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MoFo Reenforcement

The Enforcement Blog

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.

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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.

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Financial Regulatory Reform Legislation Proceeds through Congress

Posted in Regulatory Developments

On May 22, 2018, the U.S. House of Representatives passed S. 2155, the “Economic Growth, Regulatory Relief, and Consumer Protection Act.” The bill was passed on a bipartisan basis with a vote of 258-159. The bill was previously passed by the U.S. Senate on March 14, 2018. Now that identical legislation has passed both houses of Congress, the bill will go to President Trump for his signature, which is expected in the coming days. Once effective, the new law will provide modest regulatory relief to regional and community banks.

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HUD to Reconsider Disparate Impact Rule

Posted in Disparate Impact, Fair Lending

The U.S. Department of Housing and Urban Development announced that it will “shortly” seek public comment on whether its controversial disparate impact rule is consistent with the Supreme Court’s Inclusive Communities decision. In Inclusive Communities, the Supreme Court held that disparate impact is a cognizable theory of discrimination under the Fair Housing Act. Thus, a defendant may be liable for a practice that is facially neutral but that nevertheless has a discriminatory impact, unless there is a legally sufficient justification for the practice. Inclusive Communities did not decide the standard for evaluating disparate impact claims; rather, it provided several guideposts for “necessary” “limitations.” HUD’s disparate impact rule is arguably inconsistent with those limitations and the Supreme Court’s decision in several respects. The agency’s announcement suggests it is now considering revising the rule to conform to the Supreme Court’s holdings.

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South Carolina’s Money Transmission Law Comes into Effect

Posted in Regulatory Developments, State Regulators

Yesterday, the Office of the South Carolina Attorney General issued a press release announcing that it has created a Money Services Division within the AG’s office and that, effective May 14, the Division is accepting applications for licensure under South Carolina’s money transmission law. This law, officially known as the South Carolina Anti-Money Laundering Act, will formally take effect on May 25, the date the regulations promulgated to implement the Act are scheduled to be published in final form in the State Register. This will occur nearly two years after the Act’s passage on June 9, 2016.

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EVENT: ETA Spotlight Call: Key Elements of Strategic Partnership Agreements

Posted in Events

Wednesday, May 16, 2018
3:00 p.m. – 3:30 p.m. EDT

Please join Morrison & Foerster attorneys Trevor Salter and Crystal Kaldjob as they speak on key elements of strategic partnership agreements. The speakers will discuss the benefits and drawbacks of partnerships, getting the legals right in your partnership agreements, and best practices from their experience advising major financial institutions and merchants in these transactions.

Please note this call is only open to Electronic Transactions Association members.