Cornerstone June Newsletter

INDUSTRY NEWS

NMLS FEE INCREASES PROPOSED FOR 2025 TO SUPPORT SYSTEM ENHANCEMENTS

The CSBS has requested public comment on proposed increases to processing fees for the NMLS. If approved, this would be the first time these fees have changed since NMLS launched nationwide in 2008. The proposed fee increases aim to sustain and enhance NMLS, which has become a vital tool for states, consumers, and the 600,000 industry users who depend on it. The new fee structure will support a responsible and stable NMLS budget, while sharing the cost of system enhancements among the industry.

INDUSTRY NEWS

SUPREME COURT OVERTURNS CHEVRON DOCTRINE

The Supreme Court overturned the Chevron doctrine, giving courts more power to challenge and overturn agency regulations. Judges must now use their own judgment to interpret laws, potentially making it easier to challenge regulations from the CFPB, FTC, and other agencies. The decision marks a significant shift in the balance of power between the judiciary and federal agencies, making the industry's regulatory framework more unpredictable. Moving forward, regulations from various agencies will be more susceptible to legal challenges, and industry groups may have more success challenging unfavorable regulations in court. The decision may make it harder for agencies to issue new regulations or enforce existing ones without explicit Congressional authorization, potentially requiring businesses to be more agile and proactive in their compliance and legal strategies.

CALIFORNIA

REGULATORY CHANGES PROPOSED FOR DEBT COLLECTORS?

The DFPI is proposing amendments to define the "net proceeds" used to determine the annual fees paid by debt collectors and changes to the annual reporting requirements. The key proposals include:

1. Defining "net proceeds" as the amount a debt collector retains from its California debt collection activities, before deducting costs and expenses, regardless of the fee structure.
2. Requiring debt collectors to report the total number of California debtor accounts where collection was attempted but less than the full amount was resolved, where payments were made but a balance remains, and where no payments were collected.
3. Removing a section that would have defined "net proceeds" differently for first-party collectors.

The notice of modifications to proposed regulations is available?here.

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INDUSTRY NEWS

CFPB RENEWED VIGOR FOLLOWING SUPREME COURT UPHOLDING FUNDING

The recent supreme court decision to uphold the funding of the CFPB has crystallized their role in enforcing compliance and shaping financial practices to protect consumers. Since the ruling, the CFPB has instituted a wave of industry-wide changes, and as they continue to implement these sweeping initiatives, staying current and informed is essential. Click here to read about all the newly implemented rules and key initiatives for enforcement.

COMPANY UPDATE

NEW CORNERSTONE PORTAL: FASTER, MORE SECURE & EASIER TO USE

Our portal has been redesigned from the ground up to provide you with an enhanced user experience. Featuring a more intuitive interface, improved speed, and state-of-the-art security features, navigating the portal has never been smoother or more secure!

Watch our Dir. of Technology briefly walkthrough the new features!

Cornerstone clients get unlimited access to the Portal at no additional cost. To request a login to your account or to get help accessing your portal, contact your Licensing Specialist or email [email protected].?

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TENNESSEE?

AMENDED CONSUMER PROTECTION ACT

A recently enacted Tennessee law introduces several significant changes to the state's Consumer Protection Act, including establishment of factors that a court may consider when determining a civil penalty for violation of the Consumer Protection Act. The court may consider:

• The defendant’s participation in the attorney’s general complaint resolution process
• The defendant’s restitution efforts prior to the action
• Whether there was good or bad faith
• Injury to the public
• One’s ability to pay
• The public’s interest in eliminating the benefits derived by the violator
• The state’s interest

Effective immediately, the new law strengthens Tennessee's regulatory framework, providing courts with clear guidelines to assess violations.

FEDERAL REQUIREMENT

BOI REMINDER

?With less than 6 months remaining to report your Beneficial Ownership Information (BOI) to FinCEN, it's crucial to take care of this Federal compliance item as soon as possible. The penalties for?BOI reporting violations are levied at $591/day, effective Jan. 25.

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REPORTING UPDATE

?FinCEN has implemented a technical solution, enabling the use of the same tax identification number to file initial BOI reports for multiple reporting companies, where permitted by law. Previously, using the same SSN, EIN, or TIN for multiple reporting companies could result in an error upon submission. This issue was reported to FinCEN and a resolution has been delivered.

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CORNERSTONE CAN HELP

?Cornerstone can handle the filing of your BOI report with FinCEN on your behalf. This service is designed to save you time and ensure accuracy. If you are a client, we likely already have all information needed in order to file on your behalf.?

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Our dedicated team is ready to assist you. Connect with us today to learn more or move forward with Cornerstone handling your CTA filing. If you are already a Cornerstone client, please book time directly with Beth Aide, Sr. Customer Success Manager.

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NEW JERSEY

FOR-PROFIT DEBT ADJUSTMENT RULES?

A NJ bill was introduced to allow for-profit debt adjustment companies to conduct business in the state under certain conditions. It defines a debt adjuster as someone who acts as an intermediary between a debtor and their creditors to settle, compound, or alter the terms of payment of the debtor's debts. For-profit companies must not receive or hold consumer funds and must be regulated by the FTC under the Telemarketing Sales Rule. They are subject to the same rules and restrictions as non-profit entities but are exempt from providing certification about salaries and expenses as part of their annual audit. Additionally, for-profit companies are not required to meet the bonding requirements that apply to non-profit social service agencies and non-profit consumer credit counseling agencies. The bill also outlines specific disclosure requirements for for-profit debt adjuster licensees in their agreements with debtors.?

MINNESOTA

DEBT COLLECTION REFORMS?

The Minnesota Governor recently signed a law introducing a series of reforms for Debt Collection relating to collection agency licensing, coerced debt, medical debt limitations, property exemptions, and wage garnishment. Click here to for all the details about the provisions that were passed into law affecting the receivables industry.

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MAINE

AMENDMENTS ON MEDICAL DEBT COLLECTION?

Maine has enacted new legislation aimed at limiting unfair practices in the collection of medical debt. The key highlights of the legislation include:

• Prohibition on charging interest or fees on medical debt that "the collector knows is medical debt," as well as prohibiting the false representation of fees or interest charges.
• Requirement for collectors to provide notice to consumers and wait 30 days before pursuing litigation, if the collector knows the consumer's household income is not more than 300% of the federal poverty guidelines.
• Definition of "medical debt" that excludes certain types of debt, such as those charged to credit cards not specifically for healthcare services, home equity lines of credit, and secured debt.

The new legislation may require changes in collection procedures and training to comply with the requirements. Moving forward, collectors will have to determine whether litigation can be pursued by sending notice and receive evidence from consumers concerning their household income.

NEW YORK

BUY NOW PAY LATER REGULATION

New York introduces comprehensive regulations for buy-now-pay-later (BNPL) lenders, requiring them to obtain a license and adhere to various compliance measures. If passed, the act:

• Mandates the approval of the Superintendent for any acquisition of control of a BNPL lender, subject to an investigation and fee.
• Requires licensees to maintain and use detailed books, accounts, and records, preserved for at least 6 years, and file annual reports providing business and operational information.
• Prohibits unfair, deceptive, or predatory acts by licensees, mandates fair dispute resolution, and transparent handling of customer data.
• Establishes penalties for violations, empowers the Superintendent to issue regulations, and defines a BNPL loan as credit provided for goods or services to be repaid in equal installments without interest and with a fixed principal.
• Grants the Superintendent the power to promulgate rules and regulations to implement and enforce the Act, including protecting borrowers and defining unfair, deceptive, or abusive acts.

?Cornerstone will be monitoring progress of this bill and providing updates.??

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RHODE ISLAND

NEW REGULATIONS ON MEDICAL DEBT AND MONEY TRANSMISSION?

The Rhode Island Governor signed off on a series of laws introducing new requirements that impact debt collection and money transmission.

New regulations on medical debt impose restrictions on reporting and communicating about medical debt, along with strict liability for noncompliance including fines levied daily or civil action. Key aspects include prohibitions on reporting medical debt to credit agencies, limitations on collection efforts during insurance review periods, and a narrowed definition of "medical debt" that excludes certain types of obligations. Effective Jan. 1.

Significant changes have also been made to the regulatory requirements for currency transmission licensees. Key provisions include stricter tangible net worth standards, mandatory maintenance of permissible investments to cover outstanding obligations, and restrictions on the types of eligible investments. Effective immediately.

MINNESOTA

NEW DATA PRIVACY LAWS

The Minnesota Consumer Data Privacy Act (MCDPA) was recently enacted to protect consumer rights and secure personal data. The MCDPA applies to entities conducting business in Minnesota and sets thresholds based on their involvement with personal data, granting extensive consumer rights and imposing obligations on controllers and processors. The act includes exemptions, introduces unique provisions, and aligns with broader definitions of 'sale' to provide greater consumer control over personal data. Businesses subject to the MCDPA must ensure compliance by July 31, 2025, and are mandated to establish a comprehensive privacy program and conduct data privacy and protection assessments. Evolving compliance strategies and foundational changes may be necessary for processing, handling, and safeguarding consumer data. Click here for more details.

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COLORADO

REVISED DEBT SETTLEMENT AND COLLECTION REGULATIONS

The Governor of Colorado recently signed off on significant changes to the state's consumer protection laws related to debt collection, credit services organizations, and debt management service providers. Key provisions of the law include requirements for debt collectors to include their name and the original creditor's name in legal actions against consumers, obligations for credit services organizations to provide essential business information and pay an annual notification fee, and the state administrator's authority to issue cease-and-desist orders and impose penalties for violations. Additionally, the law mandates that debt-management service providers prepare a comprehensive debt management plan for consumers and allows the state administrator to adopt rules regarding debt settlement service fees. These amendments are set to go into effect 91 days following the final adjournment of the General Assembly, subject to potential approval by Colorado voters if referendum is filed.

BLOG POST

CFPB INTERPRETIVE RULE FOR BUY NOW PAY LATER LENDERS

The rise of buy now pay later (BNPL) services has reshaped consumer financing, prompting new regulatory measures, shaping a more level playing field for fintechs and banks. The CFPB's "interpretive rule" under the Truth in Lending Act aims to standardize BNPL dispute resolution, refund processes, and billing statements, aligning them with credit card provisions. It is crucial for BNPL lenders to understand the regulations and incorporate changes into operational frameworks for compliance. Read the whole article for details and key features.

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MINNESOTA

MONEY TRANSMISSION ASSESSMENT?

Minnesota will implement an Assessment this year on their Money Transmission Licensees.? They have had the authority over the last three years but have not done so. This year with rising costs, etc. they have determined that they will need one. The assessment will be $111,000, and portioned to companies based on Assets and Transaction Volumes from the January 2024 Call Reports. If the amount is less than $30, they will not bill for it.

They will be holding their Exam and license Fees at the same rate. Companies can expect an ongoing assessment to cover their expenses. A notice will be sent to the individual that is the NMLS contact.

NEBRASKA

REVISED REGS FOR CONSUMER FINANCIAL SERVICES LICENSES

?The Nebraska Department of Banking and Finance issued a notification to inform specific regulated licensees and applicants about modifications to the regulations governing the state's various licenses, including delayed deposit services, installment loans, installment sales, money transmitters, and mortgage banker licenses (CFS licenses). The communication specifically alerts the intended licensees and applicants that, starting July 19, updated background check procedures and data breach notification requirements relating to CFS licenses will come into effect. The department will exclusively use NMLS-based background checks for all CFS licenses and will mandate that all companies holding CFS licenses report any data breaches involving the personal information of Nebraska residents within three days of becoming aware of the breach.

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SOUTH CAROLINA

EARNED WAGE ACCESS SERVICE ACT

South Carolina became the fifth state to enact the Earned Wage Access Service Act (EWA). This legislation aims to regulate earned wage access, allowing employees to access their earned wages before a regularly scheduled payday. The EWA requires providers to register annually with the state's Department of Consumer Affairs and disclose the fees charged to employees or employers for their services. Notably, the EWA specifies that these services are not to be treated as loans, which means providers will not be viewed as lenders under the EWA, distinguishing it from similar laws in other states. The Act also imposes various requirements on EWA providers, including the development of policies for responding to consumer complaints, providing transparent disclosures, and complying with privacy and information security laws.

INSURANCE

ERRORS AND OMISSIONS - 5 FREQUENTLY ASKED QUESTIONS

Errors and Omissions (E&O) insurance is essential for companies offering professional services, protecting against losses not covered by general liability policies. It covers lawsuits resulting from service-related claims, including personal injury, negligence, and financial loss due to errors or omissions. Even careful businesses may face frivolous lawsuits, making E&O coverage crucial for defense costs. However, E&O policies typically exclude illegal acts, purposeful wrongdoing, bodily injury, property damage (unless service-related), employee injuries, discrimination, harassment, and patent/trade secret infringement. Understanding "retroactive date" and "claims-made policy" terms is vital, as they determine coverage effectiveness and reporting requirements. Click here to learn more about the five FAQs we commonly encounter regarding E&O.?

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VIRTUAL SUGGESTION BOX

We’ve continued to hear great feedback from you, our clients, on how our newsletter provides value for your organization. To ensure we continue to research and provide the best data, we have created a virtual “suggestion box” for your ideas. Whatever topic you’d like to learn about, large and small, we will go research with our team and knowledgeable folks from our industry.?

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CORNERSTONE CAN HELP

BUSINESS FORMATION

Choosing the right business structure is a critical decision? as it affects the legal, financial, and operational aspects of the business, as well as its growth and success. There are many differing business structures and factors such as the number of owners, liability protection, taxation, and management structure play a role in determining the best structure.? We are here to guide you through this exciting journey. Our team of experts is well-versed in business formation and can help you navigate the complexities. We'll assist you in choosing the most suitable business structure that aligns with your goals and needs, filing all the necessary paperwork swiftly and accurately. Let us handle the technicalities while you focus on what truly matters - growing your business.

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INDUSTRY NEWS

CRISIS IN FINTECH SECTOR AMID SYNAPSE BANKRUPTCY

The Synapse bankruptcy has caused a significant shortfall, with an estimated $85 million disparity between what partner banks are holding and what depositors are owed. More than 100,000 customers of various fintech companies have been locked out of their savings accounts for nearly a month following Synapse's failure, leading to a crisis in the U.S. fintech sector. The trustee, Jelena McWilliams, is working with several banks to reconcile their ledgers, but the complexity of fund movements and commingling among different institutions has made it difficult to ascertain the exact source of the shortfall. She has presented options to the judge to allow some customers to regain access to their funds, but the situation is described as "uncharted territory," and uncertainties persist about the court's ability to resolve the crisis. Regardless of the outcome, increased regulation in this sector appears imminent.