Troutman Pepper Consumer Financial Services Weekly Newsletter

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To help you keep abreast of relevant activities, below is a breakdown of some of the biggest federal and state level events impacting the consumer financial services industry in the past week:

Federal activities

Federal activities:

  • On September 23, the Federal Reserve Board invited comments on updates to operational risk management requirements for certain systemically important financial market utilities (FMUs) overseen by the Fed. FMUs provide essential infrastructure for clearing and settling payments and other financial transactions upon which financial markets and the wider economy depend to function effectively. Proposed updates generally provide further clarification of existing requirements. For more information, click here.
  • On September 22, the Consumer Financial Protection Bureau (CFPB) announced its request for public comment on ways to stimulate new mortgage products that help households. The CFPB is seeking ideas on ways to improve mortgage refinances for homeowners who would benefit from refinancing, especially for borrowers with lower loan balances. The CFPB is also seeking public input on ways to support automatic short- and long-term loss mitigation assistance for homeowners experiencing financial disruption. The CFPB plans to use this information when considering measures to support household financial stability and fill gaps in the refinancing market. For more information, click here.
  • On September 22, the Commodity Futures Trading Commission (CFTC) issued an order, simultaneously filing and settling charges against Ooki DAO and its co-founders Tom Bean and Kyle Kistner. The order states that bZx protocol, the predecessor of Ooki DAO, violated the Commodities Exchange Act (CEA) by failing to register as a forward broker before allowing bZx protocol users to s engage in margin and leveraged trading. In particular, the ordinance expressly stipulated that “[v]Virtual currencies such as ETH, DAI and others” traded on the bZx protocol constitute “commodities” within the meaning of the CEA. Additionally, the order ruled that Ooki DAO is an unincorporated association and therefore the co-founders are personally liable for violations of the CEA committed by Ooki DAO. In July 2020, alleged members of Ooki DAO filed a class action lawsuit against the DAO in federal court in California, which we have discussed in depth here. For more information on the CFTC’s recent settlement with Ooki DAO, click here.
  • On September 22, the Department of Justice and the Internal Revenue Service announced that a federal judge had granted their request for an order, allowing the IRS to issue a John Doe subpoena requiring MY Safra Bank to produce information about US taxpayers who allegedly failed to report to the IRS and pay taxes on cryptocurrency transactions. For more information, click here.
  • On September 20, an identified party hacked DeFi liquidity provider Wintermute and got away with $160 million worth of cryptocurrency. For more information, click here.
  • On September 19, the CFPB released its annual Home Mortgage Activity and Trends Report for 2021, based on data from thousands of lending institutions nationwide in accordance with the Home Mortgage Disclosure Act. The report shows a shift from refinancing loans in 2020 to home purchase loans in 2021, with a greater share of home purchase loans going to white Asian, black and Hispanic borrowers compared share of home purchase loans for non-Hispanic white borrowers. The top 25 closed-end lenders by loan volume held nearly half of the residential mortgage market share – a trend that has been growing every year since 2018. For more information, click here.
  • On September 19, the Securities and Exchange (SEC) issued a cease and desist order against Sparkster Ltd. and Sparkster CEO Sajjad Daya for the unregistered offering and selling of crypto-asset securities from April 2018 to July 2018 and accused crypto influencer Ian Balina of failing to disclose the compensation he received after reselling Sparkster tokens. For more information, click here.
  • On Sept. 19, Reps. Peter Welch (D-VT) and Lance Gooden (R-TX) introduced the House Companion to the Credit Card Competition Act of 2022 (CCCA), which Senators Dick Durbin ( D-IL) and Roger Marshall (R-KS) introduced in late July 2022. The bill seeks to expand interchange price controls by creating a new credit card routing mandate. For more information, click here.
  • On Sept. 14, while addressing testimony presented by SEC Commissioner Gary Gensler, U.S. Senate Banking Committee member Pat Toomey (R-PA) made clear his frustration at the lack of guidance Useful public notices from the SEC regarding the distinction between cryptocurrencies that constitute securities and cryptocurrencies that do not. For more information, click here.

State activities:

  • On September 20, Colorado Governor Jared Polis (D) announced that Colorado residents can now pay state taxes with cryptocurrencies using PayPal. For more information, click here.
  • On September 15, California Governor Gavin Newsom signed into law Assembly Bill 1904, which amends California’s Consumer Legal Remedies Act to prohibit “covered persons” from not including certain information in a solicitation from a consumer for a financial product or service. . The amendment complements existing consumer protection laws, targeting illegal, unfair, deceptive or abusive acts or practices relating to consumer financial products or services, as well as unfair competition and deceptive acts relating to the sale or rental of goods or services to a consumer. For example, the amendment would require a “covered person” to disclose that a solicitation is “advertising” and does not require any payment or other action on the part of the consumer. For more information, click here.
  • On September 15, New York Governor Kathy Hochul signed legislation to expand the reach of the federal Public Service Loan Forgiveness Program (PSLF) statewide. PSLF encourages public service work by canceling a portion of borrowers’ federal student loan debt. Hochul noted that “this legislation recognizes the important contributions of our public servants, first responders, educators, and more, in helping to unlock federal loan forgiveness for countless members of New York’s workforce.” . An estimated 2.7 million people currently serve New York’s public or nonprofit sectors. For more information, click here.
  • On September 14, the New York Department of Financial Services released a notice of proposed rules regarding the state’s Commercial Financial Disclosure Law (CFDL). The CFDL requires certain commercial finance providers to provide prescribed information when making an offer of finance to a potential recipient. Among some of the issues addressed by the proposed regulations are annual percentage rate disclosure, a formula for determining whether an annual percentage rate disclosure is accurate, and formatting and content requirements for various disclosures. Although reception of the rules has varied, many commentators have acknowledged that the rules are necessary to implement the CFDL. The public has until October 31 to provide further comments on the proposed rule. For more information, click here.
  • On September 13, California Governor Gavin Newsom signed Assembly Bill 2311 into law, which, among other things, would prevent a seller from conditioning the extension of credit, the term of credit, or the terms of a conditional sale contract for the purchase of an automobile to the consumer purchase. a guaranteed asset protection (GAP) waiver. In addition, the bill would prevent a sale with a GAP waiver when the vehicle purchase’s loan-to-value ratio exceeds the waiver’s maximum loan-to-value ratio, unless the GAP waiver discloses this and the consumer be informed of the limitation. In addition, the bill would require the GAP waiver to include a statement advising the consumer of the right to a refund of any unearned portion of the prorated waiver. For more information, click here.
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