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California requires consumer credit contract notices to be provided in multiple languages
On August 15, the California governor signed SB 633, which expands the obligation of creditors who obtain more than one person’s signature on a consumer credit contract when providing cosigners a notice regarding their obligation if the borrower does not pay the debt. Under existing law, these notices had to be provided in English and in Spanish. A creditor who provides a consumer a contract in a foreign language will now have to provide the cosigner notice in the language in which the contract is written. In addition to expanding the languages the notice must be provided in, the required cosigner notice must be provided even if the individuals are married to each other. SB 633 also requires the California Department of Financial Protection and Innovation to provide translations of these notices on its website by January 1, 2023, along with any translations of languages later added to state law. Additionally, notice must be provided only on a separate sheet preceding the contract.
NYDFS to study overdraft fees
On July 15, New York’s governor signed S9348, directing the superintendent of NYDFS to conduct a study of overdraft fees in the state. (See also NYDFS press release here.) The study will examine, among other things: (i) the total amount of overdraft fees paid in the state; (ii) the geographical distribution of these fees; (iii) whether certain communities have higher rates of overdraft fees than others and the possible reason for such high rates; (iv) “the percentage of overdraft fees reduced through direct or indirect negotiation”; and (v) the enumeration of consumer rights related to overdraft fee negotiations. The results of the study are to be delivered within one year to the governor, the temporary president of the senate, and the speaker of the assembly. The act is effective immediately.
Louisiana lets financial institutions, trust companies provide virtual currency custody
Recently, the Louisiana governor signed HB 802, which permits financial institutions or trust companies to provide customers with virtual custody services so long as there are “adequate protocols in place to effectively manage risks and comply with applicable laws.” A “trust company” is defined as “a corporation or a limited liability trust company organized in accordance with this Title, the laws of another state, or pursuant to the laws of the United States, including a trust company organized pursuant to the laws of this state before June 27, 2003, or an entity chartered to act as a fiduciary that is neither a depository institution nor a foreign bank.”
Before offering virtual currency custody services, a financial institution or trust company must conduct a “methodical self-assessment” to examine the risks involved in offering such services. Should it decide to offer such services, the financial institution or trust company must: (i) “[i]mplement effective risk management systems and controls to measure, monitor, and control relevant risks associated with custody of digital assets such as virtual currency”; (ii) confirm adequate insurance coverage for such services is in place; and (iii) “[m]aintain a service provider oversight program to address risks to service provider relationships as a result of engaging in virtual currency custody services.” A financial institution or trust company may provide virtual currency custody services in either a fiduciary or non-fiduciary capacity, consistent with its charter. If such services are provided in a nonfiduciary capacity, the financial institution or trust company will “take possession of the customer’s asset for safekeeping while legal title remains with the customer” (i.e., “the customer shall retain direct control over the keys associated with his virtual currency”). Should services be provided in a fiduciary capacity, a financial institution or trust company must “require customers to transfer their virtual currencies to the control of the financial institution or trust company by creating new private keys to be held by the financial institution or trust company.” In its fiduciary capacity, a financial institution or trust company has the “authority to manage virtual currency assets as it would any other type of asset held in such capacity.” Additionally, a financial institution or trust company may also provide virtual currency custody services through third-party service providers. HB 802 takes effect August 1.
Louisiana enacts student loan servicer provisions, establishes requirements for private education lenders
On June 18, the Louisiana governor signed HB 610, which defines terms and outlines provisions related to student loan servicers. Among other things, the act prohibits servicers from misleading student loan borrowers or engaging in any unfair, abusive, or deceptive trade practice. Servicers are also prohibited from making misrepresentations or omitting information related to fees, payments, repayment options, loan terms and conditions, or borrower obligations. Moreover, servicers may not “[a]llocate a nonconforming payment in a manner other than as directed by the student loan borrower” under certain circumstances. The act also outlines duties related the furnishing of information to consumer reporting agencies, providing that a servicer may not (i) submit inaccurate information to a consumer reporting agency; (ii) refuse to correct inaccurately furnished information; (iii) fail to report a borrower’s favorable payment history at least once a year; (iv) refuse to communicate with a borrower’s authorized representative; and (v) make false statements or omit material facts connected to a state or local agency investigation. Additionally, the act specifies responsibilities related to responding to written inquires and complaints from consumers.
The same day, the governor also signed HB 789, which establishes a private student loan registry and outlines provisions related to private education lenders. The act stipulates that all private education lenders operating in the state must register with the commissioner, which may include the payment of fees and registration through the Nationwide Multistate Licensing System and Registry. However, the act allows the commissioner to prescribe an alternative registration process and fee structure for postsecondary education providers. These registration requirements are not applicable to banks, savings banks, savings and loan associations, or credit unions operating pursuant to authority granted by the commissioner. Private education lenders will also be required to comply with certain reporting requirements, including providing information related to the schools where the lender has made loans to students residing in the state, the total number and dollar amount of loans made annually, interest rate ranges, borrower default rates, copies of promissory notes and contracts, and cosigner loan statistics, among others.
Both acts take effect August 1.
Hawaii enacts licensing legislation
On June 17, the Hawaii governor signed two bills into law. HB 2113 permits money transmitter license applicants to submit to either a state or federal criminal history record check, rather than both, upon application. SB 1105 establishes that, in addition to application fees, and any fees required by NMLS, a mortgage loan originator licensee must pay a mortgage loan recovery fund fee of $200, and upon application for renewal of a license, a mortgage loan originator licensee must pay $100. The bill also permits a person aggrieved by the fraud, misrepresentation, or deceit of a mortgage loan originator company licensee to receive restitution payment upon a final court order. The bills are effective July 1.
Illinois amends Collection Agency Act provisions
On May 27, the Illinois governor signed HB 5220, which makes various amendments to provisions related to the state’s Collection Agency Act. Among other things, the amendments strike language repealing specified provisions and add, amend, and strike certain definitions, including amending “financial institution” to include “consumer installment lenders, payday lenders, sales finance agencies, and any other industry or business that offers services or products that are regulated under any Act administered by the [Director of the Division of Financial Institutions].” The amendments further provide that an adjudicated finding by the FTC or other federal or state agency that shows a licensee violated the FDCPA or its rules is grounds for disciplinary action. Also, at the discretion of the Secretary (after having first received the recommendation of the Collection Agency Licensing and Disciplinary Board), an “accused person’s license may be suspended or revoked, if the evidence constitutes sufficient grounds for such action.” Moreover, the amendments restore language providing that the Department of Financial and Professional Regulation may obtain written recommendations from the Collection Agency Licensing and Disciplinary Board “regarding standards of professional conduct, formal disciplinary actions, and the formulation of rules affecting these matters.” The Act takes effect January 1, 2023.
Colorado enacts medical debt collection bill
On June 9, the Colorado governor signed HB 1285, which prohibits hospitals from taking certain debt collection actions against a patient if the hospital is not in compliance with hospital price transparency laws. Specifically, the bill prohibits hospitals that are not in compliance with a price transparency rule that went into effect in January 2021 from placing debts with third-party collection agencies, filing lawsuits to collect on unpaid debts, and reporting debts to credit reporting agencies. The bill also establishes that a patient may file suit if they believe that a hospital was not in material compliance with price transparency laws.
Maryland amends security procedures standards
On May 29, Maryland HB 962 was enacted under Article II, Section 17(c) of the Maryland Constitution - Chapter 502, which amends the Maryland Personal Information Protection Act. The bill, among other things, expands the types of businesses that are required to implement and maintain reasonable security procedures and practices to protect personal information from unauthorized use. The bill also decreases the period within which certain businesses must provide required notifications to consumers after a data breach. Violation of the bill’s provisions are considered to be an unfair, abusive, or deceptive trade practice under the Maryland Consumer Protection Act (MCPA), subject to MCPA’s civil and criminal penalty provisions. The law is effective October 1.
Florida amends money service businesses provisions to define “control persons”
On May 26, the Florida governor signed HB 389, which amends provisions related to money service businesses and related licensing requirements. The bill, among other things, replaces the term “officers” with “control person” and expands the definition of “control person” to designate the type of individuals that may be considered to control a licensee. As a result of this amendment, the bill sets forth and clarifies various requirements related to the vetting and reporting of control persons, as opposed to officers generally, going forward. The law is effective October 1.
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.