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Maryland issues bipartisan consumer protection recommendations
On January 26, the Maryland Financial Consumer Protection Commission (the “Commission”) and ranking officials from the Maryland legislature announced bipartisan “Interim Recommendations” of the Commission for State and local action in response to the federal government’s “efforts to change or weaken […] important federal consumer protections.” New legislation in response to the recommendations is expected to be released in the near future. Key recommendations include, among other things: (i) requiring credit reporting agencies to provide an alert of data breaches promptly and provide free credit freezes; (ii) adopting new financial consumer protection laws in areas where the federal government may be weakening oversight; (iii) addressing potential issues with Maryland’s current payday and lending statutes; (iv) adopting the Model State Consumer and Employee Justice Enforcement Act that addresses forced arbitration clauses; and (v) adopting new laws that address new risk, such as, virtual currencies and financial technology.
New York Senate bill proposes replacing online lending task force with study
On January 8, the New York State Senate Committee on Rules voted to amend legislation to authorize the New York Department of Financial Services (NYDFS) to conduct a study about online lending. The original legislation, S6593A, signed into law by Governor Cuomo on December 29, 2017, created a seven-person task force responsible for analyzing online lending activity in the state. The proposed amendments to this legislation, S07294 and A8938, which would be effective immediately if passed by both houses of the New York legislature and signed into law, remove the requirement for a task force, and instead authorize NYDFS to direct the study and produce a public report with recommendations prior to July 1. According to the amendments, the study should analyze (i) lending practices of the online lending industry and primary differences between online lenders and traditional lenders; (ii) types of credit products available online; (iii) a review of available complaints, actions and investigations related to online lenders; and (iv) a survey of existing state and federal laws that apply to the online lending industry.
Ohio Governor Signs Residential Mortgage Lending Act
On December 22, Ohio Governor John Kasich signed legislation enacting amendments to the state’s residential mortgage lending act. HB 199, among other things, (i) updates certain definitions, such as modifying the definition of “nationwide mortgage licensing system and registry” to broadly include “persons providing non-depository financial services”; (ii) provides limits on the application of the current law to “unsecured loans and loans secured by other than residential real estate”; and (iii) updates requirements for applicants registering for mortgage loan originator licenses. The amended act takes effect March 23.
Pennsylvania Governor Signs Law Concerning Mortgage Servicing Activities
On December 22, Pennsylvania Governor Tom Wolf signed into law SB 751, an act amending Title 7 of the Pennsylvania Consolidated Statutes to regulate certain mortgage servicing activities. The amendments revise existing definitions, define new terms, establish mortgage servicing licensing requirements, create single point of contact requirements, and set forth specific steps that mortgage servicers must complete as soon as mortgage loans are paid in full. The law also requires, effective December 22, the promulgation of regulations to incorporate the CFPB’s mortgage servicing regulations. The remaining sections of SB 751 go into effect on the date that the new promulgated regulations are issued.
District of Columbia Mayor Signs Emergency Legislation Temporarily Prohibiting Credit Freeze Fees
On October 23, District of Columbia Mayor Muriel Bowser signed emergency legislation (Act 22 155) that prohibits credit reporting agencies (CRAs) from charging consumers fees for security credit freezes. The Credit Protection Fee Waiver Emergency Amendment Act of 2017 requires CRAs to provide security freeze services and one-time reissuances of passwords or PINs to consumers for free, but permits charging up to $10 for subsequent instances of password or PIN requests. The Act took effect immediately and will remain in effect for a maximum of 90 days.
As previously covered in InfoBytes, a coalition of state attorneys general recently petitioned two major CRAs to cease charging fees for credit freezes.
California Governor Incorporates Federal Military Lending Act Amendments Into State Financial Code
On October 5, California Governor Jerry Brown signed into law revisions to sections of the state’s Financial Code to incorporate references to federal Military Lending Act (MLA) amendments and applicable regulations. Impacted are the state’s Banking Law, Credit Union Law, Finance Lenders Law, and Deferred Deposit Transaction Law. Specifically, SB 266 is designed to ensure that the California Department of Business Oversight’s Commissioner has the authority to enforce violations of the federal MLA rules by state-regulated lenders. The provisions also incorporate additional changes to Section 394 of the state’s Military and Veterans Code to prohibit discrimination against servicemembers (Assembly Bill No. 1710 was approved by Governor Brown on October 8). The amendments take effect January 1, 2018.
California Bans Use of Arbitration Clauses in Fraudulently Created Financial Contracts
On October 4, Governor Jerry Brown signed into law amendments to the state’s code of civil procedure that essentially eliminates the use of forced arbitration in cases of fraudulently created accounts. SB 33 prevents state or federally chartered depository institutions from enforcing arbitration agreements in existing consumer contracts to compel California customers to arbitrate disputes regarding other contracts created “fraudulently without the consumer’s consent or by unlawfully using the consumer’s personal identifying information.”
The law comes at a time when, as previously discussed in InfoBytes, several financial industry groups issued a joint lawsuit challenging the Bureau’s arbitration rule, which prohibits the use of mandatory pre-dispute arbitration clauses in certain contracts for consumer financial products and services. The amendments take effect January 1, 2018.
California Legislature Urges Congress to Request the Department of Defense Alter Criteria for Safe Harbor Provision in the MLA
On September 25, the California Legislature filed a joint resolution that urges Congress to impress upon the Department of Defense the need to realign their criteria requiring a social security number for the safe harbor provision in the Military Lending Act (MLA). The resolution noted that the revised MLA regulations requiring lenders to ask for a social security number, among other information from borrowers, may expose lenders to liability under the California Unruh Civil Rights Act. It further states that this provision of the MLA could unnecessarily burden many segments of California’s immigrant communities.
Illinois Governor Enacts Amendments to Predatory Lending Database Article
On September 15, Illinois Governor Bruce Rauner signed into law amendments to the state’s Residential Real Property Disclosure Act to change provisions under its Predatory Lending Database Article. Public Act 100-0509 sets forth the following changes, among others: (i) certificates of compliance or certificates of exemption must now contain at least “one of the borrower’s names on the mortgage loan and the property index number for the subject property”; (ii) amends the definitions of “counseling” by removing the reference to “telephone counseling” and “originator” to reference “mortgage loan originator”; (iii) eliminates the requirement that originators shall provide information regarding affiliated or third party service providers or monies received from a broker or originator for inclusion in the predatory lending database; and (iv) provides additions to the information that must be collected and submitted by the title insurance company or closing agent for inclusion in the predatory lending database, such as a detailed list of all notices provided to the borrower at closing, including information in connection with the Integrated Closing Disclosure and the Integrated Loan Estimate Disclosure required under TILA-RESPA. The amendments took effect September 15, 2017.
Illinois Authorizes the Electronic Delivery of Documents in Connection With Premium Finance Agreements
On September 8, Illinois Governor Bruce Rauner signed into law amendments to the state’s insurance code to authorize the electronic storage, presentment, and delivery of notices and other documents required in connection with premium finance agreements. Public Act 100-0495 provides that a premium finance company can electronically deliver notices and other documents if the receiving party has provided its consent and the premium finance company has made certain required disclosures. The amendments take effect January 1, 2018.