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 discuss the licensing trends and developments that consumer financial services providers should be anticipating in 2025, and address important announcements by the Maryland Office of Financial Regulation (“OFR”) in response to market concerns regarding licensing guidance for assignees of certain residential mortgage loans and installment loans released by the OFR in January. Check it out and subscribe to receive future issues directly.

Mayer Brown serves as a trusted advisor to our clients in the consumer financial services industry, a role that we cherish and constantly strive to improve.

In this report, we provide a snapshot of our 2024 consumer financial services representative engagements and how we helped industry participants navigate the terrain. It also provides links to thought leadership pieces that were developed throughout the year for additional information on topics. These representative engagements demonstrate how Mayer Brown helps clients navigate the complex world of consumer financial services. The report covers:

  • Regulatory, Compliance & Licensing
  • Enforcement & Investigations
  • Litigation
  • Financial Services M&A
  • Securitization & Structured Finance
  • Fintech & Payments
  • Cybersecurity & Data Privacy

The last page of the report also includes a collection of links to related Mayer Brown resources and publications. Access the report here.

There were positive developments last week in connection with the recently announced licensing requirements for assignees of residential mortgage loans and installment loans in Maryland — a proposed legislative fix, an extended enforcement deadline, and a clarifying exception from the requirement.

As we discussed in our Legal Update last month, the Maryland Office of Financial Regulation (OFR) asserted that assignees of residential mortgage loans — including certain “passive trusts” that acquire or obtain assignments of residential mortgage loans in Maryland — must become licensed in Maryland prior to April 10, 2025, unless the assignee is expressly exempt under Maryland law. The guidance reflected the OFR’s understanding of an April 2024 decision by the Appellate Court of Maryland in Estate of Brown v. Ward that any assignee of any residential mortgage loan is required to obtain a Mortgage Lender license, and an Installment Loan license is required if the mortgage loans are made subject to the Credit Grantor provisions, regardless of whether the loans are open- or closed-end extensions of credit.

That guidance has caused significant turmoil in the Maryland residential mortgage markets, with significant practical concerns about requiring passive trusts to obtain a license and with certain industry participants suspending the purchase of Maryland mortgage loans.

To address these concerns, the OFR worked with industry participants to develop proposed legislation, the Maryland Secondary Market Stability Act of 2025 — two identical bills, Senate Bill 1026 and House Bill 1516, introduced on February 17, 2025.

Continue Reading Update on Maryland Licensing for Loan Assignees

On Friday, the Trump administration installed Russell Vought, the recently-confirmed head of the Office of Management and Budget, as the new acting director of the Consumer Financial Protection Bureau (“CFPB” or “Bureau”).  Vought replaced Scott Bessent who served as the acting director of the Bureau for less than a week.  Vought quickly issued a notice directing staff to pause all agency activity.  The directive goes further than the similar directive issued by former Acting Director Bessent and notably instructs staff to “cease all supervision and examination activity” and to “cease any pending investigations.”  Significantly, it has been reported that today Vought instructed Bureau staff to “not perform any work tasks” at all. It has also been reported that the Bureau’s DC headquarters will be closed from February 10 through the 14th.

Continue Reading New Acting Director Installed at the CFPB

As we reported earlier this week, the CFPB’s new Acting Director and Treasury Secretary, Scott Bessent, has directed Bureau employees not to make any filings or appearances in litigation, other than to seek a pause in the proceedings. This directive played out almost immediately this week—including in a case before the Fifth Circuit brought by several trade associations challenging the Bureau’s small business data collection final rule (“1071 rule”). The case was slated for oral arguments before the Fifth Circuit on February 3, but in light of the directive from the Acting Director, CFPB counsel appeared and, without addressing the merits of the case, notified the court that they had been instructed by new leadership not to make any appearances in litigation except to seek a pause in proceedings. The court then directed each side to announce, in writing, its posture regarding the current status of the case. In response, the CFPB stated in writing that it no longer opposes the plaintiffs’ motion to stay the 1071 rule’s compliance deadlines (the first of which is in July 2025) for 90 days to give the Acting Director time to consider the issues. Today, the Fifth Circuit issued an order granting plaintiffs’ motion for a stay pending the appeal, but subject to modification at any time. As a result, the 1071 rule’s compliance deadlines are tolled for plaintiffs’ and intervenors in the litigation.

Notably, this is the second time that the 1071 rule has been stayed by a federal court. We previously reported on the prior nationwide stay, which ultimately resulted in the Bureau delaying the original compliance deadlines by 290 days.

Although the stay is a welcome relief for covered small business lenders—many of whom have been working industriously to get ready for the July compliance deadline—it creates additional uncertainty in the industry regarding the implementation of the 1071 rule. Because the 1071 rule became effective in August 2023, it is not subject to the new administration’s regulatory freeze, nor is it subject to the Acting Director’s directive to halt new rulemakings that have not yet become effective. It remains to be seen what actions the Bureau’s new leadership may take with respect to the substantive requirements set forth in the 1071 rule.

Yesterday, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced that Scott Bessent, the recently confirmed Treasury secretary, is now the acting director of the Bureau. The announcement comes after the Trump administration fired former Director Rohit Chopra over the weekend. 

Unlike the prior transition to a Trump administration, when then-Director Richard Cordray stayed on through most of the first year of President Trump’s term, the industry expected Director Chopra to be removed immediately due to a 2020 Supreme Court decision that held that the CFPB director may be removed at will by the President. President Biden removed Trump’s Senate-confirmed CFPB director, Kathy Kraninger, using that authority. However, Director Chopra continued to hold his job for almost two weeks after the inauguration. In our view, this delay was expected as the administration had to wait to remove Director Chopra until it had a Senate-confirmed individual who could be appointed to serve as the acting director under the Federal Vacancies Reform Act. The Trump administration presumably did not want to remove Director Chopra only to have one of his deputies serve as the acting director as the goal of installing Secretary Bessent as the acting director is to quickly shift the priorities of the Bureau.

Continue Reading Acting Director Installed at CFPB: What to Expect in the Months Ahead

On January 27, 2025, the Fifth Circuit Court of Appeals held that the Federal Trade Commission’s rule to curb certain practices in the automobile dealer industry was invalid on procedural grounds because the agency did not issue an advance notice of proposed rulemaking.

On January 4, 2024, the Federal Trade Commission (“FTC”) published a final “Combating Auto Retail Scams Trade Regulation Rule,” or “CARS Rule.” The rule was scheduled to become effective on July 30, 2024. The FTC issued that rule after publishing a proposed rule for public comment in July 2022 and after a series of public roundtables with input from industry participants, consumers, and others.

The final rule provides that certain acts or practices of motor vehicle dealers are prohibited as unfair or deceptive, including misrepresentations about the costs or terms of purchasing, financing, or leasing a vehicle or of any add-on product or service (such as extended warranties, service and maintenance plans, payment programs, guaranteed automobile or asset protection (“GAP”) agreements, emergency road service, VIN etching and other theft protection devices, or undercoating). The final rule also would prohibit misrepresentations regarding many other aspects of purchasing or financing a vehicle, or the circumstances under which a vehicle may be repossessed.

The final rule also provides that it is a prohibited unfair or deceptive act or practice not to disclose in advertisements or consumer communications a vehicle’s full cash offering price (excluding only government charges), or not to disclose that an add-on product or service is voluntary (if true). When making any representations about the amount of monthly payments for vehicle financing, the final rule provides that the dealer must disclose the total amount the consumer will pay after making all payments, including the amount of any down payment or trade-in.

As to add-on products or services, the final rule provides that it is a prohibited unfair or deceptive act or practice for a dealer to charge for any such product or service that provides no benefit to the consumer, including certain nitrogen-filled tire-related products or services; products or services that are merely duplicative of otherwise applicable warranty coverage; or any item without the consumer’s express, informed consent.

The auto dealer and finance industries quickly objected to the rule, arguing in part that the FTC did not adequately consider the costs of the rule and that the rule is arbitrary and capricious. The FTC then determined that it was in the interests of justice to stay the rule’s effective date to allow for judicial review.

The Fifth Circuit did not address the validity of the rule’s substantive provisions, or the FTC’s authority to declare those or other practices as unfair or deceptive. However, the court held that the final rule is invalid because the FTC did not issue an advance notice of proposed rulemaking (“ANPRM”) prior to issuing its proposed rule.

Continue Reading Fifth Circuit Vacates the FTC’s CARS Shopping Rule

On January 15, 2025, the Consumer Financial Protection Bureau took three coordinated actions related to home equity contracts or investment transactions. Although none of the CFPB’s actions are binding, and may not reflect the new administration’s views, the CFPB seeks to educate consumers and hints at ways that regulators could address those those transactions moving forward.

Read about the CFPB’s stance on home equity contracts in Mayer Brown’s Legal Update.

What constitutes a “reasonable” ability-to-repay determination when making a mortgage loan? Since the CFPB’s Ability-to-Repay rules became effective in 2014, the clearest answer to that question is that making a qualified mortgage (“QM”) complies (or is presumed to comply) with those rules. However, mortgage lenders serving the non-QM market have few specifications for how they must meet that “reasonable” standard. A recent complaint the CFPB filed against a mortgage lender, alleging that the lender failed that standard, does not add much clarity – only that the agency believes the determination should not be based on “unreasonable,” “implausible,” or “unrealistic” analyses.

On January 6, 2025, the CFPB sued a company that offers manufactured home financing. The agency alleges that the company failed to comply with its obligations under the Truth in Lending Act and Regulation Z to make reasonable ability-to-repay determinations when offering those mortgage loans.

The CFPB’s Ability-to-Repay rules provide that mortgage lenders may either make QMs (which have relatively strict underwriting and pricing parameters), or lenders may opt for more underwriting flexibility so long as they consider the borrower’s debt-to-income ratio (“DTI”) or residual income, credit history, and other enumerated factors. Beyond that, the requirements for non-QM lending expressly do not mandate specific underwriting standards – they “do not specify how much income is needed to support a particular level of debt or how credit history should be weighed against other factors.”

In the CFPB’s recent lawsuit, the agency accuses a lender of using a residual income model based in some instances on an estimated amount of monthly expenses, and that the estimated expense model was unreasonable. The agency also asserts that the lender did not appropriately consider the borrowers’ lack of assets, the degree to which the borrowers had debts in collection, or the borrowers’ family size. The agency’s complaint also appears to indicate that rates of delinquencies and defaults were evidence that the lender’s ability-to-repay determinations were unreasonable, and that the lender “ignored clear and obvious red flags.”

While the CFPB implies that the lender should have known that certain borrowers could not reasonably repay their loans, and that the lender’s underwriting principles were therefore inadequate, the CFPB has offered little firm guidance on boundaries for non-QMs. In 2016, the CFPB objected to the use of internet-based income estimates, even though the lenders were primarily relying on the borrowers’ assets, and not their income, to determine repayment ability. In 2017, the CFPB objected to lenders’ consideration of the size of the borrowers’ down payment as an asset for purposes of the required repayment determination. Then, in the course of the agency’s reconsideration of its Ability-to-Repay rules and its QM parameters, the agency addressed reliance on bank statements, commenting that reliance on unidentified deposits into a consumer’s account, without confirmation that the funds constitute income, does not comply with the regulation’s verification requirements. Beyond those admonishments, however, the CFPB has not provided specific guidance for complying with the Ability-to-Repay rules for non-QMs.

As the CFPB raced toward today’s change in administration, the recent lawsuit against the manufactured home lender could fall into the regulation-by-enforcement critique. Based solely on the complaint, we know only that the CFPB found that unreasonable analyses may not lead to reasonable ability-to-repay determinations. Of course, the new administration will decide whether or not to continue pursuing the action.

The US Consumer Financial Protection Bureau is giving no-action letters a second chance. On January 8, 2025, the CFPB issued a policy statement setting forth new procedures for companies to request supervisory and enforcement relief through no-action letters. The policy statement was issued at the same time as a related policy statement setting forth procedures for companies to seek approvals under the CFPB’s Compliance Assistance Sandbox, which would permit companies to rely on certain statutory safe harbor provisions. Both policy statements reestablish programs that had been established in 2019 and rescinded in 2022, following what the CFPB determined were potential abuses and other challenges in connection with the programs. The new policy statements incorporate updates that the CFPB indicates are intended to address those issues and to otherwise improve the effectiveness of the related programs.

For more information, see this Mayer Brown Legal Update.