To keep you informed of recent activities, below are several of the most significant federal and state events that have influenced the Consumer Financial Services industry over the past week:
- On September 6, the Fifth Circuit Court of Appeals announced that it will hear oral arguments in the ongoing litigation challenging the Federal Trade Commission’s Combating Auto Retail Scams (CARS) Rule on October 9. The National Automobile Dealers Association and the Texas Automobile Dealers Association have raised significant procedural and data-based objections to the rule, which purportedly aims to curb deceptive sales practices and eliminate “junk fees” in the car-buying process. For more information about the CARS Rule and the legal challenges it faces, click here, here, and here.
- On September 5, the Consumer Financial Protection Bureau (CFPB) issued its annual report on debt collection, highlighting reported aggressive practices in the collection of medical and rental debt. The report reveals that some debt collectors pursue consumers for medical bills already satisfied by nonprofit hospitals’ financial assistance programs. The CFPB has also received complaints about nonprofit hospitals and other health care providers offering medical financing products without considering whether the patients may be eligible for financial assistance. As for rental debt collection, the CFPB has received complaints that landlords and management companies may have used “revenue management software” to collect improper amounts that ultimately end up in debt collection and some rental debt collectors charge excessive fees. For more information, click here.
- On September 4, the Board of Governors of the Federal Reserve System announced it had entered into a consent agreement with United Texas Bank to rectify issues identified during an examination, particularly concerning foreign correspondent banking and virtual currency customers. The agreement mandates the bank to submit comprehensive plans to strengthen board oversight, revise its Bank Secrecy Act (BSA)/anti-money laundering (AML) program, enhance customer due diligence, improve suspicious activity monitoring and reporting, and bolster Office of Foreign Assets Control (OFAC) compliance. For more information, click here.
- On September 4, the Commodity Futures Trading Commission (CFTC) issued an order against Uniswap Labs for allegedly illegally offering leveraged or margined retail commodity transactions in digital assets via a decentralized digital asset trading protocol. According to the CFTC, these leveraged tokens are leveraged or margined commodity transactions that did not result in actual delivery within 28 days and therefore can be offered to non-Eligible Contract Participants only on a board of trade that has been designated or registered by the CFTC as a contract market, which Uniswap Labs was not.As a result, Uniswap Labs was fined $175,000 and ordered to cease and desist from violating the Commodity Exchange Act. The order acknowledges Uniswap Labs’ substantial cooperation, resulting in a reduced civil monetary penalty. For more information, click here.
- On September 3, the Federal Bureau of Investigation released a public service announcement warning that North Korea is aggressively targeting the cryptocurrency industry with sophisticated social engineering attacks. These campaigns aim to deploy malware and steal company cryptocurrency by compromising employees of decentralized finance and similar businesses. The FBI highlighted the complexity and persistence of these attacks, which can even deceive those well-versed in cybersecurity. The announcement includes detailed tactics used by North Korean actors, potential indicators of such activity, and recommended mitigation measures for at-risk companies. For more information, click here.
- On September 3, the League of Southeastern Credit Unions (LSCU) and the Virginia Credit Union League (VCUL) announced plans to merge, marking the first state league consolidation since 2022. According to the leagues’ combined website, this strategic partnership will provide a larger, more diverse membership base and will have a stronger voice in industry discussions and advocacy efforts. The merger, which requires approval from credit union members of both leagues, will combine VCUL’s $9.6 million in net assets with LSCU’s $41.1 million. For more information, click here.
- On August 29, the Federal Financial Institutions Examination Council issued updated examiner guidance on financial institutions’ information technology development, acquisition, and maintenance. The new “Development, Acquisition, and Maintenance” booklet provides examiners with expectations regarding planning, governance, risk management, and change management practices. It emphasizes the interconnectedness of an entity’s assets and processes, including those of third-party service providers, and aims to ensure compliance with applicable laws and regulations. This booklet replaces the previous version issued in April 2004, reflecting the evolving technological environment and the need for enhanced security and resilience. For more information, click here.
- On August 28, the U.S. Securities Exchange Commission (SEC) issued a Wells notice to OpenSea, alleging that the nonfungible tokens, or NFTs, sold on its platform are securities. The SEC typically issues Wells notices as one of its final steps before issuing formal charges. OpenSea CEO Devin Finzer expressed shock at the SEC’s move, emphasized that OpenSea operates legally, and pledged $5 million to support NFT creators facing similar legal challenges. This action is part of the SEC’s broader crackdown on the crypto sector, which has included legal actions against several other crypto firms and platforms. For more information, click here.
- On September 4, California Attorney General (AG) Rob Bonta announced a settlement with Robinhood Crypto, LLC for failing to allow customers to withdraw their cryptocurrency and for not fully disclosing aspects of its trading and order handling arrangements from 2018 to 2022. The settlement includes a $3.9 million penalty and mandates that Robinhood permit cryptocurrency withdrawals, ensure accurate customer representations, and disclose to the AG’s office any incidents causing delayed settlements longer than one week. For more information, click here.
- On August 28, the Wisconsin Department of Financial Institutions announced that it will begin accepting applications for a new money transmitter license through the Nationwide Multistate Licensing System starting October 1. This new license replaces the current seller of checks license and is part of the Money Transmission Modernization Act, which takes effect on January 1, 2025. Existing licensees will not need to reapply but must comply with the new requirements by the effective date. For more information, click here.