July 10, 2023

Consumer Financial Services Practice Digest

4 min

Legal and Regulatory Developments

CFPB Eyes Consumer Payment Markets for Supervision and Examinations

The CFPB's latest regulatory agenda signals that it is considering rules to define larger participants in markets for consumer payments, to be published in July 2023. This action, if implemented, would represent a sea change for consumer payments providers, and would result in larger providers being subjected to agency supervision and examination. Any such future rules would likely focus on peer-to-peer payment providers, social media companies that facilitate payments, and digital wallets, among other consumer-facing providers, but seem less likely to target merchant payment processors and similar payments companies.

Small Business Lenders Data Reporting Obligations Under Section 1071

The Consumer Financial Protection Bureau ("CFPB" or "Bureau") recently published a Small Entity Compliance Guide (the "Guide") regarding Section 1071 of the Dodd-Frank Act, which amended ECOA to require that financial institutions compile certain data regarding small business lending and report it to the CFPB.

Increasing Regulatory Scrutiny for the Merchant of Record Model

The Federal Trade Commission (FTC) recently announced a settlement with a group of related companies and two of their officers that used a merchant of record (MoR) model to facilitate sales for merchants. According to the FTC, the MoR businesses violated the law by assisting and facilitating fraudulent telemarketing sales of tech support services and laundering credit card charges through the defendants’ own merchant processing accounts.

Colorado Passes Law to Curb Interest Rates on Consumer Loans

Colorado has passed a law that amends the Colorado Uniform Consumer Credit Code (UCCC) to extend state interest rate limits on certain consumer loans made by out-of-state state-chartered banks, which caps rates at a maximum of 36 percent, depending on the loan balance. The law, HB23-1229, attempts to exercise a provision in the federal Depository Institutions Deregulation and Monetary Control Act (DIDA), permitting states to opt out of the preemption of the states’ interest rate caps on loans made in the state. The provisions of the law related to DIDA opt-out take effect July 1, 2024, and will apply only to consumer credit transactions, as defined by the UCCC, made or renewed on or after July 1, 2024. Yet, questions remain about whether the measure will be enforceable.

FDIC Releases Revised Supervisory Guidance on Multiple Re-Presentment NSF Fees

On June 16, 2023, the Federal Deposit Insurance Corporation (FDIC) released an update to its Supervisory Guidance on Multiple Re-Presentment NSF Fees (FIL-40-2022) (the "Guidance"), to provide additional guidance for supervised institutions on the consumer compliance risks associated with assessing multiple non-sufficient funds (NSF) fees for the re-presentment of unpaid transactions. This alert discusses the potential risks the FDIC identified and outlines the risk mitigation practices that supervised institutions can implement to mitigate risks when processing multiple re-presentment NSF fees.

Navigating State Licensing for Financial Services: Five Essential Tips

For financial technology and nonbank financial services providers, obtaining state licenses can be a critical step toward establishing credibility, expanding business opportunities, and ensuring compliance with regulatory requirements. State licensing obligations can vary significantly, making the process complex and overwhelming. However, with the right approach and understanding, navigating state licensing can be manageable and rewarding. Below we discuss five essential tips to help companies navigate state licensing for financial services.

Banking Agency Guidance on Third Party Relationships

Financial technology companies (fintechs) and other third parties in bank partnerships are routinely subject to scrutiny by their banking partner customers. The Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (collectively, the “Banking Agencies”) have issued final guidance on managing risks associated with third-party relationships, which is effective as of June 6, 2023.

Telemarketing and Texting 2.0: A Regulatory Refresher and Federal and State Updates

With emerging state laws and increasing activity by regulators, organizations that use telephone calls or text messaging to contact customers and prospects must remain vigilant. The Federal Communications Commission and Federal Trade Commission are tightening requirements for lead generators, and state laws have offered class action plaintiffs new ways to file challenges (in addition to the steady stream of lawsuits filed under the Telephone Consumer Protection Act). At the same time, companies are finding relief, including Florida’s recent amendment to its telemarketing law. Although the laws and regulations governing telemarketing have changed significantly, many basic principles remain constant.

FCC Proposes Codifying New TCPA Consent Rules in Notice of Proposed Rulemaking

The Federal Communications Commission (FCC) has issued a Notice of Proposed Rulemaking intending to strengthen consumers’ ability to revoke consent to receive both robocalls and robotexts, in addition to strengthening callers’/texters’ obligations to honor such requests in a timely manner.

Florida Limits Its Telemarketing Law, but Other State Laws Continue to Gain Traction

Last month, Florida Gov. Ron DeSantis signed the much-anticipated amendment to the Florida Telemarketing Solicitation Act (FTSA) into law, significantly limiting the ability of private plaintiffs to file telemarketing lawsuits under the FTSA. While this will undoubtedly stem the tide of lawsuits under Florida’s law, class action plaintiffs’ attorneys have wasted no time in finding new states to file suit.