November enforcement actions

    On December 29, the FDIC released a list of administrative enforcement actions taken against banks and individuals in November. The FDIC made 12 orders public including, “five consent orders, three prohibition orders, two orders terminating consent orders, one order to pay a civil money penalty (CMP), and one order dismissing both a notice of assessment of CMPs and an order to pay.” Included is a stipulated order and written agreement with a Tennessee-based bank (the Bank) to resolve alleged violations of the Bank Secrecy Act (BSA) and weaknesses in board and management oversight of its information technology function. The Bank agreed to the conditions of the consent order which requires the Bank to, among other things (i) establish an action plan to correct the bank’s Anti-Money Laundering/Countering the Financing for Terrorism (AML/CFT) program deficiencies and alleged violations; (ii) retain qualified IT management; (iii) perform a cybersecurity assessment; and (iv) designate someone responsible for coordinating and monitoring day-to-day compliance with the BSA.

    Bank Regulatory Federal Issues Enforcement Bank Secrecy Act Anti-Money Laundering

  • Large bank agrees to proposed settlement agreement; to be decided in February


    On November 27, 2023, a large Canadian bank agreed to pay $15.9 million to accountholders in a proposed settlement agreement stemming from a class action suit in which the bank allegedly charged improper non-sufficient fund (NSF) fees. NSF fees are charges by a financial institution when they decline to make a payment from an accountholder’s account after determining the account lacks sufficient funds. Plaintiffs alleged that from February 2, 2019, to November 27, 2023, the bank charged accountholders multiple NSF fees on a single attempted transaction. In the agreement, the bank continues to deny liability. While an agreement has been reached between the two parties, the agreement has yet to be approved by the courts. A hearing has been scheduled for February 13, 2024, in the Ontario Superior Court of Justice to approve the settlement and award the payouts. Accountholders will receive their payouts, “estimated to be in the range of approximately $88 CAD,” deposited directly to their account with the bank. Under the proposed settlement agreement, the representative plaintiff will receive an honorarium of $10,000. As previously covered by InfoBytes, the FDIC warned that supervised financial institutions that charge multiple NSF fees on re-presented unpaid transactions may face increased regulatory scrutiny and litigation risk.

    Courts Banking Canada Of Interest to Non-US Persons Settlement Class Action Enforcement NSF Fees Fees

  • SEC charges DAO for unregistered sale of crypto smart yield bonds


    On December 22, 2023, the SEC announced a settlement with a decentralized autonomous organization (DAO) and a second settlement with its founders. The SEC alleged that the DAO failed to register with the Commission for its offering and sale of structured crypto-asset securities. The SEC additionally charged the organization for operating certain pools as unregistered investment companies. According to the SEC, the organization compared its structured crypto-asset securities to asset-backed securities and marketed them to the public. Furthermore, investors could acquire “senior” or “junior” interest which could be pooled and used to generate returns. The orders state that the structured crypto-asset securities attracted significant investments, totaling over $509 million, with fees paid to the organization by investors based on investment size and chosen yield.

    Securities Enforcement Cryptocurrency


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