On July 20, 2022, the Connecticut Department of Banking (the “Department”) issued a Consumer and Industry Advisory on Money Transmission (the “Advisory”).
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Financial
Payment Processor Agrees to Refund Customers After FTC Alleges Surprise Exit Fees and Zombie Charges On Small Businesses
On July 29, a payment processor company and its two sales affiliates (defendants) agreed to a stipulated order with the FTC to settle charges that they imposed hidden terms, surprise exit fees, and “zombie charges” on small businesses.
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Regulators Remind Auto Industry of Servicemember Protections
On July 29, the CFPB and DOJ issued a joint letter to the auto lending and leasing industry reminding auto companies of their obligations under the Servicemembers Civil Relief Act (SCRA). The SCRA affords special protections to servicemembers and their dependents against unfair or predatory practices by auto lenders, including:…
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CFPB, DOJ Propose $22 Million Penalty Against Nonbank Mortgage Lender for Illegal Redlining
On July 27, the CFPB and DOJ proposed a settlement with a nonbank mortgage lender for its discriminatory “redlining” lending practices against minority families living in the greater Philadelphia area. If approved by the court, the mortgage lender would be required to pay more than $22 million in civil penalties, and would be the CFPB’s first nonbank mortgage redlining settlement.
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4th Circuit: Borrower Must Return Loan Proceeds After Rescission Despite Lender’s Failure to Meet TILA Requirements
Recently, the United States Court of Appeals for the 4th Circuit held that a mortgage servicer’s failure to provide a required disclosure informing borrowers of their three-day right to rescind the loan under the Truth in Lending Act (TILA) does not relieve borrowers of their obligation to return disbursed loan proceeds upon an effective rescission. The ruling reversed a West Virginia District Court’s ruling against the mortgage servicer in a purported class action.
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CFPB’s Chopra Has Payments and Crypto In Focus
On July 27, CFPB Director Chopra was interviewed in multiple publications, here and here, about, among other topics, how the CFPB could seek to help mortgage borrowers strained by the Federal Reserve’s battle against inflation and how the agency is looking at cryptocurrency. Below are some of the more important updates from the interviews.
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Fed Reports on Cybersecurity and Financial System Resilience
Recently, the Federal Reserve Board (Fed) published its annual Cybersecurity and Financial System Resilience report describing measures it has taken to strengthen cybersecurity in the financial services sector, including the supervision and regulation of financial institutions and third-party service providers.
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CFPB Continues Efforts to Promote Competition in Financial Markets
On July 11, CFPB Director Rohit Chopra drafted a blog post detailing the Bureau’s efforts to comply with President Biden’s Executive Order on Promoting Competition in the American Economy aimed, in part, to address the Administration’s concerns about pressing antitrust and competition issues affecting consumers. The CFPB was directed by the Order to explore ways to make it easier for consumers to switch financial institutions and to aggressively enforce the prohibition of UDAAPs in consumer financial products and services pursuant to the Dodd-Frank Act.
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FSB Highlights Vulnerabilities Crypto-assets for Global Financial System
On July 11, the Financial Stability Board (FSB) published a letter sent to G20 finance ministers and central bank governors outlining concerns over the rapid growth in crypto-assets and vulnerabilities facing the global financial system. The letter highlighted the following:…
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DOJ Investigating FinTech Over PPP Loans
On June 3, a federal court filing in the Southern District of Florida by an Atlanta-based FinTech company revealed that the small business lender is under DOJ investigation for alleged PPP loan approval practices. According to the FinTech, by August 2020, it processed over $7 billion in PPP loans to at least 300,000 small businesses.
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DFPI Second Rulemaking Proposal on Debt Collection Licensing
On July 15, the California DFPI released draft text for a proposed second rulemaking under the Debt Collection Licensing Act (DCLA) relating to the scope, annual report, and bond amount increase provisions of the DCLA.
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Proposed California Commercial UDAAP and Annual Reporting Regs to be Promulgated Under California Consumer Financial Protection Law
Two weeks after the DFPI set a Dec. 9 effective date for its long-threatened commercial financing disclosure requirement (we discussed these regulations in a previous bog, here), the DFPI issued proposed commercial UDAAP and annual reporting regulations likely impacting many of the same companies. Specifically, the proposed regulations would apply to providers of commercial financing or other financial products and services to small businesses, nonprofits, and family farms, and would (i) expand the DFPI’s UDAAP authority, and (2) impose annual reporting requirements on covered providers (we briefly discussed these proposed regulations in a previous blog post here).
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Crypto Interest-Bearing Accounts, the Next Target?
On July 12, the California Department of Financial Protection and Innovation (DFPI) announced that it is investigating multiple crypto companies that offer interest-bearing crypto asset accounts. These accounts allow users to lend crypto to the company in return for interest.
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Louisiana Approves Virtual Custody Services and Proposes Virtual Currency Business Licensing Rules
Recently, the Louisiana lawmakers and regulators have taken steps to legalize operations in the state involving virtual currencies. On June 15, the Louisiana governor signed a bill that, effective August 1, 2022, will allow financial institutions and trust companies to provide virtual currency custody services to their customers as long as they satisfy certain requirements on risk-management and compliance. On June 20, the Louisiana Office of Financial Institutions (OFI) published proposed rules on licensing and regulation of virtual currency businesses in the state pursuant to the Louisiana Virtual Currency Business Act, which went into effect on August 1, 2020.
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DOJ Charges Six Individuals with NFT Fraud
On June 30, the DOJ charged six individuals in four separate cases for a fraudulent NFT trading scheme.
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Payday Lender Ordered to Pay $39 Million in Misappropriated Funds Suit
On June 29, a Florida court issued a final judgment against a Miami-based payday lender and its CEO resolving allegations that the defendants misappropriated investor funds. According to the complaint, the business fraudulently raised upwards of $66 million through the sale of promissory notes to more than 500 Venezuelan-American investors who were told that the company would use their funds to finance payday loans through the offer and sale of “safe and secured” promissory notes. Investors were promised returns of up to 120%, yet it was alleged that the company did not generate revenue to cover its principal and…
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