Last Week, This Morning

May 12, 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 May 9, the Consumer Financial Protection Bureau announced that it is withdrawing many guidance documents issued since the agency assumed its functions in 2011. The guidance materials include policy statements (8), interpretive rules (7), advisory opinions (13), and other guidance (39). The withdrawals are applicable as of May 12, 2025.

The CFPB notes that the withdrawals are not necessarily final because it intends to continue reviewing all guidance documents to determine whether they should ultimately be retained. However, the CFPB will not enforce or rely on the withdrawn guidance documents while this review is ongoing. The CFPB states that it is withdrawing the guidance documents because: (1) the agency is committed to issuing guidance only where that guidance is necessary and would reduce compliance burdens rather than increase them; (2) the agency is reducing its enforcement activities in light of President Trump's directives to deregulate and streamline bureaucracy and, therefore, has no pressing need for interpretive guidance to remain in effect; and (3) the agency does not believe that any reliance interests compel retention of the guidance documents.

One of the interpretive rules that is withdrawn is the "Use of Digital User Accounts to Access Buy Now, Pay Later Loans," which was published in the Federal Register on May 31, 2024, and was effective on July 30, 2024. On May 6, the CFPB had announced that it would not prioritize enforcement of this interpretive rule, which clarified that lenders that provide digital user accounts that consumers use to access credit products to purchase goods and services, including those lenders that market their products as "Buy Now, Pay Later," are "card issuers" under Reg. Z, thereby subjecting BNPL lenders to certain provisions of Reg. Z applicable to credit cards.

Amicus Brief(ly): Guidance documents and other interpretive materials from the CFPB were one of its primary methods of telling regulated entities and their advisors what the CFPB was thinking about certain regulatory topics, including and especially those that arose during examinations and investigations. While we may not have agreed with the CFPB about their interpretations, we benefited from knowing what they were. But those interpretations did not have the effect of law even though the CFPB was pretty staunch in its adherence to the positions taken in the guidance documents. The primary complaint about the CFPB's reliance on issuing guidance documents was that that approach skirted the more thorough rulemaking process that involves a proposal and a comment period. For what it's worth, the guidance documents - while withdrawn - are still largely available online for reference. Withdrawing them is consistent with the new Bureau leadership's approach to deregulation, but because the guidance did not have the effect of law, this change is more symbolic than impactful.

On May 6, New York Attorney General Letitia James announced that her office obtained settlements with eight car dealerships located in New York, resolving allegations that the dealerships charged unlawful and unauthorized fees to consumers who opted to purchase their leased vehicles at the end of the lease term. The AG alleged that these allegedly unlawful fees or charges were not disclosed in consumers' lease agreements. The AG also alleged that the dealerships inflated the vehicles' prices on the invoices given to consumers at the time they purchased their leased vehicles. The AG claimed that the dealerships violated Regulation M and the New York State Motor Vehicle Retail Leasing Act by charging lease-purchase consumers more than the price stated in their lease agreements. The AG also claimed that the dealerships engaged in false advertising and deceptive practices in violation of the state's General Business Law, as well as fraud in violation of the state's Executive Law, by misrepresenting the price at which consumers could purchase their leased vehicles at the end of the lease term, failing to honor the purchase price stated in the lease, and concealing fees and the accurate price information for the vehicles.

Under the terms of the settlements, the dealerships are required to pay approximately $400,000 in penalties and approximately $2.8 million in restitution to affected consumers.

Amicus Brief(ly): We have been expecting an increase in state AG enforcement given the pullback at the CFPB and the placement of CFPB enforcement alumni in those state offices. But these investigations started before all of that, so they are not a result of those recent changes. The allegations in these cases, if true, suggest that the dealerships did not follow New York law that limits the fees a dealer can charge at lease end in connection with the exercise of a lease purchase option. We do not know how the dealerships came to charge those fees, but anyone looking for a compliance takeaway should ensure that their lease form templates reflect the limitations of state law and that their origination systems feature controls to limit fees to those permitted by state law. The allegations related to price advertising are pretty typical and serve as another reminder that dealerships and other providers have to honor advertised prices and terms.

Tennessee Governor Bill Lee recently signed House Bill 908, which revises the maximum effective rate of interest for home loans. Currently, the maximum interest rate for a home loan is the lesser of an amount equal to four percentage points above the index of market yields of long-term government bonds adjusted to a 30-year maturity by the Department of Treasury or 18%. The new law sets the maximum rate of interest at an amount equal to four percentage points above the average prime offer rate, as defined in 12 C.F.R. § 1026.35, that applies to a 30-year fixed loan.

The new law also provides that the maximum effective rate of interest per annum for home loans may not exceed 18% per annum.

The new law takes effect July 1, 2025.

Amicus Brief(ly): Tennessee simplified its mortgage loan interest rate calculation with this change but retained the 18% cap. The impetus for the change appears to be uncertainty about whether Fannie Mae will go private and what that will mean in terms of interest rates. Whatever the reason, the simpler formula is easy to apply even though it is tied to an index. Simpler can be better.

On May 6, Iowa enacted Senate File 398 relating to closing costs secured by an interest in land under the Iowa Consumer Credit Code. The new law adds to the closing costs that a creditor may contract for and receive in connection with a real estate financing transaction, under Section 537.2501(1)(e) of the Iowa Code, bona fide and reasonable discount points that result in a bona fide reduction of the interest rate applicable to the debt or points agreed upon by the creditor and the consumer to secure a given interest rate, provided that the points and fees the consumer is charged by all lenders in connection with the loan do not exceed the amounts specified in 12 C.F.R. § 1026.43(e)(3) of Regulation Z governing qualified mortgages. In addition, the new law provides that if a mortgage banker licensed or registered under Iowa law originates a real estate-secured loan in which the APR, points, and fees that the consumer is charged by all lenders do not exceed the amounts specified in 12 C.F.R. § 1026.43(e)(2)(vi) and 12 C.F.R. § 1026.43(e)(3) of Reg. Z, then the consumer loan is not subject to the limitations on fees specified in Iowa Code Section 535.8(4)(a) governing loan origination or processing fees and broker fees or Iowa Code Section 535.8(5) governing payment reduction fees.

Amicus Brief(ly): Iowa generally limits loan fees to 2% of the loan amount, so this update can be beneficial to lenders and consumers, especially given the current interest rate uncertainty owing to the potential for higher interest rates that may result from on-again, off-again tariffs on imports. Iowa will allow bona fide and reasonable discount points paid to reduce the periodic interest rates on junior-lien loans (Iowa's Consumer Credit Code does not apply to first-lien loans), subject to the points and fees cap, which will allow lenders more flexibility in the closing fees they can charge and allow consumers the option to buy down their interest rate. This is a good result.

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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.