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DFPI releases more proposed CCFPL modifications on complaints and inquiries
On March 23, the California Department of Financial Protection and Innovation (DFPI or the Department) released a second round of modifications to proposed regulations for implementing and interpreting certain sections of the California Consumer Financial Protection Law (CCFPL) related to consumer complaints and inquiries. As previously covered by InfoBytes, DFPI issued a notice of proposed rulemaking (NPRM) last May to implement Section 90008 subdivisions (a) (b), and (d)(2)(D) of the CCFPL. Subdivisions (a) and (b) authorize the DFPI to promulgate rules establishing reasonable procedures for covered persons to provide timely responses to consumers and the DFPI concerning consumer complaints and inquiries, and subdivision (d)(2)(D) permits covered persons to withhold certain non-public or confidential information when responding to consumer inquiries. The first round of proposed modifications to the NPRM was released in December (covered by InfoBytes here).
DFPI considered comments received on the initially proposed text and the proposed modifications and is now proposing the following additional changes:
- Applicability. The proposed modifications clarify that Sections 1072, 1073, and 1074 apply only to covered persons required to be licensed by the DFPI or registered with the DFPI “pursuant to Financial Code sections 90009 and 90009.5, including any rules promulgated thereunder.”
- Amended definitions. The proposed modifications add an additional exclusion from the definition of “complaint[,]” excluding a “notice of error filed with a remittance transfer provider.” “Complainant” is amended to clarify that it does not include individuals who are not residents of California at the time “the act, omission, decision, condition, or policy giving rise to the complaint was applied to the consumer.”
- Complaint processes and procedures. Among other things, the proposed modifications add requirements that (i) covered persons issue initial and annual disclosures to California residents that include the procedures for filing a complaint; (ii) the main home page or main contact page include the set hours a live representative is normally available to accept oral complaints; (iii) all written communications—not just the final decision—related to a complaint must be submitted in the language in which the contract was negotiated; and (iv) make changes to DFPI’s annual complaint report requirements, including a new category related to nuisance complaints.
Comments are due April 7.
CFPB: TILA does not preempt state commercial financial disclosures
On March 28, the CFPB issued a determination that state disclosure laws covering lending to businesses in California, New York, Utah, and Virginia are not preempted by TILA. The preemption determination confirms a preliminary determination issued by the Bureau in December, in which the agency concluded that the states’ statutes regulate commercial financing transactions and not consumer-purpose transactions (covered by InfoBytes here). The Bureau explained that a number of states have recently enacted laws requiring improved disclosure of information contained in commercial financing transactions, including loans to small businesses. A written request was sent to the Bureau requesting a preemption determination involving certain disclosure provisions in TILA. While Congress expressly granted the Bureau authority to evaluate whether any inconsistencies exist between certain TILA provisions and state laws and to make a preemption determination, the statute’s implementing regulations require the agency to request public comments before making a final determination. In making its preliminary determination last December, the Bureau concluded that the state and federal laws do not appear “contradictory” for preemption purposes, and that “differences between the New York and Federal disclosure requirements do not frustrate these purposes because lenders are not required to provide the New York disclosures to consumers seeking consumer credit.”
After considering public comments following the preliminary determination, the Bureau again concluded that “[s]tates have broad authority to establish their own protections for their residents, both within and outside the scope of [TILA].” In affirming that the states’ commercial financing disclosure laws do not conflict with TILA, the Bureau emphasized that “commercial financing transactions to businesses—and any disclosures associated with such transactions—are beyond the scope of TILA’s statutory purposes, which concern consumer credit.”
SEC proposes to expand EDGAR filings
On March 22, the SEC proposed amendments intended to “modernize” filing procedures through the use of electronic filings on EDGAR using structured data as appropriate. (See also SEC fact sheet here.) Currently, registrants must submit many forms required by the Securities Exchange Act, as well as other materials and submissions, in paper form. The proposed rule would require covered self-regulatory organizations (SROs) to submit these filings electronically, and would apply to national securities exchanges, national securities associations, clearing agencies, broker-dealers, security-based swap dealers, and major security-based swap participants. The proposed rule also would require SROs to make certain submissions in a structured, machine-readable data language, and would amend certain provisions regarding the Financial and Operational Combined Uniform Single Report to harmonize it with other rules, make technical corrections, and provide clarifications. Additionally, the announcement noted that the proposed rule would require, in certain circumstances, withdrawal of notices “filed in connection with an exception to counting certain dealing transactions toward determining whether a person is a security-based swap dealer.” Comments on the proposed rule will be accepted 30 days after publication in the Federal Register or until May 22, whichever is later.
FinCEN releases beneficial ownership reporting guidance
On March 24, FinCEN released its first set of guidance materials to aid the public and small businesses in reporting beneficial ownership information (i.e., individuals who directly or indirectly own or control a company). As previously covered by InfoBytes, last September, FinCEN published a final rule establishing beneficial ownership information requirements, as required by the Corporate Transparency Act. The final rule, which becomes effective January 1, 2024, will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States, to report information about their beneficial owners to FinCEN. Reporting companies created or registered before January 1, 2024, will have until January 1, 2025, to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. The guidance materials include FAQs, information on key filing dates, and informational videos. Additional guidance will be published in the coming months, including a Small Entity Compliance Guide, FinCEN said in the announcement.
FHFA seeks feedback on updated credit score requirements
On March 23, FHFA announced a two-phase plan for soliciting stakeholder input on the agency’s proposed process for implementing updated credit score requirements. In October, FHFA announced that the FICO credit score model would be replaced by the FICO 10T and the VantageScore 4.0 credit score models, which were both validated and approved for use by Fannie Mae and Freddie Mac (covered by InfoBytes here). The agency also announced that Fannie and Freddie will now require two credit reports – instead of three – from the national consumer reporting agencies for single-family loan acquisitions. FHFA seeks public input on the projected implementation process to inform the transition to these new credit score models, which the agency estimates will happen in two phases. Phase one, estimated to start Q3 2024, will include the delivery and disclosure of additional credit scores, while phase two will include the incorporation of the new credit score models in pricing, capital, and other processes (estimated to occur in Q4 2025).
FTC proposes changes to Negative Option Rule
On March 23, the FTC announced a notice of proposed rulemaking (NPRM) seeking feedback on proposed amendments to the agency’s Negative Option Rule, which is used to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs. (See also FTC fact sheet here.) Claiming that current laws and regulations do not clearly provide a consistent legal framework for these types of programs, the NPRM, which applies to all subscription features in all media, proposes to add a new “click to cancel” provision that would make it as easy for consumers to cancel their enrollment as it was to sign up. The NPRM would also require sellers to first ask consumers whether they want to hear about new offers or modifications before making a pitch when consumers are trying to cancel their enrollment. If a consumer says “no” a seller must immediately implement the cancellation process. Sellers would also be required to provide consumers who are enrolled in negative option programs with an annual reminder involving anything other than physical goods before they are automatically renewed.
Commissioner Christine Wilson issued a dissenting statement, in which she argued that while the NPRM “may achieve the goal of synthesizing the various requirements in one rule,” it “is not confined to negative option marketing [as it] also covers any misrepresentation made about the underlying good or service sold with a negative option feature.” Wilson commented, “as drafted, the Rule would allow the Commission to obtain civil penalties, or consumer redress under Section 19 of the FTC Act, if a marketer using a negative option feature made misrepresentations regarding product efficacy or any other material fact.”
Colorado finalizes privacy rules
On March 15, the Colorado attorney general’s office finalized rules to implement and enforce the Colorado Privacy Act (CPA). The final rules, which went through three draft versions (covered by InfoBytes here), were filed with the Colorado Secretary of State following completion of a review by the attorney general’s office. (See redline version of the final rules showing changes made to address concerns raised through public comments here.) As previously covered by a Special Alert, the CPA was enacted in July 2021 to establish a framework for personal data privacy rights. The CPA, which is effective July 1, 2023 with certain opt-out provisions taking effect July 1, 2024, provides consumers with numerous rights, including the right to access their personal data, opt-out of certain uses of personal data, make corrections to personal data, request deletion of personal data, and obtain a copy of personal data in a portable format. Under the CPA, the attorney general has enforcement authority for the law, which does not have a private right of action. In addition to promulgating rules to carry out the requirements of the CPA, the attorney general has authority to issue interpretive guidance and opinion letters, as well as the authority to develop technical specifications for at least one universal opt-out mechanism. Colorado is one of several states that have enacted comprehensive privacy laws that take effect in 2023, joining California, Connecticut, Utah, and Virginia. (Covered by InfoBytes here, here, here, and here.) The final rules will be published in the Colorado Register in March and will go into effect July 1.
CFPB updates card survey to improve comparison shopping
On March 21, the CFPB announced updates to its terms of credit card plans (TCCP) survey. The updates are intended to “create a neutral data source” to help consumers comparison shop for credit cards and “find the best interest rates and products,” the Bureau explained. Previously, credit card data was compiled and made publicly available from the largest 25 issuers, as well as from a sample of at least 125 other issuers (as required by the Fair Credit and Charge Chard Disclosure Act of 1988). The refreshed TCCP survey will now allow issuers to voluntarily submit information about their credit card products to enable smaller credit card issuers to reach comparison shoppers and compete with bigger players. The TCCP survey will also include additional questions about credit card annual percentage rates, and will require issuers to report the minimum and maximum APR offered if it varies by credit score. According to the Bureau, allowing consumers to see the median APR for their credit score range will help them better compare products and estimate the potential cost of borrowing before applying. Additionally, the top 25 credit card issuers will have to provide information on all their credit cards instead of just their most popular products. Other issuers will be permitted to voluntarily submit information on multiple products. Expanded information reporting requirements include providing details on whether a product is a secured card or if it requires a deposit to open an account, as well as information about promotional terms of balance transfers, introductory rates, and cash advances.
HUD restores 2013 discriminatory effects rule
On March 17, HUD announced the submission of a final rule—Reinstatement of HUD’s Discriminatory Effects Standard—which would rescind the agency’s 2020 regulation governing Fair Housing Act (FHA or the Act) disparate impact claims and reinstate the agency’s 2013 discriminatory effects rule. Explaining that “the 2013 rule is more consistent with how the [FHA] has been applied in the courts and in front of the agency for more than 50 years,” HUD emphasized that it also “more effectively implements the Act’s broad remedial purpose of eliminating unnecessary discriminatory practices from the housing market.”
As previously covered by InfoBytes, in 2021, HUD proposed rescinding the 2020 rule, which was intended to align the 2013 rule with the U.S. Supreme Court’s 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. The 2020 rule included, among other things, a modification of the three-step burden-shifting framework in its 2013 rule, several new elements that plaintiffs must show to establish that a policy or practice has a “discriminatory effect,” and specific defenses that defendants can assert to refute disparate impact claims. According to HUD’s recent announcement, the modifications contained within the 2020 rule complicated the discriminatory effects framework, created challenges for establishing whether a policy violates the FHA, and made it harder for entities regulated by the Act to assess whether their policies were lawful.
The final rule is effective 30 days after publication in the Federal Register. According to HUD, the 2020 rule never went into effect due to a preliminary injunction issued by the U.S. District Court for the District of Massachusetts, and the 2013 rule has been and currently is in effect. Regulated entities that have been complying with the 2013 rule will not need to change any practices currently in place to comply with the final rule, HUD said.
CFPB updates agency contact information
On March 20, the CFPB published a final rule in the Federal Register to make non-substantive technical corrections and updates to Bureau and other federal agency contact information found within Regulations B, E, F, J, V, X, Z and DD, including federal agency contact information that is required to be provided with ECOA adverse action notices and the FCRA Summary of Consumer Rights (available here). Additionally, the final rule “revises the chapter heading, makes various non-substantive changes to Regulations B and V, and provides a Bureau website address where the public may access certain APR tables referenced in Regulation Z.” The final rule is effective April 19, although the Bureau noted that the mandatory compliance date for the amendments to appendix A to Regulation B, appendix A to Regulation J, and appendix K to Regulation V is March 20, 2024.