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On September 11, Delaware’s governor signed HB 154 (the “Act”), which creates the Delaware Personal Data Privacy Act. The Act ensures that residents of Delaware have the right to be informed about the collection of their personal information, access that information, rectify any inaccuracies, or request the deletion of their personal data held by individuals or entities. The Act will apply to those who conduct business in the State, that “produce products or services that are targeted to residents of the State [of Delaware] and that during the preceding calendar year,” processed personal data of more than 35,000 consumers, or processed the personal data of at least 10,000 consumers while deriving more than 20 percent of their gross revenue from personal data sales. Additionally, the Act mandates that the Delaware Department of Justice conduct public outreach programs to educate consumers and the business community about the Act, starting at least 6 months before the date on which the Act becomes effective.
The Act is effective on January 1, 2025.
Draft risk assessment regulations and cybersecurity audit regulations were released in advance of the September 8 open meeting held by the board. Draft regulations on automated decision-making remain to be published. More comprehensive comment and feedback is expected on these draft regulations, unlike regulations finalized in March that were presented in a more robust state. As previously covered by InfoBytes, the California Privacy Protection Agency cannot enforce any regulations until a year after their finalization, adding a ticking reminder to the finalization process for these draft regulations.
The draft cybersecurity regulations include thoroughness requirements for the annual cybersecurity audit, which must also be completed “using a qualified, objective, independent professional” and “procedures and standards generally accepted in the profession of auditing.” A management certification must also be signed certifying the business has not influenced the audit, and has reviewed the audit and understands its findings.
The draft risk assessment regulations require conducting a risk assessment prior to initiating processing of consumers’ personal information that “presents significant risk to consumers’ privacy,” as set forth in an enumerated list include the selling or sharing of personal information; processing personal information of consumers under age 16; and using certain automated decision-making technology, including AI.
Adrienne Harris, Superintendent of the New York State Department of Financial Services (“DFS”) issued an update on the VOLT initiative, an ongoing project to enhance DFS’s role as a virtual currency regulator. Superintendent Harris published proposed guidance adopting enhanced criteria for procedures to list and de-list virtual currencies as well as updated guidance for designating virtual currencies to the DFS “Greenlist.”
The new General Framework for Greenlisted Coins sets (i) heightened risk assessment standards for coin-listing policies and enhances requirements for consumer-facing products; and (ii) new requirements associated with coin-delisting policies. Under the new guidance, a virtual currency entity that seeks to self-certify coins must create a coin-listing policy and may not self-certify any coins until such possibly has a written approval from DFS. A coin-listing policy must contain and be based on a robust governance structure; comprehensive risk assessment; consideration of factors to identify and mitigate risks involved in each coin and its uses; and policies and procedures to conduct continued monitoring of the coin to ensure consistent safety and soundness compliance.
The new framework does not require prior approval from the DFS to list coins included on the Greenlist, but does require virtual currency entities that choose to list such coins to (i) provide advance notification to DFS and (ii) have a DFS-approved coin-delisting policy.
California Attorney General Rob Bonta submitted a letter to federal agencies urging the federal government to adopt regulations and statutory protections to help protect patients who may need to use medical credit cards and installment loans to pay for healthcare-related bills.
The letter notes that medical payment products exacerbate health disparities, that patients seeking medical care may not be in an appropriate position to make complex financial decisions, and offers California’s protections against medical payment products as a model framework.
In the letter, which is addressed to the U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services, the CFPB, and the Treasury, Bonta recommends (i) designating medical credit card debt as medical debt and not consumer debt; (ii) ensuring providers properly screen patients for financial aid and charity care before offering a medical payment product; (iii) limiting enrollment when patients may be distressed or under the influence of medication; (iv) providing written notice of financial assistance and potential eligibility for charity care; (v) making reasonable efforts to notify patients about the level of insurance coverage of medical expenses; and (vi) reducing patient cost-sharing responsibilities.
On September 6, California Governor Gavin Newsom signed an Executive Order (E.O.) instructing state agencies to evaluate how generative artificial intelligence (GenAI) may impact the State and its residents. Specifically, the E.O. requires certain state agencies to provide a report to the Governor which will examine “the most significant, potentially beneficial uses” of GenAI tools by the state. The report must also discuss “the potential risks to individuals, communities, and government and state government workers” from GenAI tools. Certain California agencies, including the Department of Technology, must perform a “risk analysis of potential threats to and vulnerabilities of California’s critical energy infrastructure by the use of GenAI.” The E.O. also requires that the State issue “general guidelines for public sector procurement, uses, and required training for use of GenAI,” and consider pilots of GenAI projects to be tested in “sandboxes.” Lastly, the E.O. directs the State to pursue a formal partnership with certain California higher education institutions to study the impacts of GenAI and support its safe growth.
On September 1, California Attorney General (AG) Rob Bonta announced a settlement with a mortgage servicer for its alleged failure to properly process and grant mortgage deferment requests from California military reservists called to active duty. California’s Military and Veterans Code, which includes the California Military Families Financial Relief Act, allows reservists to delay paying mortgages, credit cards, property taxes, car loans, utility bills, and student loans. To defer payment, they must submit a written request and their military orders to the entity to which their payments are due. The AG noted that the California Department of Justice investigated the mortgage servicer’s processes for handling mortgage deferment requests and found that the servicer delayed granting the deferment requests, requested information for eligibility review outside of the 30-day timeframe to do so, and improperly denied deferment requests, on at least 10 occasions. Furthermore, the servicer allegedly attempted to collect payment from some borrowers during the requested deferral period by making calls and sending notices that warned that the servicer would foreclose on the borrowers’ properties if they failed to pay. The servicer also allegedly incorrectly charged some borrowers late fees and other charges for nonpayment of payments that should have been deferred. Finally, the servicer allegedly provided incorrect negative credit information to credit reporting agencies.
Under the terms of the settlement, the servicer agreed to, among other things, (i) pay $58,000 in civil money penalties; (ii) “remediate consumer harm”; (iii) disclose deferment request status to borrowers; and (iv) provide annual reports to the AG documenting compliance with the injunctive terms.
DFPI recently approved the final regulation for implementing and interpreting certain sections of the California Consumer Financial Protection Law (CCFPL) related to commercial financial products and services. After considering comments and releasing three rounds of modifications to Sections 1060, 1061, and 1062, the final regulation will, among other things, bring protections to small businesses seeking loans, by (i) defining and prohibiting unfair, deceptive, and abusive acts and practices in the offering or provision of commercial financing to small businesses, nonprofits, and family farms; and (ii) establishing data collection and reporting requirements.
Previous InfoBytes coverage on the (i) initial modifications to the CCFPL proposed regulation can be found here; (ii) the second round of CCFPL modifications proposal is found here; and (iii) the third iteration of the modified CCFPL proposal is located here.
This DFPI regulation was notably finalized on the heels of the CFPB’s finalized Section 1071 rule on small business lending data, which similarly will require financial institutions to collect and provide the Bureau data on lending to small businesses (covered by InfoBytes here)
Sections 1060, 1061, and 1062 will be effective on October 1.
On August 22, the FTC announced that the U.S. District Court for the Southern District of California recently issued a temporary restraining order against a business opportunity operation for allegedly engaging in deceptive practices. According to the FTC’s complaint, the operation made claims in violation of the FTC Act, the FTC’s Business Opportunity Rule, and the Consumer Review Fairness Act of 2016 by, among other things; (i) making false claims that they offered a “venture capital-backed” and “artificial intelligence-integrated” e-commerce business opportunity for consumers to buy into; (ii) falsely promoting themselves as e-commerce experts and self-made millionaires who have assisted others in generating tens of millions of dollars; (iii) relying on false business projections, including that customers would make a “$4k-$6k consistently monthly net profit”; (iv) false claims about the use of AI tools to maximize revenues; and (v) false endorsements, including false claims of success on social media by an affiliate marketer. The court’s temporary restraining order prohibited the operation from conducting business, froze its assets, appointed a temporary receiver, and required the operation to turn over business records to the FTC. Beyond the temporary restraining order, the FTC is seeking preliminary and permanent injunctive relief, monetary relief, and additional relief as determined by the court. The FTC also highlighted that its ability to provide these refunds would not be possible if the action hadn't predated the 2021 Supreme Court ruling (covered by InfoBytes here) that the FTC lacks authority under Section 13(b) of the FTC Act to seek monetary relief in federal court. The FTC used the opportunity to encourage Congress to restore its ability to seek monetary relief in federal court.
On August 9, the California Department of Financial Protection and Innovation (DFPI) announced that it issued cease and desist orders against three entities (orders here, here, and here) for allegedly offering and selling unqualified securities, and making material misrepresentations and omissions to investor related to cryptocurrency investments. The entities allegedly created high-yield investment programs (HYIPs), which DFPI characterizes as “investment frauds that typically promise high returns with low risk, promise overly consistent returns, provide little details about the people running the HYIP, use vague language to describe how the HYIP makes money, offer referral bonuses, facilitate deposits and withdrawals with crypto assets, and use social media to gain attention and attract investors.”
The cease and desist orders are just one of the tools DFPI employs to address investment scams involving crypto assets, also using enforcement actions, social media, and a Crypto Scam Tracker. DFPI has posted videos to its social media accounts that are directed towards the same group of individuals targeted by the crypto community in order to educate investors about its enforcement actions and violations of law. The Crypto Scam Tracker was launched earlier this year to help Californian’s identify and avoid scams involving cryptocurrency. (Covered by InfoBytes here).
On August 9, the Dubai International Financial Centre Authority (DIFC) Commissioner of Data Protection issued a “first-of-its-kind” adequacy decision, declaring California’s data protection regime as “substantially equivalent and low risk.” The DIFC deemed the California Consumer Privacy Act (CCPA) of 2018, as amended by the California Privacy Rights Act of 2020, equivalent to DIFC’s DP Law 2020—opening the door to facilitate personal data transfers between DIFC and California-based entities without the need to apply additional contractual measures. The DIFC further noted that CCPA Regulations provide procedures, guidance, and clarity on the requirements of the CCPA and highlighted the key aspects of CCPA, including (i) concepts and definitions; (ii) breach notification requirements; (iii) enforcement authority; (iv) notifications to the commissioner; and (v) commissioner authority and objectives. The DIFC’s decision outlines nine observations regarding California’s data protection regime that informed its adequacy decision. In its press release, the DIFC noted that the CCPA “gives consumers control and protection over personal data collected by businesses” and limits data collection and processing to what is fair, lawful, and necessary. The DIFC added that this adequacy decision sets a precedent for Dubai to build “similar relationships with various US states and the US privacy framework in the future.”