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The Enforcement Blog

California Enacts a First-of-Its-Kind Commercial Financing Disclosure Law

Posted in Regulatory Developments, State Regulators

On September 30, 2018, California Governor Jerry Brown signed into law SB 1235, which requires disclosures of key terms in connection with certain commercial financing by non-banks and could impact bank/non-bank arrangements as well.

With the passage of the Act, California became the first state to require consumer-style disclosures for commercial financing. The Act is intended to facilitate comparisons of financing options by recipients of covered financing offers. It establishes a general framework for the disclosure requirements, but requires the California Department of Business Oversight to establish the details through the adoption of implementing regulations. The Act becomes effective once the DBO issues final regulations.

Read our client alert.

Federal Agencies Reaffirm that Supervisory Guidance Is Not Law – Who Knew?

Posted in CFPB, Regulatory Developments

Yesterday, five federal agencies – the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Bureau of Consumer Financial Protection – issued a two-page, joint statement on the role of supervisory guidance for regulated institutions. Although brief, the joint statement is significant.

Read our client alert.

Financial Services Report – Fall 2018

Posted in Arbitration, Auto Lending, CFPB, Credit Cards, Credit Reports, Electronic Payments, Enforcement Actions, Fair Lending, Investigations, Mobile Payments, Mortgage, Payday Lending, Preemption, Privacy, Regulatory Developments, State Regulators, Student Lending, UDAAP

So much for the lazy days of summer. It’s been a busy couple of months on both coasts. In a case of déjà vu all over again, a New York federal court found that the CFPB structure is unconstitutional and that the defects infected Title X of the Dodd-Frank Act as a whole. The Judge rejected the D.C. Circuit’s conclusion otherwise in PHH Corp. v. CFPB, and granted the CFPB’s request to enter final judgment so it can appeal the ruling to the Second Circuit. Another round of appellate court watching and reading of tea leaves anyone?

Meanwhile, on the Left Coast, the California Legislature is at it again. The Legislature broke all speed records by passing the California Consumer Privacy Act only one week after the proposed legislation was introduced. The landmark law creates significant privacy rights for California residents and enormous operational and compliance challenges for impacted businesses. Not surprisingly given the speedy work, amendments are already on the Governor’s desk for signature.

Taking its time in the spotlight, the Senate Banking Committee narrowly approved Kathy Kraninger’s nomination to head the CFPB. The nomination now moves on to the full Senate for a vote.

If you missed these or any of the other developments during your well-deserved vacation, read on for news on the Beltway, the Bureau, mortgage, privacy, TCPA, and more.

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The CFPB Catches Up to the FAST Act: Implements GLBA Annual Notice Exception

Posted in CFPB, Privacy, Regulatory Developments

On August 17, 2018, the Bureau of Consumer Financial Protection published a final rule amending its Regulation P to include an exception to the Gramm-Leach-Bliley Act annual privacy notice obligation. Nearly three years ago, the Fixing America’s Surface Transportation Act (FAST Act) amended the GLBA to provide for such an exception. The CFPB has now caught up in order to ensure that Regulation P is consistent with the GLBA as amended. Although the final rule will take effect on September 17, 2018, the FAST Act’s statutory amendment has been effective for several years. That is, notwithstanding the fact that Regulation P fell behind the statute, financial institutions have been able to rely on the GLBA’s statutory exception to the annual notice obligation.

Read our client alert.

Treasury and the OCC Make Significant Fintech Announcements

Posted in Electronic Payments, Mobile Payments, Regulatory Developments

Two key federal government announcements were made on July 31, 2018 related to fintech issues. First, the U.S. Department of the Treasury issued a press release announcing a report entitled “Nonbank Financials, Fintech, and Innovation.” The Report is the fourth and final in a series of reports prepared by Treasury in response to President Trump’s February 2017 Executive Order 13772. In addition, the Office of the Comptroller of the Currency announced that it would begin accepting applications for special purpose national bank charters from fintech companies that are engaged in the business of banking, but do not take deposits. This alert reviews these important developments.

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Are You a Money Transmitter in California?

Posted in Electronic Payments, Regulatory Developments, State Regulators

One of the most important questions facing non-bank providers of payments services is whether they are subject to regulation under U.S. state money transmission laws. Though almost all U.S. states regulate money transmitters, there are a number of states that provide exemptions for entities that act as an agent of the payee. While a small handful of states have had long-standing agent of the payee exemptions, California more recently addressed the applicability of a money transmission licensing law to payments services, and a number of other states followed suit. However, recent California developments suggest that the scope of what constitutes exempt payee-agency activity may be subject to greater scrutiny. In addition, the California Department of Business Oversight, which regulates money transmission in California, has indicated that it is commencing a rulemaking on the “agent of the payee” exemption and its limitations.

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The 2018 California Consumer Privacy Act: California Scraps Ballot Initiative and Passes Sweeping Data Privacy Regulation

Posted in Privacy, Regulatory Developments, State Regulators

With the passage of the California Consumer Privacy Act of 2018 (AB 375), the United States now has its first truly sweeping privacy regime. On Thursday, June 28, 2018, California Governor Jerry Brown signed into law what is arguably the most expansive privacy legislation in U.S. history. The Act is the product of backroom wrangling between legislators, industry, and the primary sponsor of a ballot initiative by the same name. Proposed just last week as an alternative to the initiative, the bill has now become law, and the initiative is history, having been formally withdrawn.

Read our client alert.

Are You a Money Transmitter in Vermont?

Posted in Electronic Payments, Regulatory Developments, State Regulators

The Banking Department of the Vermont Department of Financial Regulation recently entered into a consent order with a money transmission licensing applicant. The consent order makes it clear that “Vermont does not exempt a payment processor or an agent of a payee from [money transmission] licensure.”

Vermont’s position is at odds with the recent trend of state banking departments affirming that payee agency or payment processing transactions involving the sale of goods or services are not money transmission subject to licensing and regulation, provided certain conditions are met. As a result, the Vermont consent order could have far reaching implications for consumers, businesses, and payments companies alike.

Read our client alert.

Financial Services Report – Summer 2018

Posted in Arbitration, Auto Lending, CFPB, Credit Cards, Disparate Impact, Electronic Payments, Enforcement Actions, Fair Lending, Investigations, Mobile Payments, Mortgage, Payday Lending, Preemption, Privacy, Regulatory Developments, State Regulators

No more pencils, no more books.

No more CFPB indirect auto lending guidance.

No more CFPB Consumer Advisory Board.

No more Volcker Rule and risk-based capital for community banks.

No more Eric Schneiderman.

It’s the end of the school year, and we’ve seen enormous changes on the financial services regulatory landscape since our last Report. Hope you are hanging on to your seat, because there could be more to come:

No more payday lending rule?

No more disparate impact theory of fair lending liability?

No more CFPB complaint database?

Stay tuned and read on as we follow all the developments.

Before you do though, we want to tip our hats to our former colleague Andrew Smith as he takes over as the director of the FTC’s Bureau of Consumer Protection. Andrew is a brilliant lawyer who takes a practical, hands-on approach to problem solving. The FTC is lucky to have him, and we will all benefit from his public service.

Enjoy your summer!

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California SB1-Plus? GDPR-Like? Considerations for Financial Institutions in Evaluating the California Consumer Privacy Act

Posted in Privacy, Regulatory Developments

Financial institutions in the United States are no strangers to privacy regulations, particularly given the obligations imposed by the federal Gramm-Leach-Bliley Act (“GLBA”) and the California Financial Information Privacy Act (“SB1”).  More recently, financial institutions have been focused on whether and/or the extent to which the EU’s GDPR may apply to their U.S. operations.  Many financial institutions, however, have yet to consider an equally important U.S. privacy development—the California Consumer Privacy Act (“Act”), a ballot initiative likely to appear on the November ballot.

If approved by voters, the Act would impose notice obligations on covered businesses to disclose the categories of personal information (“PI”) they collect, sell, and share about California consumers, and give those consumers a right to say “no” to the “sale” of their information. We discussed the Act and its potential requirements and related risks, including litigation arising from alleged violations of the Act, in greater detail in an earlier alert.

Here, we highlight certain considerations that are unique to financial institutions and evaluate the potential impact of the Act on financial institutions, particularly given their existing privacy obligations under the GLBA and SB1.  Below are six key considerations for financial institutions to keep in mind as they navigate the interplay between the Act, the GLBA, and SB1.

Read our client alert.