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Washington State Attorney General wins two suits under medical billing practices
On February 1, the Attorney General from Washington State successfully sued a large healthcare group to pay over $158 million for settlement of funds under the state’s Consumer Protection Act (CPA). The Washington AG stated that the healthcare group violated state law which requires hospital management to notify patients about financial assistance and to screen them for eligibility before trying to collect payment. The healthcare group has been ordered to pay $20.6 million in patient refunds and will forgive $137.2 million in medical debts; it will also pay $4.5 million to cover the attorney general’s costs. Among others, the consent decree includes several injunctions to be engaged in or refrained from for five years, including maintaining charity care policies, and not collecting payment for medical services unless presented with either of two stated stipulations. Lastly, the consent decree states that if the healthcare group violates a condition, it would have to pay up to $125,000 per violation. The defendants do not admit the allegations of the complaints filed in the first lawsuit from February 2022.
Similarly, on February 2 the Washington AG successfully entered into a motion for partial summary judgment against a medical debt collection agency working within the healthcare group for sending 82,729 debt collection notices under the Collection Agency Act (CAA). The court agreed with the AG’s finding that the agency’s debt collection notices failed to make the required disclosures under the CAA. Damages have not yet been awarded.
Connecticut Attorney General reports on Connecticut Data Privacy Act
On February 1, Connecticut’s Attorney General (AG) released a report on the Connecticut Data Privacy Act (CTDPA) including information on the law and how the state enforces it. Enacted in May 2022, the CTDPA is a comprehensive consumer data privacy law which took effect on July 1, 2023. The CTDPA gives consumers in Connecticut a set of rights regarding their personal information and privacy standards for businesses handling such data. Connecticut residents can: (i) see what data companies have on them; (ii) ask for corrections on inaccurate information; (iii) request the deletion of their data; and (iv) choose not to have their personal information used for selling products, targeted advertisements, or profiling. The report noted that within the first six months the CTDPA has been in effect, the AG issued dozens of violations towards a number of information requests. It added that companies generally responded positively to the notices and updated quickly their privacy policies and consumer rights mechanisms. According to the report, while some companies initially went below the CTDPA threshold, they made changes to meet it later while a few went beyond identified areas in the notices by strengthening their disclosures.
The report also mentioned that beginning on January 1, 2025, businesses are required to acknowledge universal opt-out signals, reflecting consumers’ choice to opt out of targeted advertising and the sale of personal data. This mandatory provision was emphasized during Connecticut's legislative process to alleviate the consumer burden, and it has been enacted into law. Finally, the report discusses possible expansions and clarifications to the CTDPA for the legislature to consider.
Texas resolves securities fraud case with decentralized finance lending platform
Recently, a decentralized finance crypto lending platform and its owners (respondents) entered into a settlement agreement with a Texas regulatory agency, resolving an emergency cease-and-desist action brought in June 2023. The Texas State Securities Board alleged that respondents committed securities fraud in connection with the offers and sales of investments, falsely denied the platform’s impending bankruptcy, and “secretly” transferred customer funds to a crypto exchange, as well as offered unregistered securities. Under the terms of the settlement, respondents have agreed to, among other things, (i) inform clients of its plan for asset return within seven days of the settlement and provide a seven-day window for clients to withdraw assets through the app; (ii) continue to provide customer support to prior customers; (iii) pay an administrative fine; and (iv) cease-and-desist from selling unregistered securities in the state without admitting or denying the allegations. Texas also agreed to dismiss its emergency cease-and-desist order as part of the settlement.
Colorado Attorney General fines debt collector $500,000 for collecting on illegal loans
On January 16, the Colorado State Attorney General (AG) reached a settlement agreement with a third-party debt collection company that is ordered to pay $500,000 to the State. The company previously contracted to collect debt from consumers on behalf of unlicensed lending entities associated with Native American tribes, or Tribal Lending Entities (TLEs). According to the settlement agreement, none of the TLEs were licensed Colorado lenders and all of their loan agreements with consumers contained finance charge terms that exceeded the Uniform Consumer Credit Code’s 12 percent finance charge cap on unlicensed lenders—with most having interest rates that exceeded 500 percent APR and some up to 900 percent APR. The AG alleged that, between 2017 and 2022, the company violated the Colorado Fair Debt Collection Practices Act by using “unfair or unconscionable means” to collect on defaulted TLE-issued loans by representing to consumers that the entire loan balance was owed to the TLEs, that the company was legally authorized to collect the payments, and that consumers were legally obligated to pay the full amount. The company denies that its conduct violated any state law and otherwise denies all allegations of wrongdoing. Along with the penalty, the company will be barred from collecting on any debt where the loan’s APR exceeded the 12 percent cap and will provide the State with a list of affected consumers within 30 days.
Illinois proposes rule to evaluate mortgage community reinvestment
Recently, the Illinois Department of Financial and Professional Regulation issued a proposed rule pursuant to the Illinois Community Reinvestment Act (ILCRA). The ILCRA is modeled off the Community Reinvestment Act but expands its scope of covered financial institutions to include credit unions and licensed entities. The proposed rule will help the Department administer and enforce the ILCRA in an equitable manner. The rule establishes a framework and criteria by which the Department will evaluate a covered mortgage licensee’s record of helping to meet the mortgage credit needs of Illinois, including low- and moderate-income neighborhoods and individuals, through different tests and performance standards depending on the number of loans made by a covered mortgage licensee. Tests and considerations for evaluating licensees’ record include a lending test, service test, performance record, data collection and reporting, and content and recordkeeping of information received from the public.
To mitigate the impact on small businesses, a licensee that has made less than 200 home mortgage loans in Illinois in the last calendar year will not be subject to the service test. Furthermore, licensees that made less than 100 home mortgage loans in Illinois in the previous calendar year will have less frequent examinations than those with more than 100. Based on the licensee’s performance under the lending and service tests, the proposed rule specifies that a licensee’s rating of “outstanding”; “satisfactory”; “needs to improve”; or “substantial noncompliance” will affect how frequent they are evaluated. Compliance with the proposed rule is required six months from its effective date, and comments are due by February 26.
Student loan servicer fined $1.8 million by Massachusetts Attorney General
On January 11, the Massachusetts Attorney General (AG) announced a $1.8 million settlement with a student loan servicer, to resolve allegations that the company did not properly communicate Income-Driven Repayment (IDR) plan renewals to borrowers. According to the settlement, IDR plans are a “helpful tool for managing unaffordable federal student loan debt and avoiding the consequences of default… [and respondent] is required to follow specific procedures intended to ensure that borrowers are able to successfully navigate the enrollment and annual recertification processes required for IDR.” The AG alleged that the respondent violated state law by sending written notices that did not meet regulatory requirements and failed to send required notices.
Under the terms of the settlement, respondent will (i) pay $1.8 million; (ii) include certain disclosures in renewal notice correspondence to borrowers; (iii) comply with requirements for FFELP loans owned by the DOE and enrolled in certain repayment plans; (iv) clearly disclosure to certain borrowers that failure to timely provide certain information about income or family size will result in increased monthly payments; and (v) retain copies of each written communication that it sends to borrowers regarding their IDR plans. The student loan servicer enters into this agreement for settlement purposes only (without admission).
NYDFS offers guidance to insurers on AI models
On January 17, NYDFS issued a guidance letter on artificial intelligence (AI) intended to help licensed insurers understand NYDFS’s expectations for combating discrimination and bias when using AI in connection with underwriting. The guidance is aimed at all insurers authorized to write insurance in New York State and is intended to help insurers develop AI systems, data information systems, and predictive models while “mitigat[ing] potential harm to consumers.”
The guidance letter states that while the use of AI can potentially result in more accurate underwriting and pricing of insurance, AI technology can also “reinforce and exacerbate” systemic biases and inequality. As part of the letter’s fairness principles, NYDFS states that an insurer should not use underwriting or pricing technologies “unless the insurer can establish that the data source or model… is not biased in any way” with respect to any class protected pursuant to New York insurance law. Further, insurers are expected to demonstrate that technology-driven underwriting and pricing decisions are supported by generally accepted actuarial standards of practice and based on actual or reasonably anticipated experience. It was last noted that these rules build on New York Governor Hochul’s statewide policies governing AI.
New York State floats BNPL legislation in FY 2025 budget
On January 14, New York proposed its FY 2025 budget: Transportation, Economic Development and Environmental Conservation Article VII Bill, which includes an article, cited as the “Buy Now Pay Later Act” (the “Act”). The Act includes new licensing provisions, requiring buy now pay later (BNPL) financing providers (referred to as “lenders” within the Act) to pay a fee and file a written application to receive a license in order to provide BNPL loans. BNPL lenders would also be required to submit an affidavit of financial solvency, disclose their license on their website, app, or other consumer interface, and list the license in the terms and conditions of any BNPL loan offered and entered by the licensee. Licensees would also be subject to supervisory investigations. The Act would further require BNPL lenders to (i) maintain policies for ensuring the accuracy of data that may be reported to credit agencies; (ii) disclose certain loan terms; (iii) engage in limited ability-to-repay analyses; (iv) refrain from charging unfair, abusive, or excessive fees; and (v) abide by certain restrictions and disclosure requirements relating to the use of consumer data, among other things.
NYDFS orders digital currency trading company to pay $8 million
On January 12, NYDFS announced that it had entered into a consent order with a digital currency trading company after an investigation that found the company responsible for compliance failures that violated NYDFS’s virtual currency and cybersecurity regulations, leaving the company vulnerable to illicit activity and cybersecurity threats.
NYDFS found that the company failed to meet its compliance obligations due to (i) deficiencies in the company’s AML program; (ii) failure to file compliant suspicious activity reports; (iii) failure to conduct required OFAC screening; and (iv) failure to maintain an adequate cybersecurity program. In connection with the settlement, the company will surrender its BitLicense, the license required to be held by any company conducting virtual currency business in New York state and pay an $8 million penalty.
States endorse the CFPB’s rule to regulate fintechs
Recently, 19 state attorneys general submitted a comment letter supporting the CFPB’s proposed rule that would expand the CFPB’s supervisory authority to regulate nonbank fintech firms that offer digital payment services. They emphasized the importance of regulating nonbank financial institutions, including popular digital payment applications. The proposed rule aims to protect consumers from fraud, unregulated investment risks, and data privacy concerns. It addresses issues such as the lack of FDIC insurance for funds stored in digital payment applications, customer service problems, and potential risks associated with investment activities. The state attorneys general commend the CFPB for exercising its authority to improve the regulation of consumer financial products and urge prompt publication and implementation of the final rule.