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On April 4, the Arkansas governor signed SB 514, which establishes a process for state regulation of telecommunications service providers and third-party spoofing providers, and stiffens criminal penalties for persons who engage in illegal robocalling and spoofing practices. The act reclassifies “spoofing”—defined in the act as “displaying fictitious or misleading names or telephone numbers—and illegal robocalls as Class D felonies. Arkansas law previously classified these actions as misdemeanors. The act requires telecommunications providers to report, on an annual basis, to the Arkansas Public Service Commission, implemented measures for identifying and combating the illegal calls.
The Arkansas Attorney General issued a press release in which she noted that the legislation “reinforces how determined Arkansans are to stop these illegal calls and creates a path for enforcement to hold the bad actors accountable.” The act takes effect 90 days after adjournment of the legislature.
On April 3, the Virginia governor signed SB 1737, which provides a 30-day stay of eviction and foreclosure proceedings for furloughed federal employees and contractors during a partial closure of the federal government. The law grants a tenant or homeowner who defaults on a housing payment after December 22, 2018, a 30-day stay on eviction or foreclosure proceedings. The tenant or homeowner must provide “written proof” that they were subject to a furlough, or were not otherwise receiving wages, as a result of the partial government shutdown that began on December 22, 2018. The tenant or homeowner must be an (i) employee of the federal government; (ii) a federal government contractor; or (iii) an employee of a contractor for the federal government. The law is effective immediately and expires on September 30.
On April 5, the Minnesota Department of Commerce (Department) issued guidance clarifying the types of entities meeting the definition of “sales finance company” under Minnesota law for purposes of whether a license is needed to conduct business. The guidance requires “any company who purchases motor vehicle retail installment contracts from retail sellers located in Minnesota, and applies a finance charge,” to obtain a motor vehicle sales finance company license. Any company engaged in the business of a “sales finance company” is required to apply for and maintain a license under Minnesota law, regardless of whether the company has a physical presence in Minnesota or whether an in-state retail seller chooses to hold and collect retail installment contracts out-of-state.
Completed applications by companies that purchase motor vehicle retail installment contracts are due to the Department by July 1. The license application requirement will only apply to those contracts entered into on or after July 1. Non-depository financial institution applicants must apply through the Nationwide Multistate Licensing System (NMLS).
California Court of Appeal upholds return of $331 million to NMS Deposit Fund despite legislative efforts
On April 2, the California Third District Court of Appeal upheld its July 2018 ruling that the state is required to return $331 million to the National Mortgage Settlement Deposit Fund (NMS Deposit Fund), reaching the same conclusion as it did previously notwithstanding newly enacted legislation. As previously covered by InfoBytes, three groups filed a lawsuit in 2014 against California Governor Jerry Brown and the state’s director of finance and controller alleging they unlawfully diverted money from the NMS Deposit Fund to make bond payments and offset general fund expenditures. The groups sought a writ of mandate compelling the state government to pay back approximately $350 million in diverted funds. After the Superior Court denied the writ, the Third District Court of Appeal reversed, concluding that the money still belongs in the NMS Deposit Fund, and not in the state’s General Fund. The state petitioned to the State Supreme Court for review and while the petition was pending, the governor signed SB 861, which states, “It is the intent of the Legislature…to confirm that allocations and uses of funds made by the director of finance from the National Mortgage Special Deposit Fund pursuant to [section 12531] in the 2011-12, 2012-13, and 2013-14 fiscal years were consistent with legislative direction and intent and to abrogate the holding of the Court of Appeal in [this case]. The Legislature further declares that the allocations made by the director of finance pursuant to [section 12531] were made for purposes consistent with the National Mortgage Settlement.” The Supreme Court directed the Court of Appeal to vacate the July 2018 opinion and reconsider in light of SB 861.
The Court of Appeal, having considered the views of the legislature in SB 861, confirmed its original conclusion from July 2018. Specifically, the court stated that the defendants’ reading of SB 861, “would effectively defeat the purpose of creating a special deposit fund to house the money” and would disregard the former Attorney General’s instructions for use of the settlement money, which was part of the National Mortgage Settlement. The Court of Appeal noted that in SB 861, the legislature declared that “the allocations…were made consistent with the National Mortgage Settlement,” but emphasized that “such a ‘belief is not binding on a court. . . .’” and the interpretation is “an exercise of the judicial power the Constitution assigns to the courts.” Therefore, upon second review, the Court of Appeal again held that the trial court erred when it did not issue a writ of mandate ordering the diverted funds to be returned to the NMS Deposit Fund.
On April 4, the Colorado Court of Appeals reversed the trial court’s ruling assessing civil penalties against a foreclosure law firm for allegedly failing to disclose that its principals had an ownership interest in one of its vendors. The appeals court found that the civil penalty was not warranted because the failure to disclose “did not significantly impact members of the public as actual or potential consumers.” According to the opinion, the State of Colorado brought an enforcement action against a foreclosure law firm and its affiliated vendors, alleging, among other things, that the law firm and its vendors violated the Colorado Consumer Protection Act (the Consumer Act) by making “false or misleading statements of fact concerning the price” of their foreclosure services. The State argued that the relationship between the law firm and its vendors allowed the vendors to charge for services in excess of the market rate, pass on those costs to the law firm’s customers, and share a portion of the inflated costs with the law firm. While the trial court rejected two of the State’s claims against the defendants, it concluded that the law firm committed a deceptive practice under the Consumer Act that, “significantly impact[ed] the public as actual or potential consumers,” by failing to disclose its affiliated relationship with one of the vendors.
On appeal, the appellate court rejected the trial court’s conclusion that the alleged deception significantly impacted the public, noting that the deception was confined to two clients, Fannie Mae and Freddie Mac, in the context of their private agreements with the firm. Because the misrepresentation was in the context of a private relationship, and the tax-paying public were not “consumers of the law firm’s services for purposes of the Consumer Act,” the appellate court found the trial court erred when awarding the civil penalties under the Act. Moreover, the appellate court affirmed the trial court’s rejection of the State’s other claims against the law firm.
On April 2, 10 out of the 11 Maryland Senate Finance Committee members voted in favor of a motion to consider SB 786 as “unfavorable.” The bill would have extended the effectiveness of the Maryland Financial Consumer Protection Commission (MFCPC) through June 30, 2021; however, because the bill cannot be revisited this session, the MFCPC will end June 30, 2019. Other provisions of the bill would have, among other things, addressed (i) mobile home retailer requirements; (ii) certain notice requirements for consumer borrowers; (iii) personal information protections and security breach notifications; (iv) vehicle sales and lending requirements; and (v) currency exchange licensing and regulatory requirements.
On April 1, the North Carolina governor signed SB 162, which amends the allowed loan origination fee and late payment charges for certain loans. Under these amendments, the maximum origination fee covered banks are permitted to charge for a loan or credit extension not secured by real property with a principal amount of $100,000 or greater is one quarter of one percent of the principal. For loans with principal amounts of less than $100,000, the maximum origination fee varies between $100 to $250, depending on the loan amount. SB 162 also caps the annual percentage rate at 36 percent for loans or extensions of credit with principal amounts of less than $5,000, where the borrower is a natural person and the debt is primarily incurred for personal, family, or household purposes. Among other provisions, SB 162 also limits allowable late payment charges that vary depending on loan type and loan amount and also states that a late payment charge may not exceed the “amount disclosed with particularity to the borrower pursuant to [TILA],” if applicable. The amendments took effect immediately and apply to contracts entered into, renewed, or modified on or after April 1.
On March 26, the Utah governor signed SB 213, which, among other things, defines and clarifies blockchain technology-related terms and exempts from the state’s Money Transmitter Act certain persons who facilitate the “creation, exchange, or sale of certain blockchain technology-related products.” Specifically, the amendments state that blockchain tokens are not money transmissions. The amendments take effect 60 days after adjournment of the legislature.
On April 1, the Arizona governor signed HB 2177, which modifies the state’s Regulatory Sandbox Program (RSP). As previously covered by InfoBytes, in March 2018, Arizona became the first state to create a regulatory sandbox for companies to test innovative financial products or services without certain regulatory requirements. The bill clarifies the RSP to allow participants to temporarily test an innovation “with respect to providing a financial product or service or a substantial component of a financial product or service,” as opposed to, an “innovative financial product or service.” Among other things, the bill also (i) removes the Arizona consumer residency requirement when participants test innovative money transmitter products, requiring only that the consumer have physical presence in the state at the time of the transaction; (ii) removes record keeping requirements for participants testing investment management products; and (iii) provides sole enforcement authority of state regulatory laws applicable to RSP participants to the state Attorney General. The bill is effective 91 days after the state’s legislative session ends.
On March 25, the West Virginia governor signed SB 603, which adds exemptions from the currency exchange licensing requirements. Among other things, the bill exempts from the state’s currency exchange licensing requirements a person or persons operating a payment system that provides processing, clearing, or settlement services in connection with wire transfers, debit/credit card transactions, ACH transfers, or similar fund transfers. Additionally, the bill also exempts from licensing requirements a person or persons that facilitate payment for goods or services (not including currency or money transmission) pursuant to a contract and the payment obligation is satisfied or extinguished. The bill is effective June 7.
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: The CFPB’s proposed debt collection rule
- Buckley Webcast: Trends in e-discovery technology and case law
- Brandy A. Hood to discuss "What the flood? Don’t get washed away by a flood of changes" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Mitigating the risks of banking high risk customers" at the American Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano, Kari K. Hall, Brandy A. Hood, and H Joshua Kotin to discuss "Regulations that matter in a deregulatory environment" at the American Bankers Association Regulatory Compliance Conference Power Hour
- Buckley Webcast: Data breach litigation and biometric legislation
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- 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
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- 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 "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium