Troutman Pepper Consumer Financial Services Weekly Bulletin – November 2022 | Troutman pepper

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

State activities

Federal activities:

  • On November 11, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra delivered a speech before the FDIC’s Systemic Resolution Advisory Committee. Director Chopra discussed potential resolutions on the hypothetical failure of three categories of systemically important financial institutions: (1) domestic systemically important financial institutions; (2) systemically important non-bank financial institutions; and (3) systemically important global banks. For more information, click here.
  • On November 11, prominent cryptocurrency exchange FTX abruptly filed for Chapter 11 bankruptcy and founder Sam Bankman-Fried stepped down as CEO. John Ray III, a well-known bankruptcy attorney who administered the Chapter 11 restructuring of energy giant Enron in 2001, will replace Bankman-Fried as CEO of FTX. Ahead of FTX’s bankruptcy filing, Changpeng Zhao, CEO of Binance, the world’s largest cryptocurrency exchange by volume, signed a non-binding letter of intent to acquire FTX, but quickly pulled out of the deal. agreement after conducting company due diligence and discovering that FTX’s liquidity issues were “beyond [Binance’s] ability to control or ability to help. For more information, click here.
  • On November 10, US Senator John Boozman (R-AR) released a statement on the recent collapse of cryptocurrency exchange FTX. Senator Boozman noted that he and U.S. Senate Agriculture Committee Chair Debbie Stabenow (D-MI) remain committed to advancing the Digital Consumer Protection Act of 2022 to increase protection consumers and trust in digital asset markets. For more information, click here.
  • On November 10, the CFPB published its analysis of the crypto-related consumer complaints it received from October 2018 to September 2022. The CFPB reported that it had received “over 8,300 crypto-related complaints assets”, and a large percentage of these complaints related to “fraud or scam”. Along with fraud, the CFPB noted that consumers also reported numerous dispute resolution issues, including but not limited to being unable to access assets while a crypto platform -currency goes bankrupt. For more information, click here.
  • On November 10, the CFPB issued a circular on its recent revelation that consumer reporting agencies and suppliers may be evading their obligation under the Fair Credit Reporting Act to reasonably investigate consumer disputes. . According to the CFPB, a consumer reporting agency or provider that requires a consumer to submit documentation other than what the Fair Credit Reporting Act describes as a prerequisite to investigating the consumer dispute may do so. object of an application. Notably, the CFPB clarified that the Fair Credit Reporting Act requires consumer reporting agencies and vendors to reasonably investigate all disputes that are neither frivolous nor irrelevant, even if the consumer submits a dispute that does not correspond. in the entity’s preferred litigation format. For more information, click here.
  • On November 10, the Federal Trade Commission (FTC) issued a policy statement, affirming its intent to renew and broadly apply its authority under Section 5 of the FTC Act to challenge “the full range of behavior anti-competitive in the market”. For more information, click here.
  • On Nov. 8, the U.S. Treasury Department’s Office of Foreign Assets Control delisted and renamed cryptocurrency mixer Tornado Cash for allegedly helping the Democratic People’s Republic of Korea launder more than $100 million. dollars worth of cryptocurrency to support its weapons of mass destruction and ballistic missile programs. . For more information, click here.
  • On November 7, a federal judge in the U.S. District Court for the District of New Hampshire granted the Securities and Exchange Commission’s (SEC) motion for summary judgment against LBRY, a blockchain-based file-sharing platform. In its motion for summary judgment, the SEC argued that LBRY’s public offering of its native LBC token constituted an unregistered sale of securities. By using the Howey test, the court determined that the parties disputed only whether LBRY’s offer of LBC had led investors to have a “reasonable expectation of profit” from LBRY’s management efforts. Here, the court found that the evidence indicated that LBRY had promoted LBC as an investment that would increase in value over time through the development of the LBRY network by the company, and therefore, LBC is a security under Howey. For more information, click here.
  • On Nov. 4, the SEC filed a lawsuit against Douver founder Torres Braga and various U.S. promoters of Trade Coin Club, a company that claimed to leverage a “crypto asset trading bot” to provide investors with minimum daily returns of 0.35%. The SEC alleged that the Trade Coin Club had never used a crypto-asset trading bot of any kind, and investors were paid entirely from deposits made by other investors. The SEC further alleged that Braga personally received “at least 8,396 bitcoins” (worth approximately $55 million) of the total amount of investors’ deposits. For more information, click here.

State activities:

  • On November 10, the California Department of Financial Protection and Innovation (DFPI) announced that it had launched an investigation into the FTX crypto-asset platform. The investigation comes after the platform apparently failed earlier in the week. The DFPI press release did not reveal details of the exact scope and objective of the investigation. For more information, click here.
  • On November 8, Arizona voters approved a measure limiting the collection of medical debts. Proposition 209, or the Predatory Debt Collection Act, lowers the interest rate cap on medical debt and also increases the value of assets that are safe from certain creditors. The measure will not apply retroactively, so medical debts incurred before its adoption are not subject to the cap. Critics of Proposition 209 argue that its provisions are too broad and will likely have a chilling effect on the willingness of creditors to provide loans to Arizona consumers in the future. Proposition 209 is expected to become law in January 2023. For more information, click here.
  • On November 8, the New York Department of Financial Services, through a special private student loan refinancing task force established by state law, issued a Request for Information (RFI) concerning the refinancing of student loans. The task force will study and analyze how to induce and encourage private lenders serving students at state colleges and universities to create student loan refinancing programs. The Task Force RFI consists of 20 questions, which include, among other things, an RFI on (1) the options available to private and federal student loan borrowers to refinance their loans and details on the terms; (2) the volume of private and federal student loans refinanced and details on the terms of the original and refinanced loans; (3) the demographic profile of student borrowers; (4) factors affecting a student’s decision to refinance; and (5) predatory lending practices generally directed against private student borrowers in and out of state. For more information, click here.
  • On November 7, Massachusetts Attorney General Maura Healey announced a settlement with payment processor Global Holdings LLC (Global). Global is accused of providing substantial assistance to debt settlement provider DMB Financial LLC (DMB), which allegedly violated the Telemarketing Sales Rule and Massachusetts Consumer Shield Law by “seeking or receiving charges for debt settlement services”. As a condition of settlement, Global must implement meaningful changes to its business practices to ensure that similar behavior does not occur in the future. Global must also certify compliance with the amendments set forth in the Settlement Agreement within six months of the Effective Date. For more information, click here.
  • On November 3, Pennsylvania Governor Tom Wolf signed into law Bill 2667, changing the definition of “remote location” as defined by the Pennsylvania Mortgage Licensing Act (PMLA). Under the PMLA, a mortgage originator, disqualified person, or other employee of the licensee may conduct licensed business on behalf of the licensee from a remote location, if certain criteria are met. The amendment, which took effect immediately, adds a ban on “in-person” consumer interaction occurring at the personal residence of the mortgage originator (or other person acting on behalf of the licensee , as provided for in the PMLA), and it has a provision that previously required physical records of the licensee’s mortgage business to be kept at the remote location. For more information, click here.
  • On November 3, the California DFPI released an opinion letter regarding the state’s Money Transmission Act (MTA). The notice was issued in response to a request from a company intending to offer the buying, selling and trading of various cryptocurrencies using a platform provided by its affiliate and in connection with a other affiliate. Ultimately, the company behind the request sought advice on whether its issuance of tokenized versions of the US dollar or securities, or its use to exchange cryptocurrencies, referred to as “money transmission “, required the company to obtain a license under the MTA. The DFPI noted in its notice that it does not require the business to obtain a license since it has not determined whether such activity constitutes money transmission. The notice warns that the DFPI’s findings are subject to change, and the notice does not specify whether the company’s activities require licensing under other laws. For more information, click here.

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