Alston & Bird Consumer Finance Blog

Consumer Finance

Vermont Enacted HB 648 that Imposes Licensing, Disclosure and Certain Restrictions on Sales-Based Financing and Factoring Transactions

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What Happened?

On June 16, 2026, Vermont enacted HB 648 that imposes licensing, disclosure and certain restrictions on sales-based financing and factoring transactions. The bill incorporates certain notable provisions from Texas HB 700, which was enacted on May 29, 2025, including an ACH debit ban and confession-of-judgment prohibition. The law takes effect on July 1, 2027.

Why Does It Matter?

Notably, the Vermont law applies to both sales‑based financing (e.g., merchant cash advances, revenue‑based financing) as well as factoring / receivables purchase transactions, and covers both providers (funders) and brokers. The law requires providers of sales-based financing and/or factoring to obtain a Vermont Lender license and persons who solicit prospective recipients of sales-based financing and/or factoring to obtain a Vermont loan solicitation license. The Vermont law requires providers to disclose the amount of financing, the APR, the total cost of capital, the repayment terms / method and other material pricing and structural terms. Similar to Texas HB 700, the law prohibits sales-based financing and factoring providers from automatically debiting a recipient’s deposit account unless the provider holds a validly perfected, first-priority security interest in the recipient’s account. The law includes salient restrictive provisions such as prohibitions on confessions of judgment and similar provisions in any factoring or sales-based financing contracts and requires that contracts must be governed exclusively by Vermont law. Further, the law mandates that all disputes be brought in Vermont courts, and that if arbitration is necessary, face-to-face proceedings cannot occur outside Vermont.

The Vermont law does not apply to banks and other depository institutions, sellers of goods or services that finance the sale of goods or services, and transactions of $1,000,000 or more that are not primarily for personal, family, or household use.

What to Do Now

Vermont joins eleven states that require providers of certain types of commercial financing to disclose key terms to small businesses and other covered entities before a transaction is consummated. The new Vermont law is notable because it requires providers and brokers to obtain licenses, not the more ministerial registrations mandated by the state statues adopted in Texas, Utah and Virginia, and it covers both sales-based financing and factoring transactions. The Vermont prohibitions against debiting a recipient’s deposit account and requirement to litigate in Vermont courts are especially burdensome if not impractical. It is a certainty that other states will enact similar types of laws regulating commercial financing arrangements.

The California Financial Protection Bureau? California Moves to Fill the CFPB Void

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What Happened?

On May 12, 2026, California Governor Gavin Newsom announced the appointment of former Consumer Financial Protection Bureau (“CFPB”) Director Rohit Chopra as Secretary of the newly created California Business and Consumer Services Agency (“BCSA”).

The BCSA is a cabinet-level reorganization that will officially launch on July 1, 2026, consolidating a wide range of licensing, regulatory, and enforcement functions across numerous consumer-facing sectors of the California economy. These include oversight bodies such as the Department of Financial Protection and Innovation (“DFPI”), Department of Consumer Affairs, and other key regulators impacting financial services, real estate, and technology markets.

Governor Newsom framed the move explicitly as a response to the federal government’s retrenchment in consumer financial protection under the Trump administration, positioning California to “strengthen the state’s efforts to protect consumers and honest businesses” as federal enforcement is scaled back.

Chopra, who previously led the CFPB and served as a Federal Trade Commission commissioner, is widely known for aggressive enforcement initiatives targeting “junk fees,” repeat offenders, and unfair or abusive practices in consumer finance.

Why Does It Matter?

The creation of the BCSA—and the selection of Chopra to lead it signals a deliberate effort by California to function as a state-level analogue to a weakened CFPB. As federal consumer protection oversight contracts, California is positioning itself to step into the resulting regulatory vacuum.

This mirrors broader state-level trends, where states are expanding their authority and enforcement posture to address unfair, deceptive, and abusive acts and practices (“UDAAP”) in the absence of robust federal oversight. For example, as we have noted in prior posts, New York has moved to modernize its UDAAP framework in anticipation of increased enforcement and oversight of the financial services industry. California now appears poised to follow a similar path, albeit through a different structural approach.

Unlike a single regulator the BCSA is structured as a coordinating “umbrella” agency that brings together dozens of previously fragmented entities. This consolidation is designed to align enforcement priorities, streamline supervision, and enable coordinated rulemaking across industries that increasingly intersect (e.g., fintech, payments, and digital platforms).

For financial services companies, the most significant implication is the integration of the DFPI into a broader enforcement framework. The DFPI already exercises expansive authority over mortgage banking and finance lending activities and, under the California Consumer Financial Protection Law (“CCFPL”), supervises a broad spectrum of nonbank financial products, including lending, payments, and emerging fintech offerings. The new structure allows California to pursue cross-sector enforcement strategies, particularly where financial products intersect with technology platforms, data practices, or broader consumer marketplaces.

Chopra’s appointment strongly suggests that California enforcement will reflect the priorities and philosophy that characterized his tenure at the CFPB. During that time, the Bureau emphasized:

  • Aggressive enforcement against “junk fees” and pricing practices;
  • Scrutiny of repeat offenders and systemic compliance failures;
  • Focus on unfairness and abusiveness theories, not just deception; and
  • Increased attention to digital platforms, data usage, and algorithmic decision-making.

Expect these same themes to shape California’s enforcement agenda, with a particular emphasis on identifying “pattern and practice” violations affecting broad segments of consumers, rather than isolated compliance issues.

What Do You Need to Do?

In light of California’s evolving regulatory posture, financial services companies should take proactive steps to reassess their compliance frameworks with an eye toward increased state-level scrutiny.

First, companies should assume that CFPB-style UDAAP standards will remain highly relevant and ensure that policies and controls are calibrated to address unfair and abusive practices, not just deception.

Second, institutions should evaluate their operations holistically, recognizing that California regulators may take a “full lifecycle” view of consumer interactions. This includes:

  • Product design and pricing;
  • Marketing and disclosures;
  • Servicing and communications; and
  • Complaint handling and remediation practices.

Third, companies should prepare for greater inter-agency coordination within California, which may lead to:

  • More complex and multi-dimensional investigations; and
  • Parallel scrutiny across licensing, conduct, and consumer protection regimes.

Finally, organizations should closely monitor developments from the BCSA and its component agencies, particularly the DFPI, as enforcement priorities and rulemaking agendas begin to take shape under Chopra’s leadership.

Maryland Update: Legislature Clarifies Licensing Treatment for Passive Trusts and Loan Assignees Through SB 784

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What Happened?

In April 2026, Maryland Governor Wes Moore signed Senate Bill 784 (Chapter 40 of the Laws of 2026), a measure addressing the application of licensing requirements under the Maryland Financial Institutions Article. SB 784 repeals Section 11‑102, a provision addressing whether entities that acquire or are assigned mortgages, mortgage loans, or installment loans are subject to Maryland consumer credit licensing requirements.

The General Assembly expressly characterized SB 784 as a “clarifying corrective measure” intended to repeal a provision of law that was “erroneously enacted” in 2025. The bill takes effect July 1, 2026.

SB 784 follows a period of uncertainty triggered by the Maryland Appellate Court’s 2024 decision in Estate of H. Gregory Brown v. Carrie M. Ward, et al., No. 1009 (App. Ct. Sept. Term 2023), and the Legislature’s subsequent emergency response through the Maryland Secondary Market Stability Act of 2025.

As we previously discussed, in Brown, the court concluded that a statutory trust holding a defaulted HELOC was required to be licensed before proceeding to foreclosure. Following that decision, the Maryland Office of Financial Regulation issued guidance suggesting that assignees of certain Maryland loans—including trusts—could be subject to licensing requirements.

The 2025 Legislative Response

In April 2025, Governor Moore signed the Maryland Secondary Market Stability Act of 2025 (HB 1516 and its companion SB 1026) with an immediate effective date. We covered that legislation and its regulatory impact in detail here.

As enacted, HB 1516 was intended to be the controlling law. It took a targeted approach by:

  • Defining and expressly exempting “passive trusts” from Maryland mortgage lender licensing requirements; and
  • Making conforming amendments to ensure that securitization and similar trust vehicles that acquire Maryland mortgage loans—but do not originate or service them—would not be required to obtain licenses.

Although similar language appeared in SB 1026 adding new Section 11‑102, market participants and regulators generally treated HB 1516 as reflecting the Legislature’s operative intent. SB 784 confirms that understanding.

What SB 784 Does—and Does Not Do

SB 784 repeals Section 11‑102 and states expressly that the provision was erroneously enacted. Importantly, SB 784 does not disturb the passive trust exemption adopted in 2025. The definition of “passive trust” and the express exemption for such trusts remain part of Maryland law.

In practical terms, SB 784 eliminates a stand‑alone statutory provision that could be read to create a broad exemption for all loan assignees, while preserving the narrower exemption the General Assembly intended to adopt in 2025.

Current State of Maryland Law

Following SB 784:

  • Passive trusts—as defined in the Maryland Mortgage Lender Law—remain exempt from Maryland mortgage lender licensing requirements.
  • Other entities that acquire or hold loans do not appear to require licensure solely by virtue of assignment, consistent with historical practice and legislative intent, provided they are not otherwise engaged in lending or servicing activity.
  • The analysis remains fact‑specific, and licensing exposure will continue to depend on an entity’s role in the credit lifecycle.

Although the Legislature has now clarified its intent, the area remains somewhat unsettled and could be subject to further judicial or regulatory scrutiny, particularly given the reasoning in Brown and the possibility of future challenges.

Why Does It Matter?

SB 784 provides welcome clarity for securitization sponsors, trustees, and other secondary‑market participants holding Maryland loan assets. By confirming that Section 11‑102 was a drafting error, the Legislature has reduced the risk that passive trust structures will again be drawn into licensing disputes based on technical anomalies.

At the same time, SB 784 underscores that Maryland has not adopted a blanket statutory exemption for all assignees. Licensing risk remains tied to actual conduct, not merely loan ownership.

What Do I Need to Do?

Companies that acquire or hold Maryland mortgage or consumer loan assets should:

  • Confirm whether their structures qualify as passive trusts under Maryland law;
  • Review servicing and operational arrangements to ensure borrower‑facing activity is conducted by appropriately licensed entities;
  • Monitor ongoing developments, including any additional guidance from the Office of Financial Regulation or future litigation interpreting Brown in light of the Legislature’s corrective actions; and
  • Reassess licensing strategies adopted during the 2024–2025 period of uncertainty.

Alston & Bird’s Consumer Financial Services Team continues to monitor these developments and can assist with licensing analysis, transaction structuring, and risk assessments related to secondary‑market and servicing activity in Maryland.

Oregon Opts-Out of Federal Preemption for Certain Consumer Loan Products

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What Happened?

On April 7, 2026, Oregon Governor Tina Kotek signed into law Oregon HB 4116 which prohibits out-of-state FDIC insured, state-chartered banks from making consumer finance loans of $50,000 or less to Oregon borrowers using the banks’ home-state interest rates if those rates exceed Oregon’s 36% interest rate cap. According to the Oregon Legislative website, the law takes effect on June 5, 2026.

Why It Matters

In recent years, certain states (i.e., Illinois, New Mexico, Washington State, Maine, among others ) have adopted anti-evasion restrictions for marketplace lending arrangements and with notable exceptions, do not recognize the bank’s rate exportation authority if the interest rates of the loans originated in these partnerships exceed certain proscribed state usury caps. The new Oregon law follows this trend by opting Oregon out of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), and expressly providing that state chartered banks must adhere to usury restrictions (36%) of “consumer finance loans”, namely secured and unsecured consumer loans in amounts of $50,000 or less. Congress enacted DIDMCA during a time of very high interest rates, and the statute aimed to improve competition between state and national banks by allowing interest rate “exportation” across state lines, though it permitted states to “opt out” of these preemption provisions.

The new law does not apply to national banks, however, who apparently are still able to preempt restrictions applicable to “consumer finance loans.” With an eye toward marketplace lending arrangements, the law applies to anyone originating, brokering and facilitating consumer loans to Oregon residents, whether by mail, telephone or the Internet.

What to Do Now

With the enactment of Oregon HR 4116, Oregon becomes the fourth jurisdiction to opt out of DIDMCA, following Puerto Rico, Iowa and Colorado. Notably, however, Colorado’s recent opt out of DIDMCA has been subject to a constitutional challenge in the Tenth Circuit Court of Appeals, which if ultimately successful, could jeopardize the enforceability of Oregon HR 4116. Further, there is pending federal legislation, the fate of which is uncertain, that would prohibit additional DIDMC opt-outs. Nevertheless, legislation has been introduced in other states that would either opt the state out of DIDMCA or would enact anti-evasion provisions that would disallow the exportation of interest rates exceeding the particular state limitations in a marketplace lending arrangement.

Executive Order Targets Smaller Bank Participation in Mortgage Markets

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What Happened?

On March 13, President Trump issued an Executive Order titled “Promoting Access to Mortgage Credit,” addressing factors that may have negatively impacted the ability of community banks and other smaller financial institutions to participate in mortgage lending and servicing.

In order to expand access to mortgage credit, the Executive Order directs the Consumer Financial Protection Bureau (“CFPB”) and other financial regulators (the Board of Governors of the Federal Reserve System, the National Credit Union Administration, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (collectively, the “Regulators”)) to take action to reduce regulatory burdens, modernize reporting requirements, and utilize digital mortgage processes, among other actions.

Why Does it Matter?

The Executive Order includes broad directives to the Regulators to update regulations and processes that impact the mortgage markets, including:

  • Changes to Origination Regulations: The Executive Order directs the CFPB to consider regulatory changes including tailoring Regulation Z requirements as applicable to smaller banks (including ATR and QM, TILA, RESPA, and TILA-RESPA Integrated Disclosure (TRID) rules), updating TRID timing rules, modifying or exempting small mortgage loans from caps on QM points and fees, and amending rescission rights.
  • HMDA Modernization: The Executive Order requires the CFPB to consider proposing amendments to Regulation C to increase the asset threshold for exemption from HMDA data collection and reporting requirements for smaller banks, exclude inquiries from the scope of HMDA, and reduce burdens related to disclosures.
  • Alignment of Capital and Liquidity Standards: The Executive Order directs the Regulators to consider: (a) updating capital regulations and collateral valuation and transfer systems between the Federal Reserve and Federal Home Loan Banks; (b) expanding access to longer‑dated FHLB advances tied to residential mortgage assets; (c) creating targeted FHLB liquidity programs for entry‑level housing, owner‑occupied purchase loans, and small residential builders; and (d) modernizing collateral boarding and valuation processes.
  • Construction and Housing Supply: The Executive Order directs the Regulators to consider revising supervisory guidance to: (a) exclude one-to four-family residential development and construction lending from commercial real estate concentration guidance; and (b) ensure that supervisory expectations support responsible construction lending by community banks.
  • Appraisal Modernization: The Executive Order directs the Regulators to consider certain changes to appraisal processes, including with respect to valuations performed in connection with FHA-insured and VA-guaranteed loans and with respect to the use of alternative valuations (AVMs, desktop and hybrid appraisals, and artificial intelligence valuation tools).
  • Digital Mortgage Modernization: The Executive Order requires the Regulators to consider certain changes to facilitate digital mortgages, namely eliminating unnecessary wet signature requirements, standardizing acceptance of electronic signatures, e-notes, and remote online notarization, and promoting digital mortgage standards.
  • Servicing and Supervisory Certainty: The Executive Order directs the Regulators to consider supervisory changes relating to mortgage loan servicing, including: (a) aligning supervisory expectations to support portfolio mortgage servicing as a core community banking function; (b) extending cure‑first standards to good‑faith servicing errors; (c) simplifying loss mitigation requirements; (d) issuing a proposed rule providing exemptions from complex mortgage services for smaller banks; and (e) ensuring that supervisory evaluations of performing, prudently underwritten portfolio loans do not focus on technical defects or rely on evolving supervisory interpretations.
  • Duplicative or Unnecessary Licensing Requirements: The Executive Order requires the Regulators to consider eliminating duplicative or unnecessary requirements regarding licensing or registration (i.e., MLO licensing) for mortgage loan officers of any smaller bank.

What Do You Need to Do?

While the Executive Order does not directly impose obligations on mortgage lenders and servicers, it has the potential to significantly impact the mortgage market by changing the rules of the game, particularly for community banks and smaller banks. Industry participants appear open to the possibility of reform – for example, Mortgage Bankers Association President and CEO Bob Broeksmit issued a statement applauding the focus on “addressing costly mortgage regulations that have increased costs and limited access to credit,” and supporting efforts to address other structural factors (including valuations and construction regulations) impacting access to housing.

We will continue to monitor the Regulators’ activities to implement the directives of the Executive Order, particularly as the 21st Century ROAD to Housing Act (which includes provisions on some of the same topics) advances in Congress; we encourage mortgage market participants to do the same.