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DFPI issues NPRM on debt collector licensing requirements
On June 23, the California Department of Financial Protection and Innovation (DFPI) issued a notice of proposed rulemaking (NPRM) to incorporate changes to its debt collection license requirements and application. As previously covered by InfoBytes, in 2020, California enacted the “Debt Collection Licensing Act” (the Act), which requires a person engaging in the business of debt collecting in the state, as defined by the Act, to be licensed and provides for the regulation and oversight of debt collectors by DFPI. In April, DFPI issued a NPRM to adopt new requirements for debt collectors seeking to obtain a license to operate in the state (covered by InfoBytes here).
Among other things, the most recent NPRM seeks to:
- Revise the definition of “applicant” to clarify that an affiliate who is not applying for a license is not an applicant.
- Include language requirements for documents filed with DFPI.
- Clarify the requirements and appointment process of DFPI as the agent for service of process.
- Eliminate the requirement that an applicant must file a copy of the California Department of Justice Request for Live Scan Service form for each individual with the Nationwide Multistate Licensing System & Registry (NMLS) instead of DFPI.
- Remove requirements regarding the submission of the management chart being submitted to DFPI, the extent to which an applicant intends to utilize third parties to perform debt collection functions, and the filing with NMLS of policies and procedures.
- Refine requirements for maintaining media records.
- Refine the process of filing a change in control amendment for new officers, directors, partners, and other control people.
- Establish new branch office registration procedures.
- Eliminate requiring the submission of the total dollar amount of debt collected from consumers to determine whether a higher surety bond is required.
- Remove provisions that would permit DFPI to set a higher surety bond amount.
DFPI’s notice specifies that comments on the most recent proposed modifications are due July 12.
Wyoming passes consumer lending act
Earlier this year, the Wyoming governor signed HB 8 to authorize sales-finance activities for some licensees and establish procedures and calculations for refunding certain credit-insurance products upon prepayment. Among other things, this act exempts certain supervised financial institutions from certain notice and fee requirements in the Wyoming Uniform Consumer Credit Code (the Code) and generally restructures the Code to repeal statutes for consumer-related and supervised loans, consolidating the provisions for those loans into existing laws for consumer loans. Regarding the MLA, the act authorizes that “the administrator may seek an appropriate remedy, penalty, action or license revocation or suspension.” This act is effective July 1.
Minnesota enacts student loan servicer, debt buyer provisions
On June 26, the Minnesota governor signed omnibus bill HF 6, which, among other things, creates a Student Loan Bill of Rights and outlines new provisions for student loan servicers. The act provides new definitions and, subject to exemptions, requires entities servicing student loans in the state to be licensed. The act outlines servicer duties and responsibilities, including those related to responding to borrower communications, applying overpayments and partial payments, handling student loan transfers, providing income-driven repayment program options, and maintaining records. Additionally, servicers are prohibited from (i) misleading borrowers; (ii) engaging in any unfair or deceptive practices or misrepresenting or omitting information related to a borrower’s student loan obligations; (iii) misapplying payments; (iv) knowingly or negligently providing inaccurate information; (v) failing to provide both favorable and unfavorable payment history to consumer reporting agencies; (vi) refusing to communicate with a borrower’s authorized representative; (vii) making false statements or omitting material facts connected “with any application, information, or reports filed with the commissioner or any other federal, state, or local government agency”; (viii) violating any federal, state, or local law; (ix) providing incorrect information regarding the availability of student loan forgiveness; and (x) failing to comply with outlined duties and obligations. Furthermore, the state commissioner has authority to conduct examinations; deny, suspend, or revoke licenses; censure servicers; and impose civil penalties.
Additionally, as part of the omnibus bill, the definition of “collection agency” now includes a “debt buyer,” which is defined as a “business engaged in the purchase of any charged-off account, bill, or other indebtedness for collection purposes, whether the business collects the account, bill, or other indebtedness, hires a third party for collection, or hires an attorney for litigation related to the collection.” The act also defines an “affiliated company” as “a company that: (1) directly or indirectly controls, is controlled by, or is under common control with another company or companies; (2) has the same executive management team or owner that exerts control over the business operations of the company; (3) maintains a uniform network of corporate and compliance policies and procedures; and (4) does not engage in active collection of debts.” The commissioner is also required to allow affiliated companies to operate under a single license and be subject to a single examination provided all of the affiliated company names are listed on the license. Under the act, debt buyers are required to submit license applications no later than January 1, 2022; however, a debt buyer who has filed an application with the commissioner for a collection agency license before January 1, 2022, and has a pending application thereafter, “may continue to operate without a license until the commissioner approves or denies the application.”
The provisions take effect August 1.
Maine enacts predominant economic interest standard
On June 21, the Maine governor signed S.P. 205/L.D. 522, which enacts and amends provisions prohibiting certain actions in the making of consumer loans to protect consumers from predatory, fraudulent lending practices. Among other things, the act prohibits covered entities from “engag[ing] in any device, subterfuge or pretense to evade the requirements of this Article, including, but not limited to, making a loan disguised as a personal property sale and leaseback transaction, disguising loan proceeds as a cash rebate for the pretextual installment sale of goods or services or making, offering, assisting or arranging a debtor to obtain a loan with a greater rate of interest, consideration or charge than is permitted by this Article through any method.” Loans that violate these provisions are “void and uncollectible as to any principal, fee, interest or charge.” The act also specifies that a person qualifies as a lender subject to the act’s requirements if, among other things, (i) “[t]he person holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan”; (ii) “[t]he person markets, brokers, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase the loan or a receivable or interest in the loan”; or (iii) “[t]he totality of the circumstances indicate that the person is the lender and the transaction is structured to evade the requirements of this Article.” Additionally, the act provides that a lender who violates the act’s provisions may not furnish information concerning a debt associated with the violation to a consumer reporting agency, nor may it refer the associated debt to a debt collector. The bill takes effect 90 days after legislative session adjourns.
Connecticut amends data security breach provisions
On June 16, the Connecticut governor signed H.B. 5310 to establish new data breach notification requirements related to state residents. Among other things, the act updates the definition of “personal information” to also include (i) taxpayer identification numbers; (ii) IRS identity protection personal identification numbers; (iii) passport and military identification numbers, as well as other government-issued identification numbers; (iv) medical information; (v) health insurance policy numbers or other identifiers used by health insurers; (vi) biometric information; and (vii) user names or email addresses combined with passwords or security questions and answers used to access an individual’s online account.
The act also requires businesses to notify residents whose personal information was breached or reasonably believed to have been breached within 60 days instead of 90 days after the discovery of the breach. Should a business identify additional affected residents after 60 days, it is required to provide notice as expediently as possible. Additionally, in the event that a resident’s login credentials are breached, a business may provide notice in electronic form (or another form) that directs the individual to take appropriate measures to protect the affected online account and all other online accounts. Businesses that furnish email accounts are also required to either verify that the affected individual received the data breach notice or provide notification through another method. The act also adds provisions related to compliance with privacy and security standards under the Health Insurance Portability and Accountability Act of 1996 and the Health Information Technology for Economic and Clinical Health Act, and specifies that information provided in response to an investigative demand connected to a data breach will be exempt from public disclosure, but the attorney general may make the information available to third parties in furtherance of the investigation. The act takes effect October 1.
Montana adopts mortgage licensing requirements
On June 1, the Department of Administration of the State of Montana certified to the Secretary of State a new rule covering provisions related to, among other things, the revocation and suspension of mortgage licenses, the reinstatement of expired or suspended licenses, and applications for initial licenses near year end. Specifically, the rule provides that (i) the department may “suspend or revoke a license for a violation of the Montana Mortgage Act, this subchapter, or for any other violation of state or federal law pertaining to licensees or residential mortgage loans”; (ii) a military member or reservist whose license expired or was suspended when the licensee was on active duty at the time of renewal may have a license reinstated provided the department receives (within 30 days of the licensee’s discharge from active duty) an acceptable sponsorship request through the Nationwide Multistate Licensing System & Registry (NMLS) from the licensee’s employing mortgage broker or mortgage lender, as well as a completed mortgage loan originator license renewal or reinstatement form submitted separate from the NMLS renewal process during the same timeframe; and (iii) applicants who are approved for licensure during the renewal period of November 1 through December 31, and who are requesting the issuance of a license immediately, must submit certain application materials within a specified timeframe or their application will be deemed abandoned.
The rule also amends provisions related to mortgage licensing examination fees, the submission of consumer complaints, information-sharing arrangements, mortgage loan origination disclosure forms, and the certification process for bona fide not-for-profit entities.
Nevada passes licensing provision act
On June 3, the Nevada governor signed into law SB 453, a bill that revises provisions relating to certain persons licensed or certified by the Division of Financial Institutions of the Department of Business and Industry or the Commissioner of Financial Institutions (DFI). The amendments allow DFI to accept licensing applications through the Nationwide Multistate Licensing System & Registry (NMLS) for the following license types: (i) money transmitters; (ii) installment loans; (iii) uniform-debt-management; (iv) deferred deposit, high-interest, title loans, and check-cashing; (v) consumer litigation funding; (vi) private professional guardians; (vii) exchange facilitators; and (viii) collection agencies. Among other things, SB 453 authorizes the NMLS to accept license applications, fees, and renewals, conduct criminal background checks, and accept credit reports on behalf of DFI. SB 453 became effective upon passage and approval.
Illinois regulator proposes implementation of Predatory Loan Prevention Act
Last month, the Illinois Department of Financial and Professional Regulation (IDFPR) published proposed regulations in the state register to implement the Illinois Predatory Loan Prevention Act (Act). As previously covered by InfoBytes, the Act was signed into law in March and prohibits lenders from charging more than 36 percent APR on all non-commercial consumer loans under $40,000, including closed-end and open-end credit, retail installment sales contracts, and motor vehicle retail installment sales contracts. Violations of the Act constitute a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, and carry a potential fine up to $10,000. Additionally, any loan with an APR exceeding 36 percent will be considered null and void “and no person or entity shall have any right to collect, attempt to collect, receive, or retain any principal, fee, interest, or charges related to the loan.”
The IDFPR’s notice of proposed rules provides definitions and loan terms, including (i) general conditions; (ii) limits on the cost of a loan; (iii) how to calculate and compute the APR for the purposes of the Act; (iv) how to determine bona fide fees charged on credit card accounts, including outlining ineligible items, providing standards for assessing whether a bona fide fee is reasonable, and specifying bona fide fee safe harbors and “[i]ndicia of reasonableness for a participation fee”; and (iii) the effect of charging fees on bona fide fees.
Additionally, the IDFPR proposes several amendments related to rate cap disclosure notices. These specify that (i) all loan applications must include a separate rate cap disclosure signed by the consumer (disclosures must be provided in English and in the language in which the loan was negotiated); (ii) lenders must “prominently display” a rate cap disclosure in both English and Spanish in any physical location and on all websites, mobile device applications, or any other electronic mediums owned or maintained by the lender; and (iii) lenders must disclose the rate cap in any written loan solicitations or advertisements.
Maryland passes bill regarding creditworthiness
On May 30, the Maryland governor signed HB 1213, which requires “certain credit grantors to adhere to certain rules concerning evaluations of applications and, under certain circumstances, consider alternative methods of evaluating an applicant’s creditworthiness when evaluating an application for a primary residential mortgage loan or an extension of credit.” Under HB 1213, an entity must, among other things: (i) adhere to the rules concerning evaluations of applications including history of rent or mortgage payments and utility payments, school attendance, and work attendance; and (ii) consider other verifiable alternative indications of creditworthiness if requested by the applicant. The law is effective October 1.
Nevada updates consumer privacy framework
On June 2, the Nevada governor signed SB 260, which revises certain provisions under the state’s existing privacy law. Among other things, the act (i) adds “data broker” to the existing privacy framework; (ii) exempts certain persons and information collected about a consumer in the state from requirements imposed on operators, data brokers, and covered information, including consumer reporting agencies, personally identifying information regulated by the FCRA or the federal Driver’s Privacy Protection Act, information collected for the purposes of fraud information, publicly available information, and financial institutions; (iii) prohibits a data broker from selling covered information collected about a consumer in the state if so directed by the consumer, and revises provisions related to the sale of certain covered information about a consumer; (iv) requires data brokers to respond to a consumer’s verified request within 60 days after receipt (a data broker may extend this period by no more than 30 days if an extension is determined to be reasonably necessary); (v) provides data brokers and operators 30 days to remedy violations of the opt-out requirement (provided they have not previously failed to comply with the opt-out requirements); and (vi) updates the definition of “sale” to include “the exchange of covered information for monetary consideration by an operator or data broker to another person.” While existing law already provides the Nevada attorney general with the authority to seek injunctive relief and impose civil penalties of no more than $5,000 per violation, the act extends this authority to cover data brokers. Additionally, the act explicitly does not provide for a private right of action against operators. The act takes effect October 1.