Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this issue, we

Mayer Brown is publishing its first edition of Licensing Link, a new periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.

In this

Small business financers and brokers active in New York must comply with New York’s Commercial Finance Disclosure Law (“CFDL”) by August 1, 2023, according to the new effective date the New York Department of Financial Services provided in final administrative rules on February 1.

In addition to the new effective date, the final rules include

State-chartered banks lending to Iowa residents will want to take note of an Assurance of Discontinuance entered into in December between the State of Iowa and an out-of-state bank to settle claims that the bank charged usurious rates of interest to Iowa consumers. The settlement also highlights the Iowa Attorney General’s interpretation of the state’s

New York Governor Kathy Hochul signed the Foreclosure Abuse Prevention Act on December 30, 2022. The new law, which takes effect immediately, threatens to significantly constrain the ability of lenders, servicers, and investors to foreclose and may jeopardize their recovery, including with regard to pending foreclosure actions.

Read more in Mayer Brown’s Legal Update.

Pay close attention to New Jersey Bill A793, the Community Wealth Preservation Act, which the New Jersey legislature passed at the end of June and sent to the Governor for consideration.  While I’m not steeped in the intricacies of state foreclosure laws, it appears the Act would cap a holder’s bid at foreclosure sale

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

In February 2022, a legal opinion issued by the California Department of Financial Protection and Innovation (“DFPI”) concluded that employer-provided earned wage access (“EWA”) transactions are not loans under the California Financing Law and California Deferred Deposit Transaction Law.  The DFPI’s legal opinion stands to provide significant clarity to the EWA industry and should encourage the continued adoption of earned wage access as a solution to employees’ needs for low-cost temporary liquidity.

Before diving into the DFPI legal opinion, we briefly remind readers of the basic structure of EWA programs.  Earned wage access is a service that allows workers to obtain wages that they have earned, but have not yet been paid, prior to the worker’s regularly scheduled payday.  Although the exact structure of each program differs, EWA programs generally fall into two broad categories:

  • Direct To Consumer Models are offered directly to workers, without the employer’s involvement.  Any eligible worker can access EWA from a direct to consumer model, as the worker’s employer offering the service is not a prerequisite.  Because direct to consumer models do not integrate with employers, recoupment of EWA advances is typically effected through a single-use automated clearinghouse transaction from the employee’s personal bank account on the employee’s payday.
  • Employer Integrated Models involve the EWA provider entering into a contract with an employer to offer the service as an employee benefit to the employer’s employees.  An EWA provider using the employer integrated model may integrate with the employer’s payroll and time card systems to receive data about the amount of earned wages that an employee has accrued as of a certain date.  Employer integrated programs typically fund an earned wage advance through the employer’s payroll system and then recoup the advance through a payroll deduction facilitated by the employer on the employee’s next regular payday.

Some EWA providers charge fees for use of the service, which are typically either flat transaction fees or “participation” fees for use of the program.

As an innovative and emerging product, EWA programs present novel financial regulatory issues.  The most significant of these issues is the status of an EWA transaction as a non-credit transaction.
Continue Reading California DFPI Affirms Employer-Integrated Earned Wage Access Is Not a Loan

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,