February Newsletter

INDUSTRY NEWS

FCC BANS AI ROBOCALLS

In a recent move to combat deceptive practices, the Federal Communications Commission (FCC) has declared that robocalls generated by A) are illegal unless prior express consent is obtained from the individuals being called. This ruling categorizes AI-generated calls as artificial or prerecorded voice communications under the Telephone Consumer Protection Act (TCPA). The FCC's decision stems from a growing concern over AI's involvement in robocalls, particularly those that use "deep-fake" technology to impersonate well-known figures or even family members to commit scams.

It is clear from this ruling that there will be no leniency for AI-generated calls that replicate the experience of speaking with a live person, thereby safeguarding consumers from potential exploitation through advanced technology.

NEW LEGISLATION

CORPORATE TRANSPARENCY ACT

FinCEN's new Corporate Transparency Act (CTA) went into effect this past January, requiring most entities registered to do business in the U.S. to disclose comprehensive information about their owners, officers, and control persons. The aim is to combat illicit activities, and noncompliance will carry penalties including fines and imprisonment.

Cornerstone will be providing additional support to ensure our clients comply with this new mandate before the end of the year deadline. We are able to assist you in completing this filing during 2024, and are committed to ensuring your compliance with this act is seamless and stress-free.?

Beneficial Ownership Filing Service

Understanding the complexities of federal compliance, we now offer to handle the filing of your BOI (beneficial ownership information) report with the FinCEN on your behalf. This service is designed to save you time and ensure accuracy in meeting federal requirements. If you are a client, we likely already have all information needed in order to file on your behalf.?

Our dedicated team is ready to assist you with this new requirement. 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.

INSURANCE

CYBER INSURANCE: PROTECT YOUR BUSINESS FROM RISING DIGITAL THREATS

Last year marked a significant evolution in cyber threats, with criminals deploying more sophisticated, multi-stage operations, leading to massive data leaks and costly ransomware payouts. The surge in IoT (Internet of Things) device vulnerabilities and the alarming rate of small businesses suffering cyberattacks underscore the urgency for robust cybersecurity measures. This article delves into the evolving landscape of cyber threats, emphasizing the critical need for comprehensive cyber insurance and an effective cybersecurity plan to safeguard businesses against the ever-growing digital dangers. Click here to read the full article.

PENNSYLVANIA?

EXPANDING CREDIT ACCESS

PA lawmakers are proposing two bills aimed at improving financial health for consumers. These bills mandate that utility companies and landlords with more than 15 residential properties offer the option for timely payments to be reported to credit bureaus. This initiative addresses the issue that millions of Americans lack a sufficient credit record due to non-reporting of positive payment histories for regular obligations like rent and utilities. The proposed legislation seeks to enable individuals to build or improve their credit scores by ensuring that their responsible payment behavior is recognized and recorded, potentially easing their access to loans, housing, and employment opportunities by reflecting positively on their credit reports.

ILLINOIS

EXPANDING DEFINITION OF FINANCIAL INSTITUTION?

Proposed Illinois measure 3550 seeks significant changes to the Financial Institutions Code, which will be renamed the Financial Institutions Act. It expands the definition of financial institutions to include agents of title insuring and guaranteeing companies, as well as collection agencies, broadening the scope of entities under regulatory oversight. The Division of Financial Institutions is granted enhanced powers to investigate complaints, examine the activities and records of regulated persons, and enforce compliance with the Act. Notably, the legislation introduces the ability to fine unlicensed i

ndividuals or businesses up to $10,000 per violation, aiming to ensure that all actors within the financial sector operate within the bounds of the law. This comprehensive overhaul emphasizes stricter regulatory control and accountability, with immediate effect upon enactment.

As always, Cornerstone is closely monitoring the outcome of this measure, will be providing updates and standing by to handle all licensing needs to ensure compliance for our clients.

CALIFORNIA

NEW DFPI REGULATIONS

On February 9, the California Department of Financial Protection and Innovation (DFPI) proposed new regulations under the Debt Collection Licensing Act (DCLA), aiming to clarify the financial obligations of debt collectors operating in California. The proposed rule introduces a definition for "net proceeds" as the amount a debt collector retains from its activities in California, and outlines how these proceeds should be calculated for different types of debt collectors. It also mandates that debt collectors submit an annual report to the DFPI detailing their collection activities over the past year. Stakeholders have until March 27 to provide comments on these proposed regulations.

INDUSTRY EVENTS

2024 FINTECH SYMPOSIUM

Cornerstone is proud to sponsor?The U.S. Fintech Symposium, June 4-6 in Chicago, uniting tech and finance experts to explore how advanced technologies are transforming enterprise finance. Register now using our discount code CORNERSTONE100 for $100 off registration. We'd love to connect with you there!

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.

ARIZONA

ENHANCED CONSUMER PROTECTION IN EARNED WAGE ACCESS SERVICES

AZ measure 1273 aims to regulate earned wage access services, ensuring consumer protection and compliance within the industry by revising the definition of financial institutions to include earned wage access providers but excludes payroll service providers and certain other entities.

Providers of earned wage access services must be licensed to operate in Arizona, with detailed application requirements submitted to the Division of Financial Institutions.

Licensed providers are required to develop consumer inquiry and complaint policies, offer a no-cost option for accessing proceeds, adhere to privacy laws, and annually report financial and operational data. Providers must inform consumers of their rights, allow service cancellation without fees, disclose the voluntary nature of tips, and comply with the Electronic Fund Transfer Act regarding repayment. Earned wage access services are not to be considered as loans, credit, money transmission, or in violation of certain state laws.

A surety bond of $25,000 is required for consumer protection. The measure allows for license suspension or revocation for violations, with fines ranging from $100 to $10,000 per violation.

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

ILLINOIS

NEW LICENSING FOR COMMERCIAL FINANCING

Illinois Measure 5587 introduces the Consumer Protections for Small Business Act, setting new licensing requirements for those offering commercial financing. It criminalizes unlicensed commercial financing operations, labeling such actions as a Class 4 felony, and requires licensees to operate under their real names with mandatory updates upon changes. The application process involves a comprehensive review of the applicant's financial and legal history, including a nonrefundable fee of $2,500, and provides the Secretary of Financial and Professional Regulation with broad investigatory powers to ensure compliance. License renewal is annual, with strict reporting requirements to maintain transparency in commercial financing activities. Violations of the act can lead to significant penalties, including license revocation and civil fines up to $100,000. The measure exempts certain entities, such as banks and credit unions, and takes immediate effect, aiming to enhance the regulatory oversight and protection in the commercial financing sector.

This bill has been introduced and awaits referral to a committee. Cornerstone will be monitoring progress and providing updates.

MARYLAND

EARNED WAGE ACCESS SERVICES

Earned-wage access service providers must register with the Commissioner of Financial Regulation and file a surety bond of up to $100,000, ensuring compliance with laws. The bond is continuous, valid for 3 years post-cancellation or registration cessation, and can be canceled with 90-day prior notice. Claims may lead to pro rata distribution if they exceed the bond amount.

Obligations & Consumer Protections:?

Providers must develop consumer response policies, offer a no-cost proceeds option, fully disclose fees, inform about service changes, allow penalty-free cancellation, and clarify the voluntary nature of tips.

Providers must reimburse consumers for any overdraft or insufficient funds fees caused by the provider and are prohibited from engaging in certain practices, including sharing fees with employers or requiring a credit report for service eligibility.

Providers are required to report to the Commissioner annually on revenue, transactions, customer numbers, proceeds provided, and received tips or fees.

Compliance and Violations:?Providers must maintain records for compliance verification. Violations are subject to civil penalties, with fines up to $1,000 for a first violation and $2,500 for subsequent ones.

Earned-wage access services under this measure are not considered a violation of law, a form of loan or credit, or money transmission.

If passed, the measure is set to take effect on October 1, 2024.

CORNERSTONE CAN HELP

NEW HIRE BACKGROUND CHECKS

Cornerstone offers background screening services that are accurate and prompt so you can spend less time worrying about compliance and more time on your business. Most criminal searches are completed in less than a day. We provide screenings for new hires as well as for statutory requirements. We can perform domestic screenings as well as international screenings.

CALIFORNIA

LICENSING ALL COMMERCIAL LOAN BROKERS

Senate Bill 869 proposes a new licensing requirement for individuals providing "commercial brokerage" services related to commercial loans of $5,000 or more in California, expanding the existing commercial loan broker licensing under the California Financing Law. As of now, CA does not require a license to broker non-real estate secured commercial loans. This bill introduces a fiduciary duty for brokers to prioritize the borrower's interests with utmost honesty and integrity, a significant shift in broker responsibilities. It builds on California's history of imposing regulatory frameworks on commercial lenders, including TILA-like disclosures and prohibitions against unfair practices in commercial financing. This legislation underscores California's ongoing commitment to enhancing transparency and fairness in commercial financing, with the practical implications of the fiduciary duty yet to be fully understood.?

INDUSTRY NEWS

PROPOSED "TRUE LENDER" LAWS

Legislation has introduced in Washington, Maryland, and the District of Columbia aiming to significantly change bank partnership models by establishing "true lender" criteria. This criteria includes holding a predominant economic interest, or engaging in marketing, brokering, arranging, facilitating, or servicing a loan with rights to it, or being deemed the lender based on the overall situation. These proposed laws require substantive licensing and compliance from entities involved in such partnerships. Additionally, Washington D.C. seeks to opt out of the DIDMCA, potentially imposing a 24% interest rate cap on out-of-state banks and aligning D.C. with states like Iowa and Colorado in limiting interest rate exportation. The trend of "true lender" legislation is growing, with more states, including Florida and Connecticut, considering similar measures.

SOUTH CAROLINA

MONEY TRANSMITTER ENHANCED REGULATIONS

Aiming to enhance oversight, consumer protection, and integrity within the money transmission sector, proposed measure 1031 amends the South Carolina Uniform Money Services Act, introducing comprehensive changes for money transmission licensing and regulation, overseen by the Attorney General. Key aspects include a licensing fee of $1,600, a requirement for applicants to provide financial statements, criminal background checks, credit reports, and a detailed personal history. The measure mandates a surety bond or similar security and stipulates that licensees maintain a tangible net worth exceeding $100,000, with additional percentages based on total assets. It further outlines responsibilities for money transmission conduct, including maintaining permissible investments and submitting regular reports on authorized delegates and financial conditions. Importantly, the measure emphasizes the confidentiality of collected information, except for necessary disclosures for public welfare, and introduces a multistate licensing process for streamlined regulation across states.?

NEBRASKA

NEBRASKA MONEY TRANSMITTERS ACT

Nebraska Measure 1075 updates licensing requirements for entities under the Nebraska Money Transmitters Act and other financial acts, mandating comprehensive background checks including criminal, civil, administrative, and credit histories. The Director of Banking and Finance is permitted to use the NMLS for executing these background checks. Additionally, licensees must promptly report any breaches of computerized data security to the Director or the Nationwide Mortgage Licensing System and Registry within three business days after discovery. In cases where Nebraska residents must be notified of a data breach, the Department of Banking and Finance should be informed prior to or at the same time as the residents. However, this notification can be delayed if it would interfere with criminal investigations. If passed, this measure would take effect 3 months after the adjournment of the Nebraska legislature.

As always, Cornerstone is monitoring the outcome of this measure, will be providing updates and standing by to handle all licensing and background checks needed to ensure compliance for our clients.