Last Week, This Morning

June 15, 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.

On June 8, the Consumer Financial Protection Bureau published a statement concerning creditors' obligations under the Truth in Lending Act and Regulation Z to assess consumers' ability to repay before extending a residential mortgage loan or issuing open-end credit products, such as credit cards, and the consideration of a consumer's immigration status in making that determination. When assessing a consumer's ability to repay, a creditor considers the consumer's current or reasonably expected income or assets. According to the CFPB, "in evaluating a consumer's ability to repay based on expected employment income, creditors need only consider repayment ability based on what is known when the decision to extend credit is made or the credit is issued." "However, if the information the creditor considers when the decision to extend credit is made or the credit is issued indicates that there will be a change in repayment ability after consummation, a creditor must consider that information in order to have reasonably assessed a borrower's ability to repay."

The CFPB's guidance "remind[s] creditors that, when determining repayment ability, creditors relying on an individual's income derived from U.S.-based employment are permitted - and may, under certain facts and circumstances, be obligated - to consider information that bears on the consumer's underlying and continuing ability to earn income when residency in the United States is a necessary component of such employment. Where a change 'cannot be reasonably anticipated' from the application and relevant records, the change need not be considered. The obligation arises if documentation in the consumer's application or other records indicates that the consumer's repayment ability will change on account of their immigration status. In such a circumstance, a creditor must consider that information, just as they must consider anything else in the application or records at or before consummation indicating that there will be a change in a consumer's repayment ability after consummation. A failure to do so would overlook key information regarding the consumer's income, and may risk the creditor failing to reasonably assess the consumer's ability to repay the credit sought."

The CFPB notes that "there are a wide variety of lawful immigration statuses in the United States. Assessing how each status might bear on a lender's reasonable expectation that a consumer has the ability to repay an obligation with U.S.-based employment income is varied, and it cannot be assumed that consumers with different lawful statuses have identical abilities to repay. Accordingly, the Bureau cannot, and does not, provide a comprehensive analysis of variations in immigration status and the consequent reasonable expectations as to a consumer's ability to repay a loan through expected income from U.S.-based employment. Rather, the Bureau reminds creditors that future changes in borrower income must be considered under Regulation Z in the ability-to-repay analysis. Regulation Z enables lenders to make these judgments by affirming their ability to lawfully consider the consumer's immigration status, lawful presence, authorization to work, and other factors that may indicate risk of removal insofar as it bears on their current or reasonably expected income from U.S.-based employment."

Amicus Brief(ly): We understand that the CFPB's messaging with this statement is still another reminder of the administration's hardline stance on immigration but wonder (as we have before in similar contexts) whether there is anything for creditors to do in light of the statement. Likely not because credit underwriting policies and procedures focus on likelihood of repayment, and income is a critically important feature when analyzing an applicant's prospects for repaying debts. It's good to know what the CFPB is thinking on any subject in its purview, so we should welcome the statement, but we are fairly certain that this statement will not trigger strong (if any) reaction from creditors vis-à-vis their underwriting procedures.

On June 8, the National Credit Union Administration published an interim final rule to clarify federal credit unions' power to charge non-interest charges and fees, including interchange fees. An interchange fee is generally a fee paid to an issuer bank as part of a payment card transaction. The interim final rule also clarifies that federal credit unions may charge non-interest charges and fees even when such charges and fees are set by or in consultation with third parties.

The NCUA's interim final rule is intended to preempt any state law affecting the non-interest charges and fees related to payment card services and is specifically in response to Illinois's Interchange Fee Prohibition Act. The IFPA, enacted in 2024, prohibits card issuer banks, card networks, and acquirer banks from charging or receiving interchange fees on the tax and gratuity portions of payment card transactions and restricts the use of payment card transaction data. However, a federal district court recently issued a permanent injunction against enforcement of most of the IFPA after the Office of the Comptroller of the Currency issued its interim final rule in April that clarifies that a national bank's power under the National Bank Act to charge non-interest charges and fees includes the power to charge and collect interchange fees for processing credit and debit card transactions, regardless of whether those fees are set by the bank or a third party.

The NCUA's interim final rule is effective on June 30, 2026. Comments on the interim final rule must be received by July 9, 2026.

Amicus Brief(ly): The NCUA took a page out of the OCC's book with this interim final rule, asserting a preemption position with regard to the Illinois interchange fee law. As we mentioned in the context of the OCC's rulemaking, in the aftermath of the U.S. Supreme Court's Loper-Bright decision from two short years ago, courts are not compelled to defer to the agencies' interpretations in these rules the way they once were under the Chevron "arbitrary and capricious" standard. We have reviewed the rulemakings, and they are sensible, so we hope the courts will agree (assuming there is litigation challenging the NCUA rule, which seems like a foregone conclusion these days). Readers should note that the litigation that is pending over the IFPA is moving through the federal courts in Illinois but does not involve the OCC or its rule. This is not over, but, for now, the NCUA has aligned itself with the OCC and written a rule taking a preemption stance against the IFPA.

During the 2025 legislative session, Maryland's General Assembly passed the Maryland Secondary Market Stability Act of 2025. As passed, the SMSA included provisions codified as Md. Code Ann., Financial Institutions Article § 11-102, that exempted from Maryland's licensing requirement entities that acquire mortgage and installment loans by assignment but do not originate, service, or collect these loans on their own behalf. The General Assembly believed that these provisions had been struck from the final version of the bill as passed. There were two versions of the legislation - Senate Bill 1026 and House Bill 1516. Section 11-102 was not deleted in S.B. 1026 but was deleted in H.B. 1516. Westlaw relied on the version in S.B. 1026 instead of H.B. 1516 (the last and accurate version).

Section 11-102 provided that the Consumer Credit Title of the Financial Institutions Article, which contains the licensing requirements, did not apply to a person that acquires or is assigned in whole or in part:

• a mortgage, if the person does not otherwise make mortgage loans;
• a mortgage loan, if the person does not otherwise engage in the mortgage lending business; or
• an installment loan, if the person relies on another person to service or collect on the installment loan and does not otherwise make installment loans.

During the 2026 legislative session, the Maryland General Assembly passed and Maryland Governor Wes Moore signed S.B. 784, which corrects this error and deletes Section 11-102. On June 8, in an unusual but welcome move, the Maryland Office of Financial Regulation announced that "it will not take enforcement action against persons who, in good faith, had relied upon the provisions of FI § 11-102 subsequent to its publication in determining that they were not subject to licensing requirements so long as such persons obtain any required license by July 1, 2026."

Amicus Brief(ly): The enforcement reprieve will be over before we know it. Holders of these kinds of loans have about two weeks to get their license applications filed and approved (note that the OFR's announcement says that persons must "obtain" the license by July 1). It is not clear how license applicants may have to prove that they relied "in good faith" on the apparent exemptions when they did not previously apply for the licenses. But that concern is secondary - the primary concern is getting applications in as soon as possible. Fortunately, businesses that buy and hold mortgage loans and installment loans need to have licenses in a number of states and should have the material necessary to complete the Maryland license application(s) close at hand.

The Illinois legislature recently passed Senate Bill 3561, which creates the Buy-Now-Pay-Later Loan Consumer Protection Act, by unanimous vote in both the House and Senate. The bill now awaits Governor JB Pritzker's approval and, upon becoming law, would require compliance by January 1, 2028, or any later date established by rule by the Illinois Department of Financial and Professional Regulation.

The Act defines a "buy-now-pay-later loan" ("BNPL") as closed-end credit provided to a consumer at the time of a transaction in connection with the consumer's particular purchase of goods or services that: (1) is payable in four or fewer installments; or (2) has a term of 120 days or less. The bill clarifies that BNPL may or may not include interest or finance charges. BNPL does not include credit where the creditor is the seller of goods or services, unless pursuant to an agreement where, at the consumer's request, the creditor purchases specific goods or services from a seller and resells the specific goods or services to the consumer on closed-end credit.

The Act requires any person engaged in the business of BNPL, buying a whole or partial interest in BNPL, arranging BNPL for a third party, acting as an agent for a third party in making BNPL to a consumer, or servicing BNPL to be licensed. The Act exempts merchants or merchant platforms that make BNPL available to consumers through an agreement with a licensed BNPL lender (or a person exempt from licensing) if the merchant or platform does not originate, underwrite, service, or hold an ownership interest in the loan. The Act also exempts a person who acquires or holds a partial interest in a loan as a passive investor but does not otherwise originate, underwrite, or service the loan or control the servicing of the loan. Lenders licensed under the state's Consumer Installment Loan Act, Sales Finance Agency Act, or Collection Agency Act are exempt from licensing but must comply with the rest of the Act.

Banks, savings banks, savings and loan associations, credit unions, and insurance companies are exempt from the Act. However, the Act limits the exemption when these institutions partner with non-depository institutions to offer BNPL by clarifying that the party with the predominant economic interest in the BNPL in such partnerships is not exempt. Further, the Act clarifies that the exemption does not extend to any person who markets, brokers, arranges, or facilitates the BNPL and holds the right, requirement, or first right of refusal to purchase the BNPL or receivables or interest in the BNPL. The Act also limits the exemption where the totality of the circumstances indicates that the non-depository institution is the lender and the transaction is structured to evade the requirements of the law. Circumstances that would support such a finding include when: (1) the person indemnifies, insures, or protects an exempt person or entity for any costs or risks related to the BNPL; (2) the person predominantly designs, controls, or operates the BNPL program; or (3) the person purports to act as an agent, service provider, or in another capacity for a person exempt from the Act while acting directly as a lender in other states.

In addition to requiring licensing, the Act requires each BNPL lender to perform risk-based underwriting before providing BNPL to a consumer. The underwriting must, at a minimum, provide an assessment of the outstanding loans taken out by the consumer from the lender. The lender must also consider the ability of the consumer to repay the BNPL in the time and manner provided in the BNPL contract. The lender must disclose to the consumer the factors the lender considers in the underwriting process in a clear and conspicuous manner (though the lender is not required to disclose proprietary underwriting models, anti-fraud criteria, or trade secrets to the public).

The Act also includes various additional consumer protections, including disclosure requirements concerning, for example, how to file a complaint with the DFPR and the various terms of the BNPL. The Act also prohibits: (1) requiring automatic payments; (2) charging fees for those who elect automatic payments and subsequently cancel their election; (3) requiring payment by credit card; (4) debiting a consumer's account if the creditor has been notified there are insufficient funds or has reason to believe there are insufficient funds without seeking additional, express approval from the consumer; (5) debiting an ACH payment more than twice; (6) imposing fees for paying off BNPL or for refinancing before full repayment; (7) accepting tips; or (8) charging expedited payment fees.

A BNPL made by a lender not licensed or exempt is null and void, and the lender has no right to collect or receive any principal, fees, interest, or charges. A violation of the Act is a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act.

Amicus Brief(ly): That last part is the biggest news out of this Illinois bill - unlicensed activity will cost a provider all principal, interest, and fees, and violations of the law are violations of the state's CFDBPA. That's a lot. There are other state laws with similarly draconian remedies for violations, so this is not unheard of. BNPL providers should spend some time with this bill because it covers a lot of ground. For example, the bank exemption is useful for banks in the BNPL space with their proprietary products, but bank products that are part of partnership arrangements where a non-bank holds the predominant economic interest in the transaction will be subject to the law on its face. The terms of permissible BNPL products under this bill are restrictive, to the point where providers may decide not to offer them to Illinois consumers, especially in light of the potential penalties for noncompliance.

On June 8, New York Attorney General Letitia James sued an online arbitration platform and its founders, alleging that the defendants fraudulently presented the platform as a "neutral," "independent," and "impartial" arbitration forum for resolving disputes while "secretly working with the merchant cash advance (MCA) industry to stack the debt against small businesses." The AG's complaint alleges that the arbitration platform was created in coordination with an MCA company and that the MCA company wrote the arbitration process rules to favor the MCA industry. After the founding of the arbitration platform, MCA companies put arbitration clauses in their MCA agreements requiring all disputes with merchants to be resolved through arbitration before the arbitration platform. According to the AG, the arbitration platform's docket consisted almost entirely of filings by MCA companies to enforce MCA agreements with small businesses.

Specifically, the AG's complaint alleged that the platform's arbitration rules were "designed to produce quick default awards in favor of [the MCA companies]. [The defendants] trained their so-called arbitrators to produce the desired 'rapid' rulings enforcing MCA agreements against merchants, even providing 'sample' awards that uniformly rejected all merchant defenses and awarded MCA companies every penny that they requested. [The defendants] aggressively marketed [the arbitration platform] directly to MCA companies at industry conferences but did not similarly market it to merchants or small businesses." According to the complaint, "[the platform's] arbitrations almost always resulted in a default award for the MCA company claimant. In the rare matters in which merchants did manage to timely respond, [the platform's] arbitrators still ruled overwhelmingly in favor of MCA companies, often mimicking verbatim the 'sample' awards provided to them. In fact, during [the platform's] first three years, only a single merchant prevailed in a contested matter, and that victory was entirely due to a filing error by the MCA company."

The New York AG is seeking restitution for impacted businesses, damages, and civil penalties against the defendants.

Amicus Brief(ly): The New York AG has been busy lately. This lawsuit makes some serious allegations that the parties will work out in the New York state courts. The fact that the arbitrators frequently awarded rapid rulings in favor of MCA providers is not a shock in and of itself. Just like in the case of consumer debt collection, the providers in this context likely have good grounds under their agreements to seek recourse, and the merchants that have allegedly not paid as agreed may not have viable defenses for their noncompliance. A quick judgment under those circumstances is efficient and cost-effective, as long as there has been an opportunity for the merchants to be heard. But the AG alleges more nefarious behavior as well, putting the onus on the defendants to explain the fine print, alleged "structural bias," and charges that the whole arrangement is a sham.

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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.