California Governor to Consider Capping Rate on Finance Lender Loans
The California State Assembly passed Assembly Bill 539, the Fair Access to Credit Act (FACA), with a vote of 61 to 8. FACA prevents licensed finance lenders from charging more than 36% (plus the federal funds rate) on consumer loans between $2,500 and $10,000. Reports from California’s Department of Business Oversight (DBO), as previously discussed here, found that many loans carried triple-digit annualized interest rates and were often issued to repeat, low-income customers.
Among other things, FACA requires lenders to report the borrower’s credit information to a national consumer reporting agency and offer a DBO-approved credit education program while largely prohibiting prepayment penalties. Notably, FACA allows for the collection of an administrative fee under certain conditions in addition to the interest cap. The bill also modifies existing loan term requirements. Now, the Governor must decide whether to sign FACA into law or veto it.
CFPB Considers Tech Sprints to Boost Regulatory Innovation
The Consumer Financial Protection Bureau (CFPB) is requesting comments and information on ways it can use Tech Sprints to develop viable solutions to challenging regulatory compliance issues. Tech Sprints are also known as brainstorming competitions where experts, regulators and financial institutions can develop ideas on how processes can be improved and simplified.
The CFPB is seeking ways in which regulatory compliance issues may benefit, how new technologies can be leveraged for compliance purposes, and why potential participants might be dissuaded from participating. The CFPB requests that inquiries and submissions be received electronically, via email or by mail no later than November 8, 2019. Submission details may be found here.
If you are interested in participating and would like to review a submission or generally discuss ideas, please contact Sam Boro (SBoro@perkinscoie.com) or Nick Lundgren (NLundgren@perkinscoie.com).
CFPB Director Kraninger Says For-Cause Removal Provision is Unconstitutional
On September 17, 2019, the CFPB joined the Department of Justice’s amicus brief in the case Seila Law LLC v. CFPB, which argues that the U.S. Supreme Court should take the case’s challenge to the Dodd-Frank Act’s for-cause removal provision regarding the CFPB Director position. In the amicus brief, the DOJ states that it previously informed the Supreme Court in a separate case that it believed the for-cause removal provision was unconstitutional, and that since that time the CFPB has come to the same conclusion. Additionally, the DOJ argues that the proper remedy for the unconstitutionality of the for-cause removal provision is to sever the provision from the Dodd-Frank Act, leaving the rest of the law intact.
CFPB Director Kathleen Kraninger also sent letters to Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi stating her agreement that the for-cause removal provision is unconstitutional and that she has directed the CFPB to not defend the for-cause removal provision in lower courts.
Visa and Mastercard Face an Antitrust Challenge
Visa and Mastercard face another antitrust-related action after two hotel resort chains and an airline filed a complaint in the U.S. District Court for the District of Columbia alleging that the card networks have colluded with member banks to charge artificially high interchange fees.
The complaint alleges that the defendants and their respective member banks improperly agreed to set interchange fees, eliminating the ability of plaintiffs to negotiate lower interchange and network fees through specific merchant restraints such as the “No Surcharge” rule, the “No Discount” rule, the “No Discrimination” rule, the “Interchange Fee Payment” rule, and the “Honor-All-Cards” rule. Without such restrictions, the complaint states that merchants would be able to surcharge, discount, or state preferences for credit cards at the brand name, issuing bank, and product levels. The complaint seeks treble damages for damages sustained by the plaintiffs since January 1, 2004.
The case before the U.S. District Court for the District of Columbia is Westgate Resorts, LTD. et al v. Visa, U.S.A., Inc. et al, case no: 1:19-cf-02752.