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Recently Florida and Arkansas made it a requirement for those engaging in virtual currency activities to obtain money transmission licenses in their respective jurisdictions.
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Continue Reading Money Transmission Licenses Required for Virtual Currency Activities in Arkansas and Florida

Last month we wrote a blog relating to a consent order entered into by the California Department of Financial Protection and Innovation (DFPI) with a servicer of income share agreements.  The DFPI determined that, despite claims by the provider to the contrary, the income share agreements are student loans that subject the provider to California’s licensing requirements.  It did not take long for the CFPB to enter the fray.  On September 7, the CFPB entered into a consent order with Better Future Forward, Inc. and various affiliates (collectively BFF) in which the CFPB determined that the company:
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Continue Reading Are Income Share Agreements Loans? The CFPB Says Yes

On August 5, California’s Department of Financial Protection and Innovation (DFPI) announced that it entered into a consent order with a New York-based FinTech company that offers student Income Share Agreements (ISAs) to finance post-secondary education and training.  According to the DFPI, it is the first agreement to subject an ISA provider to state licensing and regulation.  The agreement reflects the DFPI’s decision to treat these private financing products as student loans for the purpose of the California Student Loan Servicing Act (SLSA).  Below are significant highlights from the agreement:

  • The DFPI found that the SLSA defines “student loans” broadly to include “any loan” or “extension of credit” and does not exclude contingent debt.
  • Under the ISAs, students agree to repay a school a fixed percentage of their future gross income after graduation, but only if the student is employed and making more than an agreed-upon amount.
  • The settlement provides that the DFPI will issue the company a conditional license under the SLSA based on its finding that ISAs are “student loans” for the purposes of the SLSA.

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Continue Reading California Regulator Signals New Scrutiny of Student Lending Industry, Enters Into Consent Order with Servicer of Income Share Agreements

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.

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Continue Reading Maine Enacts “True Lender” Legislation, Amends Consumer Credit Code to Include Anti-Evasion Provisions

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.
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Continue Reading CFPB Takes Action Against FinTech Company for Originating Unauthorized Loans