Alston & Bird Consumer Finance Blog

State Law

The Updated CCPA Regulations: Alston & Bird Detail the 30 Key Business Impacts

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On February 7, California Attorney General Xavier Becerra released updated regulations to the California Consumer Privacy Act (CCPA).  The updates contain a number of material modifications to the initial CCPA regulations that AG Becerra’s office released in October 2019.

Alston & Bird has compiled a privacy briefing summarizing the 30 key modifications to the Regulations that potentially impact businesses. These include modifications to rules regarding:

  • Notices companies must provide (there are new types!);
  • How companies must intake and process consumer requests to access or delete data;
  • “Do Not Sell My Info” requests;
  • How B2B service providers can use customer data; and
  • Data-mediated financial incentive programs.

To read the full Privacy Briefing on the Updated Regulations, click here.

For further information, contact Kathleen Benway, David Keating, Amy Mushahwar, or Daniel Felz.

New York Proposes Licensing Consumer Debt Collectors

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A&B ABstract:  On January 21, 2020, New York Governor Andrew Cuomo proposed a measure to license consumer debt collectors as part of his budget bill. If enacted, the measure would require any person acting as a “consumer debt collector” in New York to obtain a license from the New York Banking Superintendent.

Effective October 1, 2020, the measure would require any person acting as a consumer debt collector either directly or indirectly in the State of New York to obtain a license.

Who is a Consumer Debt Collector?

The proposed bill defines a “consumer debt collector” as “any person who engages in a business, a principal purpose of which is the collection of consumer debts or of debt buying, or who regularly collects or attempts to collect, directly or indirectly, consumer debts owed or due to another person.” The definition also includes any creditor that “in the process of collecting its own consumer debts, and uses [sic] any name other than its own, which would reasonably indicate that a third person is collecting or attempting to collect a consumer debt.” The measure would set a one-year license period, with an expiration date of September 1 each year.

Exemptions

Although the definition of “consumer debt collector” is broad, the proposed bill does carve out exemptions for a variety of entities. Notably, loan servicers are exempt from licensing if they are servicing loans or accounts that are not delinquent. Additionally, the measure exempts from licensure a national bank and any subsidiary or affiliate of a national bank if the entity is not primarily engaged in the business of purchasing and collecting upon delinquent debt, other than debt secured by real property. However, unlike many other states (such as Illinois and Washington), New York would not exempt attorneys from licensure.

License Requirements

The proposed bill would require that consumer debt collectors file and maintain a $25,000 surety bond in connection with the application for, and renewal and maintenance of, a consumer debt collector license. Further, expiration of a debt collector’s bond without a replacement being filed with the New York Department of Financial Services would cause automatic expiration of a license.

Practice Restrictions

The proposed bill also includes substantive restrictions on communications with consumer debtors. Significantly, the measure would prohibit a consumer debt collector from contacting a consumer debtor outside the hours of 8 a.m. to 8 p.m. local time for the consumer debtor. This prohibition deviates from a similar provision in the Fair Debt Collections Practices Act (“FDCPA”). The FDCPA prohibits debt collectors from contacting consumers outside of the hours of 8 a.m. to 9 p.m. local time for the consumer.

Takeaways

If enacted, the proposed bill would expand the scope of licensing for debt collectors in New York, which are currently licensed only by individual municipalities. Further, in its current form, the measure would require attorneys to be licensed to collect on delinquent debt. We will continue to monitor this measure, which has a high likelihood of passage given its inclusion in Governor Cuomo’s budget bill.

Puerto Rico Office of the Commissioner of Financial Institutions Announces Mandatory Mortgage Servicer Reporting in Response to Recent Earthquakes

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A&B ABstract:

In the wake of the recent earthquakes in Puerto Rico, the Puerto Rico Office of the Commissioner of Financial Institutions (“OCFI”) released Circular Letter No. CFI-2020-01 (the “Circular Letter”). The Circular Letter imposes weekly and monthly reporting requirements on all Puerto Rico licensed mortgage lenders, mortgage servicers, Home Equity Conversion Mortgage servicers, reverse mortgage servicers, and all financial institutions acting as mortgage servicers (collectively “Mortgage Servicers”) for specific zip codes and “persons affected by the earthquake” in Puerto Rico. Significantly, the Circular Letter does not include a deadline for Mortgage Servicers to submit the first monthly report, but it provides that the first weekly report is due by 4:30 P.M. on February 5, 2020, for the week ending January 31, 2020.

Purpose of the Circular Letter

The Circular Letter requires that all Mortgage Servicers report to OCFI on their on-going activities to assist all persons affected by the earthquakes that took place in southern Puerto Rico commencing on December 28, 2019, and which continue as of the date of the Circular Letter, January 31, 2020. Specifically, the OCFI is interested in the efforts undertaken by Mortgage Servicers to help the affected persons to file insurance claims to recover their property losses caused by the earthquakes.

Covered Persons for Reporting

For purposes of the reporting requirement, “persons affected by the earthquake” include “persons who suffered a physical damage to their residence or buildings (whether or not covered by hazard or homeowner’s insurance and/or other type of property insurance), persons who have suffered economic injury or loss attributable to the earthquakes (including, but not limited to, loss of income from employment or business), and persons who have been harmed or suffered injuries from the earthquakes or circumstances or events directly related to the earthquakes, which persons’ principal residence or place of employment or business is located in [the following 17 zip codes in Puerto Rico]”:

  • Adjuntas, 00601
  • Maricao, 00606
  • Arecibo, 00612
  • Peñuelas, 00624
  • Sabana Grande, 00637
  • Ciales, 00638
  • Utuado, 00641
  • Guánica, 00653
  • Guayanilla, 00656
  • Hatillo, 00659
  • Jayuya, 00664
  • Lajas, 00667
  • Lares, 00669
  • Yauco, 00698
  • Ponce, 00730
  • Ponce, 00731
  • Juana Díaz, 00795

Reporting Requirements

Monthly Reporting Requirement: For all persons affected by the earthquake, Mortgage Servicers must provide a monthly report, for each of the 17 zip-codes listed above, on the OCFI’s “Report of Moratorium Granted Due to Earthquake PR” Form. This form does not appear to be publicly-available on the OCFI’s website. The Circular Letter did not specify when Mortgage Servicers must submit the monthly reports or any associated timing requirement. A conservative reading of the Circular Letter would suggest that the end of the first monthly reporting period would be February 29, 2020, one month after the OCFI released the Circular Letter.

Weekly Reporting Requirement: For all consumer mortgages on properties located in the 17 listed zip-codes, or for persons affected by the earthquake, Mortgage Servicers must provide weekly individual reports by zip-code using the OCFI’s “Mortgage Delinquency Report” Form for the entirety of their portfolio. This form also does not appear to be publicly-available on the OCFI’s website. The Circular Letter states that the first weekly report is due to the OCFI by 4:30 p.m. on Wednesday, February 5, 2020, and all subsequent weekly reports must be submitted the Wednesday after the proceeding week, by 4:30 p.m. Each weekly report must cover all activity Monday-Friday from the previous week.

The Circular Letter specifies that Mortgage Servicers are required to transmit the weekly and monthly reports to the OCFI in electronic form using the corresponding excel forms in the appendix of the Circular Letter. However, the Circular Letter does not provide an email or portal where licensed Mortgage Servicers are supposed to submit their reports.

Takeaways:

Licensed Mortgage Servicers in Puerto Rico are now required to submit a monthly report for mortgage servicing activity taken to help borrowers affected by the recent earthquakes and are required to submit weekly reports for all consumer mortgages located in the 17 zip-codes and for all persons affected by the earthquake. The first weekly report, which shall cover activities undertaken in the week commencing on January 27, 2020, is due tomorrow, February 5, 2019, in electronic format to the OCFI by 4:30 P.M. EST. Going forward, weekly reports are due every Wednesday at 4:30P.M. EST, which must include any relevant activity from the previous week.

Mortgage Servicers that fail to provide their reports to the OCFI in a timely manner may be subject to penalties: the OCFI may impose fines of up to $10,000 for each violation of any rules and regulations under title 7 chapter 143 of the Laws of Puerto Rico, and the OCFI may also impose fines of up to $5,000 for each day that a Mortgage Servicer fails to comply with any orders issued by the Commissioner.

NYDFS Issues Final Mortgage Loan Servicer Business Conduct Rules (Part 419)

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The New York Department of Financial Services (“NYDFS”) has issued final mortgage servicer business conduct rules found in Part 419 of the Superintendent’s Regulations.  Our January 24 client advisory provides a full analysis of the changes, which include:

  • New provisions governing affiliated business arrangements;
  • Expanded restrictions on servicing fees (including property valuation fees);
  • A broader servicer duty of fair dealing;
  • Expanded protections available to delinquent borrowers and borrowers seeking loss mitigation assistance; and
  • Detailed third party vendor management requirements.

Although the rules took effect on December 18, the NYDFS added Section 419.14 to provide a 90-day transition period for servicers who were compliant with the previous version of the rules as of the effective date.

California Governor Moves to Strengthen State Consumer Protection Enforcement in 2020

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A&B ABstract:

On January 10, 2020, California Governor Gavin Newsom released his budget summary for 2020 to 2021. Fearing that the Trump administration will further roll back consumer financial protections, Gov. Newsom proposed the California Consumer Financial Protection Law, which would provide the state’s primary financial services regulator with additional authority to enforce consumer protection laws.

Discussion

In his budget summary for 2020 to 2021 (“Budget”), Gov. Newsom expressed concern that “[t]he federal government’s rollback of the [Consumer Financial Protection Bureau (“CFPB”)] leaves Californians vulnerable to predatory businesses and leaves companies without the clarity they need to innovate.” Seeking to protect Californians from the effects of such rollbacks, Gov. Newsom proposed that state funds be allocated to enact and administer the California Consumer Financial Protection Law (“CCFPL”).

A draft of the CCFPL is not yet available.  However, as described in the Budget, the CCFPL would expand the authority and capacity of the state’s primary financial services regulator, the Department of Business Oversight (“DBO”), “to protect [California] consumers and foster the responsible development of new financial products.”

Change in Regulatory Structure

The DBO, which would be re-named the Department of Financial Protection and Innovation (“DFPI”), would be responsible for:

  • Offering services to empower and educate consumers, especially older Americans, students, military service members, and recent immigrants;
  • Licensing and examining new industries that are currently under-regulated [including, but not limited to, debt collectors, credit reporting agencies, and financial technology companies];
  • Analyzing patterns and developments in the market to inform evidence-based policies and enforcement;
  • Protecting consumers through enforcement against unfair, deceptive, and abusive practices;
  • Establishing a new Financial Technology Innovation Office that will proactively cultivate the responsible development of new consumer financial products;
  • Offering legal support for the administration of the new law; and
  • Expanding existing administrative and information technology staff to support the DFPI’s increased regulatory responsibilities.

The statements on the DFPI indicate that it will be another “mini-CFPB” (i.e. a state version of the CFPB) that will protect California consumers in a way that Gov. Newsom believes the CFPB cannot. Former CFPB Director Richard Cordray is reportedly working with California to develop the DFPI.

DFPI Funding and Staffing

The Budget includes a $10.2 million Financial Protection Fund and the creation of 44 new positions at the DFPI between 2020 and 2021. This will grow to $19.3 million and 90 new positions at the DFPI between 2022 and 2023, to establish and administer the CCFPL. According to the Budget, initial costs for the DFPI and the CCFPL “will be covered by available settlement proceeds in the State Corporations and Financial Institutions Funds, with future costs covered by fees on any newly-covered industries and increased fees on existing licensees.”

Takeaway

Gov. Newsom’s comments in the Budget suggest that California will be more active in investigating regulated financial services entities and enforcing California’s existing consumer protection laws. Additional regulations may be passed as part of this initiative. Action by California is consistent with a growing trend among the states to be more active in their oversight of regulated industries in response to a less active CFPB. Industry participants should be mindful of this trend, assessing their compliance programs to manage oversight from multiple entities under multiple regulatory schemes.