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On May 30, the Commonwealth Court of Pennsylvania reversed an order by the Pennsylvania Department of Banking and Securities Commission (Commission) issued against a mobile giving app and two of its executives (petitioner), holding that the petitioner was not required to be licensed by the Commission because it was not transmitting money under the court’s interpretation of the Pennsylvania Money Transmitter Act (Act). In 2016 the Compliance Office of the Department of Banking and Securities (Department) issued an order to cease and desist against the petitioner for transmitting money in the state without a license as required under the Act. At issue was whether petitioner’s activities constituted “transmitting money” under the Act, or merely involved collecting and supplying information. The Department claimed the petitioner’s app was “an indispensable part of a chain of events through which money was transferred from the donors to the recipients of the donations.” However, the petitioner argued that the app simply connected donors to the recipients, and that the actual transmission of money was outsourced to a payment processor who conducted the actual transactions.
The six-judge majority stated that the Commission’s interpretation of the Act was too broad, holding that “[o]n a basic and critical level, the Commission erroneously interpreted the terminology ‘engage in the business’ in an overly expansive manner and essentially read it as prohibiting any conduct that contributes toward—or has a tangential involvement with—the concrete and real act of ‘transmitting money.’” Moreover, “the key term in ascertaining the defining characteristic of the conduct that is proscribed by the statute is ‘transmitting,’” and while the petitioner’s “software application can be deemed to have acquired and ‘transmitted’ information vital to the donative transactions to [the payment processor], by no means was [the petitioner] ‘transmitting money’ itself, or transmitting some other ‘method for the payment’ of the donation, ‘from one person or place to another.’”
On May 28, the Nevada governor signed SB 201, which, among other things, updates existing Nevada law referring to the federal Military Lending Act (MLA). Specifically, the bill eliminates the current state law provisions that adopt the MLA by referring generally to the federal law and instead specifically adopts the language of certain MLA provisions for lending to a covered service member or a dependent of a covered service member. The bill thus includes language that (i) prohibits a lender from charging an annual percentage rate greater 36 percent; (ii) requires a lender to make certain disclosures before extending certain consumer credit; and (iii) prohibits certain additional loan terms in a transaction, such as a requirement that the loan be repaid by allotment. The bill also requires the Commissioner of Financial Institutions to adopt regulations to administer, carry out, and enforce the MLA provisions. The new provisions were effective on May 28 for the purpose of adopting any regulations and performing any other preparatory administrative tasks that are necessary to carry out the provisions of this act, and on October 1, 2019, for all other purposes.
On May 28, the California Attorney General announced approximately $1.5 million in judgments against a company and four individuals (defendants) charged with allegedly operating a telemarketing scheme that offered fake investment recovery services. According to the Attorney General’s office, the defendants allegedly made false and deceptive claims to investors, many of whom were elderly, that the company could recover money lost from previous investments for an up-front fee of several thousand dollars. The terms of the judgments include $930,800 in combined civil penalties and $567,774 in restitution, and permanently enjoin and restrain the defendants from, among other things, making false or misleading statements in connection with telemarketing transactions. The Attorney General’s announcement also disclosed the recovery of nearly $25,000 in victim restitution pursuant to a bond issued to the company under California’s Telephonic Sellers Law.
On May 24, Attorneys General from 47 states, American territories, and Washington D.C., sent a letter to Secretary Betsy DeVos of the U.S. Department of Education (Department) to implement an automatic discharge process for the student loans of veterans who are totally and permanently disabled or otherwise unemployable (known as a “TPD discharge”). The letter asserts that while the Higher Education Opportunity Act of 2008 requires that the Department discharge the student loans of veterans who are totally and permanently disabled as a result of service, the Department requires eligible veterans to take “affirmative steps to secure the loan forgiveness,” which “may prove [to be] insurmountable obstacles to relief for many eligible veterans due to the severe nature of their disabilities.” According to the letter, the Department has identified over 42,000 veterans who are eligible for discharges and carry over $1 billion in dischargeable student loan debt, yet fewer than 9,000 of the eligible veterans had applied for the discharge as of April 2018. In response to the Department’s concerns about the veterans’ potential tax liability, the Attorneys General pointed out that federal tax law excludes loan discharges for disabled borrowers from taxable income. Even if the discharge increases their state tax bill, the Attorneys General argued that most borrowers would prefer to have their outstanding loans completely discharged, and those that do not could be given notice and an opportunity to opt out. Because there is no statutory requirement that eligible veterans apply for the TPD discharges, the Attorneys General urged the Department to implement a program to automatically discharge the outstanding loans as expeditiously as possible.
On May 22, the Minnesota governor signed HF 990, which exempts manufactured home dealers and salespersons from the state’s licensing requirements for residential mortgage originators. Under the bill, manufactured home dealers or salespersons qualify for the exemption if they (i) perform only clerical or support duties in connection with assisting a consumer in filling out a loan application; (ii) do not receive any direct or indirect compensation from any individual or company, in excess of the customary salary or commission, for assisting consumers with loan applications; and (iii) provide specified disclosures. The bill takes effect on August 1.
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.
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.
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.
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.
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.
- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Tim Lange to discuss "Ease your pain at the state level: Recommendations for navigating the licensing issues in the states" at the Online Lenders Alliance Compliance University
- Amanda R. Lawrence, Aaron C. Mahler, and Jonice Gray Tucker to discuss "Expanded role for the FTC ahead: Implications for bank and nonbank financial institutions" at an American Bar Association Banking Law Committee Webinar
- Buckley Webcast: Flirting with alternatives — Opportunities and challenges created by alternative data, modeling, and technology
- Daniel P. Stipano to discuss "Reporting requirements for credit unions: CTRs and SARs" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Daniel P. Stipano and Moorari K. Shah to discuss "Vendor management: What is the NCUA looking for?" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Summer Regulatory Compliance School
- Warren W. Traiger to discuss "CRA modernization" at the National Association of Industrial Bankers and the Utah Association of Financial Services Annual Convention
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Hank Asbill to discuss "Ethical guidance in conducting internal investigations – The intersection of Yates and Upjohn" at the American Bar Association Southeastern White Collar Crime Institute
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Risk management in enforcement actions: Managing risk or micromanaging it" at the American Bar Association Business Law Section Annual Meeting
- Daniel P. Stipano to discuss "Navigating the conflicting federal and state laws for doing business with cannabis companies" at the American Bar Association Business Law Section Annual Meeting
- Tim Lange to discuss "Services and value" at the North American Collection Agency Regulatory Association Annual Conference
- Amanda R. Lawrence to discuss "Data privacy litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Brandy A. Hood to discuss "How to ace your TRID exam" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "HMDA data is out, now what?" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Melissa Klimkiewicz to discuss "Navigating FHA rules and regs" at the Mortgage Bankers Association Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "The state’s role in fintech: Providing an industry framework for innovation" at Lend360
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference