Last Week, This Morning

June 2, 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.

Nebraska Governor Jim Pillen recently signed Legislative Bill 474, which overhauls the Nebraska Money Transmitters Act with revisions based largely on the Model Money Transmission Modernization Act. The law also combines the Nebraska Installment Loan Act and the Nebraska Installment Sales Act into a single Act known as the Nebraska Installment Loan and Sales Act. The NILSA will be codified at Neb. Rev. Stat. §§ 45-334 et seq.

Importantly, the new law does not change the core substantive provisions applicable to retail installment sales and installment loans governed by the NILA and the NISA. The licensing triggers, licensing exemptions, disclosure requirements, and maximum rates and fees currently found in the NILA and the NISA will remain the same. However, in combining the two Acts into one, some prohibitions currently only found in the NILA, such as the anti-discrimination provision and the prohibition against misleading advertising, will now apply to any NILSA licensee.

The bill was introduced at the request of the Nebraska Department of Banking and Finance, which administers the NILA and the NISA. Under the NILSA, the DBF will continue to issue two separate licenses based on the activity conducted - an installment loan license or an installment sales license. However, new applicants seeking to obtain one of these licenses will now be subject to the same application process. The NILA's burdensome publication and hearing requirements have been eliminated, and a streamlined process for obtaining installment loan branch licenses has been added. NILSA licensees will also be subject to the same examination, license renewal, and reporting requirements.

L.B. 474 becomes effective on October 1, 2025.

Amicus Brief(ly): There is a lot going on in this bill but, as noted above, not a lot of substantive change to the regulation of installment sales finance or non-bank lending in Nebraska. The streamlined licensing process is a plus for industry and for the typically short-staffed DBF. The updated statute keeps in place the licensing provisions enacted a few years ago that require a license for non-bank participants in bank partnership loans. Nebraska licensees with a wish list for substantive changes to the lending statute will have to wait for another legislative session.

On May 23, the Maryland Office of Financial Regulation issued an industry advisory regarding the 2025 annual assessment of licensed companies.

The advisory states that, "[a]s part of the planned transition to a new assessment funding mechanism, [the] OFR did not issue assessments for fiscal year 2025 (FY25). Assessments will soon commence for FY26 to ensure [the] OFR has the resources necessary to continue its consumer protection and regulatory operations."

The advisory also states that, "[u]nlike the previous system, which charged fixed amounts per physical branch, the new system determines assessments based on a licensee's business activity in Maryland. This approach levels the playing field by ensuring that companies doing more business in Maryland contribute more to support the oversight that protects Marylanders, regardless of whether they have a physical branch presence in the state. The prior structure inadvertently discouraged companies from opening local branches. The new system removes that disincentive. Many licensees will pay less under this new system than they did under the previous branch-based model. The OFR will continue to evaluate the assessment structure each year to ensure fairness and alignment with actual supervisory costs. Licensees will receive individual assessment notices for each of their licenses in the coming weeks via the Nationwide Multistate Licensing System, with payment due within 30 days of issuance. This determination applies only to the current fiscal year; the need for future assessments will be reviewed at a later date."

Amicus Brief(ly): This update in Maryland favors smaller licensees with branch offices. The business-based assessment structure, contrasted with the rooftop-based fee structure of the past, requires larger fees from the companies doing more business in Maryland. As noted in the advisory, the OFR expends greater resources on bigger businesses without regard to whether they operate from a single place of business or several. Other states use the revenue or business-based assessment fee structure and have for a while, and it seems to work. This change does not necessarily mean that licensees will open more branch offices in Maryland, but licensees considering physical business expansion in Maryland will be able to omit the branch-based assessment fees from their cost-benefit analysis.

Nevada has long remained an outlier among states by requiring a lender to maintain a fully-functioning in-state office in order to be licensed. The state granted some relief from this requirement in 2020 when it began allowing lenders making business-purpose loans over the internet to apply for a license under the Installment Loan and Finance Act without needing an in-state office. Now, consumer lenders will also be getting that relief.

Senate Bill 437, which becomes effective on October 1, 2025, allows a lender making consumer loans exclusively through the internet to apply for a Nevada installment loan license without needing an in-state office. Lenders that are granted a license will be subject to some additional compliance requirements when making loans to Nevada residents. In particular, a lender will need to ensure its loan contract: (1) includes a Nevada governing law provision; and (2) provides for any litigation or arbitration to occur in Nevada.

Amicus Brief(ly): Finally. The in-state office requirement for lending licenses started to fall out of favor many years ago, even though non-bank branch-based lending is still fairly common. But branch-based lenders choose to have walk-in offices available in the local communities they serve, whereas national lenders that make loans available to consumers across multiple states favor remote consumer loan origination. With the increasing prevalence of online lending, it has been surprising to see Nevada hold onto its in-state office requirement for so long. We anticipate that, as a result of this legislation, at least some licensed lenders will close their local Nevada offices to reduce overhead. Nevada may also see an uptick in license applications from lenders that want to do business there but did not want to open a local office. This should be a productive change for Nevada.

On May 25, Maryland Governor Wes Moore signed House Bill 1294, which subjects earned wage access products to the Maryland Consumer Loan Law and other related statutory provisions that regulate entities that provide consumer credit.

H.B. 1294 provides clarity to earned wage access providers that were reluctant to do business in Maryland because of August 1, 2023, guidance from the Maryland Commissioner of Financial Regulation restricting earned wage access products. The new law explicitly treats certain earned wage access products as loans and establishes new rules for the acceptance of "tips" in connection with the provision of earned wage access products and other credit under the MCLL. The law requires licensing of entities offering earned wage access products. Finally, the law establishes restrictions and notification requirements regarding the costs and fees associated with obtaining an earned wage access product and modifies Maryland's credit licensing structure to account for new products, services, and fees.

H.B. 1294 becomes effective on October 1, 2025.

Amicus Brief(ly): Maryland committed its 2023 earned wage access guidance to law and is the most recent state, following closely behind Indiana, Utah, and Arkansas, to enact a law regulating the product. Maryland was one of more than 20 states contemplating earned wage access regulation during this year's legislative sessions. States regulating this product have been pretty consistent in treating it as a loan or at least credit, and Maryland is no different.

Last week, the Texas Senate and House passed House Bill 700, which regulates sales-based financing transactions and requires providers and brokers of sales-based financing transactions to register with the Texas Office of Consumer Credit Commissioner. One of our legal reporters, InstallmentLaw, reported on H.B. 700's companion bill, Senate Bill 2677, in March. H.B. 700 lacks the proposed interest rate cap of S.B. 2677 but includes a proposed ban on ACH payments in most circumstances.

The bill requires a provider or broker of sales-based financing transactions to register with the OCCC by December 31, 2026. Additionally, a provider must give the recipient certain disclosures before consummation of a sales-based financing transaction. The required disclosures do not include an APR.

The proposed ban on most ACH debits was added by Senator Charles Perry (R-Lubbock) just before passage of the bill in the Senate. The amendment prohibits a sales-based financing provider or broker from automatically debiting a recipient's deposit account unless the provider or broker has a first-priority security interest against the claims of all other persons in the recipient's account. The amendment to H.B. 700 reads as follows:

Sec. 398.056. CERTAIN AUTOMATIC DEBITS PROHIBITED. A provider or commercial sales-based financing broker may not establish a mechanism for automatically debiting a recipient's deposit account unless the provider or broker holds a validly perfected security interest in the recipient's account under Chapter 9, Business & Commerce Code, with a first priority against the claims of all other persons.

The above provision will be materially disruptive to sales-based financing transactions in Texas. If Texas Governor Greg Abbott signs it into law, the bill will take effect on September 1, 2025 (except for the registration requirement, as mentioned above).

Amicus Brief(ly): What could have been a reasonably standard state law to impose cost-of-funding disclosures and registration requirements on providers of sales-based financing became a bill that effectively prohibits most sales-based financing in its current form in Texas. For readers unfamiliar with the product, "sales-based financing" refers to a type of business financing in which a merchant who sells goods or services obtains financing from a provider that agrees to permit the merchant to repay the transaction based on a percentage of the merchant's sales or revenue. The merchant's payments adjust in accordance with increases and decreases in its sales or revenue, and, in most of these transactions, the merchant authorizes the provider to initiate ACH debits from the merchant's account for the merchant's payments. As noted above, the Texas bill limits the right of providers to initiate ACH debits only from deposit accounts in which the provider holds a perfected security interest that has a "first priority" against the claims of "all other persons." That is the concern. Under the Uniform Commercial Code, a security interest in a deposit account can only be perfected by entering into a deposit account control agreement with the bank at which the account is maintained. These control agreements typically provide a creditor with lien priority against the claims of other secured creditors, but not against the claims of the bank itself. Because the claims of the bank will be superior to the claims of the sales-based financing provider, no provider would be able to satisfy the Texas requirement that the provider's security interest in the merchant's account have priority against the claims of "all other persons." It is not clear that Senator Perry knew all of this before adding his amendment to the bill, but, whether he did or not, his amendment is about to dramatically impact the sales-based financing industry in Texas.

The Federal Trade Commission recently obtained a permanent injunction and monetary relief against two companies and their owners in connection with the marketing and sale of student loan debt relief services. Specifically, the FTC alleged that the defendants:

• misrepresented that they were affiliated with, endorsed by, or approved by the Department of Education and its loan servicers when communicating with student loan borrowers seeking debt relief;
• made false promises to enroll consumers in programs that guarantee permanent low, fixed monthly payments and lump-sum forgiveness of the remaining balance;
• illegally called consumers on the National Do Not Call Registry;
• charged consumers illegal advance fees; and
• falsely marketed their services by providing fake consumer reviews and testimonials on social media and their website.

The proposed order imposes a partially suspended monetary judgment of approximately $7.3 million and requires the defendants to turn over more than $1 million in personal and business assets to resolve the FTC's charges. If any of the defendants are found to have materially misrepresented their finances, the full amount of the monetary judgment would become immediately due from that defendant.

Amicus Brief(ly): The allegations in this case reflect a number of unforced errors by the debt relief service providers. Alleged misrepresentations and false promises aside, the other claims were easily avoidable for a reputable debt relief company. For example, the DNC Registry has been around for a very long time and is a well-known system for consumers to use to stave off unwanted calls. It is difficult to imagine the company had never heard of the registry. Similarly, it is hard to believe that the company was unaware of the federal limitation - along with a great many state limitations - on charging consumers fees before providing services. Additionally, the FTC has been very clear about its stance against posting fake consumer reviews and testimonials designed to create a positive impression of a business. The injunction and monetary relief in this case appear commensurate with the alleged compliance mistakes.

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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.