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After an almost two-year regulatory process, the California Department of Financial Protection and Innovation (DFPI) adopted final administrative regulations to implement the state’s 2018 commercial financing disclosure law. Most importantly, the final rules come with a long-awaited effective date: December 9, 2022. The effective date honors prior DFPI statements that a six-month window for compliance

The California State Legislature provided commercial lenders with welcome news this week when the California Senate passed Senate Bill 577 (“SB 577”).  If it is signed by the governor, SB 577 will reinstate the de minimis exemption from the California Financing Law (“CFL”) for lenders making a single commercial loan of $5,000 or more in

Earlier this month, both Kentucky and Virginia enacted significant legislation related to student loan servicing. Kentucky joined the ever-growing list of states to pass legislation regulating student loan servicing activities while Virginia pared back its existing student loan servicing law.

Kentucky’s new Student Education Loan Servicing, Licensing, and Protection Act of 2022 (“KY Law”) will

On April 11, 2022, Virginia became the second US state to require providers of merchant cash advance (“MCA”) products to obtain a state regulatory license or registration—hot on the heels of Utah. With Governor Glenn Youngkin’s signing House Bill 1027 into law, companies providing “sales-based financing” in Virginia will now be required to provide up-front

On April 6, 2022, the Federal Housing Finance Agency (“FHFA”) announced that Fannie Mae and Freddie Mac will require servicers to suspend foreclosure activities for up to 60 days if the servicer has been notified that a borrower has applied for assistance from the Homeowner Assistance Fund (“HAF”). HAF was established by the American Rescue Plan Act of 2021, and the program is designed to distribute funds to states, tribes, and territories to help homeowners who have been financially impacted by the pandemic with housing-related costs. For example, among other uses, the funds may be used to reduce mortgage principal or pay arrearages so that homeowners can qualify for affordable loan modifications. The specific HAF programs available to borrowers and the required application procedures depend on the borrowers’ state or territory.

Many COVID-related borrower protections expired in 2021, including federal foreclosure moratoriums and the Consumer Financial Protection Bureau’s (“CFPB” or “Bureau”) temporary Regulation X restrictions on foreclosure initiations. However, the CFPB estimated that, as of March 1, 2022, over 700,000 borrowers remain in forbearances and are at risk of foreclosure. According to FHFA Acting Director Sandra L. Thompson, FHFA’s foreclosure suspension for borrowers who applied for HAF “will provide borrowers who need temporary mortgage assistance with additional time to be evaluated for relief through their state’s approved Homeownership Assistance Fund.”

Fannie Mae and Freddie Mac have issued guidance providing that servicers of loans sold to either entity must delay initiating any judicial or non-judicial foreclosure process, moving for a foreclosure judgment or order of sale, or executing a foreclosure sale for up to 60 days if the following criteria are met:
Continue Reading FHFA Suspends Foreclosure for Borrowers Applying for HAF Assistance

Utah has followed California and New York by enacting its own Truth in Lending-like commercial financing disclosure law, but with an additional twist—Utah’s new law has a registration requirement. On March 24, Utah Governor Spencer Cox signed SB 183 into law, with an effective date of January 1, 2023. We discuss how this new law

Marketplace lender Opportunity Financial, LLC has gone on the offensive against the California Department of Financial Protection and Innovation to protect its bank partnership program against challenge on a “true lender” theory. On March 7, 2022, OppFi filed suit against the DFPI to ask the state court to declare that FinWise Bank, a Utah-chartered bank,

Mortgage servicers should prepare for increased scrutiny of their default servicing activities.  Earlier this week, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”), along with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators, issued a statement that the agencies would resume their full supervision and enforcement of mortgage servicers, ending the flexible approach the agencies announced at the onset of the COVID-19 pandemic.  This move is consistent with the Bureau’s March 2021 rescission of similar statements issued during the pandemic that provided temporary flexibilities to financial institutions.
Continue Reading CFPB Announces Return to Mortgage Servicing Enforcement

The New York Department of Financial Services (NYDFS) has issued “pre-proposed” rules under New York’s commercial financing disclosure law that was enacted at the end of 2020. The pre-proposed rules are 45 pages long and were posted on the NYDFS website on September 21. Comments on the pre-proposed rules are due by October 1. There will be a longer comment period once a proposed rule is published in the State Register. The NYDFS aims to finalize the rules before the law takes effect on January 1, 2022.

The pre-proposed rules give the state’s commercial financing disclosure law, colloquially known as the “NY TILA,” the formal name of the “Commercial Finance Disclosure Law (CFDL).” The pre-proposed rules also define terms and provide detailed requirements for the content and formatting of the CFDL-required disclosures. The proposed definitions borrow heavily from, but do not exactly mirror, those under the California Department of Financial Protection and Innovation’s (DPFI) proposed rules to implement its own commercial financing disclosure law. The lack of uniformity between the two states’ regulations will complicate compliance for commercial financers subject to both laws. Where the NYDFS rules borrow most substantially from the California rules, the NYDFS tends to draw from the prior version of those rules, before the DFPI’s second round of modifications issued August 9, 2021. This raises the question of whether the NYDFS will incorporate California’s latest modifications when the NYDFS issues the next version of its proposed rules.
Continue Reading NYDFS Issues Pre-Proposed Rules to Implement New Commercial Financing Disclosure Law

The California Department of Financial Protection and Innovation (“DFPI” or the “Department”) will have no shortage of applications to process before year end.  Last week, the DFPI reminded industry participants that, beginning on September 1, 2021, it will make available through the Nationwide Multistate Licensing System (“NMLS”) the application needed to apply for a license under the Debt Collection Licensing Act (“DCLA”).  Passed in September of 2020, the DCLA (SB 908) requires any person engaged in the business of debt collection, which includes debt buyers, to apply for a license on or before Friday, December 31, 2021, in order to continue to operate as a debt collector in California when the DCLA goes into effect on January 1, 2022.  Failure to submit an application by the December 31st application deadline will preclude a debt collector from lawfully operating as a debt collector until the issuance of a license (Fin. Code §§ 100000.5, 100001(a)).  For more details,  the DFPI has published a series of Frequently Asked Questions (FAQs) at:  Debt Collectors: Frequently Asked Questions | The Department of Financial Protection and Innovation (ca.gov).

Also, nearly two years after publishing a Notice or Proposed Rulemaking that will require all California Financing Law (“CFL”) licenses to be issued through the NMLS, and one day prior to an extended NMLS maintenance period (covered in our prior blog post), the DFPI announced that existing  CFL licensees are now eligible to begin transitioning their licenses to the NMLS.   Oddly, the announcement was made two days prior to the July 22nd end date for the comment period relating to the most recently proposed modifications to the proposed rules (see  Fifth Notice of Modifications to Proposed Regulations).  Upon final approval of  the regulations, it is expected that all CFL licenses will be issued through the NMLS by December 31, 2021.  This change may not be welcome for entities that do not presently have an NMLS record because establishing a Company Record through the NMLS to transition an existing CFL license onto the system is a separate process that takes time and effort.

Given the typical processing times (usually 90 days) for CFL license applications and the upcoming NMLS renewal period that begins on November 1, 2021, CFL licensees that do not have an existing NMLS Company Record should consider starting the transition process sooner rather than later. 
Continue Reading California Licensing Update