On April 5, Maine Governor Paul LePage signed into law LD 1389, which expedites foreclosures on properties determined by a court to be abandoned by shortening the redemption period from 90 to 45 days. The bill also shortens the period of time within which an action can be filed to challenge the validity of a governmental taking of real property for nonpayment of property taxes from 15 to five years after the expiration of the redemption period. This shorter challenge period applies where the tax lien is recorded after October 13, 2014. The law takes effect 90 days after the legislative session adjourns.
On April 10, Kentucky Governor Steve Beshear signed into law HB 232 to establish a data breach notice requirement. The new law requires any person or business that operates in the state to provide written or electronic notice to affected state residents of any breach of a security system that exposes unencrypted personally identifiable information. The law requires notification “in the most expedient time possible and without unreasonable delay” upon discovery or notification of a breach, and permits certain substitute forms of notice if the person or business subject to the breach demonstrates that the notice exceeds certain cost or scope thresholds. The law does not require separate notice to the state attorney general, nor does it apply to entities subject to Title V of the Gramm-Leach-Bliley Act or HIPPA. The bill takes effect July 14, 2014. Kentucky’s adoption of a data breach notice law leaves only three states—Alabama, New Mexico, and South Dakota—without such a statutory requirement.
On April 4, Tennessee Governor Bill Haslam signed into law SB 1486, which authorizes registered industrial banks, industrial loan and thrift companies, and industrial investment companies to charge a convenience fee to any borrower making payment by credit card, debit card, electronic funds transfer, electronic check, or other electronic means in order to offset actual costs incurred by the lender. The convenience fees cannot exceed the actual costs incurred by the registrant for each payment type, or the average of the actual cost incurred for the various types of electronic payments accepted by the registrant. Registrants who elect to charge a convenience fee must also allow payment by non-electronic means—check, cash, or money order—without the imposition of a convenience fee. The changes take effect July 1, 2014.
On March 31, Washington Governor Jay Inslee signed into law HB 2723, which amends the foreclosure mediation process established by the 2011 Foreclosure Fairness Act. The bill, which takes effect June 12, 2014, amends the meet-and-confer process to (i) require that notice of pre-foreclosure options a beneficiary or authorized agent is required to send to the borrower must be sent by first-class registered or certified mail, return receipt requested; (ii) require that in-person meetings must be held in the county where the property is located, unless the parties agree otherwise; and (iii) amend the “foreclosure loss mitigation form” to add options for describing or explaining meet-and-confer efforts. The bill also alters mediation provisions to (i) allow mediation upon agreement of the parties, even if the borrower failed to elect mediation in the required timeframe; (ii) require beneficiaries to disclose any investor restriction that prohibits the beneficiary from implementing a modification and not just the portion or excerpt of a pooling and servicing agreement that includes such a prohibition; and (iii) require mediation to take place in the county where the property is located.
On March 26, Iowa Governor Terry Branstad signed into law HF 2324, which revises the state’s mortgage and consumer credit statutes to align with federal law. The bill amends the current $25,000 loan ceiling applicable to certain consumer credit transactions and replaces it with a “threshold amount” that incorporates by reference limits established under federal Truth in Lending Act. The bill also adopts the federal definition of “points and fees” for mortgage transactions and provides that if a loan is extended with points and fees higher than those specified under federal law the loan is subject to state law, including monetary limits on loan origination or processing and broker fees, a limit on the types of permissible lender charges, and a limit on fees relating to payment of interest reduction fees in exchange for a lower rate of interest. The bill also amends the definition of “finance charge” in the state’s consumer credit code to include an initial charge imposed by a financial institution for an overdrawn account. Finally, the bill adds a new section that allows banks to include in their consumer credit contracts over $25,000 a provision that a consumer is responsible for reasonable attorney fees if the bank is the prevailing party in a lawsuit arising from the transaction. The changes take effect July 1, 2014.
On April 7, Illinois Attorney General (AG) Lisa Madigan sued a payday loan lead generator to enforce a 2012 cease and desist order issued by the state’s Department of Financial and Professional Regulation. The regulator and the AG assert that the state’s Payday Loan Reform Act (PLRA), which broadly defines “lender” to include “any person or entity . . . that . . . arranges a payday loan for a third party, or acts as an agent for a third party in making a payday loan, regardless of whether approval, acceptance, or ratification by the third party is necessary to create a legal obligation for the third party,” required the lead generator to obtain a license before operating in Illinois. The AG claims that the lead generator violated the state’s Consumer Fraud and Deceptive Business Practices Act by offering and arranging payday loans in knowing violation of the PLRA’s licensing and other requirements. The suit also alleges that the lead generator knowingly matched Illinois consumers with unlicensed members of the generator’s payday lender network. The AG is seeking a permanent injunction and a $50,000 civil penalty. On the same day, the AG also announced it filed suits against four online payday lenders for failing to obtain a state license, making payday loans with interest rates exceeding state usury caps, and otherwise violating state payday loan limitations. Those suits ask the court to permanently enjoin the lenders from operating in Illinois and declare all existing payday loan contracts entered into by those lenders null and void, with full restitution to borrowers.
On April 3, Iowa Governor Terry Branstad signed SF 2259, which amends the state’s data breach notice law to add a requirement that businesses that experience a data breach notify the state attorney general’s office within five days of discovering or being notified of the breach. Previously, state law required that businesses notify only consumers after discovery or notification. Several existing exemptions to the consumer notice requirement, including for businesses subject to Title V of the Gramm-Leach-Bliley Act, also apply to the attorney general notice requirement. SF 2259 also amends (i) the definition of “breach of security” to cover personal information maintained in any medium that was transferred to that medium from computerized form, e.g., printed records originally maintained in electronic form; and (ii) the definition of “personal information” to include encrypted, redacted, or otherwise protected data. The changes take effect July 1, 2014.
On April 1, Utah enacted SB 332, which amends the Utah Residential Mortgage Practices and Licensing Act, the Real Estate Licensing and Practices Act, and the Real Estate Appraiser Licensing and Certification Act to establish a procedure for the voluntary surrender of a license issued under each of those acts. The bill clarifies the scope of what it means to be engaged in the business of residential mortgage loans under the Utah Residential Mortgage Practices and Licensing Act, and includes numerous other amendments to the other two Acts. The changes take effect May 13 2014.
On March 31, South Dakota enacted SB 68, becoming the 30th jurisdiction to adopt the Uniform Real Property Electronic Recording Act (URPERA) with the enactment. URPERA, promulgated by the Uniform Law Commission in 2004, gives county clerks and recorders the legal authority to prepare for electronic recording of real property instruments. Among other things, SB 68 (i) establishes that, for any law requiring that a document be an original as a condition for recording, an electronic document satisfying certain specific conditions will qualify; (ii) establishes an electronic recording commission to adopt uniform standards to implement procedures for recording electronic documents with the register of deeds; and (iii) requires the register of deeds to comply with standards set by the commission, including accepting electronic documents for recording. The law takes effect July 1, 2014.
On March 26, Idaho enacted SB 1314, which, among other things, prohibits payday lenders from making a loan that exceeds 25% of the borrower’s gross monthly income at the time the loan is made. The bill provides a safe harbor for lenders if the borrower presents evidence of gross monthly income or represents in writing that the payday loan does not exceed 25% of the borrower’s gross monthly income. The bill also requires lenders to, upon request, allow borrowers to enter into extended repayment plans. Lenders cannot charge any additional fees related to such plans, but lenders are not required to enter into an extended plan with a borrower more than one time in any 12-month period. Finally, the bill requires specific written disclosures and prohibits payday lenders from presenting a borrower’s check to a depository institution more than two times. The changes take effect July 1, 2014.
On April 3, the Texas Department of Banking issued a supervisory memorandum on the regulatory treatment of virtual currencies under the Texas Money Services Act. The memorandum states that money transmission licensing determinations regarding transactions with decentralized virtual currencies such as Bitcoin, referred to by the Banking Department as cryptocurrencies, turn on whether cryptocurrencies should be considered “money or monetary value” under the Money Services Act. The memorandum concludes that cryptocurrencies currently cannot be considered “money or monetary value” because they are not currencies as that word is defined in the Money Services Act, and a unit of cryptocurrency is not a claim under the Act. However, when a cryptocurrency transaction includes sovereign currency, it may constitute money transmission depending on how the sovereign currency is handled. The memorandum provides examples of common types of transactions involving cryptocurrencies and whether they would constitute money transmission subject to state licensing requirements. For example, the Department states that exchanging cryptocurrency for sovereign currency through a third party exchanger is generally money transmission, and that exchange of cryptocurrency for sovereign currency through an automated machine is usually but not always money transmission. The Department advises that cryptocurrency businesses conducting money transmission must comply with state licensing requirements. The Department further advises that (i) a money transmitter that conducts virtual currency transactions is subject to a $500,000 minimum net worth requirement; (ii) a license holder may not include virtual currency assets in calculations for its permissible investments; and (iii) license applicants who handle virtual currencies in the course of their money transmission activities must submit a current third party security audit of their relevant computer systems.
On April 1, New York Attorney General (AG) Schneiderman announced that 10 repossession companies agreed to discontinue repossessing vehicles at the request of title loan companies. The AG states that out-of-state or online lenders offer title loans, which he characterizes as a type of payday loan with high interest rates, to New Yorkers without obtaining a New York license, and offer loans in excess of the 16% interest rate cap applicable to unlicensed lenders. In September 2013, the AG settled with five companies that collected debts on allegedly illegal payday loans, part of a broader effort by New York authorities to address alleged usurious online lending.
On March 29, Utah Governor Gary Herbert signed HB 127, which amends state law to require deferred deposit lenders, i.e. payday lenders, to assess a borrower’s ability to repay the loan “in the ordinary course, which may include rollovers or extended payment plans” and to obtain a signed acknowledgment from a borrower that the person has the ability to repay the loan. The legislation states that a lender is in compliance with the ability to repay requirement if, at the time of the initial period of the deferred deposit loan transaction, the lender obtains (i) a consumer report; (ii) written proof or verification of income from the person seeking the deferred deposit loan; or (iii) prior repayment history with the deferred deposit loan from the records of the deferred deposit lender. In addition, if a borrower is charged 10 continuous weeks of interest or fees on a payday loan, including rollovers, then at the end of the 10-week period, the lender must allow the borrower, upon the borrower’s request, to repay the loan and rollovers under an extended payment plan that meets certain requirements. The legislation also requires a lender to provide notice of default at least 10 days before filing a civil action to collect on a deferred deposit loan.
On March 27, Washington Governor Jay Inslee signed SB 2171, which amends the Washington Service Member’s Civil Relief Act (WSCRA) to provide that a violation of the federal Servicemembers Civil Relief Act is a violation of the WSCRA and applies in proper cases in all Washington courts. The bill also provides a private right of action for servicemembers or their dependents to enforce the WSCRA, and grants the state attorney general civil litigating authority, with penalties of up to $55,000 for a first violation and up to $110,000 for each subsequent violation. The changes take effect on June 12, 2014.
On March 26, the California Department of Business Oversight issued a request for comments on proposed changes to regulations impacting money transmitters. The Department is required to amend outdated regulations that correspond to the repealed Payment Instruments Law, and establish new regulations to implement the Money Transmission Act. Specifically, the regulations under consideration include amendments to definitions, exemptions from the Money Transmission Act, license application requirements, administrative standards and procedures relating to an application for a license, tangible shareholders’ equity, consumer disclosures, and eligible securities. Comments on the proposal are due by April 26, 2014.