State Issues

Subscribe to State Issues

Earlier this month, the Colorado legislature voted to approve HB23-1229, which would opt the State out of Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”), a federal law enacted to create competitive equality between state-chartered banks and national banks. Section 521 gives federally insured banks, state credit unions, and state savings institutions the ability to export the interest permitted under their home state laws to borrowers in other states notwithstanding any interest limitations in the borrower’s state.…

Continue Reading Colorado Approves DIDMCA Opt-Out, Raising Concerns for Consumer Credit Access

On February 2, the Massachusetts Attorney General announced that her office entered into an assurance of discontinuance with an auto loan provider to settle allegations of certain illegal auto loan collection practices. Specifically, the Massachusetts AG alleged that, beginning in 2017 and continuing to the present day, the auto loan provider allegedly failed to give borrowers adequate information relating to the calculation methods for deficiencies left on their auto loans after their vehicles were repossessed. The Massachusetts AG further alleged that the auto loan provider engaged in a pattern of excessive collection calling to borrowers in violation state debt collection regulations, which prohibit the initiation of more than two collection communications during a seven-day period.…

Continue Reading Massachusetts AG Settles Enforcement Action Against Auto Lender

On January 11, 2023, a Texas federal court dismissed a class action lawsuit against a leading financial technology company alleging it violated Texas usury laws by charging interest on loans it made through a partnership with a state-chartered bank at rates above the maximum allowed under Texas law. The plaintiff alleged that the partnership amounted to a “rent-a-bank” scheme designed to evade state law such that financial technology company, rather than its bank partner, was the “true lender” on the loans. In dismissing the lawsuit, the district court entered an order accepting and adopting the magistrate judge’s report and recommendation, finding the arbitration clause in the plaintiff’s note and disclosure statement (the “Note”) enforceable and recommended that the complaint be dismissed with prejudice. The district court also compelled arbitration of the plaintiffs’ claims.…

Continue Reading FinTech Prevails in Texas “True Lender” Challenge

On January 4, the Colorado Attorney General announced that his office entered into assurances of discontinuance (available here and here) with two credit unions that will result in $4 million being refunded to Colorado borrowers who were entitled to refunds of guaranteed automobile protection (“GAP”) fees. These settlements follow an investigation by the Consumer Protection Section of the Colorado Department of Law, which found that the credit unions historically failed to refund unearned GAP fees owed to consumers.…

Continue Reading Colorado AG Secures Latest Settlement over Unearned GAP Fees

In December, a Utah-based bank and its service provider entered into an assurance of discontinuance with the Iowa Attorney General and the Iowa Division of Banking, settling an investigation into allegedly usurious installment loans that the bank made to Iowa consumers. The Iowa AG alleges that, between March 2020 and April 2022, the bank made more than 1,600 installment loans to Iowa residents that imposed excessive finance charges in violation of state and federal law. Some of these loans, according to the Iowa AG, carried interest rates of nearly 200 percent, far in excess of the maximum allowable finance charge of 21 percent under the Iowa Consumer Credit Code and the limits established by Section 521 of the federal Depository Institutions and Deregulation Monetary Control Act.…

Continue Reading Iowa AG Usury Investigation into Bank Partnership Ends in Settlement

On December 18, the Arizona Attorney General issued an opinion on earned wage access (EWA), which determined that fully non-recourse EWA products do not constitute consumer loans subject to consumer loan regulations, and correspondingly, that providers of non-recourse EWA products would not be considered consumer lenders subject to licensure under Arizona law. The opinion found that an EWA product could be identified as fully non-recourse when the provider:…

Continue Reading AZ Attorney General Concludes Non-Recourse EWA Not a Loan

On September 14, the New York Department of Financial Services (NYDFS) published a notice of proposed rules under New York’s Commercial Financing Disclosure Law (CFDL) (we discussed this previous rulemaking in a blog post here). Under the CFDL, commercial finance companies are required to give consumer-style loan disclosures to potential recipients when a specific offering of finance is extended for certain commercial transactions of $2.5 million or less. We note some items in particular from the latest proposed rule:
…
Continue Reading New York Publishes Proposed Rules on Commercial Financing Disclosures

Recently, the Louisiana lawmakers and regulators have taken steps to legalize operations in the state involving virtual currencies. On June 15, the Louisiana governor signed a bill that, effective August 1, 2022, will allow financial institutions and trust companies to provide virtual currency custody services to their customers as long as they satisfy certain requirements on risk-management and compliance. On June 20, the Louisiana Office of Financial Institutions (OFI) published proposed rules on licensing and regulation of virtual currency businesses in the state pursuant to the Louisiana Virtual Currency Business Act, which went into effect on August 1, 2020.
…
Continue Reading Louisiana Approves Virtual Custody Services and Proposes Virtual Currency Business Licensing Rules