Firm News

Consumer-like protections continue to invade business finance. The latest example is a new rule expanding the California Department of Financial Protection and Innovation’s authority to regulate unfair, deceptive and abusive acts and practices (“UDAAP”) in “commercial financing transactions”, defined to mean consummated commercial financing transactions for which California disclosures are required. Read More

In the absence of federal action, states keep marching forward with their own comprehensive consumer data privacy laws with mixed results. Oregon joins California, Colorado, Connecticut,
Indiana, Iowa, Montana, Tennessee, Texas, Utah and Virginia in enacting a non-uniform privacy law. See S.B. 619 (signed by governor July 18, 2023, effective July 1, 2024).Read More

The Federal Deposit Insurance Corporation (FDIC) has issued a cease and desist letter to Unbanked, Inc. concerning potential violations of Section 18(a)(4) of the Federal Deposit Insurance Ac (12 U.S.C. § 1828(a)(4)) for deceptive statements suggesting that various crypto-related products may be covered by FDIC deposit insurance. Unbanked, a nonbank, maintains relationships with insured banks.Read More

The U.S. District Court for the Southern District of Texas has ruled on a motion for preliminary injunction, granting an injunction to members of two trade groups and a private bank that filed suit challenging the Consumer Financial Protection Bureau’s (CFPB) final rule implementing the “Small Business Lending Rule Under the Equal
Opportunity Act (Regulation B)” pursuant to Section 1071 of the Consumer Financial Protection Act (“Rule”). See Texas Bankers Association vs. CFPB, No. 7:23-cv-00144 (S.D. Tex., order filed July 31, 2023); see our Alerts of Mar. 28 and Apr. 28, 2023. The plaintiffs had sought a nationwide preliminary injunction to prevent the CFPB from enforcing the Rule. The Rule requires banks and nonbanks to collect and report information about small business credit applications. Read More

A federal judge has delivered a split-decision on the Ripple Labs XRP token, providing some mixed clarity on the question of whether digital tokens are or can be securities. SEC v. Ripple Labs, Inc., No. 1:20-cv-10832-AT-SN (S.D. N.Y., filed July 13, 2023). Judge Torres concluded that an XRP token is a security when sold by Ripple directly to sophisticated institutional investors capable of understanding that such tokens are “speculative value propositions,” meeting the test for an “investment contract,” but not a security when sold to “programmatic investors” (the broader public) on secondary markets (digital asset exchanges). Judge Torres noted that many statements cited by the Securities Exchange Commission (“SEC”) may not have been shared with the general public who might not know whether they were buying from Ripple or third parties in an even (bid/ask) exchange. (Additional XRP were distributed in various contexts for goods or services or as funding for initiatives.) Read More

On June 26, 2023, Florida Governor Ron DeSantis vetoed HB 1267, which would have amended the Consumer Finance Act to allow licensed lenders to charge a greater rate of interest on consumer loans, among other changes. See our ALERT of May 26, 2023. In his veto transmittal letter, Governor DeSantis stated that while the bill included provisions modernizing the licensing process and increasing transparency requirements, the increase in the interest rate for loans of $25,000 or less caused him concern, as he believes the increase in rates “may result in additional consumer indebtedness and could exacerbate the pinch already being felt due to federal government-induced inflation.” In vetoing the bill, the Governor leaves the old tiered rate caps in place. Read More

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued guidance on managing risks associated with third-party relationships on June 6, 2023. The new guidance replaces prior guidance by the banking agencies on thirdparty relationships identified in the release. The agencies describe the guidance as a broad, principles-based approach in response to comments on the prior draft guidance released in July of 2021 requesting that the guidance address specific topics or types of relationships. Read More

Indiana, Montana and Tennessee joined six other states in enacting consumer data privacy laws. The other states with consumer data privacy laws are California (effective Jan. 1, 2020), Virginia (effective Jan. 1, 2023), Colorado (effective July 1, 2023), Connecticut (effective July 1, 2023), Utah (effective Dec. 31, 2023) and Iowa (effective Jan. 1, 2025). With the exception of the California consumer data privacy law, all the recently enacted privacy data laws are very similar. Importantly, all the state consumer date privacy laws except California include an exemption for financial institutions and data subject to the privacy provisions of the Gramm-Leach-Bliley Act. The laws give a consumer certain rights over the data collected about the consumer by businesses, including the right to know the consumer data being collected and restrict its use. Additionally, the laws require specific provisions in contracts between businesses that collect consumer data and their service providers. The Montana law will take effect October 1, 2024. The Tennessee law will take effect July 1, 2025. The Indiana law will take effect January 1, 2026. Read More

Compliance with the New York Commercial Finance Disclosure Law (“CFDL”) is required by August 1, 2023. The CFDL applies to multiple types of commercial financing products and requires providers to deliver disclosures when “extending a specific offer” for commercial financing in amounts of $2.5 million or less to a “recipient,” defined as a person who applies for commercial financing and is made a specific offer of commercial financing by a provider. See our ALERTS dated Feb. 10, 2023, Sept. 29, 2022 and Sept. 27, 2021. Read More

On May 1, 2023, both chambers of the Florida legislature passed HB 1267, amending the Consumer Finance Act, Florida’s licensed lender statute. Most notably, the proposed amendments would modify the interest rate provision for loans up to $25,000 from the current tiered rate caps to a flat maximum rate of 36% per annum for all loans up to $25,000. The interest rate cap for loans greater than $25,000 was not affected. The bill also proposes to increase the statutorily mandated grace period on delinquency charges to 12 days (up from the current 10 day grace period). Read More