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The Enforcement Blog

Assembly Bill 539 and the Future of Consumer Loans in California

Posted in Regulatory Developments

The California legislature is poised to cap rates on larger consumer installment loans. Assembly Bill 539 has passed the state Assembly and the state Senate Committee on Banking and Financial Institutions. Although directed only to California Financing Law (CFL) licensees, the bill has broader implications for consumer installment lending in California.

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CFPB Announces Public Comment Extension on HMDA Reconsideration

Posted in CFPB, Mortgage, Regulatory Developments

The CFPB extended the deadline for public comments on its advance notice of proposed rulemaking (ANPR) relating to the Bureau’s 2015 Rule addressing the Home Mortgage Disclosure Act (HMDA). The ANPR, issued on May 2, requested comments by July 8, 2019, on whether the CFPB should revise the data points lenders must report under the Bureau’s 2015 Rule, and the types of transactions covered by the 2015 Rule. We discuss how the CFPB is seeking additional comment on its reconsideration of burdens and benefits of the expanded HMDA data and how the public may have the opportunity to comment on HMDA’s lender coverage thresholds.

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Policy Makers Examine the Disparate Impact Risk of Artificial Intelligence and Underwriting

Posted in Fair Lending, Regulatory Developments

Recent Congressional activity reflects increasing concern in the fair lending implications of artificial intelligence (AI) in credit underwriting. Congress and regulatory agencies are likely to press financial services providers to better understand the AI they use and to ensure that its use does not result in unfair treatment of minorities and other protected groups through the employment of seemingly neutral criteria that have a disproportionate impact on protected classes of consumers.

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FinCEN Issues Convertible Virtual Currency Guidance and Advisory

Posted in Enforcement Actions, Regulatory Developments

The Financial Crimes Enforcement Network recently issued a guidance, Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (CVC), together with an Advisory on Illicit Activity Involving Convertible Currency. The Guidance largely summarizes FinCEN’s existing regulatory framework regarding the application of the Bank Secrecy Act to virtual currency activities. The Advisory warns financial institutions of the use by criminals and other bad actors of CVC schemes involving darknet marketplaces, P2P exchangers, foreign-located MSBs, and CVC kiosks. Our client alert provides an overview of FinCEN’s position on CVC-related AML expectations and its impact on financial institutions and CVC businesses.

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Take Two: Are You a Money Transmitter in Vermont?

Posted in Electronic Payments, Regulatory Developments

Last year, we noted that the Banking Department of the Vermont Department of Financial Regulation had taken the position that its money transmission law “does not exempt a payment processor or an agent of a payee from [money transmission] licensure.” Vermont’s Governor now has signed legislation that creates a statutory exemption from the money transmission licensing law for payment processors, provided that certain conditions are met. Given the somewhat unique nature of this exemption, however, payments services companies, whether payee agents, payment processors, platforms, or marketplaces, should review their compliance approaches in light of this new exemption.

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CFPB Requests Comment on Overdraft Rule

Posted in CFPB, Electronic Payments, Regulatory Developments

On May 15, 2019, the CFPB published a Request for Comment on the Regulation E provisions that require consumers to opt in to overdraft fees on one-time debit card and ATM transactions. The Request for Comment is made under the Regulatory Flexibility Act, which requires an agency to review rules within 10 years after their adoption.

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CFPB Proposes New Rules to Modernize Debt Collection

Posted in CFPB, Regulatory Developments

On May 7, 2019, the Consumer Financial Protection Bureau (CFPB) issued proposed rules (“Proposed Rules”) under the Fair Debt Collection Practices Act (FDCPA) and its authority under the Dodd-Frank Act. If finalized, the Proposed Rules will be the first substantive regulations for debt collection practices since the FDCPA was enacted in 1977. The Proposed Rules would clarify the application of the FDCPA to current market conditions, most notably by permitting the use of text messages, emails, and social media to communicate with debtors. At the same time, the Proposed Rules would address concerns about traditional means of communication, such as phone calls and voice mail messages.

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Home Mortgage Disclosure Act Amendments: CFPB Issues Two Regulation C Releases

Posted in Fair Lending, Mortgage, Regulatory Developments

On May 2, 2019, the CFPB issued two releases related to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The CFPB released a notice of proposed rulemaking (NPRM) to adjust Regulation C’s loan volume thresholds that trigger HMDA and to make other changes. Comments are due 30 days after publication in the Federal Register. The CFPB also released an advance notice of proposed rulemaking (ANPR) seeking comment on whether it should propose to revise the data elements that covered institutions must report.

Comments are due 60 days from publication in the Federal Register.

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Could Strong Consumer Authentication Weaken Consumer Demand?

Posted in Electronic Payments, Regulatory Developments

From 14 September 2019, certain electronic and remote payments must be subjected to two-factor, or “strong customer authentication”, under regulatory standards covering the European Economic Area relating to the second EU Payment Services Directive, which took effect in January 2018. Retailers are uncertain whether these new European anti-fraud measures will cause consumers to abandon online purchases. Read our client alert for guidance on transactions that might be impacted or exempt.

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In a First, FinCEN Assesses Civil Money Penalty Against Peer-to-Peer Virtual Currency Exchanger

Posted in Enforcement Actions, Regulatory Developments

The Financial Crimes Enforcement Network (“FinCEN”) issued a press release announcing a civil money penalty for violations of the Bank Secrecy Act against Eric Powers, an individual who acted as a peer-to-peer virtual currency exchanger. The enforcement action is the first-ever penalty assessed by FinCEN against a peer-to-peer virtual currency exchanger. Our alert discusses this recent action by FinCEN and its implications.

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