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California to allow banks to service licensed cannabis businesses
On September 29, the California governor approved AB 1525, which provides, among other things, that banks and accountants that provide financial services to cannabis businesses are not in violation of California law “solely by virtue of the fact that the person receiving the benefit of any of those services engages in commercial cannabis activity as a licensee.” The bill also allows licensed cannabis businesses to sign a waiver permitting state or local licensing and regulatory authorities to share “application, license, and other regulatory and financial information” with a designated financial institution “for the purpose of facilitating the provision of financial services for that licensee.”
California enacts the Debt Collection Licensing Act
On September 25, California governor signed SB 908, which includes the “Debt Collection Licensing Act” (the Act). The Act requires a person engaging in the business of debt collecting in the state of California to be licensed and provides for the regulation and oversight of debt collectors by the Department of Financial Protection and Innovation (DFPI) (the legislation refers to the DFPI as its previous name Department of Business Oversight). Debt collection licenses will be required starting January 1, 2022. Debt collectors who submit applications before January 1, 2022 will be allowed to operate while their application is pending.
The Act details the process of licensure, including application fees and background checks, and requires each licensee to (i) file reports under oath with the Commissioner; (ii) maintain a surety bond; (iii) and pay to the Commissioner its pro rata share of all costs and expenses to administer the licensing provisions. The Act requires the Commissioner to “take all actions necessary” in preparation “to fully enforce the licensing and regulatory provisions of this division, including, but not limited to, adoption of all necessary regulations” by January 1, 2022.
Moreover, in addition to the FDCPA’s general prohibition on engaging in unfair or deceptive acts or practices in the collection of consumer debts, SB 908 also prohibits California debt collectors from, among other things, (i) using profane language; (ii) placing telephone calls without disclosing the caller’s identity; (iii) communicating with debtors at a frequency that is “unreasonable,” and would “constitute harassment of the debtor under the circumstances;” and (iv) sending written or digital communications without their California license number displayed in at least 12-point sized font.
California DBO now Department of Financial Protection and Innovation
On September 29, the California governor signed AB 107, an Assembly Budget Committee bill, which changes the name of the Department of Business Oversight (DBO) to the Department of Financial Protection and Innovation (DFPI), effective immediately. As previously covered in depth by a Buckley Special Alert, the California legislature passed AB 1864, which was signed by the governor on September 25 and enacts the California Consumer Financial Protection Law (CCFPL) and establishes the DFPI name change.
The DFPI name change is now live on their website.
Certain business and employment CCPA exemptions extended to 2022
On September 29, the California governor signed AB 1281, which extends certain exemptions under the California Consumer Privacy Act (CCPA) from January 1, 2021 to January 1, 2022. As previously covered by InfoBytes, the CCPA—enacted in June 2018 (covered by a Buckley Special Alert) and amended several times—became effective January 1, and provides consumers several rights regarding their personal information that is held by a business. Specifically, the exemptions at issue in AB 1281 apply to “information collected by a business about a natural person in the course of the natural person acting as a job applicant, employee, owner, director, officer, medical staff member, or contractor, as specified.” The exemptions also apply to certain personal information used in communications or transactions between a business and a consumer if the “consumer is a natural person who is acting as an employee, owner, director, officer, or contractor of a company, partnership, sole proprietorship, nonprofit, or government agency and whose communications or transaction with the business occur solely within the context of the business conducting due diligence regarding, or providing or receiving a product or service to or from that company, partnership, sole proprietorship, nonprofit, or government agency.” However, the act will only take effect if a ballot proposition does not pass during the November statewide general election.
California enacts student loan servicing requirements
On September 25, the California governor signed AB 376, which provides new requirements for student loan servicers. Among other things, these requirements require servicers to (i) timely post, process, and credit payments within certain timeframes; (ii) apply overpayments “consistent with the best financial interest of a student loan borrower,” and apply partial payments so that late fees and negative credit reporting are minimized; (iii) diligently oversee service providers; and (iv) provide specialized training for personnel responsible for offering advice to “military borrowers, borrowers in public service, borrowers with disabilities, and older borrowers.” The bill also prohibits student loan servicers from, among other things, engaging in unfair or deceptive practices or abusive acts and practices. Additionally, the bill will allow a borrower “who suffers damages as a result of a person’s failure to comply with these provisions as well as all applicable federal laws relating to student loan servicing to bring an action for actual damages, injunctive relief, restitution, punitive damages, attorney’s fees, and other relief, including treble damages in certain circumstances.” The bill also provides for an opportunity to cure alleged violations. The bill further stipulates that, starting July 1, 2021, the Commission of Business Oversight will be authorized to compile information on student loan servicers’ business conduct and various activities in order to monitor and assess consumer risk.
Special Alert: California’s new consumer financial protection law expands UDAAP and enforcement authority
On Monday, August 31, the California Legislature passed Assembly Bill 1864, which enacts the California Consumer Financial Protection Law (CCFPL) and changes the name of the Department of Business Oversight (DBO) to the Department of Financial Protection and Innovation (DFPI).
Key takeaways
- Establishes UDAAP authority for the new DFPI, adding “abusive” to “unfair or deceptive” acts or practices prohibited by California law, and authorizing remedies similar to those provided in the Dodd-Frank Act. The DFPI also has authority to define UDAAPs in connection with the offering or provision of commercial financing (e.g., merchant cash advance, lease financing, factoring) and other financial products or services to small business recipients, nonprofits, and family farms.
Pennsylvania Supreme Court says state mortgage law does not apply retroactively
On August 18, the Supreme Court of Pennsylvania affirmed a lower court’s decision, holding that 2008 amendments to the Pennsylvania Loan Interest and Protection Law (also known as “Act 6”), which raised the mortgage principle-amount ceiling from $50,000 to nearly $215,000, do not apply retroactively to loans executed prior to 2008. According to the opinion, in May 2002, homeowners executed a mortgage for $74,000. In 2008, the homeowners defaulted on their mortgage and in 2009, their bank—through its counsel—filed a mortgage foreclosure complaint, which included $1,300 in attorneys’ fees. In 2012, while their foreclosure was still pending, the homeowners filed a class action against the bank’s counsel, alleging the counsel violated Act 6’s limit on attorney’s fees. The trial court sustained the counsel’s demurrer, concluding that the homeowners’ mortgage was not “a ‘residential mortgage’ as Act 6 defined that term in 2002.” The superior court affirmed.
On appeal, the Pennsylvania Supreme Court agreed with the superior court, noting not only the “presumption against finding statutes retroactive,” but the state’s General Assembly’s “explicit instruction that courts should avoid applying legislation retroactively unless the statute clearly and manifestly states otherwise.” Because Act 6 does not expressly state that the 2008 increased mortgage-ceiling should apply to mortgages executed prior to the amendment, the Court concluded there was “no basis allowing for application of the updated law to the [homeowners]’ mortgage,” and thus, the counsel was not subject to Act 6’s limitation on attorneys’ fees.
California Consumer Financial Protection Law still pending
On June 29, California Governor, Gavin Newsom, signed SB 74, Budget Act of 2020 (and accompanying budget summary), which allocates $10.2 million in 2020-21 growing to $19.3 million in 2022-23 to the Department of Business Oversight, contingent on the enactment of the California Consumer Financial Protection Law (Law). As previously covered by a Buckley Special Alert (which details an earlier version of the proposal), the Law was originally proposed as a trailer bill to the state’s budget, but was not finalized by lawmakers prior to the June 15th budget deadline. In this version, the proposed budget and Law would: (i) revamp and rename the state’s Department of Business Oversight (DBO) to the Department of Financial Protection and Innovation (DFPI); (ii) establish an Office of Financial Technology Innovation to study emerging technologies in the financial industry; (iii) expand the DFPI’s authority to protect consumers from predatory practices by, among other things, prohibiting unlawful, unfair, deceptive, or abusive acts (consistent with Section 17200); and (iv) foster the responsible development of new financial products. California lawmakers now have until August 31 (end of session) to finalize “the statutory framework needed to implement the [Law].”
Notably, on August 6, the Assembly is holding a hearing to discuss the proposal and is seeking public feedback. Written comments should be submitted to BudgetSub6@asm.ca.gov prior to the hearing date.
Missouri amends mortgage broker licensing requirements
On July 6, the Missouri governor signed SB 599, which, among other things, modifies the state’s mortgage broker licensing requirements. Specifically, the legislation (i) provides that a prelicensing education course that is completed by an applicant will not satisfy the state’s education requirement if the course precedes an application “by a certain period” as established by the Nationwide Multi-State Licensing System and Registry (NMLSR); (ii) requires persons with various financial relationships with a business applicant for a residential mortgage loan broker license to furnish fingerprints to the NMLSR for submission to the FBI and any other authorized government entity for a background check; and (iii) allows the Director of the Division of Finance to waive the requirement that residential mortgage loan brokers maintain at least one full-service office in the state of Missouri for persons “exclusively engaged in the business of loan processing or underwriting,” or providing mortgage loan servicing. The legislation is effective August 28.
NYDFS discusses state CRA exams and Covid-19 considerations
On June 30, NYDFS issued two industry letters aimed at reminding New York regulated banking institutions of their responsibilities under New York State’s Community Reinvestment Act (New York CRA) with respect to minority-and women-owned businesses, as well as opportunities to receive NYCRA credit for Covid-19 pandemic activities.
The first industry letter discusses the state’s recent amendments to the New York CRA, which were effective January 11, 2020, and require NYDFS to consider “several aspects of banking institutions’ activities with respect to minority- and women-owned businesses.” These include, among other things, (i) “‘the banking institution’s participation, including investments, … in technical assistance programs for small businesses and minority- and women-owned businesses’”; and (ii) “‘banking institution’s origination of … minority-_and women-owned business loans within its community or the purchase of such loans originated in its community.’” NYDFS notes that later this year, it will begin to request information regarding programs related to minority- and women-owned businesses in order to begin evaluating banks under the new amendments. NYDFS also provided a spreadsheet with sample requests for guidance.
The second industry letter describes the circumstances in which regulated institutions may receive New York CRA credit for activities taken in response to the Covid-19 pandemic, which the announcement notes is consistent with the guidance federal regulators have issued on the same topic (covered by InfoBytes here and here).