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Money Transmitter Licensing Changes in New Hampshire and Washington for Virtual Currencies
On August 1, New Hampshire HB 436 went into effect, “exempting persons using virtual currency from registering as money transmitters” under the state’s money transmitter licensing laws. The new exemption applies to persons who “engage in the business of selling or issuing payment instruments or stored value solely in the form of convertible virtual currency” or “receive convertible virtual currency for transmission to another location.” However, the exemption provides that such persons are “subject to” certain state consumer protection laws.
Separately, Washington SB 5031 took effect on July 23, amending the state’s Uniform Money Services Act as it relates to money transmitters and currency exchanges. With respect to virtual currencies, the amendments, among other things: (i) define “virtual currency”; (ii) subject virtual currencies to the state’s money transmitter licensing laws (the definition of “money transmission” now includes virtual currency transmissions); (iii) require businesses that “store virtual currency on behalf of others” to provide the state with “a third-party security audit of all electronic information and data systems” when applying for a money transmitter license; (iv) require virtual currency licensees to “hold like-kind virtual currencies of the same volume . . . obligated to consumers”; and (v) require virtual currency licensees to provide certain disclosures “to any person seeking to use the licensee’s products or services,” including a schedule of fees and charges, and whether the product or services are insured.
Colorado UCCC Administrator Opinion Provides Guidance on Debt Cancellation and Suspension Agreement Fees
On August 7, the Colorado Attorney General’s Office, through the Administrator of the Uniform Consumer Credit Code (UCCC), issued an Administrator Opinion to provide clarification on fees related to debt cancellation and suspension agreements. The UCCC has adopted and authorized rules permitting additional charges to be assessed in addition to a finance charge, such as fees for Single Premium Non-Credit Insurance, Involuntary Unemployment Insurance Premiums, and Guaranteed Automobile Protection. However, because the UCCC has not yet adopted by rule permissible fees for debt cancellation and suspension agreements, those fees must be included in the calculation of the finance charge, even if they are “permitted by federal or state law or regulation—including debt cancellation and suspension agreements offered by Colorado-[c]hartered [b]anks, Colorado-[c]harted [i]ndustrial [b]anks, and Colorado-[c]hartered [c]redit [u]nions.” This Administrator Opinion rescinds the November 9, 2004 Advisory Opinion titled “Debt Cancellation and Suspension Agreements Offered by Colorado-Chartered Banks, Colorado-Chartered Industrial Banks, and Colorado Chartered Credit Unions.” Organizations have 120 days to comply with the newly issued guidance.
Virginia AG Announces Settlement with Small Dollar Lender Over Excessive Fees
On August 1, Virginia Attorney General Mark Herring announced a settlement with a Virginia pawnbroker to resolve allegations that the company violated the Virginia Consumer Protection Act (VCPA) by offering consumers small dollar loans in exchange for personal property—held as security for the loans—and then charging interest and fees beyond the limits allowed by the state’s statutes applicable to pawnbrokers. According to a press release issued by the Attorney General’s office, the settlement requires the company to provide refunds of more than $27,000 to borrowers and reimburse the state for expenses incurred during the investigation. A permanent injunction also prohibits the company from violating state pawnbroker statutes and the VCPA.
Oregon Governor Enacts Law Regarding Compliance Requirements for Debt Collection Licensees
On August 2, Oregon Governor Kate Brown signed into law House Bill 2356 (HB 2356), which establishes provisions relating to debt collection practices in the state. Among other things, the law (i) details the practices a debt buyer, or debt collector acting on behalf of a debt buyer, is required to follow to legally collect debt; (ii) specifies the type of notice and documents that a debt buyer must provide to a debtor; (iii) requires persons engaged in debt buying to obtain or renew their licenses through the Department of Consumer and Business Services; and (iv) specifies duties of licensees, outlines prohibited conduct, and identifies unlawful collection practices. The law takes effect January 1, 2018.
NYDFS Launches New Cybersecurity Portal, Sets Compliance Deadlines
On July 31, the New York Department of Financial Services (NYDFS) announced the launch of an online cybersecurity portal for businesses to securely report cybersecurity events as required by the state’s cybersecurity regulation that took effect March 1. (See previous InfoBytes summary here.) The regulation, Cybersecurity Requirements for Financial Services Companies, requires all banks, insurance companies, and other financial services institutions regulated by NYDFS to establish and maintain cybersecurity programs to safeguard consumers’ private data. The cyber portal is designed to facilitate easy reporting of cybersecurity events and will allow regulated entities to file compliance certifications. Starting August 28, 2017, all entities required to comply with NYDFS cybersecurity regulations “must file certain notifications to the [Financial Services] Superintendent including notices of certain cybersecurity events within 72 hours from a determination that a reportable event has occurred.” A cybersecurity event is reportable if it: (i) “impacts the covered entity and notice of it is required to be provided to any government body, self-regulatory agency or any other supervisory body”; or (ii) “has a reasonable likelihood of materially harming any material part of the normal operation(s) of the covered entity.” Additionally, covered entities are required to file a certificate of compliance confirming compliance for the previous calendar year no later than February 15, 2018.
Massachusetts AG Announces Settlement with Law Firm Over Debt Collection Practices
On July 27, Massachusetts Attorney General Maura Healey announced a $1 million settlement with the largest debt collection law firm in the state to resolve allegations that the firm engaged in unfair and unlawful debt collection practices. According to a lawsuit filed by the Attorney General’s office in 2015, the firm began filing tens of thousands of debt collection lawsuits each year beginning in 2011, at times targeting the wrong consumers or filing claims based on unsubstantiated debts. The firm also allegedly demanded payment from consumers who relied on social security or other exempt income, despite being provided evidence that the income was exempt from court-ordered collection. Under the terms of the settlement, the company is required to reform its debt collection practices by adhering to guidelines including the following:
- The firm is required to obtain and review “original account-level documentation” prior to initiating a collection to determine whether a consumer is obligated to pay the debt such as, among others, (i) an authenticated bill of sale reflecting the transferred ownership of debt; (ii) original documents reflecting the charge-off balance; (iii) contractual terms and conditions; and (iv) original consumer signed documents showing proof the account was opened;
- The firm is prohibited from engaging in threatening actions to collect on a debt initiated on behalf of a collector or debt buyer, and is further restrained from commencing a collection suit without possessing a final judgment or execution against the consumer, or acceptable account-level documentation;
- The firm cannot initiate a collection suit against a consumer until an attorney listed on the company in the collection suit has reviewed the pertinent information and made the determination that the debt owed is not subject to bankruptcy proceedings and certifies in writing that the collection suit is in compliance.
The settlement terms also stipulate that the firm must comply with collection terms and restrictions concerning exempt and protected income, must adhere to time-barred debt collection restrictions, is enjoined from using false and misleading affidavits to collect debts, and must submit enhanced compliance reporting to AG Healey for review. Additionally, the firm previously paid $1 million to the state to be used in one or more of the following ways: (i) as payments to consumers; (ii) to assist with final judgment facilitation; (iii) to be added to the state’s general fund and/or the Local Consumer Aid Fund; and (iv) to fund programs that “address the negative effect of unfair and deceptive practices related to debt collection.”
North Carolina Amends Collection Agency Definition
On July 20, North Carolina Governor Roy Cooper signed into law Senate Bill 415 (S.L. 149), which amends the state’s collection agency law to exclude persons engaged in routine billing services from the definition of a “collection agency.” Specifically, a “collection agency” does not include “corporations or associations engaged in accounting, bookkeeping, or data processing services where a primary component of such services is the rendering of statements of accounts and bookkeeping services for creditors.” The law went into effect July 20, 2017.
Connecticut Governor Enacts Law Regarding Compliance Requirements for Mortgage Licensees
On July 11, Connecticut Governor Dannel Malloy signed into law Public Act No. 17-233 (H.B. 7141), which makes various revisions to the state’s banking laws. Among other things, the law (i) applies certain mortgage servicers’ and student loan servicers’ prohibited acts to other licensees; (ii) requires non-depository licensees to maintain and enforce compliance policies and procedures; (iii) allows the banking commissioner to require the use of electronic bonds for licensed or registered individuals to participate in the Nationwide Mortgage Licensing System; (iv) reduces pre-licensing education requirements for mortgage loan originators, loan processors, and underwriters; and (v) sets limits for money transmitters regarding virtual currency transactions and timeframes for transmitting money. The law takes effect October 1, 2017, with provisions relating to compliance policies and procedures taking effect July 1, 2018, and pre-licensing education requirements taking effect January 1, 2019.
Hawaii Enacts Law to Prohibit Release of Credit Information of Children, Others
On July 5, Hawaii Governor David Y. Igge signed into law H.B. 651, which was devised to protect children and certain other individuals from identity theft and credit fraud. The law applies to “protected consumers,” defined as minors under the age of 16 years, incapacitated persons, and individuals with appointed guardians or conservators.
Based on research suggesting that minors may be targeted for identity theft due to their clean credit reports, the legislation permits representatives of protected consumers to place and remove security freezes on protected consumers’ credit files. Because one impediment to requesting such a freeze is the lack of an existing credit file, the legislation also requires consumer credit reporting agencies (CRAs) to create records for the protected consumers. A CRA may not release the protected person’s file when it is in a security freeze until the representative requests a removal of the freeze. In order to request a security freeze or a freeze removal, a protected person’s representative must provide proper identification and evidence of authority to the CRA. Additionally, with a few exceptions, the CRA may charge a fee not to exceed five dollars for each freeze or removal of a freeze to a protected person’s credit file.
The law will go into effect on January 1, 2018.
Maine Passes Law to Notify Secretary of State About Abandoned Motor Vehicles
On June 21, LD 1251, “An Act Regarding Certain Abandoned Vehicles and Notice to the Secretary of State Regarding Those Vehicles” became law in Maine. The law applies to a vehicle left at a business after authorized repairs were made at the request of the vehicle owner, and to a vehicle left in storage when the vehicle owner has not paid the storage fee. The law requires the owner of a repair or storage facility or the owner’s agent to notify the Secretary of State within 14 days after the earliest date that the vehicle owner becomes responsible for unpaid repair or storage and towing fees. After notice is provided by the facility (or facility’s agent), the Secretary of State must notify the vehicle’s owner and lienholder that the vehicle is being claimed unless the charges against the vehicle are paid. If the Secretary of State is not notified within 14 days using the prescribed form, the owner of the auto repair business or storage facility cannot charge the vehicle owner more than 14 days of storage fees. The law will take effect 90 days following the adjournment of the legislative session.