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Maine amends processes regarding sale of foreclosed properties for nonpayment of taxes
On April 16, the Governor of Maine signed into law HP 1452 (the “Act”), which will amend the selling processes for foreclosed properties, specifically when a property is being foreclosed upon following a failure to pay taxes. The Act will provide that any money returned to the former owner of a property pursuant to a foreclosure sale due to nonpayment of taxes will be exempt from attachment to claims for a period of 12 months. The Act will also amend the form notice provided for impending foreclosure due to nonpayment of taxes to read “[i]f the tax lien forecloses, the municipality will own your property and may sell it and return excess sale proceeds to you.” Under the sale of foreclosed properties, the Act also added a definition of “tax-acquired property,” defined to mean any real property taken by a municipality for nonpayment of property taxes. The Act added requirements outlining the sale process, amending some payment and notice requirements and adding that a seller must provide a written accounting record of the amount of excess sale proceeds at the former owner’s request. Of interest, Section 4-A of the Act noted that if a real estate broker or agent failed to sell the property within a year, or the municipality failed to contract with a real estate broker or agent after three attempts, then the municipal officers may sell the property in any authorized manner and return the proceeds to the former owner. There are additional provisions adding requirements for receipts and notices, as well as on transfer of proceeds. The Act will go into effect 90 days after the state legislature adjourned, which will be on July 16.
Tennessee updates its UCC to amend “money” definition and include CBDCs
On April 11, the Governor of Tennessee signed into law SB 2219 (the “Act”) that amended Section 47-1-201(b) of the Tennessee Code by redefining “money” and codifying “central bank digital currency.” The term “money” was updated to include a new provision that will state that money does not include a central bank digital currency. “Central bank digital currency” will instead be defined as a digital currency issued by a federal reserve, foreign government or foreign reserve system, and will include a digital currency, digital medium of exchange, or digital monetary unit of account processed by the entity. The Act will go into effect on July 1.
Iowa enacts new money transmission provisions
On April 10, Iowa’s governor signed into law HF 2262 (the “Act”) relating to money transmission services. The Act will exempt a person appointed as an agent of a payor for purposes of providing payroll processing services from licensure, provided that their agreement and services meet certain conditions. The Act will also allow the superintendent to suspend or revoke a licensee’s license, should they, among other things: (i) violate the Act; (ii) fail to cooperate with an examination or investigation conducted by the superintendent; (iii) engage in willful misconduct or blindness and, which leads to a conviction of an authorized delegate for violating a state or federal anti-money laundering statute, or violates the Act, a rule adopted under the Act, or an order issued under the Act; or (iv) engage in an unsafe or unsound practice. Further, the Act will detail different scenarios in which the superintendent may pursue an enforcement action. For instance, if the superintendent determined any violations were “likely to cause immediate and irreparable harm to the licensee, the licensee’s customers, or the public, or cause insolvency” the superintendent may issue a cease and desist order. Finally, the Act will provide guidelines for investigations, civil penalties, criminal penalties, and administrative proceedings. The Act became effective upon enactment and will apply retroactively to July 1, 2023.
Kansas enacts its Commercial Financing Disclosure Act
On April 12, Kansas enacted the Commercial Financing Disclosure Act in SB 345 (the “Act”) which will require the disclosure of certain commercial financing product transaction information, provide civil penalties for violations, and authorize enforcement by the attorney general. The Act will apply to any commercial loan, accounts receivable purchase transaction, and commercial open-end credit plan (when the transaction would be less than or equal to $500,000).
According to the Act, providers must disclose the total amount of funds furnished, and total amount dispersed, if that number is less than the amount furnished. Additionally, providers must disclose the total amount borrowers will owe the provider in that agreement, including the total cost to the borrower, as well as the manner, frequency, and amount of each payment. For each commercial financing agreement, only a single disclosure is necessary. If there are alterations to the financing arrangement, a new disclosure will not be mandated. Furthermore, providers will not be required to issue a new disclosure with every purchase of accounts receivables under the agreement. Moreover, brokers of such transactions are prohibited from collecting an advance fee from a business, making any false representations, or omitting any material facts during the sale of the services.
The Act will exempt certain depository institutions, commercial financing transactions secured by real property or a lease, and providers that made five or fewer commercial financing transactions in Kansas in one year, among other things.
Violations of the Act will be subject to a civil penalty of $500 per individual violation and the total penalty for multiple aggregated violations cannot exceed $20,000. If a person continues to violate the Act after receiving a written warning from the attorney general, the penalty will increase to $1,000 per violation. The maximum penalty for multiple aggregated violations in this scenario will be $50,000. The Act will not grant individuals the right to sue based on compliance or non-compliance with its provisions; there is no private right of action. Violations of the Act will not affect the enforceability or validity of the underlying agreement. The authority to enforce the Act will not be given exclusively to the attorney general.
CFPB approves of Illinois’ new regulations on appraisal discrimination
On April 9, the CFPB released a comment letter supporting the Illinois Department of Financial and Professional Regulation’s decision to propose three rules prohibiting discrimination related to appraisals. The CFPB interpreted and issued rules under ECOA and would enforce its requirements. Illinois’ three proposed rules (38 IAC 345.280(c)(1)(A); 38 IAC 185.280(c)(1)(A); and 38 IAC 1055.240(c)(1)) would all update the Illinois code to prohibit discrimination under ECOA or the FHA, including a provision to deny loan applications where they should have been granted due to discrimination. “Discrimination against applications on a prohibited basis in violation, for example of the [ECOA] or [FHA], including… relying on giving force or effect to discriminatory appraisals to deny loan applications where the covered financial institution knew or should have known of the discrimination[.]” The CFPB commented in their letter that these provisions accurately described ECOA. The CFPB also noted that TILA’s Appraisal Independence Rule, which it has rulemaking authority under, does not conflict with a lender’s obligations to comply with civil rights laws including ECOA.
Oregon enacts new consumer finance protections related to wage garnishment
Recently, the Governor of Oregon enacted bill SB 1595 (the “Act”) that amended Oregon’s statutes to provide greater consumer protection rights for Oregonians working to pay back their debts. The Act was mostly comprised of new rights for wage garnishments. Section 10, which updated ORS 18.785, amended what a financial institution must do if it receives a writ of garnishment for a debtor, including checking for federal benefits and analyzing an account holder’s base protected account balance, among other provisions. Additionally, the Act protected $2,500 from a person’s bank account to help them meet basic needs. The law went into effect on April 4.
Wisconsin updates licensing and regulation of financial services providers
On April 4, Wisconsin enacted SB 668 (the “Act”) which will amend many provisions to the Wisconsin Department of Financial Institution’s (DFI) regulation of non-banks. According to an analysis by the state’s Legislative Reference Bureau, the Act will change how multiple financial practices are regulated and rely on the Nationwide Multistate Licensing System and Registry (NMLS). The Act will allow Wisconsin to use NMLS to administer licensing needs concerning consumer lenders, payday lenders, collection agencies, sales finance companies, money transmitters, mortgage bankers and brokers, adjustment service companies, community currency exchanges, and insurance premium finance companies. The amendments were modeled after the Model Money Transmission Modernization Act approved by the CSBS.
The Act will require licensees to provide information directly to NMLS. For collection agencies, the Act will eliminate the requirement that a collector hold a separate license from the one held by his employer, update the definition of collection agency to add the exception for mortgage bankers, and require separate collection agency licenses for each place of business, among others – including repeals. As to consumer lenders, the Act will better define consumer loans, specify provisions governing licensed lenders, and specify which activities require licensure. With respect to sellers of checks and money transmitters, the Reference Bureau noted three provisions governing licensing and regulation of money transmitters will be replaced by the MTMA. This will include registering a license through the NMLS; granting the power to suspend, revoke, or refuse renewal of a license to the DFI; and allowing a licensed money transmitter to conduct business through an authorized delegate; among others. The Act also updated NMLSR requirements and DFI powers concerning payday lenders, sales finance companies, adjustment service companies, community currency exchanges, and insurance premium finance companies.
Kentucky enacts bills: on mortgage liens and unlawful trade practices
On April 9, Kentucky enacted HB 488 (the “Bill”) which will establish when a county clerk admits any amendment, renewal, modification, or extension of a recorded mortgage to record. The Bill will also establish when a county clerk admits affidavits of amendment prepared and executed by an attorney to record. Additionally, the Bill will establish recording requirements and a section to establish when a promise, acknowledgment, or payment of money operates as an extension of a lien in a recorded mortgage or deed. Finally, the Bill establishes recording requirements for extensions on a lien in a recorded mortgage or deed.
On April 4, Kentucky also enacted HB 88 (the “Act”) which will amend provisions related to unlawful trade practices, prohibiting (i) entities that are not banks or trust companies from implying that they are engaged in banking or trust activities, and (ii) entities to use in their marketing materials the name, trademark, logo or symbol of any financial institution or similarly resembling any financial institution, with exceptions for permitted use or disclosure of non-consent.
The Act will also state that residential real property service agreements cannot give rise to rights or obligations lasting longer than two years after their effective date. Additionally, barring exceptions, service agreements cannot (i) be enforceable on future owners of interests in the residential real property or otherwise purport to remain attached to the property; (ii) create or impose a lien, encumbrance, or other real property interest on the residential real property; or (iii) require or permit recording of the agreement or any notice or memorandum of the agreement, among other things.
Kentucky makes wholesale amendments to its financial services code
On April 9, the Governor of Kentucky signed into law HB 726 (the "Act"), an act that will make substantial amendments to the state’s regulation of financial services under Chapter 286 of the Kentucky Financial Services Code. Of note, the Act will update key definitions under the state’s financial services code, including “Bank,” “Company,” “Control,” and “Deposit.” Some of the changes will amend certain powers to the financial commissioner, an appointed position by the Governor, as well as the banking experience requirements for this position. The Act also, among other things, addresses in- and out-of-state trust company rules; banking activities rules for foreign and out-of-state financial companies; bank mergers and reviews by the commissioner; bank closures; bank loan compliance under 12 U.S.C. sec. 371c (prohibiting acceptance of a security from a bank’s affiliate); the commissioner’s rules to remove any officer, director, or employee of a bank via written notice; and mortgage loan license fees, including annual assessments.
Kentucky enacts a comprehensive data privacy law for controllers
On April 4, Kentucky enacted HB 15 (the “Act”) which will apply to persons who conduct business that produces products or services that are targeted towards Kentucky residents. The Act will also apply to companies handling personal data of at least (i) 100,000 consumers, or (ii) 25,000 consumers and derive over 50 percent gross revenue from the sale of personal data. The Act does not apply to various entities, including: (i) city or state agencies, or political subdivisions of the state; (ii) financial institutions and their affiliates, as well as data subject to the Gramm-Leach-Bliley Act; (iii) covered entities or businesses governed by HIPAA regulations; and (iv) nonprofit organizations. Enforcement of the Act will be through Kentucky’s Attorney General.
The Act will impose several requirements on controllers, including: (i) limiting collection of personal data to what is relevant and necessary for the disclosed purposes; (ii) implementing reasonable administrative, technical, and physical data security measures to safeguard the confidentiality, integrity, and accessibility of personal data; (iii) refraining from processing personal data for undisclosed purposes unless the consumer consents; and (iv) obtaining explicit consent before processing sensitive data, particularly from known children, in accordance with the Children’s Online Privacy Protection Act. Controllers will also need to conduct and document a data protection impact assessment for certain activities, such as targeted advertising, selling personal data, and profiling. Furthermore, controllers will be required to furnish consumers with a privacy notice containing information on the categories and purposes of data processing, consumer rights, appeals processes, and disclosures to third parties.
The Act will grant consumers the right to confirm whether their personal data is being processed by a controller and to access that data, except where doing so would expose trade secrets. Also, consumers will have the right to rectify any inaccuracies, as well as the right to have their personal data deleted or to receive a copy of their personal data processed by the controller in a portable and easily usable format. This will allow transmission to another controller without impediment where processing is typically automated. Further, consumers will have the right to opt out of processing for targeted advertising, sale of personal data, or profiling for solely automated decisions with significant legal effects. Controllers must respond to consumer rights requests within 45 days and may be given another possible 45-day via an extension if necessary. Controllers and processors will be given a 30-day cure period during which they must confirm in writing that alleged violations have been rectified and pledge to prevent future breaches. The Act will go into effect January 1, 2026.