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  • Florida allows 60 - 90 day payday loan


    On March 19, the Florida governor signed legislation, SB 920, which authorizes the lending of an additional type of payday loan (referred to as, “deferred presentment installment transaction”). The legislation now allows loans under $1,000 that have a repayment term between 60 and 90 days with maximum fees of 8 percent of the outstanding transaction balance charged on a biweekly basis. Fees must be calculated using a simple interest calculation. Previously, Florida only authorized small-dollar loans under $500 that had repayment terms between seven and 30 days (referred to as, “deferred presentment transaction[s]”).

    The expansion of the allowable small-dollar loans, appears to be in response to the CFPB’s final rule addressing payday loans, vehicle titles loans, and certain other extensions of credit (previously covered in a Buckley Sandler Special Alert), which covers most transactions with repayment terms of less than 45 days. While the CFPB’s rule became effective on January 16, compliance for most of the rule’s provisions is not required until August 2019. Moreover, in January, the CFPB announced its plan to reconsider the final rule (covered by InfoBytes here).

    Lending State Issues State Legislation Payday Lending

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  • New York Attorney General reaches $230 million settlement for international company’s RMBS misconduct


    On March 21, the New York Attorney General announced a $230 million settlement with two divisions of an international financial services company to resolve allegations that the company made misrepresentations in the sale of residential mortgage-backed securities (RMBS) in violation of New York’s Martin Act and Section 63(12) of New York’s Executive Law. According to the settlement agreement, the investigation focused on 15 securitizations sold by the company between 2006 and 2007. In addition to the alleged misrepresentations in each of the securitizations’ prospectus and prospectus supplements, the company also included loans in the sales portfolio that diligence reports flagged for underwriting and valuation issues. The $230 million settlement includes $41 million to New York State and $189 million to consumer relief programs.

    Securities RMBS State Attorney General State Issues Mortgages

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  • Indiana amends financial services legislation, adds allowable charges

    State Issues

    On March 13, the Indiana governor signed HB 1397 and SB 377, which make a variety of changes to various Indiana banking, consumer, and financial services laws administered by the state’s Department of Financial Institutions (DFI). Among other things, HB 1397 amends Indiana’s Universal Commercial Credit Code (UCCC) to codify current DFI practice, which allows for additional charges in connection with a consumer credit sale or loan, including charges for a skip-a-payment service ($25 maximum), an expedited payment service ($10 maximum), and a guaranteed asset protection agreement. The legislation also adds electronic funds transfers to the list of return payments that may be assessed a $25 charge. For payday loans, the legislation clarifies that a borrower, during the third consecutive loan or any subsequent consecutive loan, may request an extended payment plan if the rescission period has expired and the borrower has not previously defaulted on the outstanding loan. Indiana’s SB 377 allows for the director of DFI to use certain technology solutions to oversee compliance with and enforce state laws associated with the regulation of payday loans.

    Both pieces of legislation are effective July 1. 

    State Issues Lending UCCC Payday Lending Consumer Finance State Legislation

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  • Mississippi passes amendment concerning open-end credit finance charges

    State Issues

    On March 15, the Mississippi governor signed House Bill 1338, which amends sections of the Mississippi Code by authorizing state chartered or domiciled banks that offer open-end credit to assess finance charges, credit service charges, and other fees and charges “at rates and amounts . . . that financial institutions domiciled in other states are permitted to impose and collect when extending credit to Mississippi customers. . . .” In doing so, the amendment strives to retain existing financial services within the state. The amendment takes effect July 1.

    State Issues State Legislation Credit Cards Debit Cards

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  • Multiple states address cost of security freezes

    State Issues

    On March 19, the Michigan governor signed legislation, HB 5094, which amends the Michigan Security Freeze Act to prohibit consumer reporting agencies (CRAs) from charging a fee for “placing, temporarily lifting, or removing a security freeze” on a credit report. Previously, the state allowed for a fee of up to $10 to use the service, if the consumer had not previously filed a police report alleging identity theft. HB 5094 is effective immediately.

    On March 15, the Utah governor signed legislation, HB 45, which amends the Utah Consumer Credit Protection Act to prohibit CRAs from charging a fee in connection with placing or removing a security freeze. Additionally, the bill also prohibits CRAs from charging a fee in connection with mobile applications through which a consumer would place or remove a security freeze. The legislation outlines the manner in which a consumer may request a security freeze and the requirements CRAs must follow in responding to the requests. Previously, Utah allowed for CRAs to charge a “reasonable fee” in connection with a security freeze service. 

    State Issues Credit Reporting Agency Privacy/Cyber Risk & Data Security Data Breach Security Freeze State Legislation

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  • Washington state enacts student education loan bill of rights, outlines servicer requirements


    On March 15, the Washington governor signed Senate Bill 6029, which establishes the “Washington student education loan bill of rights” and outlines licensing requirements and responsibilities for student loan servicers. The act, among other things, requires that the council designate a “student loan advocate” whose responsibilities include providing timely assistance to borrowers, reviewing borrower complaints, referring servicing-related complaints to the state’s Department of Financial Institutions (DFI) or the Attorney General’s office, compiling and disseminating data regarding borrower complaints, and establishing a student education loan borrower education course by October 1, 2020. The act also requires that student loan servicers be licensed through the state (certain entities that are exempt from the licensing requirement must still comply with the act’s other requirements). Under the act, student loan servicers—in addition to complying with applicable federal program requirements—must also (i) provide information to borrowers concerning repayment options, account history, and assessed fees; (ii) notify borrowers when acquiring or transferring servicing rights; and (iii) provide disclosures concerning the possible effects of refinancing student loans. The act further provides that third-parties offering student education loan modification services may not charge or receive money “prior to full and complete performance of the [agreed upon] services,” may not charge fees that are in excess of what is customary or reasonable, and must immediately inform a borrower in writing if the owner or servicer of a loan requires additional documentation or if “modification, refinancing, consolidation, or change in repayment plans . . . is not possible.”

    Furthermore, the act exempts from the outlined requirements “any person doing business under, and as permitted by, any law of this state or of the United States relating to banks, savings banks, trust companies, savings and loan or building and loan associations, or credit unions.” 

    Lending Student Lending Licensing State Issues Servicer State Attorney General

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  • Wyoming allows state board to use NMLS to assist in regulation of debt collection industry

    State Issues

    On March 12, the Wyoming governor signed SF 26, which amends the preexisting licensing law to authorize the state’s collection agency board to use information from, and furnish information to, the nationwide multistate licensing system (NMLS) to assist in the regulation of the debt collection industry. In addition, among other things, SF 26 allows the board to establish application requirements; require background investigations of licensees and applicants; and receive criminal history record information. The law also amends provisions relating to the disposition of fees and expiration and renewal of licenses. The law is effective immediately. 

    State Issues NMLS Licensing Debt Collection

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  • Washington governor enacts amendment relating to security freeze fees

    Privacy, Cyber Risk & Data Security

    On March 13, the Washington governor signed Senate Bill 6018, which amends sections of the state’s Fair Credit Reporting Act addressing the removal of security freezes. Among other things, the amended act prohibits credit reporting agencies (CRAs) from charging a fee for placing, temporarily lifting, or removing a security freeze, or when assigning consumers unique personal identification numbers. Additionally, the offices of cybersecurity and privacy and data protection and the Attorney General’s office are instructed to work with stakeholders to evaluate the amendment’s impact on consumers and CRAs. A findings report must be submitted by December 1, 2020, and include data breach trends and recommendations by federal and state agencies. The amendment takes effect June 7.

    Privacy/Cyber Risk & Data Security State Issues State Legislation Data Breach Security Freeze

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  • Bipartisan group of state Attorneys General denounce potential limitations on state oversight of student loan industry

    State Issues

    On March 15, a bipartisan group of 30 state Attorneys General released a letter urging Congress to reject Section 493E(d) of the Higher Education Act reauthorization – H.R. 4508, known as the “PROSPER Act” – which would prohibit states from “overseeing, licensing, or addressing certain state law violations by companies that originate, service, or collect on student loans.” Led by the New York and Colorado Attorneys General, the letter characterizes Section 493E(d) as an “an all-out assault on states’ rights and basic principles of federalism.” According to the letter, if enacted, parts of the student loan industry would be immunized from state-level enforcement, placing a larger consumer protection role on the Department of Education for which the agency is not equipped to handle. The Attorneys General assert that the states have the legal capacity and track record to enforce against abuses in the student loan market; citing to a statistic which estimates $1.38 trillion in student loan debt, the letter highlights previous state enforcement actions and emphasizes the need for states and the federal government to work together to protect U.S. borrowers.

    In addition to Section 493E(d) of the PROSPER Act, the Department of Education recently published an interpretation in the Federal Register which takes the position that state regulation of certain federal student loan programs is preempted by federal law, previously covered by InfoBytes here

    State Issues State Attorney General Student Lending Enforcement Department of Education State Legislation

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  • California appellate court says mortgage servicers can be debt collectors under Rosenthal Act

    State Issues

    On March 13, a California appellate court held that a mortgage servicer that engages in debt collection activities may be considered a “debt collector” under California’s Rosenthal Fair Debt Collection Practices Act (Rosenthal Act). The decision results from a class action lawsuit alleging that the mortgage servicer made hundreds of phone calls demanding mortgage payments that had already been paid or were not yet due, including making calls at inconvenient times throughout the day and using threats of negative credit reporting and foreclosure. The class action suit alleged that the mortgage servicer’s activity violated the Rosenthal Act and the California’s Unfair Competition Law. The trial court sustained the mortgage servicer’s demurrer to the plaintiff’s complaint, concluding that servicing a mortgage is not a form of collecting consumer debts. In reversing the trial court’s decision, the appellate court held that, although the language in the Rosenthal Act was ambiguous with regard to mortgage debt servicing, it should be “construed broadly in favor of protecting the public,” and thus mortgage lenders and mortgage servicers can be considered “debt collectors” within the law’s purview. The appellate court acknowledged a split among California federal courts on the issue.

    State Issues Courts Debt Collection Mortgage Servicing

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