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Financial Services Law Insights and Observations


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  • Colorado tightens regulations related to debt settlement and collection practices

    State Issues

    On June 6, the Governor of Colorado signed into law HB 1380 (the “Act”) which revised the state’s consumer protection laws related to debt collection, credit services organizations, and debt management service providers. Key provisions of the law included:

    • Debt collectors must now include their name and the original creditor’s name in legal actions against consumers and possess full authority to settle the debt.
    • Credit services organizations will be required to provide the state administrator with essential business information (including name and address) and pay an annual notification fee.
    • The state administrator can issue cease-and-desist orders and impose penalties of up to $1,500 per violation of the Code.
    • Debt-management service providers cannot provide their services to consumers unless they have prepared a debt management plan for the individual that, among other things, lists all the creditors that the service provider expects to participate, and not to participate, in the plan, as well as those that it expects to participate but will not grant concessions to the consumer.
    • Providing the state administrator the ability to adopt rules regarding debt settlement service fees by March 1, 2025, provided the rules do not “unduly limit consumer access to debt management services programs based on available state and national data.”

    The Act’s amendments will go into effect 91 days following final adjournment of the General Assembly, subject to approval by Colorado voters if a referendum would be filed.

    State Issues Colorado Debt Collection State Legislation Consumer Finance

  • Colorado extends its money transmitter regulations

    State Issues

    On June 3, Colorado enacted HB 1328, (the “Act”), which will extend the state’s regulation of money transmitters until September 2030. The law had previously been scheduled to sunset on September 1. The Act will implement the recommendations of the Department of Regulatory Agencies, as specified in the Department's sunset review of the regulation of money transmitters. Specifically, the Act will (i) authorize the State Banking Board to suspend a money transmitter’s license and issue cease and desist orders; (ii) expand the requirement to furnish surety bond coverage to include all money transmission, rather than any exchange; (iii) increase the maximum penalty for failure to allow an examination from $100 to $1,000 per day the refusal continues and for failure to report up to $750 per day; and (iv) expand the licensing exemption to cover out-of-state banks. The Act will go into effect 90 days following the adjournment of the General Assembly, assuming a referendum petition will not be filed. 

    State Issues State Legislation Colorado Money Service / Money Transmitters Licensing Fintech Enforcement

  • Colorado enacts consumer protections for artificial intelligence

    State Issues

    On May 17, Colorado enacted SB 24-205 (the “Act”) concerning consumer protections in interactions with artificial intelligence (AI) systems. The Act requires developers of “high-risk” AI systems—defined as AI systems that make “consequential” decisions relating to education, employment, financial or lending services, housing, or insurance, etc.—to take reasonable care to protect consumers from “any known or reasonably foreseeable risks of algorithmic discrimination” that could arise from the use of such systems. The Act grants the Attorney General (AG) rule-making authority to implement and enforce the associated requirements.

    Beginning in February 2026, developers must provide deployers with comprehensive documentation comprising a general statement of the AI system’s foreseeable uses and known harmful or inappropriate applications, high-level summaries of the training data, known or reasonably foreseeable limitations and risks, the system’s purpose, and its intended benefits and uses. Furthermore, developers must share how the AI system was evaluated for performance and algorithmic discrimination mitigation, the data governance measures applied to its data sets and sources, the intended outputs, the measures taken to mitigate risks, and the guidelines on the proper use and monitoring of the system.

    Developers must share publicly a summary statement on their website or in a public use case inventory summarizing the types of high-risk AI systems that developers have developed or substantially modified and how they manage the potential risks of algorithmic discrimination associated with these systems. Additionally, deployers of high-risk AI systems must notify consumers of a system’s involvement in significant decision making, allow consumers to correct inaccurate personal data, and establish an appeal process for adverse determinations which, if technically feasible, allows for human review. 

    Finally, developers of high-risk AI systems are required to disclose any known or reasonably foreseeable risks of algorithmic discrimination to the AG and all known deployers or other developers of the system. Such disclosure must occur without unreasonable delay and no later than 90 days after a developer becomes aware of the risk. Furthermore, under the Act, the AG has the authority to request documentation or statements from developers to ensure compliance.

    State Issues Colorado Artificial Intelligence State Legislation Consumer Protection

  • Colorado extends and amends law for debt-management service providers

    State Issues

    On May 22, the Governor of Colorado approved HB 1251 (the “Act”) which will extend the regulation of debt-management service providers through September 1, 2035 (without legislative action, the relevant law would have been repealed on September 1 of this year). The Act will require debt-management service providers to provide personal finance management education to consumers and keep records of such education, require settlements between a consumer and creditor to be made in writing, and allow the Colorado Attorney General’s office to use the administrative process (instead of the rulemaking process) to establish reasonable fees to be paid by debt-management service providers. The Act will go into effect 90 days following the adjournment of the state assembly, provided no referendum would be filed.

    State Issues Colorado Debt Management Recordkeeping

  • Colorado enacts insurance proceeds disbursement requirements for mortgage servicers

    State Issues

    On May 20, Colorado enacted HB24-1011 (the “Act”), which predominantly addressed mortgage servicers’ disbursement of insurance proceeds.

    The Act states that, upon the borrower’s request, mortgage servicers must disclose the specific conditions under which the servicer will disburse insurance proceeds in the event that the underlying property was damaged and an insurance company paid proceeds to satisfy the claim. Among other requirements, if the borrower is not delinquent or was less than thirty-one days delinquent in respect of his or her mortgage payments, the borrower is responsible for creating a repair or rebuild plan for the mortgaged property and submitting such plan to the mortgage servicer for approval. In turn, the mortgage servicer is responsible for approving or denying a plan within thirty days of receipt. Additionally, the borrower is entitled to reimbursement of certain advance payments made to a contractor or to purchase materials for the repair or rebuild. The Act outlines a different process if a borrower is more than thirty-one days delinquent on a mortgage payment. The Act provides for additional details regarding the disbursement of proceeds, including the amounts of disbursement.

    Additionally, the Act provides that (1) mortgage servicers must disclose, among other items of information, the mortgage interest associated with mortgages upon the commencing of servicing and thereafter as the request of the borrower, and (2) a mortgage servicer must keep all communications with a borrower for at least four years. The Act became effective upon passage. 

    State Issues Colorado Mortgage Servicing Mortgages Insurance State Legislation

  • FDIC submits amicus brief in Colorado DIDMCA opt-out case


    On April 23, the FDIC submitted an amicus brief to the U.S. District Court for the District of Colorado in support of the defendant: the Colorado attorney general. This case involved Colorado HB 23-1229 (the “Act”), which was enacted on June 5, 2023, and will become effective on July 1. As previously covered by InfoBytes, trade groups filed a complaint in the U.S. District Court for the District of Colorado and moved for a preliminary injunction seeking to prevent enforcement of Section 3 of the Act. Section 3 purported to “opt out” of Section 521 of the DIDMCA which had allowed state-chartered banks to export rates of their home state across state borders.

    Section 525 of DIDMCA allows any state to enact legislation to opt out of Section 521 with respect to “loans made in such State.” In the brief, the FDIC argued that courts interpreting federal law have concluded “it is reasonable to conclude that interstate loans are made in the state in which the borrower enters into the transaction and in the state in which the lender enters into the transaction” and that “[i]t would be arbitrary and artificial to select one state when the parties enter into the transaction in two different states.” Thus, according to the FDIC, loans would be made in a state if either the borrower or the lender entered into the transaction in that state. Therefore, the FDIC argued that plaintiffs were incorrect in claiming that the opt-out would apply to loans made by out-of-state creditors to borrowers who were physically located in Colorado.

    In addition, the FDIC disagreed with plaintiffs’ argument that FDIC General Counsel Opinion No. 11, 63 Fed. Reg. 27282 (May 18, 1998), which set forth the FDIC’s position regarding where a bank is “located” for purposes of section 27 of the Federal Deposit Insurance Act, was applicable to interpreting Section 525. The FDIC’s amicus brief stated that Opinion 11 does not address opt-out or Section 525. Moreover, the FDIC argued that “where a loan is made under Section 525 cannot be equated with where a bank is located under Section 521.” The FDIC disagreed similarly with plaintiffs’ reliance on the 1978 Supreme Court of Marquette Nat’l Bank v. First of Omaha Serv. Corp., on the grounds that it concerned where a bank was located and not considered where a loan is “made.”

    The plaintiffs’ reply brief will be submitted by May 7, and a hearing of the pending motion for a preliminary injunction has been scheduled for May 16.

    Courts FDIC Colorado DIDMCA State Legislation Litigation

  • Trade groups sue Colorado Attorney General to block enforcement of law limiting out-of-state bank charges on consumer credit


    On March 25, three trade groups filed a lawsuit in the U.S. District Court for the District of Colorado, against the Colorado Attorney General and the Administrator of the Colorado Uniform Consumer Credit Code to prevent enforcement of Section 3 of House Bill 23-1229, which was signed into law last year to limit out-of-state bank charges on consumer credit (the “Act”). As previously covered by InfoBytes, the Act amended the state’s Uniform Consumer Credit Code to opt out of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA) provision that allowed state-chartered banks to charge the interest allowed by the state where they are located, regardless of the location of the borrower and regardless of conflicting out-of-state law. The Act would go into effect on July 1. 

    According to the complaint, the Act “far exceed[s]” the authority Congress granted Colorado under DIDMCA and would be deemed “invalid on its face.” Plaintiffs alleged that Colorado ignored the federal definition of where a loan was deemed to be “made,” imposing “its state interest-rate caps on any ‘consumer credit transaction[] in’ Colorado,” including “any loan to a Colorado consumer by any state-chartered bank that advertises on the internet in Colorado.” Plaintiffs further alleged that the Act’s opt out “is preempted by DIDMCA and violates the Supremacy Clause of the U.S. Constitution by attempting to expand the federally granted opt-out right to loans not actually ‘made in’ Colorado under federal law,” and “violates the Commerce Clause because it will impede the flow of interstate commerce and subject state-chartered banks to inconsistent obligations across different states.” The Plaintiffs also alleged that Colorado’s stated goal of combatting “predatory, payday-style lending” will not be accomplished through the opt out, as plaintiffs’ members are not payday lenders and offer “a wide variety of useful, familiar, everyday credit products” that “are provided at a range of rate and fee options, which sometimes—to account for credit risk—are above Colorado’s rate and fee caps, but within the rate caps allowed by DIDMCA.” Furthermore, plaintiffs warn that the Act “will prevent Plaintiffs’ members from offering these mainstream products to many Colorado consumers,” while “national banks will still offer these very same loan products to Colorado residents at interest rates in excess of Colorado’s interest-rate and fee caps.” Plaintiffs urged the court to issue a ruling stating that the Act “is void with respect to loans not ‘made in’ Colorado as defined by applicable federal law” and to enjoin Colorado from enforcing or implementing the Act with respect to those loans.

    Courts State Issues Colorado State Attorney General Consumer Protection Consumer Finance Interest Rate DIDMCA

  • Colorado Attorney General fines debt collector $500,000 for collecting on illegal loans

    State Issues

    On January 16, the Colorado State Attorney General (AG) reached a settlement agreement with a third-party debt collection company that is ordered to pay $500,000 to the State. The company previously contracted to collect debt from consumers on behalf of unlicensed lending entities associated with Native American tribes, or Tribal Lending Entities (TLEs). According to the settlement agreement, none of the TLEs were licensed Colorado lenders and all of their loan agreements with consumers contained finance charge terms that exceeded the Uniform Consumer Credit Code’s 12 percent finance charge cap on unlicensed lenders—with most having interest rates that exceeded 500 percent APR and some up to 900 percent APR. The AG alleged that, between 2017 and 2022, the company violated the Colorado Fair Debt Collection Practices Act by using “unfair or unconscionable means” to collect on defaulted TLE-issued loans by representing to consumers that the entire loan balance was owed to the TLEs, that the company was legally authorized to collect the payments, and that consumers were legally obligated to pay the full amount. The company denies that its conduct violated any state law and otherwise denies all allegations of wrongdoing. Along with the penalty, the company will be barred from collecting on any debt where the loan’s APR exceeded the 12 percent cap and will provide the State with a list of affected consumers within 30 days. 

    State Issues Colorado State Attorney General Enforcement Consumer Finance

  • CFPB, seven State AGs file suit against debt-relief company

    Federal Issues

    On January 19, the CFPB and seven state attorneys general (Colorado, Delaware, Illinois, Minnesota, New York, North Carolina, and Wisconsin) announced a lawsuit against a debt-relief company, its subsidiaries, and its two individual owners (defendants) for allegedly facilitating an unlawful debt relief service. According to the complaint, the company used third parties to solicit consumers with large debts and direct them to contact defendants. The company then, allegedly, advised consumers to enroll in their debt-relief service that will negotiate reduced payoff amounts with consumers’ creditors and represent consumers. Additionally, individual defendants implicated in the action created law firms paired with one of the company’s subsidiaries, which performed little to no work on behalf of consumers, while non-attorney negotiators from the company were tasked with renegotiating a consumer’s debt. The CFPB and the AGs alleged that the company charges fees ($84 million since 2016) before and during the service, that left consumers with additional debt, lower credit scores, lawsuits with creditors, and had none of their original debts settled or reduced.

    Among other things, the CFPB claimed the company violated the Telemarketing Sales Rule (TSR) by (i) charging advance fees before a consumer has made at least one payment under a debt settlement plan; (ii) collecting fees after settling some of a consumer’s debts when the fees are not proportional to the amount of debt defendant successfully settled or based on a fixed percentage of the amount saved; and, (iii) supporting its subsidiary law firms that the company knew or knowingly avoided knowing engaged in abusive acts or practices. The complaint sought permanent and preliminary injunctive relief, redress for consumers, and a civil money penalty. On January 11, the court granted the Bureau’s request for a temporary restraining order.

    Federal Issues CFPB State Attorney General Colorado Delaware Illinois Minnesota New York North Carolina Wisconsin Debt Relief

  • White House convenes on reducing medical debt

    Federal Issues

    On December 8, President Biden met with over 80 federal and state officials to discuss reducing medical debts for Americans. The Biden-Harris administration desires to address medical payment products, unfair debt collection practices, surprise billing and facility fees, and charity care. This roundtable was one of several actions taken by the administration to lower Americans’ healthcare costs, in addition to (i) the CFPB’s report on how medical debt collectors pursue debts under the FDCPA, such as through misattributed billing and billing consumers without contacting them (previously covered by InfoBytes, here); and (ii) the CFPB’s proposed rule to remove medical bills from credit reports (also previously covered by InfoBytes, here). The roundtable featured speakers from the president’s council, the CFPB, the Center for Medicare and Medicaid Services, DHHS, the Treasury, and representatives from California, Colorado, and Washington.

    Federal Issues White House FDCPA CFPB DHHS Department of Treasury California Colorado Washington


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