The Consumer Financial Services Committee held its monthly Zoom meeting on July 28th. Here’s a summary and a few notes on upcoming meetings and topics.
NOTE: Our next Zoom meeting will be on August 18th at 11:00 AM, when we will have a special “Q&A” opportunity with Jan Owen, Commissioner of California’s Department of Business Oversight from 2013 to 2019. Now known as the Department of Financial Protection and Innovation (DFPI), this state regulator has newly expanded oversight and enforcement powers. E-mail John Kimble at Jkimble@manatt.com with questions or topics you would like Jan to address.
- We had 11 attendees for our July 28th meeting, including several visitors. If you would like to Zoom in as a “visitor,” contact John Kimble or Mike Cardoza, our Co-Chairs, at the email or phone number below.
- Our Co-Chair Mike Cardoza introduced Nick Barthel, a plaintiff’s attorney and one of the visitors. Mike re-iterated what makes CFSC special:
- We have both consumer advocates and industry specialists who get together as friends and colleagues.
- We can affect and improve legislation. What should we fix?
- We went around the table (virtually) for topics of interest for future meetings. See below for planned topics and presentations. If you have ideas, please contact one of our Co-Chairs, using the contact information below.
- Mike Guerrero (Incoming Co-Chair) then began with our official presentation and discussed “point of sale” (POS) financing business practices and regulatory compliance issues.
- POS allows a consumer to “buy now and pay later.” Mike started with a historical review that compared current POS programs to older “time-price” usury exemptions.
- Mike covered POS compliance issues when assessed through the lenses of: (a) laws governing loans and credit sales; (b) state licensing issues; (c) the DFPI’s actions in this space.
- Mike noted that there are 50-state licensing questions that should be examined in a POS program.
- There are also lingering compliance issues that should not be overlooked when building a POS program. Not all of these apply, since the patchwork of laws addressing consumer credit have different scoping rules. But at the least, one should consider whether one or more of the following apply to a program: (a) FTC Holder in Due Course Rule; (b) FTC cooling off and credit practices rules (including UDAP); (c) CCFPL UDAAP compliance; (d) Other Federal Consumer Protection laws (TILA, FCRA, ECOA, EFTA and others).
- Ted Kitada reminded us that private network rules such as those governing Automated Clearing House entries may also be a compliance duty if those networks are used to process payments.
- Mike spent quite a bit of time talking about “bank partner” programs and the unique issues they may raise, including “valid when made” as a usury issue when consumer obligations are sold to a third party.
- We planned for our upcoming meetings:
- August 18: A special “Q&A” with Jan Owen, Senior Advisor at Manatt, Phelps & Phillips. As noted above, Jan is the former Commissioner of the California DFPI (at the time, named “Department of Business Oversight”). Jan will provide insights into regulatory issues likely to be of concern to providers of consumer financial services, including the migration of the CFL license to NMLS and the risks and rewards of bank partnership programs. EMAIL YOUR QUESTIONS TO JOHN KIMBLE at firstname.lastname@example.org.
- September 15: Damier Xandrine of Marqeta will present on cybercurrencies, digital tokens and the evolving world of blockchain technology.
- October 20: Tricia Engelhart of Aldrich & Bonnefin will present on open-end credit and credit cards.
- November – likely Nov. 17, and speaker not assigned – but the topic looks to be student Income Share Agreements (“ISAs”). ISAs, offered by universities, colleges and others to finance post-secondary education and training, commit the student to a revenue sharing program if he or she has income above specified levels (but no obligation to repay otherwise).
Joining CFSC is simple, and you can do it online. We are actively looking for new members, so consider clicking BLS Standing Committees to apply and become active and aware in how Consumer Law is developing. Our members come from consumer advocacy firms and from those representing financial institutions – BOTH SIDES, in other words. Join us in a civilized and informed discussion of the issues you face today. If you are interested, feel free to contact one of us.