On April 20, Washington Governor, Jay Inslee, signed into law HB 1311 creating new regulations for credit repair organizations (CROs) in the state. Among other things, the new law outlines requirements for CROs, which include the following:
On June 15, the CFPB posted a blog, titled “Buy Now, Pay Later and Credit Reporting” discussing the Bureau’s viewpoint on the importance of standardized data furnishing by buy now, pay later (BNPL) firms to consumer reporting companies for inclusion in consumer credit reports. BNPL products provide consumers with a short-term, no-interest credit option and are widely used for online purchases and, increasingly, brick-and-mortar stores. The CFPB has recently expressed concerns about the fast-growing BNPL credit industry, noting the potential for consumers to accumulate debt by making multiple BNPL purchases across several different BNPL firms. (See our previous posts about the CFPB’s December 2021 BNPL market monitoring inquiry here and here).
Continue Reading CFPB Blogs About Need for Standardized Credit Reporting
On May 4, the Connecticut Department of Banking issued a temporary cease and desist order directing a peer-to-peer lending platform that connected borrowers with third-party lenders to cease its lending-related activities on grounds that it was operating as an unlicensed small loan company. The FinTech company was also cited for operating as an unlicensed consumer collection agency, and for engaging in deceptive acts or practices under consumer protection laws. …
Continue Reading Connecticut Stops FinTech from Unlicensed Lending Activities
On November 16, the California DFPI released Version 2.0 of its Annual Report of Finance Lenders, Brokers and PACE Administrators Licensed under the California Financing Law (CFL). The Annual Report examined unaudited data gathered from finance lenders, brokers, and Property Assessed Clean Energy (PACE) administrators licensed under the CFL, as well as new data from the “buy now, pay later” or BNPL industry.
Continue Reading DFPI Reports Increase in Consumer Loans Under $2,500, Decrease in Consumer Loans Between $2,500 and $10,000
Hawaii recently enacted HB 1192, which amends the state’s small dollar lending law by setting forth a new licensing requirement for “installment lenders” and specifies various consumer protection requirements. The amendments, which impact consumer loans of $1,500 or less, include a broad definition of “installment lender” that would capture loans offered under a bank partnership model:
Continue Reading Hawaii Amends Small Dollar Lending Law
Wyoming and Maine recently amended their laws related to licensure requirements for consumer lending:
Continue Reading Wyoming and Maine Issue New Licensing Requirements Potentially Impacting Passive Loan Investors
Maine’s Governor, Janet Mills, recently signed S.P. 205/L.D. 522, which amended the Consumer Credit Code to protect consumers from predatory and fraudulent lending practices. In particular, the amendments include an anti-evasion provision under which purported bank agents or service providers are deemed “lenders” for the purposes of statute. The amendment contains the following key provisions:
- Covered entities “may not engage in any device, subterfuge or pretense to evade the requirements of this Article, including, but not limited to…making, offering, assisting, or arranging a debtor to obtain a loan with a greater rate of interest, consideration or charge than is permitted by this Article through any method.”
- Loans that violate these provisions are “void and uncollectible as to any principal, fee, interest or charge.”
- A person qualifies as a lender if it:
- holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan;
- markets, brokers, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase the loan or a receivable or interest in the loan; or
- the totality of the circumstances indicate that the person is the lender and the transaction is structured to evade the requirements of this Article.
- The circumstances that would weigh in favor of an entity being deemed the lender include, without limitation, when the entity:
- indemnifies, insures or protects an exempt entity for any costs or risks related to the loan
- predominately designs, controls or operates the loan program, or
- purports to act as an agent or service provider for an exempt entity while acting directly as a lender in other states.
- Lenders who violate these provisions may not furnish information concerning a debt associated with the violation to a consumer reporting agency, nor may it refer the associated debt to a debt collector.
When President Biden signed the bill on June 17 which made Juneteenth (June 19) a federal legal holiday immediately, it impacted certain Regulation Z timing requirements related to rescission of closed-end mortgage loans and the TILA-RESPA Integrated Disclosures (TRID), particularly with respect to transactions that either (i) closed on or before June 17, 2021 but for which consumers’ rescission periods had not yet expired or (ii) were close to the planned closing date on June 17, 2021 and subject to certain disclosure timing requirements of the TRID provisions. Since the CFPB did not publish immediate guidance, mortgage lenders were forced to make educated guesses as to how to treat Friday, June 18 and Saturday, June 19, particularly with respect to measurement periods that had already commenced before or on the date the new law became effective. On August 5 the CFPB published an interpretive rule on how to deal with these issues, and the Bureau consistently reached a result which permitted mortgage lenders to treat June 19 as either a business day or a federal holiday for the purposes of these provisions, as set forth immediately below in more detail.
Continue Reading CFPB Reaches Correct Resolution On Juneteenth Disclosure Issues
On July 13, the Federal Reserve, FDIC, and OCC proposed risk management guidance to help banking organizations manage risks related to third-party relationships, including relationships with vendors, FinTech companies, affiliates, and the banking organizations’ holding companies. The proposal is based on existing but disparate third-party risk management guidance from the three prudential regulators, and is intended to promote consistency across the banking agencies. If finalized, it will replace the guidance that each agency has released independently.
Continue Reading Federal Agencies Request Comments on Risk Management Guidance for Third-Party Relationships
On July 12, the CFPB issued a consent order against a FinTech company for facilitating point of sale financing activities without authorization from consumers. The consent order requires the company to pay up to approximately $9 million in redress to impacted consumers and a $2.5 million civil money penalty.
Continue Reading CFPB Takes Action Against FinTech Company for Originating Unauthorized Loans
On July 6, the CFPB posted a blog titled, “Should you buy now and pay later?” describing how buy now pay later (BNPL) deferred payment options work, and the benefits and risks that come with BNPL. Generally, if a consumer selects the BNPL option at an online checkout, “the purchase is . . . split into a payment schedule – typically four fixed payments made bi-weekly or monthly until the balance is paid in full.” The CFPB points out that transaction approval takes minutes, with no interest, finance charges, or hard credit inquiries.
Continue Reading CFPB Blogs About Buy Now Pay Later