Last Week, This Morning

January 26, 2026

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.

The Maryland Secondary Market Stability Act of 2025 (House Bill 1516) required the creation of the Maryland Licensing Workgroup. The workgroup's primary task is to evaluate Maryland's existing licensing and registration framework for financial services providers and propose recommendations for improvement or expansion of the existing regime. The workgroup was required to report its findings and recommendations by December 31, 2025, but it concluded that it needed more time to adequately achieve its goals. As a result, the workgroup issued an interim report to the Maryland General Assembly and asked for more time (through June 30, 2026) to continue to study and evaluate the issues and provide final recommendations.

The workgroup narrowed the scope of its interim report to the following three licensing categories: collection agency licensing, consumer loan licensing, and installment loan licensing. Through its initial meetings, presentations, and expert testimony, the workgroup identified various areas within Maryland's financial licensing framework that warrant additional consideration, including:

• Nationwide Multistate Licensing System. The benefits of the NMLS as a centralized platform for non-depository licensing.
• State Examination System. The benefits of the SES as a multistate supervisory tool for non-depository examinations.
• State Collection Agency Licensing Board. The structure and operation of the board, including how its meeting-based licensing process interfaces with Office of Financial Regulation staff review.
• Consumer Loan vs. Installment Loan Licensing. The interaction between these statutes and questions regarding statutory clarity and overlap.
• Indirect Auto Financing. One workgroup member suggested that the workgroup discuss whether motor vehicle dealers engaged in indirect auto financing should be licensed as creditors under the Financial Institutions Article, which the workgroup will consider in future meetings.
• Additional Topics. Other licensing and regulatory issues identified as potential areas for future investigation and discussion.

The workgroup arrived at a consensus on the following interim recommendations: continuation of workgroup meetings, continued use of the NMLS, and continued use of the SES.

Amicus Brief(ly): The workgroup seems to be on a productive track with regard to the laws it is looking at first. It is too soon to tell what it will ultimately conclude, but we hope it will find a way to simplify the approach the statutes take to licensing non-bank consumer lenders as Consumer Loan lenders or Installment Loan lenders. We appreciate clarity and hope the workgroup can get that for us. The workgroup met a couple of weeks ago and will meet again near the end of February, but we'll have to wait a while for its most meaningful output given the June 30th date for the next report. Here's hoping that it will be worth the wait.

The California Department of Financial Protection and Innovation recently entered into a consent order with a company based in the Cayman Islands that offered consumer and commercial loans to over 5,000 California residents under its crypto-backed lending program without first evaluating the borrowers' ability to repay the loans and obtaining a valid license, in violation of the California Financing Law and the California Consumer Financial Protection Law. Under the company's lending program, borrowers provide crypto assets as collateral, receive crypto assets or fiat money as loans, and make payments on the principal and interest in accordance with their loan agreements.

In addition to the allegations of unlicensed lending activities, the DFPI alleged that the company did not have specific underwriting policies in place for its loans to California residents and even allegedly touted its lack of certain underwriting procedures on its website by stating: "[T]here are no credit checks, and nothing is reported to credit agencies. Your credit score will not be affected in any way. This is one of the major benefits of using [the company]." The DFPI alleged that, before originating a loan, the company generally did not ask for or evaluate the borrower's credit history, debt, expenses, debt-to-income ratio, or documents relating to the borrower's overall financial condition and ability to make timely payments on the loan. Instead, according to the DFPI, the company required borrowers to overcollateralize their loans, which the DFPI stated is not a substitute for evaluating a borrower's ability to repay a loan.

The consent order imposes a penalty of $500,000 and requires the company to transfer all funds (including, specifically, pledged crypto assets) belonging to California residents to its U.S.-based affiliate that holds a CFL license with the DFPI.

Amicus Brief(ly): The $500,000 penalty from the DFPI is steep, but the DFPI reduced the immediate burden by allowing the company to pay it back over time. In the interim, though, the DFPI has made itself clear - it wants companies making loans within the scope of the CFL to have a license and comply with the law's provisions. The DFPI's apparent hostility to collateral-based lending derives from the CFL's requirement that licensees consider a consumer's ability to repay a debt before making a loan. And the DFPI has been clear since California adopted its Digital Assets Finance Law (effective this July 1, after a one-year reprieve from the legislature) that lenders making loans secured by digital assets must have a license in California unless exempt. In fact, at the end of 2024, the DFPI entered into a similar but smaller-scale consent order with another crypto lender, alleging many of the same facts. An important takeaway from this action and the DFPI's pursuit of other crypto lenders is that if the provider's product is a loan, the provider needs a license in California. Watch for other states to adopt a similar approach and to expand their regulation of crypto providers more generally. New York is on its way, as it recently introduced the CRYPTO Act that seeks to address money laundering through crypto.

The Consumer Protection Division of the Maryland Attorney General's Office recently entered into an Assurance of Discontinuance with a title insurance company and six affiliated joint venture companies to resolve allegations that the joint venture companies paid unlawful fees to real estate agents and brokers who were members of the joint venture companies, in exchange for the referral of consumers who purchased title insurance, in violation of the federal Real Estate Settlement Procedures Act and Maryland provisions governing real estate settlements (Real Property Code Annotated § 14-127). Both RESPA and Section 14-127 prohibit giving a thing of value in consideration for the referral of consumers for the purchase of title insurance. The AG also alleged that the violations of RESPA and Section 14-127 constituted unfair and deceptive trade practices prohibited by the Maryland Consumer Protection Act.

Under the settlement, the joint venture companies will be dissolved, and the title company is prohibited from forming any new joint venture companies with real estate agents or brokers for the purpose of making unlawful payments for referrals of consumers in connection with title insurance. The title company and the joint venture companies must also pay $850,000 in restitution to affected consumers and make a $200,000 payment to the Consumer Protection Division that may be used for consumer protection purposes, including future enforcement or consumer education.

Amicus Brief(ly): As always, it is important to note that the title company that is the subject of this settlement denied all allegations related to the RESPA Section 8 kickback provisions and Maryland's analogous law. In doing so, the company claimed that any payments from the title company to its affiliates were made in exchange for services rendered and following the delivery of required disclosures (the AOD omits the details of the denial, except it states that the company maintained that it had compliant policies and adhered to RESPA safe harbors). The anti-kickback rules under RESPA and Maryland law are not new, and they are well known to closing agents. Whatever the arrangement between the title company and its affiliates, this AOD unwinds it and requires expensive restitution payments and a fine.

On January 22, the Board of Directors of the Federal Deposit Insurance Corporation approved amendments to the agency's Guidelines for Appeals of Material Supervisory Determinations. The guidelines provide the process by which insured depository institutions may appeal material supervisory determinations made by the FDIC. Under the new guidelines, the FDIC is replacing the existing Supervision Appeals Review Committee with the Office of Supervisory Appeals, an independent, standalone office within the FDIC.

The Office of Supervisory Appeals will be the final level of review of material supervisory determinations, independent of the divisions that make supervisory determinations. The office will be staffed by reviewing officials who are hired externally and may include former government officials, former bankers, and other former industry professionals. Each panel will include at least one reviewing official with bank supervisory experience and at least one reviewing official with industry experience. The FDIC will notify institutions once the office is operational.

Amicus Brief(ly): The proof will be in the pudding, as they say, but creating an independent appeals team that does not include examination staff charged with making supervisory determinations in the first place is sensible and promising. It is not clear that the existing Supervisory Appeals Review Committee, just a few years old, was doing a bad job. Rather, the FDIC apparently wanted to clear up some confusion about what findings were appealable, restate the purpose of the appeals team, establish clear rules about the constitution of any team reviewing an appeal, and provide details about the appeals process. Having received only eight comments on its proposal, the FDIC effectively adopted the guidance as proposed.

On January 22, the Board of Directors of the Federal Deposit Insurance Corporation approved deposit insurance applications submitted by Ford Motor Company to establish Ford Credit Bank and General Motors Company to establish GM Financial Bank. Both banks will be Utah-chartered industrial banks.

The FDIC's news release states that the banks' proposed business models will focus on providing automotive financing products nationwide, primarily through the purchase of retail installment sales contracts from independent dealers.

An American Financial Services Association's blog post announcing this development states that, "[f]or vehicle finance companies, industrial bank charters offer a stable, federally regulated framework that enhances their ability to serve customers efficiently while maintaining strong capital and consumer protection standards. The charter enables captive finance companies to operate with greater certainty, invest in technology and service improvements, and better manage funding costs - benefits that ultimately flow to consumers in the form of better pricing and expanded credit availability."

Amicus Brief(ly): With their new bank charters, these two companies have largely, if not entirely, unburdened themselves of state sales finance company licenses and the examinations and regulatory burdens that go with them. They trade that more cumbersome licensing environment for a different, but more centralized, regulatory environment as banks subject to regulation by the FDIC and Utah's Department of Financial Institutions (which has been overseeing another 17 industrial banks). It appears from the announcement that the main focus of these "captive" banks is to continue the finance company model of buying motor vehicle retail installment sale contracts, but they will both also add deposit-taking capacity for their customers, employees and retirees, and the general public through their websites and mobile applications. The companies are on a 12-month clock to stand these new industrial banks up.

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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.