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Tennessee amends caller ID law
On April 22, Tennessee enacted HB 2504 (the “Act”), which amends the Tennessee Consumer Protection Act of 1977 to specify that it is illegal for: (i) “[a] person, in connection with a telecommunications service or an interconnected VoIP service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information to a subscriber with the intent to defraud or cause harm to another person or to wrongfully obtain anything of value”; and (ii) “[a] person, on behalf of a debt collector or inbound telemarketer service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information, including caller identification information that does not match the area code of the person or the debt collector or inbound telemarketer service the person is calling on behalf of, or that is not a toll-free phone number, to a subscriber with the intent to induce the subscriber to answer.”
The Act is effective on July 1.
Student loan servicer to pay DFPI $27, 500 for untimely response to information request
On April 24, the California DFPI entered into a consent order with a federal student loan servicer (respondent) that allegedly failed to provide the DFPI with timely access to requested borrower data. In late April of 2022, the U.S. Department of Education announced a one-time revision of income-driven repayments to address past inaccuracies. To take advantage of this adjustment, the Department of Education required borrowers to submit a loan consolidation application by April 30, 2024. The DFPI requested information from respondent on student loan borrowers for the purpose of completing outreach to impacted borrowers ahead of the loan consolidation application deadline. Respondent provided this information 17 days after the deadline set by the DFPI.
To resolve DFPI’s allegations, respondent agreed to pay a penalty in the amount of $27,500.
Nebraska enacts a comprehensive data privacy law
On April 17 Nebraska enacted LB 1074 (the “Act”), establishing a comprehensive consumer data privacy law. The Act applies to a person that is not a small business (as determined under the federal Small Business Act) who conducts business in Nebraska or produces a product or service used by Nebraska consumers and who processes or sells personal data. The Act includes exemptions for certain classes of data, including data subject to the Gramm-Leach-Bliley Act, as well as for certain entities including state agencies, financial institutions and their affiliates, nonprofits, higher education institutions, and covered entities or business associates governed by the privacy, security, and breach notification rules issued by the Department of Health and Human Services.
The Act grants consumers the right to (i) request information about whether their data is being processed; (ii) access their data; (iii) correct inaccuracies; (iv) delete their data; (v) obtain a portable copy of their data; and (vi) opt out of certain uses of their data, such as targeted advertising, sale, or “profiling in furtherance of a decision that produces a legal or similarly significant effect concerning the consumer.” Controllers, defined as persons that determine the purpose and means of processing personal data, must respond to authenticated consumer requests within 45 days and may extend the period once by another 45 days if necessary. If a request is denied, consumers must be informed of the reasons and instructed on how to appeal to the Attorney General. Controllers must offer a free response to two requests per year from each consumer but may charge a fee or refuse to act if requests are unfounded or excessive. Controllers also must establish an appeals process for consumers whose requests are denied, and inform the consumer of the outcome of their appeal within 60 days.
Rights afforded to consumers under the Act cannot be waived or limited by contract or agreement. Further, under the Act, controllers must provide consumers with a clear privacy notice including information similar to that required under the Gramm-Leach-Bliley Act.
The Act is effective on January 1, 2025 and enforceable by the Attorney General and does not provide a private right of action.
Tennessee prevents lenders from discriminating against specific factors
On April 22, the Governor of Tennessee signed into law HB 2100 (the “Act”) which amended the state consumer protection codes to prevent financial institutions and insurers (collectively, institutions) from discriminating in the provision or denial of services based on certain enumerated factors. Specifically, institutions will not be allowed to discriminate based on, among others: (i) a person’s political opinions, speech, or affiliations; (ii) a person’s religious beliefs, exercise, or affiliations; (iii) any factor that is not a quantitative, impartial and risk-based standard; or (iv) a “social credit score” that is based on certain identified factors, including the lawful ownership of a firearm, engagement in fossil fuel-related business, support of the state or federal government’s efforts to combat illegal immigration, or a person’s failure to meet environmental, social governance, corporate board composition, social justice, or diversity, equity, and inclusion standards so long as the person is in compliance with applicable state or federal law. The Act provides that engaging in the prohibited forms of discrimination constitutes an unfair trade practice. The Act will go into effect on July 1.
New York AG settles with bank over EIPA violations
On April 17, the New York attorney general (AG) announced a settlement with a bank (respondent) to resolve allegations that respondent improperly froze customer accounts and paid out consumer funds to debt collectors, and failed to properly oversee its service providers engaging in similar activity, in violation of the Exempt Income Protection Act (EIPA). The EIPA requires that banks, among other things, “not restrain consumers’ use of statutorily exempt funds, such as social security benefits, veterans benefits, and disability insurance… in consumers’ bank accounts up to an amount set every three years by New York’s Department of Financial Services.” New York law also bars debt collectors from acquiring funds that include certain government benefits.
According to the settlement, respondent typically employs the assistance of specific third-party servicer providers to market and deliver banking products like debit cards, prepaid cards, payroll cards, or gift cards to consumers while respondent holds the funds loaded onto those cards. Servicer providers administer the program and interact with consumers, including by clearing transactions through a network processor approved by respondent, and generally handling transaction disputes and preparing account statements, while respondent oversees and monitors the program and the service provider while retaining full control of the funds. The AG claimed that respondents failed to ensure its servicer providers complied with the EIPA, and that on numerous occasions, servicer providers allegedly froze accounts holding exempt funds or accounts with balances below legal thresholds, then paid debt collectors with the frozen funds under the instruction of respondent.
According to the AG, respondent’s servicer providers also engaged in deceptive acts and practices by allegedly falsely labeling legal processes as “court orders” instead of documents from debt collectors. Respondents also allegedly provided false information that account freezes could not be lifted even when account balances were below legal thresholds, and falsely claiming only debt collectors could release the freeze. Additionally, servicer providers allegedly directed consumers to debt collectors who often sought deals to release account freezes for a portion of the account balance, despite the freezes being void and subject to the protected wage threshold.
Under the terms of the settlement, respondent will refund $79,664 plus interest to approximately 88 New Yorkers whose funds were wrongfully turned over to debt collectors and amend its policies and procedures. Respondent must also pay a civil money penalty of $627,000, and comply with ongoing monitoring and compliance requirements.
Maine amends processes regarding sale of foreclosed properties for nonpayment of taxes
On April 16, the Governor of Maine signed into law HP 1452 (the “Act”), which will amend the selling processes for foreclosed properties, specifically when a property is being foreclosed upon following a failure to pay taxes. The Act will provide that any money returned to the former owner of a property pursuant to a foreclosure sale due to nonpayment of taxes will be exempt from attachment to claims for a period of 12 months. The Act will also amend the form notice provided for impending foreclosure due to nonpayment of taxes to read “[i]f the tax lien forecloses, the municipality will own your property and may sell it and return excess sale proceeds to you.” Under the sale of foreclosed properties, the Act also added a definition of “tax-acquired property,” defined to mean any real property taken by a municipality for nonpayment of property taxes. The Act added requirements outlining the sale process, amending some payment and notice requirements and adding that a seller must provide a written accounting record of the amount of excess sale proceeds at the former owner’s request. Of interest, Section 4-A of the Act noted that if a real estate broker or agent failed to sell the property within a year, or the municipality failed to contract with a real estate broker or agent after three attempts, then the municipal officers may sell the property in any authorized manner and return the proceeds to the former owner. There are additional provisions adding requirements for receipts and notices, as well as on transfer of proceeds. The Act will go into effect 90 days after the state legislature adjourned, which will be on July 16.
Tennessee updates its UCC to amend “money” definition and include CBDCs
On April 11, the Governor of Tennessee signed into law SB 2219 (the “Act”) that amended Section 47-1-201(b) of the Tennessee Code by redefining “money” and codifying “central bank digital currency.” The term “money” was updated to include a new provision that will state that money does not include a central bank digital currency. “Central bank digital currency” will instead be defined as a digital currency issued by a federal reserve, foreign government or foreign reserve system, and will include a digital currency, digital medium of exchange, or digital monetary unit of account processed by the entity. The Act will go into effect on July 1.
Kansas enacts its Commercial Financing Disclosure Act
On April 12, Kansas enacted the Commercial Financing Disclosure Act in SB 345 (the “Act”) which will require the disclosure of certain commercial financing product transaction information, provide civil penalties for violations, and authorize enforcement by the attorney general. The Act will apply to any commercial loan, accounts receivable purchase transaction, and commercial open-end credit plan (when the transaction would be less than or equal to $500,000).
According to the Act, providers must disclose the total amount of funds furnished, and total amount dispersed, if that number is less than the amount furnished. Additionally, providers must disclose the total amount borrowers will owe the provider in that agreement, including the total cost to the borrower, as well as the manner, frequency, and amount of each payment. For each commercial financing agreement, only a single disclosure is necessary. If there are alterations to the financing arrangement, a new disclosure will not be mandated. Furthermore, providers will not be required to issue a new disclosure with every purchase of accounts receivables under the agreement. Moreover, brokers of such transactions are prohibited from collecting an advance fee from a business, making any false representations, or omitting any material facts during the sale of the services.
The Act will exempt certain depository institutions, commercial financing transactions secured by real property or a lease, and providers that made five or fewer commercial financing transactions in Kansas in one year, among other things.
Violations of the Act will be subject to a civil penalty of $500 per individual violation and the total penalty for multiple aggregated violations cannot exceed $20,000. If a person continues to violate the Act after receiving a written warning from the attorney general, the penalty will increase to $1,000 per violation. The maximum penalty for multiple aggregated violations in this scenario will be $50,000. The Act will not grant individuals the right to sue based on compliance or non-compliance with its provisions; there is no private right of action. Violations of the Act will not affect the enforceability or validity of the underlying agreement. The authority to enforce the Act will not be given exclusively to the attorney general.
Iowa enacts prudential standard and corporate governance requirements for mortgage servicers
On April 10, Iowa enacted HF 2392 (the “Act”) which will establish prudential safety and soundness requirements on mortgage servicers. The Act will establish prudential standards and corporate governance requirements on covered institutions, which include mortgage servicers that service at least 2,000 residential mortgage loans. (The Act will not apply to servicers that exclusively manage or service reverse annuity mortgage loans, including those managed by certain covered institutions.)
According to the Act, covered institutions must maintain adequate capital and liquidity requirements in line with GAAP. Covered institutions may meet these requirements by adhering to FHFA standards for enterprise single-family sellers or servicers. These institutions must have written policies and procedures for maintaining capital and liquidity and must provide these to the administrator when requested.
Regarding operating liquidity, covered institutions will be required to hold sufficient liquid assets to maintain normal business operations. They must also develop and implement plans and procedures to maintain this operating liquidity, which must be documented and available for review. Covered institutions must also have a sound cash management plan and business operating plan appropriate for their complexity to ensure ongoing operations.
On corporate governance, covered institutions will be required to have a board of directors responsible for oversight or a similar oversight committee if not approved for servicing by certain enterprises. The board or committee must establish a corporate governance framework, ensure compliance with the framework and the subchapter, perform regulatory reporting, establish internal audit requirements, and maintain a risk management program. The institution must also undergo an annual external audit and conduct an annual risk management assessment. The Act will go into effect on July 1.
CFPB approves of Illinois’ new regulations on appraisal discrimination
On April 9, the CFPB released a comment letter supporting the Illinois Department of Financial and Professional Regulation’s decision to propose three rules prohibiting discrimination related to appraisals. The CFPB interpreted and issued rules under ECOA and would enforce its requirements. Illinois’ three proposed rules (38 IAC 345.280(c)(1)(A); 38 IAC 185.280(c)(1)(A); and 38 IAC 1055.240(c)(1)) would all update the Illinois code to prohibit discrimination under ECOA or the FHA, including a provision to deny loan applications where they should have been granted due to discrimination. “Discrimination against applications on a prohibited basis in violation, for example of the [ECOA] or [FHA], including… relying on giving force or effect to discriminatory appraisals to deny loan applications where the covered financial institution knew or should have known of the discrimination[.]” The CFPB commented in their letter that these provisions accurately described ECOA. The CFPB also noted that TILA’s Appraisal Independence Rule, which it has rulemaking authority under, does not conflict with a lender’s obligations to comply with civil rights laws including ECOA.