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Maine enacts new money transmission law in line with the Money Transmission Modernization Act
On April 22, the Governor of Maine signed into law LD 2112 (the “Act”) which will codify a new law titled the “Maine Money Transmission Modernization Act.” The Act will amend and repeal many parts of the state’s money transmission laws and brought the law more in alignment with the Money Transmission Modernization Act, the model law drafted with a goal of creating a single set of nationwide standards and requirements. The stated purpose of the Act will be to coordinate with states to reduce the regulatory burden, protect the public from financial crimes, and standardize licensing activities allowed and exempted by Maine.
Among many other new provisions, the Act will require any person which engages in the business of money transmission or advertises, solicits, or holds itself out as providing money transmission to obtain a license. The Act will define “money transmission” as “(i) [s]elling or issuing payment instruments to a person located in [Maine]; (ii) [s]elling or issuing stored value to a person located in [Maine]; or (iii) [r]eceiving money for transmission from a person located in [Maine].” However, the Act will exempt, an agent of the payee to collect and process a payment from a payor to the payee for goods or services, other than money transmission services, provided certain criteria are met. Additionally, the Act will exempt certain persons acting as intermediaries, persons expressly appointed as third-party service providers to an exempt entity, payroll processors, registered futures commission merchants and securities broker-dealers, among others. Anyone claiming to be exempt from licensing may be required to provide information and documentation demonstrating their qualification for the claimed exemption.
The Act also will include a section on virtual currency, which will be defined as “a digital representation of value that: (i) [i]s used as a medium of exchange, unit of account or store of value, and (ii) [i]s not money, whether or not denominated in money.” The Act will specify that “virtual currency business activity” will include, among other activities, exchanging, transferring, storing, or engaging in virtual currency administration, whereas “virtual currency administration” will be defined as issuing virtual currency with the authority to redeem the currency for money, bank credit or other virtual currency.
The Act will require certain reporting, including about the licensee’s condition, financial information, money transmission transactions from every jurisdiction, among other types of information. The amendments will also outline numerous licensing application and renewal procedures including net worth, surety bond, and permissible investment requirements. Maine will now join several other states that adopted the model law. The Act takes effect on July 16 of this year.
Oklahoma amends SAFE Act licensing provisions
On April 29, Oklahoma enacted SB 1492 (the “Act”) which will amend the Oklahoma Secure and Fair Enforcement for Mortgage Licensing Act by, among others, expanding the definition of “mortgage broker” to include servicing a residential mortgage, defining “servicing” to include holding servicing rights, as well as significantly adjusting fees and annual assessments for licensees. With respect to mortgage servicing, the law will define servicing as “the administration of a resident mortgage loan following the closing of such loan” and further will state that an entity will be servicing if it “either holds the servicing rights, or engages in any activities determined to be servicing, including: (a) collection of monthly mortgage payments; (b) the administration of escrow accounts; (c) the processing of borrower inquiries and requests; and (d) default management.” The definition of “mortgage lender” already included an entity that “makes a residential mortgage loan or services a residential mortgage loan” and will be approved by HUD, Fannie Mae, Freddie Mac, or Ginnie Mae. The Act will add a new section allowing licensees to permit its employees and independent contractors to work at “remote locations,” subject to certain conditions on policies and procedures on customer contact and data, maintenance of physical records, and prohibitions on in-person customer interactions, among other things. Finally, the Act will establish new fees and formulas for annual assessments for licensees, including assessments based on loan volumes range for loan originated and loans serviced during the assessment period. The Act will go into effect on November 1.
Florida enacts telemarketing exemption from credit counseling services law
On April 26, the Governor of Florida signed into law HB 1031 (the “Act”), which will amend Florida’s credit counseling services law to provide an exception for telemarketers and sellers that furnish “debt relief services” (as defined under the federal Telemarketing and Consumer Fraud and Abuse Prevention Act and the Telemarketing Sales Rule: i.e., the TSR). Generally, the law places certain disclosure, financial reporting, and fee charging obligations on any person engaged in “debt management services” or “credit counseling services.” The amendment will provide those telemarketers or sellers that “provide any debt relief service” within the scope of the TSR will not be subject to the provisions of Florida’s credit counseling law as long as they do not receive from the debtor or disburse to a creditor any money or items of value. The Act will go into effect on July 1.
FDIC submits amicus brief in Colorado DIDMCA opt-out case
On April 23, the FDIC submitted an amicus brief to the U.S. District Court for the District of Colorado in support of the defendant: the Colorado attorney general. This case involved Colorado HB 23-1229 (the “Act”), which was enacted on June 5, 2023, and will become effective on July 1. As previously covered by InfoBytes, trade groups filed a complaint in the U.S. District Court for the District of Colorado and moved for a preliminary injunction seeking to prevent enforcement of Section 3 of the Act. Section 3 purported to “opt out” of Section 521 of the DIDMCA which had allowed state-chartered banks to export rates of their home state across state borders.
Section 525 of DIDMCA allows any state to enact legislation to opt out of Section 521 with respect to “loans made in such State.” In the brief, the FDIC argued that courts interpreting federal law have concluded “it is reasonable to conclude that interstate loans are made in the state in which the borrower enters into the transaction and in the state in which the lender enters into the transaction” and that “[i]t would be arbitrary and artificial to select one state when the parties enter into the transaction in two different states.” Thus, according to the FDIC, loans would be made in a state if either the borrower or the lender entered into the transaction in that state. Therefore, the FDIC argued that plaintiffs were incorrect in claiming that the opt-out would apply to loans made by out-of-state creditors to borrowers who were physically located in Colorado.
In addition, the FDIC disagreed with plaintiffs’ argument that FDIC General Counsel Opinion No. 11, 63 Fed. Reg. 27282 (May 18, 1998), which set forth the FDIC’s position regarding where a bank is “located” for purposes of section 27 of the Federal Deposit Insurance Act, was applicable to interpreting Section 525. The FDIC’s amicus brief stated that Opinion 11 does not address opt-out or Section 525. Moreover, the FDIC argued that “where a loan is made under Section 525 cannot be equated with where a bank is located under Section 521.” The FDIC disagreed similarly with plaintiffs’ reliance on the 1978 Supreme Court of Marquette Nat’l Bank v. First of Omaha Serv. Corp., on the grounds that it concerned where a bank was located and not considered where a loan is “made.”
The plaintiffs’ reply brief will be submitted by May 7, and a hearing of the pending motion for a preliminary injunction has been scheduled for May 16.
Tennessee amends caller ID law
On April 22, Tennessee enacted HB 2504 (the “Act”), which amends the Tennessee Consumer Protection Act of 1977 to specify that it is illegal for: (i) “[a] person, in connection with a telecommunications service or an interconnected VoIP service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information to a subscriber with the intent to defraud or cause harm to another person or to wrongfully obtain anything of value”; and (ii) “[a] person, on behalf of a debt collector or inbound telemarketer service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information, including caller identification information that does not match the area code of the person or the debt collector or inbound telemarketer service the person is calling on behalf of, or that is not a toll-free phone number, to a subscriber with the intent to induce the subscriber to answer.”
The Act is effective on July 1.
Nebraska enacts a comprehensive data privacy law
On April 17 Nebraska enacted LB 1074 (the “Act”), establishing a comprehensive consumer data privacy law. The Act applies to a person that is not a small business (as determined under the federal Small Business Act) who conducts business in Nebraska or produces a product or service used by Nebraska consumers and who processes or sells personal data. The Act includes exemptions for certain classes of data, including data subject to the Gramm-Leach-Bliley Act, as well as for certain entities including state agencies, financial institutions and their affiliates, nonprofits, higher education institutions, and covered entities or business associates governed by the privacy, security, and breach notification rules issued by the Department of Health and Human Services.
The Act grants consumers the right to (i) request information about whether their data is being processed; (ii) access their data; (iii) correct inaccuracies; (iv) delete their data; (v) obtain a portable copy of their data; and (vi) opt out of certain uses of their data, such as targeted advertising, sale, or “profiling in furtherance of a decision that produces a legal or similarly significant effect concerning the consumer.” Controllers, defined as persons that determine the purpose and means of processing personal data, must respond to authenticated consumer requests within 45 days and may extend the period once by another 45 days if necessary. If a request is denied, consumers must be informed of the reasons and instructed on how to appeal to the Attorney General. Controllers must offer a free response to two requests per year from each consumer but may charge a fee or refuse to act if requests are unfounded or excessive. Controllers also must establish an appeals process for consumers whose requests are denied, and inform the consumer of the outcome of their appeal within 60 days.
Rights afforded to consumers under the Act cannot be waived or limited by contract or agreement. Further, under the Act, controllers must provide consumers with a clear privacy notice including information similar to that required under the Gramm-Leach-Bliley Act.
The Act is effective on January 1, 2025 and enforceable by the Attorney General and does not provide a private right of action.
CFPB supports Connecticut’s bill to ban medical debt on credit reports
On April 15, the CFPB released a letter written by Brian Shearer, the Assistant Director within the Office of Policy Planning and Strategy, throwing the Bureau’s support behind Connecticut’s new bill to bar medical debt on credit reports. The proposed bill, SB 395, has passed its committee in the first chamber. This legislation would align Connecticut with similar legislation in Colorado and New York, and the CFPB noted that the “preemption of state law is narrow under both the [FDCPA] and the [FCRA], and states may… limit the inclusion of information about a person’s allegedly unpaid medical bills on consumer reports.” The CFPB announced in September 2023 its NPRM to prohibit creditors from using medical bills in underwriting decisions (as covered by InfoBytes here). According to the letter, “[m]edical debt is categorically different from most types of consumer tradelines that typically appear on consumer reports. Consumers frequently incur medical bills in unique circumstances that differ from other forms of credit extension, and CFPB research has found that medical debt is less predictive of future consumer credit performance than other tradelines.”
Iowa enacts new money transmission provisions
On April 10, Iowa’s governor signed into law HF 2262 (the “Act”) relating to money transmission services. The Act will exempt a person appointed as an agent of a payor for purposes of providing payroll processing services from licensure, provided that their agreement and services meet certain conditions. The Act will also allow the superintendent to suspend or revoke a licensee’s license, should they, among other things: (i) violate the Act; (ii) fail to cooperate with an examination or investigation conducted by the superintendent; (iii) engage in willful misconduct or blindness and, which leads to a conviction of an authorized delegate for violating a state or federal anti-money laundering statute, or violates the Act, a rule adopted under the Act, or an order issued under the Act; or (iv) engage in an unsafe or unsound practice. Further, the Act will detail different scenarios in which the superintendent may pursue an enforcement action. For instance, if the superintendent determined any violations were “likely to cause immediate and irreparable harm to the licensee, the licensee’s customers, or the public, or cause insolvency” the superintendent may issue a cease and desist order. Finally, the Act will provide guidelines for investigations, civil penalties, criminal penalties, and administrative proceedings. The Act became effective upon enactment and will apply retroactively to July 1, 2023.
Kansas enacts its Commercial Financing Disclosure Act
On April 12, Kansas enacted the Commercial Financing Disclosure Act in SB 345 (the “Act”) which will require the disclosure of certain commercial financing product transaction information, provide civil penalties for violations, and authorize enforcement by the attorney general. The Act will apply to any commercial loan, accounts receivable purchase transaction, and commercial open-end credit plan (when the transaction would be less than or equal to $500,000).
According to the Act, providers must disclose the total amount of funds furnished, and total amount dispersed, if that number is less than the amount furnished. Additionally, providers must disclose the total amount borrowers will owe the provider in that agreement, including the total cost to the borrower, as well as the manner, frequency, and amount of each payment. For each commercial financing agreement, only a single disclosure is necessary. If there are alterations to the financing arrangement, a new disclosure will not be mandated. Furthermore, providers will not be required to issue a new disclosure with every purchase of accounts receivables under the agreement. Moreover, brokers of such transactions are prohibited from collecting an advance fee from a business, making any false representations, or omitting any material facts during the sale of the services.
The Act will exempt certain depository institutions, commercial financing transactions secured by real property or a lease, and providers that made five or fewer commercial financing transactions in Kansas in one year, among other things.
Violations of the Act will be subject to a civil penalty of $500 per individual violation and the total penalty for multiple aggregated violations cannot exceed $20,000. If a person continues to violate the Act after receiving a written warning from the attorney general, the penalty will increase to $1,000 per violation. The maximum penalty for multiple aggregated violations in this scenario will be $50,000. The Act will not grant individuals the right to sue based on compliance or non-compliance with its provisions; there is no private right of action. Violations of the Act will not affect the enforceability or validity of the underlying agreement. The authority to enforce the Act will not be given exclusively to the attorney general.
Oregon enacts new consumer finance protections related to wage garnishment
Recently, the Governor of Oregon enacted bill SB 1595 (the “Act”) that amended Oregon’s statutes to provide greater consumer protection rights for Oregonians working to pay back their debts. The Act was mostly comprised of new rights for wage garnishments. Section 10, which updated ORS 18.785, amended what a financial institution must do if it receives a writ of garnishment for a debtor, including checking for federal benefits and analyzing an account holder’s base protected account balance, among other provisions. Additionally, the Act protected $2,500 from a person’s bank account to help them meet basic needs. The law went into effect on April 4.