The Federal Deposit Insurance Corporation (FDIC) issued a final rule on June 25 that reaffirms the enforceability of the interest rate terms of loans made by state-chartered banks and insured branches of foreign banks (collectively, state banks) following the sale, assignment, or transfer of the loan. The rule also provides that whether interest on a loan is permissible is determined at the time the loan is made, and is not affected by a change in state law, a change in the relevant commercial paper rate, or the sale, assignment, or other transfer of the loan. The final rule follows the FDIC’s proposed rule on this topic, and will take effect 30 days after publication in the Federal Register.

The Office of the Comptroller of the Currency (OCC) issued a similar final rule on May 25 that reaffirms the enforceability of the interest rate terms of national banks’ loans following their sale, assignment, or transfer. The OCC’s rule (on which we previously reported) takes effect 60 days after its June 2 publication in the Federal Register, or August 3.

The US Supreme Court on June 29 ruled in Seila Law v. Consumer Financial Protection Bureau that the Consumer Financial Protection Bureau’s (CFPB’s) structure unconstitutionally insulates the agency from presidential oversight and must be altered.

The Dodd-Frank Act sculpted the now-stricken structure, including protective provisions for the independent regulatory agency’s sole director that were known to be novel in that they allowed the president to oust the unitary director, who is appointed by the president with the advice and consent of the Senate for a five-year term, only “for cause” (more specifically for “inefficiency, neglect of duty or malfeasance”), while the vast majority of presidential appointees serve at the president’s pleasure alone and thus may be terminated for any reason or no reason at all. Prior to the CFPB’s creation, such “for cause” removal provisions typically were associated with independent regulatory agencies governed by multimember boards or commissions, rather than by a single director. Following the decision, the president may remove the agency’s director “at will.”

On June 18, 2020, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a procedural rule to launch a new pilot advisory opinion (AO) program to publicly address regulatory uncertainty in the Bureau’s existing regulations. The pilot AO program will allow entities seeking to comply with regulatory requirements to submit a request where uncertainty exists, and the Bureau will then select topics based on the program’s priorities and make the responses available to the public. The Bureau states that it is establishing the pilot AO program in response to feedback received from external stakeholders encouraging the Bureau to provide written guidance in cases of regulatory uncertainty. For the pilot AO program, requestors will be limited to covered persons or service providers that are subject to the Bureau’s supervisory or enforcement authority.

The Office of the Comptroller of the Currency (OCC) issued a final rule on May 29 clarifying that when a national bank or national savings association sells, assigns, or otherwise transfers a loan, interest permissible before the transfer (the maximum rate permitted in the bank’s home state) continues to be permissible after the transfer. This marks one of the first acts of Acting Comptroller of the Currency Brian P. Brooks, who assumed office that same day.

The Federal Trade Commission (FTC) announced a settled action on April 22 with Canadian company RevenueWire (the Company) and its CEO to resolve allegations that the Company assisted and facilitated two tech-support scams that the FTC had previously targeted. Under the alleged scheme, consumers were marketed tech support services to “fix” nonexistent computer problems, leading to hundreds of millions of dollars of consumer injury. The FTC’s complaint and consent judgment maintain that, in addition to serving as a lead generator for the alleged fraudsters, the Company processed consumer credit card charges on their behalf.

The Consumer Financial Protection Bureau (CFPB or Bureau) announced on March 6 three steps designed to advance its strategy on one of its key priorities: preventing consumer harm. The CFPB is (i) implementing an advisory opinion program to provide additional guidance to assist companies in better understanding their legal and regulatory obligations; (ii) amending and reissuing its responsible business conduct bulletin; and (iii) engaging with Congress to advance proposed legislation that would authorize the CFPB to establish a whistleblower program with respect to reporting violations of federal consumer financial law.

Taken together, the first and second of these steps further the Bureau’s stated goal of clarifying in a meaningful way the regulatory requirements applicable to covered businesses. At the same time, the proposed whistleblower program would bring the Bureau in line with other federal enforcement agencies, e.g., the US Securities and Exchange Commission, that have launched similar programs in part to enhance the detection of violations in an era of leaner agency staffing.

At a meeting with a group of state attorneys general in Washington, DC, earlier this week, Consumer Financial Protection Bureau (CFPB or Bureau) Director Kathy Kraninger expressed her strong desire to provide more consistent interpretation of statutes and rules enforced by the Bureau and to further work with state counterparts to make that consistency even broader.

A recent legal conference in Washington, DC, highlighted newly proposed and ongoing regulatory changes in California concerning consumer and commercial lending. In short, one of the conference’s messages was that lending enforcement is increasing and the California Department of Business Oversight (DBO) is becoming much more aggressive in its enforcement posture (including with respect to treating retail installment sales contracts and merchant cash-advance products as loans).

The DBO Commissioner, Manuel Alvarez, was installed last spring and is a former Consumer Financial Protection Bureau (CFPB) enforcement attorney. He has already made some noticeable changes in the DBO’s enforcement posture, and we expect to see more enforcement actions brought in the months and years to come under his leadership.

In an effort to promote compliance and certainty, the Consumer Financial Protection Bureau (CFPB or Bureau) on January 24 issued an often promised and much anticipated policy statement regarding how it intends to apply the “abusiveness” standard in supervision and enforcement matters. The Dodd-Frank Act (Act) is the first federal law to broadly prohibit “abusive” acts or practices in connection with the provision of consumer financial products or services. The Act deems an act or practice to be abusive when it “(1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or (2) takes unreasonable advantage of (A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service; (B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or (C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.”

California Governor Gavin Newsom submitted his $222 billion budget proposal for the 2020-2021 fiscal year on January 10. Among other priorities identified, the budget earmarks tens of millions of dollars for the creation and administration of the California Consumer Protection Law (CCPL). The governor’s budget proposal specifically notes the need for this expanded consumer protection law as arising from “[t]he federal government’s rollback of the CFPB [which] leaves Californians vulnerable to predatory businesses and leaves companies without the clarity they need to innovate.” Under the proposal, California’s Department of Business Oversight (DBO) would dramatically expand its consumer protection role to define the contours of, and to administer, the CCPL. The stated aim of this move is to enhance consumer protection in California and “foster the responsible development of new financial products.”

Should California’s lawmakers adopt this proposal, the DBO would be renamed the Department of Financial Protection and Innovation (DFPI). In an expansion of the DBO’s current role, which includes consumer protection in financial transactions and oversight of state-licensed financial institutions, the renamed agency would gain greater authority to “pursue unlicensed financial service providers not currently subject to regulatory oversight such as debt collectors, credit reporting agencies, and financial technology (fintech) companies, among others.”