Last Week, This Morning

March 31, 2025

Below you will find several key developments in the financial services industry, including related developments in information privacy and data security, from the past week. We add an "Amicus Brief(ly)¹" comment to each item, where we briefly (see what we did there?) note for friends (and again?) of CounselorLibrary the important takeaways from the developments outlined in the email. Our legal reporters - CARLAW, HouseLaw, InstallmentLaw, PrivacyLaw, and BizFinLaw - provide more comprehensive, real-time updates of federal and state laws, regulations, litigation, and other industry items of interest. For a personal guided tour and free trial of any of these legal reporters, please contact Michael Willer at 614-855-0505 or mwiller@counselorlibrary.com.

On March 26, the acting director of the Consumer Financial Protection Bureau, Russ Vought, announced that he is seeking to vacate the CFPB's 2024 settlement with a non-depository mortgage lender and to refund the monetary penalty the CFPB imposed on the lender. According to Vought, the "CFPB abused its power, used radical 'equity' arguments to tag [the lender] as racist with zero evidence, and spent years persecuting and extorting them - all to further the goal of mandating DEI in lending via their regulation by enforcement tactics."

In November 2024, the CFPB and the mortgage lender agreed to a $105,000 settlement, resolving allegations that, from 2014 through 2017, the lender engaged in acts or practices directed at prospective applicants that discouraged them, on the basis of race, from applying to the lender for mortgage loans, purportedly in violation of the Equal Credit Opportunity Act. The settlement followed a July 2024 decision from the U.S. Court of Appeals for the Seventh Circuit that held that the ECOA prohibits lenders from discouraging, on a prohibited basis, prospective applicants from applying for credit. The CFPB had sued the mortgage lender and its CEO in July 2020 (filing an amended complaint in November 2020) for violating Regulation B by making statements on their radio show and podcast that allegedly discouraged prospective Black applicants from applying for mortgage loans. The lender moved to dismiss the complaint, arguing that the ECOA does not impose liability for the discouragement of prospective applicants. The trial court agreed and granted the motion, but the Seventh Circuit reversed, concluding that the text of the ECOA, as a whole, must be read to include actions taken by a creditor before a prospective applicant submits an application.

Amicus Brief(ly): This move by the CFPB is curious on several levels. The facts underlying the complaint and settlement order were unusual in that the CFPB made its ECOA case on the basis of statements made in a radio show that was (per the complaint) a long-form advertisement. The case settled late in 2024 for a reasonably small dollar figure. Of course, the CFPB's press release at the time of the settlement was full of the typical bluster about the case, so that was not unusual. Fast forward to last week, and the new-look CFPB took the surprising step to ask the court to vacate the settlement. And if that was not enough to make us scratch our heads in wonderment, the CFPB's press release announcing its pursuit of an order vacating the settlement was a doozy. In the press release that rivals his predecessor's most ardent efforts, Russ Vought's team went after the Chopra-led CFPB like it was some ill-tempered stranger who investigated and settled the claims through the consent order. You have to read it twice and check the URL to convince yourself it's a real CFPB statement. We are on a strange ride....

On March 27, the U.S. Senate passed Banking Committee Chairman Tim Scott's (R-S.C.) Congressional Review Act resolution to repeal the Consumer Financial Protection Bureau's final rule titled "Overdraft Lending: Very Large Financial Institutions." The final vote in the Senate was 52-48. The House is expected to vote on the Senate's resolution next week.

In December 2024, the CFPB adopted the final rule on overdraft fees, which applies to banks and credit unions with more than $10 billion in assets. According to the CFPB's press release about the rule, the rule "close[s] an outdated overdraft loophole that exempted overdraft loans from lending laws" by not treating overdraft fees as finance charges. The rule gives covered banks and credit unions three options to manage overdrafts: they can cap their overdraft fee at $5, they can charge a fee that covers no more than their costs or losses, or they can continue to extend overdraft loans if they comply with standard requirements governing other loans, like credit cards, including giving consumers a choice as to whether to open the line of overdraft credit, providing account-opening disclosures that would allow comparison shopping, sending periodic statements, and giving consumers a choice to pay automatically or manually. The rule is effective October 1, 2025, if the resolution is not approved by the House and signed by President Trump.

Amicus Brief(ly): Nothing is finished until it's finished, but this is a positive first step to overriding the CFPB's final rule on overdraft fees that imposes a severe federal limitation on the amount a financial institution can charge a consumer who might overdraw her demand deposit account. There is plenty of time before the October 1 effective date for the House to think about what to do with the resolution. The rule was popular with consumers, which may inform some House members' thinking given: (a) the slim Republican majority in the House, and (b) the 2028 mid-term elections (which we would not even be thinking about with an election less than five months ago, but it is a timely topic in the current hyper-charged political environment). Stay tuned.

On March 27, a company that provides online cash advances to consumers through its mobile app reached a proposed $17 million settlement with the Federal Trade Commission, resolving allegations that the company misled consumers about the amount and timing of cash advances.

In order to obtain a cash advance with the company, a consumer has to sign up for a subscription and pay a monthly subscription fee. According to the FTC, the company allegedly promised in its advertisements that consumers could receive instant or same-day cash advances of certain amounts. The company allegedly did not provide consumers with the amounts advertised and did not provide same-day delivery of funds without payment of an additional fee. Moreover, even after paying that fee, the funds sometimes did not arrive until the next day. The FTC also alleged that the company made it difficult for consumers to cancel their subscriptions, citing instances of the company preventing consumers with outstanding cash advance balances from cancelling their subscriptions until the cash advances were fully repaid.

Amicus Brief(ly): It's not exactly business as usual for the FTC in light of the recent firings of two Democrat commissioners and the near-immediate lawsuit that followed to challenge those firings. While that drama unfolds, the FTC continues its enforcement agenda with this UDAP settlement. At issue in this case, which follows the FTC's recent November 2024 lawsuit against cash advance provider Dave, Inc., concerning similar issues, was marketing and fulfillment. The FTC's claims are familiar in light of its lawsuits against Dave and other cash advance providers, but also because state attorneys general have reacted strongly when they find that product or contract terms are not available on the basis stated in the marketing and when advertised products do not function as advertised - especially credit products. The consumer testimony cited in the order likely had a big influence in this case; it turned the theoretical harms into articulable harms endured by consumers who said they were duped by the provider's advertising of the cash advance product.

On March 24, Virginia Governor Glenn Youngkin vetoed Senate Bill 1252, which sought to curtail perceived abuses by out-of-state banks lending to Virginia residents over the Internet at rates exceeding the 12% cap found in Virginia's usury law. SB 1252 would have expanded the usury law's definition of what it means to "make" a loan and broadened its "anti-evasion" provision to prevent lenders from structuring loans in ways designed to circumvent the 12% cap. Despite an amendment by the General Assembly that intended to clarify its scope, SB 1252's language and impact remained unclear. SB 1252 was broad enough to subject third-party vendors and fintechs that assist lenders otherwise exempt from the 12% rate cap (including banks and lenders making business-purpose loans) to the usury law's restrictions and penalties.

Several industry groups urged the governor to veto the bill, citing concerns that it would restrict Virginians' access to credit. In a press release announcing his action on legislation from the 2025 General Assembly session, Governor Youngkin stated that he vetoed bills that could hurt job growth and stifle innovation in Virginia.

Amicus Brief(ly): Governor Youngkin recently vetoed an artificial intelligence consumer protection bill on the same premise - that enacting the law the legislature passed would stifle innovation and hurt businesses in the commonwealth. This Virginia bill followed the lead of several other states attempting to rein in lending from out-of-state lenders and lenders in bank partnerships whose business models rely pretty heavily on single-source interest rate authority. The 12% interest rate was draconian (see our summary of a Tennessee bill, below, that increases permissible interest rates to 36%), with exceptions only for short-term, small-dollar credit, so critics were right to claim that this bill would cut a large number of Virginians off from loans. Good veto.

On March 24, Kentucky enacted Senate Bill 145, which amends provisions governing charges for defaults on installment sale contracts.

Specifically, the new law amends Kentucky Revised Statutes § 190.100, governing installment sale contracts for motor vehicles, to provide that the holder of a retail installment sale contract may collect a delinquency and collection charge in an amount not in excess of 5% of each installment or $15, whichever is greater, for each installment in arrears for a period not less than: (a) three days for installment periods that are less than 28 days; or (b) 10 days for installment periods that are 28 days or longer. Existing law states that the holder may collect a delinquency and collection charge on each installment in arrears for a period not less than 10 days in an amount not in excess of 5% of each installment or $15, whichever is greater.

The new law also amends KRS § 371.270, governing installment sale contracts, to provide that the holder of a retail installment sale contract, if it so provides, may collect a delinquency and collection charge on each installment in default for a period of more than 10 days in an amount not to exceed 5% percent of each installment or $15 (previously $10), whichever is greater.

Amicus Brief(ly): The amendments to the vehicle finance statute reduce the late payment grace period for retail installment contracts that call for payments more frequently than monthly. The change, designed to accommodate weekly and bi-weekly contracts common with buy-here-pay-here dealers and other subprime finance providers, provides a shorter and more appropriate late payment grace period of three days on those non-monthly contracts while leaving the permissible fee amount alone. And the other change in this new law simply amends the non-vehicle retail installment sale law to increase the permissible fee amount to match the fee allowed in the vehicle finance law. These are not splashy changes but are noteworthy for compliance professionals and programmers who will need to make some adjustments to take advantage of these changes.

On March 25, Tennessee enacted Senate Bill 694, which increases the maximum permitted interest rate for certain loans to 36% per annum. Under SB 694, the Tennessee Industrial Loan and Thrift Companies Act will allow registered lenders to charge interest up to 36% per annum on closed-end "A-loans" with an amount financed of $100 or more. Prior to this change, the maximum interest rate for A-loans was 30% for loans with an amount financed of $5,000 or less and 24% for loans with an amount financed greater than $5,000.

SB 694 also increases the acquisition charge allowed on "B-loans" from 10% of the principal amount to 12.5%.

The changes will be effective on July 1, 2025.

Amicus Brief(ly): A welcome change for Tennessee lenders, this new law provides a material interest rate increase for TILT lenders that will allow licensees to make loans to consumers with limited access to credit at interest rates that align with the risk. The well-known alternatives for unbanked consumers or consumers with low credit scores are to forgo credit (and struggle with bills) or to seek even more expensive, riskier credit from alternative providers. This new law's sponsors, and Governor Lee who supported the bill, made the case that the law will give licensed lenders in Tennessee the ability to expand their direct loan offerings in support of Tennesseans with troubled credit. They were able to pass this bill without much fanfare, and licensees now have increased interest rate authority.

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¹ For the unfamiliar, an “Amicus Brief” is a legal brief submitted by an amicus curiae (friend of the court) in a case where the person or organization (the “friend”) submitting the brief is not a party to the case, but is allowed by the court to file the brief to share information or expertise that bears on the issues in the case.