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Tennessee amends consumer debt proceeding requirements and garnishment exemptions
On May 3, the Governor of Tennessee signed into law HB 2320 (the “Act”), which will amend pleading requirements for consumer debt suits and garnishment exemptions. The Act would require that, in a civil suit or arbitration requesting judgment on a consumer debt, the plaintiff creditor would provide the following in the initial pleading: (i) if the debtor’s agreement does not exist, then provide written evidence of the debtor’s agreement or a document provided to the debtor while the account was active; (ii) a statement that the debt has been transferred or assigned; (iii) the date of the transfer or assignment; (iv) the name of any prior holders of the debt; and (v) the name or a description of the original creditor. Additionally, the Act will amend Tennessee’s garnishment provisions to automatically exempt them from execution, seizure, or attachment funds up to $2,500 in a debtor’s deposit account with a bank or financial institution. The Act will go into effect on July 1.
Georgia amends provisions for telemarketing provisions for defendants
On May 6, Georgia enacted SB 73 (the “Act”), which amends, among other things, Georgia’s telemarketing laws. The Act clarifies that no person or entity can make or cause any telephone solicitation violations, now on behalf of another person or entity, and sets forth that there is a private right of action against violators. The Act also amends the damages to be the actual monetary loss for each violation or a violation up to $1,000 in damages, whichever is greater. However, if a class action lawsuit is brought under the Act, the $1,000 in statutory damages would not apply. The Act further provides that ignorance would not be a valid defense if a defendant did not make or was not aware how a telephone solicitation violated applicable laws. However, it is defensible if the defendant had established policies and procedures to prevent violations, and enforced such procedures, or if a phone number was provided in error so long as the defendant did not have any knowledge of the mistake.
Tennessee amends its Consumer Protection Act
Recently, the Governor of Tennessee signed into law HB 2711 (the “Act”) which amends, among other things, the state’s Consumer Protection Act. In particular, the Act establishes the factors that a court may consider when determining a civil penalty for violation of the Consumer Protection Act. The court may consider (i) the defendant’s participation in the attorney’s general complaint resolution process; (ii) and the defendant’s restitution efforts prior to the action; (iii) whether there was good or bad faith; (iv) injury to the public; (v) one’s ability to pay; (vi) the public’s interest in eliminating the benefits derived by the violator; and (vii) the state’s interest. Additionally, the Act expands its protection of elderly people to “specially targeted consumers” which includes persons who are at least 60 years old, persons under 18, and current and former military service members. Persons who are found to have targeted specially targeted consumers can be liable for penalties up to $10,000. Furthermore, the Act makes other changes such as procedural requirements for actions brought by the attorney general. The Act is effective immediately.
Florida enacts new requirements for payment transaction classification
On May 2, the Governor of Florida signed into law HB 939 (the “Act”) which, among other things, will expand the definition of “depository institution” and amend the requirements for information returns relating to payment-card and third-party network transactions.
As it will relate to Florida’s commercial financing disclosure law, the Act will expand the definition of “depository institution” to mean a bank, credit union, savings or thrift association, or an industrial loan company doing business under the authority of a charter issued by the U.S., Florida, or any other state or territory which is authorized to transact business in Florida and is insured by the FDIC or NCUA Share Insurance Fund.
Additionally, the Act will require third-party settlement organizations handling transactions for participating payees located in Florida to establish a system to identify whether transactions are for goods and services or are personal payments. Third-party settlement organization will be required to create a mechanism that clearly obligates the sender to classify the transaction type prior to completion. The Act will also set forth how the sender of the payment will be responsible for categorizing the transaction accurately. Furthermore, third-party settlement organizations will be instructed to keep detailed records that reflect the transaction type as specified by the sender. However, this requirement will not be applicable to third-party settlement organizations that are contractually bound to process transactions exclusively for goods and services. The Act will define “participating payee,” “third party network transaction,” and “third party settlement organization” as defined by the Internal Revenue Code. The Act will go into effect July 1.
Oklahoma amends SAFE Act licensing provisions
On April 29, Oklahoma enacted SB 1492 (the “Act”) which amends the Oklahoma Secure and Fair Enforcement for Mortgage Licensing Act by, among other things, expanding the definition of “mortgage broker” to include servicing a residential mortgage, defining “servicing” to include holding servicing rights, as well as significantly adjusting fees and annual assessments for licensees. With respect to mortgage servicing, the law defines servicing as “the administration of a resident mortgage loan following the closing of such loan” and further states that an entity will be serviced if it “either holds the servicing rights, or engages in any activities determined to be servicing, including: (a) the collection of monthly mortgage payments; (b) the administration of escrow accounts; (c) the processing of borrower inquiries and requests; and (d) default management.” The definition of “mortgage lender” already includes an entity that “makes a residential mortgage loan or services a residential mortgage loan” and will be approved by HUD, Fannie Mae, Freddie Mac, or Ginnie Mae. The Act adds a new section allowing licensees to permit their employees and independent contractors to work at remote locations, subject to certain conditions regarding policies and procedures for customer contact information and data, maintenance of physical records, and prohibitions on in-person customer interactions, among other things. Finally, the Act will add or amend certain fees and their annual assessment determinations, including assessments based on loan volumes for originated loans and others for serviced loans during the assessment period. The Act will go into effect on November 1.
Florida enacts telemarketing exemption from credit counseling services law
On April 26, the Governor of Florida signed into law HB 1031 (the “Act”), which will amend Florida’s credit counseling services law to provide an exception for telemarketers and sellers that furnish “debt relief services” (as defined under the federal Telemarketing and Consumer Fraud and Abuse Prevention Act and the Telemarketing Sales Rule: i.e., the TSR). Generally, the law places certain disclosure, financial reporting, and fee charging obligations on any person engaged in “debt management services” or “credit counseling services.” The amendment will provide those telemarketers or sellers that “provide any debt relief service” within the scope of the TSR will not be subject to the provisions of Florida’s credit counseling law as long as they do not receive from the debtor or disburse to a creditor any money or items of value. The Act will go into effect on July 1.
DFPI annual report highlights consumer protection efforts and upcoming regulations
On April 25, the California DFPI released its Annual Report of Activity under the California Consumer Financial Protection Law (CCFPL), highlighting investigations, public actions, and consumer outreach efforts under the CCFPL. According to the report, the DFPI (i) experienced a 70 percent increase in CCFPL complaints, which predominantly involved crypto assets and debt collectors; (ii) opened 734 CCFPL-related investigations and issued 181 public CCFPL actions; (iii) launched the Crypto Scam Tracker and a new consumer complaints portal; and (iv) advanced two rules, including unlawful, unfair, deceptive, or abusive acts and practices (UUDAAP) protections for small businesses and new registration requirements (pending final approval by the Office of Administrative Law) for earned wage access, debt settlement services, debt relief services, and private postsecondary education financing products.
The report emphasized that the new regulations specified that optional payments, such as tips, collected by California Financing Law (CFL)-licensed lenders would be considered charges under the law. According to the DFPI, these updates will reinforce the CFL by blocking potential loopholes and ensuring compliance among CFL-licensed lenders. Once these regulations would be approved, DFPI will oversee these financial service providers. Upon adoption, DFPI says it will be a pioneer in defining “earned wage access” as loans and regulating income advance services and the treatment of tips as charges, all through regulatory measures rather than statutory enactment.
Virginia amends its foreclosure procedures and requires an affidavit
Recently, the Governor of Virginia signed HB 184 (the “Act”) which amended the foreclosure procedures and subordinate procedures. Specifically, the Act added a requirement that if the proposed sale was initiated due to a default in payment under a security instrument, then the subordinate mortgage lienholder must submit to the trustee an affidavit affirming that monthly statements were sent to the property owner detailing any interest, fees, or charges assessed. The amendments also provided that the subordinate mortgage lienholder must provide a copy of such affidavit to the person who would pay the instrument with written notice for a request for sale. That notice must advise the person to pay the instrument if the person believed that fees or interest were assessed in error. If the court would agree, then the person will be entitled to recover attorney fees and costs against the subordinated mortgage lienholder after the date of the foreclosure sale. The Act also added a provision that any purchaser at a foreclosure sale provide certification that the purchase will pay off any priority security instrument no later than 90 days from the date that the trustee's deed conveying the property would be recorded in the land records. The Act will go into effect on July 1.
Tennessee amends caller ID law
On April 22, Tennessee enacted HB 2504 (the “Act”), which amends the Tennessee Consumer Protection Act of 1977 to specify that it is illegal for: (i) “[a] person, in connection with a telecommunications service or an interconnected VoIP service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information to a subscriber with the intent to defraud or cause harm to another person or to wrongfully obtain anything of value”; and (ii) “[a] person, on behalf of a debt collector or inbound telemarketer service, to knowingly cause any caller identification service to transmit misleading or inaccurate caller identification information, including caller identification information that does not match the area code of the person or the debt collector or inbound telemarketer service the person is calling on behalf of, or that is not a toll-free phone number, to a subscriber with the intent to induce the subscriber to answer.”
The Act is effective on July 1.
Student loan servicer to pay DFPI $27, 500 for untimely response to information request
On April 24, the California DFPI entered into a consent order with a federal student loan servicer (respondent) that allegedly failed to provide the DFPI with timely access to requested borrower data. In late April of 2022, the U.S. Department of Education announced a one-time revision of income-driven repayments to address past inaccuracies. To take advantage of this adjustment, the Department of Education required borrowers to submit a loan consolidation application by April 30, 2024. The DFPI requested information from respondent on student loan borrowers for the purpose of completing outreach to impacted borrowers ahead of the loan consolidation application deadline. Respondent provided this information 17 days after the deadline set by the DFPI.
To resolve DFPI’s allegations, respondent agreed to pay a penalty in the amount of $27,500.