Last Week, This Morning

September 29, 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 September 25, the Consumer Financial Protection Bureau published a final rule, effective October 27, 2025, rescinding amendments to its Procedures for Supervisory Designation Proceedings rule, with some limited exceptions.

In May 2025, the CFPB published a proposed rule to rescind amendments to its procedures for supervisory designation proceedings that it adopted in April 2022, November 2022, and April 2024. Section 1024(a)(1)(C) of the Consumer Financial Protection Act gives the CFPB discretion to supervise nonbanks that do not qualify for supervision under one of the primary grounds in the CFPA. The discretionary supervisory authority can apply to "any [nonbank] covered person who ... the Bureau has reasonable cause to determine, by order, after notice to the covered person and a reasonable opportunity for such covered person to respond, based on complaints collected through the system under § 1013(b)(3) ... or information from other sources, that such covered person is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services." In the proposed rule, the CFPB noted that it had specific concerns about the manner in which the amendments provided for public release of decisions and orders. Under those amendments, if an entity consented to supervisory designation, then there would be no public release of any decision or order. However, if the entity contested designation, that choice may result in a public decision and order asserting that the entity "is engaging, or has engaged, in conduct that poses risks to consumers." The CFPB expressed concerns that these amendments would unduly pressure entities to consent to supervisory designation to avoid public disclosure.

After considering the public comments it received on the proposed rule, the CFPB rescinded its 2022-2024 amendments and restored the original 2013 rule setting forth procedures governing supervisory designation proceedings.

Amicus Brief(ly): It is hard to argue with this outcome. Comments from industry trade groups were clearly effective, making a number of fair points about the coercive nature of the proposition that a company not subject to the CFPB's supervisory authority should voluntarily submit to that authority or face potential public disclosure of the CFPB's determination that the company is engaged in activity that could cause potential harm to consumers. We have seen that such public disclosure can have an adverse impact on a company's business even if the CFPB does not fully explain its rationale or when the risk determination is sort of speculative. The CFPB identified that the potential reputational and other risks to a company outweigh the potential benefit to consumers and other businesses when making this determination publicly. The fact that this was a Rohit Chopra-era initiative may have helped inform the result, but the CFPB went through the required rulemaking process to get to its conclusion. Industry will be pleased with this sensible final rule.

The Massachusetts Division of Banks amended two mortgage lending regulations, both with disclosure implications.

First, Massachusetts (which has a partial exemption from the federal Truth in Lending Act and Regulation Z) amended its Truth-in-Lending regulation. Despite this exemption, in many instances, the Massachusetts Truth-in-Lending regulation indicates that compliance with Reg. Z constitutes compliance with the corresponding provision of the Massachusetts regulation. One of the current exceptions - where Massachusetts state-chartered institutions must follow a different rule - is in the timing of variable rate adjustment notices. Under the current Massachusetts regulation, these notices must be provided no sooner than 90, but no later than 30, days before the rate change. This timing requirement has been revised. Effective October 10, 2025, variable rate adjustment notices sent by Massachusetts banks and credit unions must be provided at least 60, but no earlier than 120, days before the first payment at the adjusted level is due, harmonizing the timing requirements under both federal and state TILA regulations.

Second, Massachusetts revised its mortgage lender and broker regulation. Under the current regulation, licensees are required to disclose the type and number of the license they hold: (1) in all advertisements, and (2) to licensee clients and/or mortgage loan applicants in writing at the time a fee is paid or when an application is accepted. Effective October 10, 2025, licensees must disclose their NMLS unique identifier to licensee clients and/or mortgage loan applicants in writing at the time a fee is paid or when an application is presented to the client or applicant for signature. The requirement to include the type of license and license number in advertisements remains unchanged.

Amicus Brief(ly): These are not major changes, but they reflect a level of regulatory activity that should remind compliance professionals to keep their pencils sharp (do compliance professionals still use pencils?). The rare state exemptions from TILA do not have a long history of being materially more effective at consumer protection than simply relying on the federal statute, largely because the states effectively copied the federal statute and corresponding regulation into state law. Required maintenance and upkeep caused a couple of states to abandon the effort and simply let federal law control, but not Massachusetts. The requirement to add a unique NMLS identifier in more documentation will allow for more loan originator accountability.

The Washington Department of Financial Institutions recently proposed amendments to the regulations implementing the Consumer Loan Act. Among other amendments, the DFI proposed to add a new section to the CLA regulations setting forth the standards the DFI will apply when determining whether a person holds, acquires, or maintains the predominant economic interest in a loan or whether the totality of the circumstances indicates that a person is the lender for purposes of the Predatory Loan Prevention Act (Senate Bill 6025), which amends the CLA.

The PLPA, which took effect on June 6, 2024, with a grace period for licensure and enforcement of unlicensed activity until October 1, 2025 (see the DFI's guidance linked here), provides: "If a loan exceeds the rate permitted under [the CLA (i.e., 25% per year)], a person is a lender making a loan subject to the requirements of [the CLA] notwithstanding the fact that the person purports to act as an agent, service provider, or in another capacity for another person that is exempt from [the CLA], if, among other things: ... (a) The person holds, acquires, or maintains, directly or indirectly, the predominant economic interest in the loan; or (b) The totality of the circumstances indicate that the person is the lender, and the transaction is structured to evade the requirements of [the CLA]." See Rev. Code Wash. § 31.04.025(3).

The proposed regulations are set for public hearing on October 14, 2025.

Amicus Brief(ly): Whatever providers may think of the thresholds for the "predominant economic interest" or the "totality of the circumstances" tests for licensing under the PLPA, Washington does us all a favor by providing details. For example, for typical non-bank participants in a bank partnership that facilitate loans made by a bank, the purchase of more than 50% of the economic or financial interest in loans originated in the program is a "predominant economic interest." Knowing that percentage allows licensing-averse non-bank providers to structure the economics of a lending program to keep licensing out of the picture. The PLPA's grace period expires this week, so it may be time to get those Washington applications in.

The California legislature recently passed Senate Bill 362, which amends the California Commercial Financing Disclosure Law. The bill restricts the use of the terms "interest" and "rate" and classifies certain violations of the CCFDL as unfair, deceptive, or abusive acts and practices under the California Consumer Financial Protection Law.

Under S.B. 362, a commercial financing provider may not use the term "interest" or the term "rate" in a manner that is likely to deceive a recipient. Use of the term "interest" or "rate" is not deceptive if the metric is an annual interest rate or annual percentage rate that is either fixed or floating for the financing period and is expressed as a margin over an index rate. The preamble to the bill (which will not be part of the law but can inform how the regulator will approach enforcement) gives the following examples of what are considered "confusing representations related to the cost of financing":

• describing the price of credit as "simple interest" when referring to a nonannual rate as opposed to a noncompounding annual rate that a reasonable person would understand "simple interest" to mean;
• describing the price of credit as an "interest rate" when describing a daily, weekly, or monthly rate and not an annual rate; and
• describing the price of credit as "X% fee rate" or "Y% factor rate," particularly when those "rates" diverge materially from the APR.

An additional disclosure requirement applies after a provider has extended a specific offer of commercial financing to a recipient. Specifically, whenever the provider states a charge, pricing metric, or financing amount relating to that specific offer, the provider must also state the offer's annual percentage rate, using the term "annual percentage rate" or "APR." This requirement may require funders to change operations, including verbally disclosing the APR during communications such as a funding call.

If Governor Gavin Newsom does not either sign or veto the bill by October 12, 2025, it will become law without his signature. If the bill becomes law, then it will take effect on January 1, 2026.

Amicus Brief(ly): Compliance nerds everywhere are cheering this California change because it requires us to be a little less lazy about how we talk about credit products. We tend to gravitate toward common terms like "interest" and "loan" when discussing alternative products that are not loans - and even (or especially) in the case of not-so-alternative credit products like retail installment sale contracts. Functionally and even technically, finance or service charges and other pricing metrics that a provider calculates against a balance for some period operate like "interest" on a loan. But the differences in terminology are important because they are intentional and are specifically designed to distinguish credit products that are not loans from "loans." Using the right terms for a product in policies, procedures, and communications is far more effective when fighting claims that a product should be characterized as a "loan" and subject to usury and other laws than using the term "loan" and having to argue that you did not mean it.

On September 22, California Governor Gavin Newsom signed Assembly Bill 238, titled the "Mortgage Forbearance Act." The Act is effective immediately.

The new law authorizes a borrower who is experiencing financial hardship that prevents the borrower from making timely payments on a residential mortgage loan due to the wildfires that took place in January 2025 to request forbearance on the loan. If a borrower requests forbearance, a mortgage servicer must offer mortgage payment forbearance for a period of up to an initial 90 days, which can be extended at the request of the borrower in 90-day increments, up to a maximum forbearance period of 12 months. The borrower must be notified by the mortgage servicer within 10 business days whether the request for forbearance has been approved. The mortgage servicer is prohibited from assessing any late fees to the borrower's account or charging a default rate of interest during the forbearance period.

The law provides that the forbearance period includes any period of forbearance related to the wildfire disaster that the mortgage servicer has provided to the borrower before the effective date of the Act.

The new law also requires mortgage servicers to report the credit obligations of borrowers under disaster-related forbearance plans in compliance with the federal Fair Credit Reporting Act. For accounts granted disaster-related mortgage payment relief, the law prohibits mortgage servicers from furnishing information during the forbearance period indicating that the payments are in forbearance and requires them to: (1) report the credit obligation or account as current, or (2) if the borrower was delinquent before the disaster-related forbearance plan, (a) maintain the delinquent status during the forbearance period, or (b) if the borrower brings the account current during the forbearance period, report the account as current.

The law prohibits a mortgage servicer from initiating any judicial or nonjudicial foreclosure process, moving for a foreclosure judgment or order of sale, or executing a foreclosure-related eviction or foreclosure during the forbearance period.

Amicus Brief(ly): That took a while. Nine months after the big fires in California, borrowers are catching a break with the potential for at least a 90-day forbearance that comes with a prohibition on foreclosure during that period. Mortgage servicers have been working with consumers since the wildfires occurred, implementing the typical hardship programs servicers deploy after natural disasters or other emergencies, and some of those programs will have run their course soon if they have not expired already. This legislative step requires consumers to demonstrate that their financial hardship is attributable to the fires and requires statements under penalty of perjury to avoid fraud. Affected consumers will be grateful for the potential reprieve in making their mortgage payments as they continue to deal with the fallout from the fires last January.

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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.