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Florida establishes blockchain task force
On May 23, the Florida governor signed SB 1024, which establishes the “Florida Blockchain Task Force” within the Department of Financial Services to “explore and develop a master plan for fostering the expansion of the blockchain industry in the state, to recommend policies and state investments to help make this state a leader in blockchain technology, and to issue a report to the Governor and the Legislature.” Within 90 days of signing, the bill requires that a majority of the 13 required members of the task force must be appointed and the task force must hold its first meeting. The task force is required to, among other things, study blockchain technology and submit a report to the Governor and the Legislature with recommendations for implementing blockchain technology in the state and recommendations for specific implementations to be developed by relevant state agencies. The bill took effect on May 23.
Illinois amends Residential Mortgage License Act
On May 10, the Office of the Illinois Secretary of State published in the Illinois Register a notice by the Department of Financial and Professional Regulation of adopted amendments to certain parts of its Residential Mortgage License Act. In general, the amendments impact independent loan processor licensing as well as residential mortgage loan bond and advertising requirements. Specifically, an independent loan processing entity must employ one or more licensed mortgage loan originators (MLO) to be in compliance with the Act’s supervision and instruction requirements. In addition, any advertisement appearing in the state by a licensee concerning residential mortgage loans must clearly and conspicuously include the following: (i) the Nationwide Multistate Licensing System and Registry (NMLS) Consumer Access homepage; and (ii) a licensee’s unique NMLS identifier. If a MLO is advertised, licensees are also required to include the MLO employee’s individual NMLS unique identifier, in addition to listing the licensee’s NMLS unique identifier. Furthermore, licensees are prohibited from including a NMLS unique identifier in any advertisement related to “activities other than residential mortgage lending or brokering” unless certain criteria are met. The amendments became effective immediately.
West Virginia high court: Insufficient facts to determine whether arbitration is enforceable
On May 17, the West Virginia Supreme Court of Appeals vacated a state circuit court’s ruling to deny a motion to compel arbitration in a case related to bounced convenience checks drawn on a consumer’s credit card account, finding that the circuit court’s order failed to contain sufficient findings of fact or conclusions of law to allow the Supreme Court of Appeals to conduct a proper review. According to the opinion, the plaintiff-respondent sued the debt collector defendants for invasion of privacy and violations of the West Virginia Consumer Credit and Protection Act after the defendants attempted to collect debt arising from two convenience check transactions that were allegedly returned as unpaid. The defendants moved to compel arbitration and presented enrollment forms that contained arbitration clauses purportedly signed by the plaintiff-respondent. However, the plaintiff-respondent claimed the enrollment forms were never presented to her, that her signature was applied to the forms electronically after she used a card reader terminal to electronically cash her checks, and that the “signing process was ‘rushed’ and unfair.” Following a brief hearing on the motion to compel arbitration, the circuit court entered an order denying the motion to compel arbitration.
On appeal, the state’s highest court vacated the circuit court’s order, which it found to be “unclear and contradictory in its rulings,” in that the lower court appeared to determine that the plaintiff-respondent had not agreed to the terms of the arbitration agreement, but also appeared to determine that the contract was unconscionable and could not be enforced. The high court remanded the case for further proceedings, including determining whether an arbitration agreement existed, and if it did, whether the agreement was unconscionable.
New Hampshire amends licensing requirements for nondepository mortgage bankers, pawnbrokers
On May 15, the New Hampshire governor signed HB 649 to, among other things, amend the state licensing requirements for nondepository mortgage bankers, brokers, and servicers, as well as pawnbrokers and moneylenders. Specifically, licensing applicants must file with the banking commissioner a written verified application through the Nationwide Multistate Licensing System and Registry (NMLS) using the NMLS form, or by providing all the same information required on the application using the NMLS. Applicants must also file a statement of net worth. Finally, HB 649 defines what constitutes a “significant event” pertaining to a licensee’s practices with respect to consumer credit, small loans, debt adjustments, and money lending. The act became effective immediately.
Georgia amends mortgage lender licensing laws
On May 7, the Georgia governor signed HB 185, which amends various state laws related to financial institutions, including the licensing requirements for mortgage lenders and mortgage loan originators. The bill specifies that any licensed mortgage lender is authorized to engage in all activities that are authorized for a mortgage broker and therefore, is not required to obtain a mortgage broker license. Additionally, the bill specifies that a mortgage loan originator license shall become inactive in the event that a mortgage loan originator is no longer sponsored by a mortgage lender or mortgage broker that is licensed. The bill becomes effective July 1.
Colorado enacts student loan servicer act
On May 13, the Colorado governor signed SB19-002, the “Colorado Student Loan Servicers Act,” which requires an entity that services a student education loan owned by a Colorado resident to be licensed by the state. Under the bill, “student loan servicer” is generally defined as a person that receives a scheduled periodic payment from a student loan borrower and applies the payments of principal and interest with respect to the amounts received from such a borrower, and provides other similar administrative services. The bill requires any person seeking to act as a student loan servicer to be licensed through the state on or after January 31, 2020, and specifies the procedures for obtaining and renewing the license. Federal student loan servicers are automatically issued the license under the bill.
Among other things, the bill also specifies particular acts that are required of the student loan servicer, including (i) providing substantive responses within 30 days of receiving a written inquiry from a borrower; (ii) inquiring of borrowers as to how to apply overpayments; and (iii) applying partial payments in a manner that minimizes late fees and negative credit reporting. Additionally, the bill specifies prohibited acts, including (i) engaging in an unfair or deceptive practice toward any person or misrepresenting or omitting any material information in connection with servicing student loans; (ii) misapplying payments to the loan balance; and (iii) failing to report both favorable and unfavorable payment history to a consumer reporting agency. A violation of the bill is considered a deceptive trade practice, and the bill provides a private right of action for borrowers to seek punitive damages for violations. The bill is expected to take effect on August 2.
25 state AGs reject CFPB payday proposal in comment letter
On May 15, a group of 25 Democratic Attorneys General submitted a comment letter in response to the CFPB’s February proposal to rescind certain provisions related to the underwriting standards of the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the Rule) (covered by InfoBytes here). In the comment letter, the Attorneys General argue, among other things, that the elimination of the underwriting provisions of the Rule: (i) is inconsistent with the Bureau’s obligations to protect consumers under the Dodd-Frank Act; (ii) ignores state experiences with payday and vehicle title lending; and (iii) would reduce states’ ability to protect their residents from predatory lending.
Specifically, the letter argues that the Bureau’s reasoning for repealing the underwriting requirements—that the findings of the Rule “were not supported by sufficiently ‘robust and reliable’ evidence”—would saddle the Bureau with an unreasonably high evidentiary standard that would prevent the Bureau from regulating unfair and abusive practices. Additionally, the letter states that the Bureau’s conclusion that the underwriting requirements would harm consumers by reducing consumer’s access to credit and ability to choose lenders offering credit ignores “the experiences of numerous states that have implemented restrictions on payday and vehicle title lending—restrictions that have protected consumers without unreasonably limiting consumers’ access to credit.” States’ restrictions on payday and vehicle title lending, according to the letter, have “benefited consumers and expanded access to manageable credit.” Lastly, the letter asserts that maintaining a federal regulatory floor on lending activities is “crucial to supporting and complementing state oversight,” and removal of the floor will “enable lenders to continue trying to avoid state regulation and continue marketing expensive and often unlawful products to consumers without providing borrowers an opportunity for negotiation or comparison.”
The comment letter was written by the Attorneys General of the District of Columbia, New Jersey, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.
As previously covered by InfoBytes, the same group of Attorneys General had urged the CFPB via a previous comment letter not to delay the August 19, 2019 compliance date for any aspect of the Rule, and had warned that they would consider taking legal action if the Bureau did so.
Kansas updates GAP waiver guidance
On May 19, the Office of the State Bank Commissioner of Kansas published in the Kansas Register an amended Administrative Interpretation No. 1004 covering Guaranteed Asset Protection (GAP). In general, the interpretation provides guidance for creditors to follow to exclude the cost of GAP waiver agreements from the calculation of the finance charge with consumer credit sales and closed-end consumer loans pursuant to the Uniform Consumer Credit Code. The revision amends paragraph 3(g) of the interpretation, which requires clear disclosure on how to contact the GAP provider in connection with claims for GAP coverage. Paragraph 3(g) states that the information must be written in bold font and the word “claims” must be bolded and underlined. Additionally, the form must also advise Kansas consumers that they can contact the Kansas Office of State Bank Commissioner with complaints about their GAP waiver agreement. The revised interpretation was effective on May 15.
Iowa amends licensing requirements for service companies
On May 16, the Iowa governor signed SF 619, which, among other things, amends the state’s service contract provider provisions to require any provider that issues, offers for sale, or sells motor vehicle service contracts in the state to be licensed as a service company. Persons who provide support services or work under the direction of a licensed service company, including those who provide marketing, administrative, or technical support, are not subject to the licensure requirements. In addition, SF 619 also prohibits a licensed service company that offers motor vehicle service contracts from making certain false, deceptive, or misleading statements regarding (i) the service company’s affiliations with a manufacturer or importer; (ii) a warranty’s validity or expiration date; or (iii) whether a contract holder must obtain a new service contract in order to maintain coverage under an existing contract or warranty. Furthermore, SF 619 prohibits a lending institution from requiring “the purchase of a motor vehicle service contract or residential service contract as a condition of a loan or the sale of any property or motor vehicle.” The amendments are effective immediately.
Vermont streamlines mortgage licensing
On May 14, the Vermont governor signed S.154, which, among other things, amends the state’s mortgage licensing statute. Specifically, the legislation repeals various provisions of the state’s licensing process for mortgage lenders and servicers and replaces the provisions with a new chapter (8 V.S.A. Chapter 72) intended to streamline the law and bring more clarity and cohesion to the licensing process. The bill is effective July 1.