Last Week, This Morning

July 28, 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 July 21, the Federal Trade Commission announced that it obtained a temporary restraining order with asset freeze against seven companies and three individuals, acting as a common enterprise, that allegedly engaged in the deceptive sale and marketing of debt relief services to consumers, primarily older consumers, in violation of the FTC Act, the FTC's Telemarketing Sales Rule, the FTC's Trade Regulation Rule on Impersonation of Government and Businesses, the Fair Credit Reporting Act, and the Gramm-Leach-Bliley Act.

The FTC alleged that the defendants contacted consumers through telemarketing calls or in response to inbound calls resulting from the defendants' direct mail and online ads and:

• impersonated consumers' banks or credit card issuers, the federal government, or a consumer reporting agency;
• made promises that they could reduce consumers' unsecured debts, even by as much as 75% or more, when they allegedly provided little or no debt relief;
• collected illegal advance fees from consumers;
• used prohibited remotely created checks;
• unlawfully obtained consumers' credit reports; and
• made telemarketing calls to consumers on the FTC's National Do Not Call Registry.

Amicus Brief(ly): The FTC's allegations were enough to convince a court to issue a TRO against the companies and individuals that engaged in activity that is widely known to be prohibited under federal and most state debt relief company or credit repair company laws. The TRO includes an asset freeze, which is another indicator of the seriousness of these allegations. The targets of the alleged deceptive practices were evidently veterans and the elderly, which may have helped the FTC obtain this early intervention. The case is in its infancy, notwithstanding the strong indicators of wrongdoing, but responsible, compliant companies will not learn much from the complaint in this case or the TRO, given the nature of the claims and the obvious compliance missteps alleged.

Pennsylvania recently enacted House Bill 1103 (Act No. 16), which becomes effective on August 29, 2025. H.B. 1103:

• adds a definition of "discount points" to section 6102 of the Mortgage Licensing Act. "Discount points" are defined as "[f]ees knowingly paid by the consumer for the purpose of reducing, and which in fact result in a bona fide reduction of, the interest rate or time-price differential applicable to the mortgage";
• amends section 6122(a)(1) of the MLA to expressly permit licensed lenders to charge discount points on first and secondary mortgage loans, subject to the limitations in the MLA; and
• repeals an anachronistic provision in the Loan Interest and Protection Law that prohibits a lender from charging discount points to a seller of real estate on certain residential mortgage loans and deletes the definition of "discount points" currently found in the LIPL.

The memo accompanying H.B. 1103 indicates that the focus of the legislation is on allowing Pennsylvania consumers the ability to buy down the interest rate on secondary mortgage loans so that they can affordably access the equity in their homes without having to refinance a comparatively lower rate first mortgage.

Amicus Brief(ly): In the higher interest rate environments we have experienced over the last few years during and following the pandemic, a consumer's ability to pay something at closing in exchange for a lower periodic rate for the term of the loan is valuable. This update to Pennsylvania's mortgage law is by design and in practice going to help Pennsylvania homeowners who would like to keep their monthly mortgage payments more manageable. We note that the focus on home equity loans is important and purposeful because first mortgage lenders in Pennsylvania already have the authority to charge discount points under Section 501 of the Depository Institutions Deregulation and Monetary Control Act and Pennsylvania law.

The California Department of Financial Protection and Innovation, along with state regulators in Massachusetts, Minnesota, Nebraska, New York, and Texas, recently announced a $4.2 million joint settlement with a New York-based money transmission company that is licensed to transmit money on behalf of customers in the U.S. and internationally, resolving allegations that the company violated Bank Secrecy Act and anti-money laundering laws.

Under BSA/AML laws and regulations, financial services firms are required to perform due diligence on customers, including verifying identities, reporting suspicious activity, and applying appropriate controls for high-risk accounts. According to the consent order, the state regulators identified compliance violations including, but not limited to, "failure to provide for an independent review of the AML program on a frequency commensurate with services provided; deficiencies identified in the company's processes for investigating and reporting suspicious activity, including the failure to timely file suspicious activity reports; transaction monitoring data integrity issues; failure to timely correct past deficiencies detected in prior examinations and independent audits; and violations related to the Consumer Financial Protection Bureau's Remittance Transfer Rule." The state regulators found that the company's alleged BSA/AML compliance failures created the potential that its services could be used to support money laundering, terrorism financing, or other illegal activities.

In addition to the monetary penalty, the company is required to correct deficiencies in its BSA/AML compliance program, hire an independent third party to verify corrective actions in the program, and submit quarterly reports for two years to the participating states.

Amicus Brief(ly): Industry participants widely and almost uniformly predicted that the states would increase enforcement activity in the financial services space with the CFPB looking, sounding, and acting very differently since the change in administration in January. This joint settlement with California and five other states suggests that prognosticators were right about that, and we expect more of this kind of joint work by the states as the year wears on. The BSA/AML claims at the center of this settlement are a concern for the reasons stated - loose BSA/AML policies can create a fertile ground for money laundering and other bad acts. We will continue to monitor for and report on developments like these as states continue to expand their enforcement initiatives.

On July 21, the American Financial Services Association submitted a comment letter to the Consumer Financial Protection Bureau concerning the Bureau's consumer complaint portal. AFSA submitted the comment letter in response to the CFPB's request for information on the onboarding form that companies use to access the complaint portal, but it also provided feedback on the overall complaint database.

The onboarding form allows companies to view and respond to consumers' complaints about financial products and services submitted to the CFPB. AFSA's comment letter states that some of the information requested from companies to access the onboarding form is unnecessary - such as tax ID and financial institution number, URL or website, state license information, whether the company is web-based, and identity of subsidiaries - and asked the CFPB to review the form to ensure that the information requested be limited to only necessary elements.

AFSA also raises concerns about the level of quality control for consumer complaint portal submissions, noting that "[a] complaint submitted to the portal is not vetted to assure (1) that its author is a human being, (2) that the author actually has an account with a financial institution, (3) that the alleged complaint actually relates to the provision of a consumer financial product or service offered by the named company, (4) that the communication is actually a complaint, as opposed to an inquiry or request for an explanation, and (5) that any of the factual allegations in the complaint occurred."

AFSA also expresses significant concern about consumers filing credit reporting disputes on the CFPB's complaint portal, despite the fact that the Fair Credit Reporting Act provides mechanisms for filing such disputes.

Finally, AFSA's comment letter notes issues with the publishing of consumer complaint narratives, stating that "[i]t is not clear that the CFPB has ever articulated a reason why raw consumer complaint content should be made publicly available. ... [T]hese accounts have little probative value, as the complaint portal allows any person or system to submit unsubstantiated and potentially libelous complaints about any company. It is possible that the motivation to publish narratives is to expose companies to scorn and reputational harm. In any case, the CFPB is not required by statute to publish complaint narratives. Without any benefit to the CFPB or industry and in light of the harm caused to creditors of having unverified complaints published for the world to see, AFSA requests that the CFPB cease publishing consumer complaint narratives immediately."

AFSA's letter provides recommendations to the CFPB to improve the quality, utility, and clarity of the information in the consumer complaint portal and requests that the CFPB extend its existing 15-day deadline to respond to complaints to 30 days.

Amicus Brief(ly): AFSA took advantage of the opportunity to offer comments not just on the company intake form but on the complaint process at large. In doing so, AFSA went right to the heart of the matter - what is the upside of publishing consumer complaints that have not been evaluated? The complaint portal is not an effective tool for companies to manage and address consumer concerns. Those concerns are far more effective when raised with the companies. Importantly, AFSA points out that consumers have been filing consumer reporting disputes in the portal notwithstanding the clear allowance for direct and indirect consumer reporting complaints in the FCRA. The comments from AFSA and others are unlikely to cause the complaint portal to go away, given its statutory basis. There really was not much to offer the CFPB with respect to its intake form, so this was a good opportunity to raise some material portal issues for the Bureau to consider.

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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.