December 5 – Read the newsletter below for the latest Mortgage Banking and Consumer Finance industry news, written by Ballard Spahr attorneys. In this issue, we discuss post-election insights for the banking and consumer financial services industry, recent happenings at the CFPB, HUD’s 2025 loan limits announcement, the record low level of unbanked U.S. households, and much more.
- Our Consumer Financial Services Group to Present Webinar Trilogy About the Next Iteration of the CFPB Featuring Former CFPB Director Kathy Kraninger and Deputy Director David Silberman
- This Week’s Podcast Episode: Post-Election Insights: Impacts on the Banking and Consumer Financial Services Industry
- This Week’s Podcast Episode: An Empirical Study of Boilerplate in Consumer Contracts
- VA Proposes Changes to Loan Reporting and Guaranty Loss Rules
- The CFPB Extends Effective Date of Medical Debt Advisory Opinion
- ACA International Files Suit Challenging CFPB Medical Debt Advisory Opinion
- HUD Announces the 2025 Loan Limits for FHA Forward Mortgages and HECMs
- FHFA Announces 2025 Conforming Mortgage Loan Limits
- The CFPB Suggests That State Privacy Laws Can—and Should—Regulate Financial Data
- Percentage of U.S. Unbanked Households Dropped to Record Low Level in 2023
- California’s DFPI Seeks Comments on Additional Products and Services to Be Registered Under the CCFPL
- Looking Ahead
You will not want to miss this three-part webinar series about the “new” CFPB which will begin doing business on January 20.
Operating under the venerable principle that “the past is prologue,” we decided that the best way to predict what may happen at the CFPB during the next Trump Administration would be to invite as special guests two of the most senior leaders at the CFPB during President Trump’s first term in office. To that end, we are very pleased to announce that Kathy Kraninger (who served as Director of the CFPB from 2018-2021) and David Silberman (who held various senior positions at the CFPB for about 10 years, including serving as the CFPB’s Associate Director of Research, Markets, and Regulations and as Acting Deputy Director, overlapping the tenures of Directors Richard Cordray and Kraninger) will join us to describe their experiences and how they presage what to expect from the CFPB during the next Trump Administration.
While, unlike Elon Musk, we are not advocating that the CFPB be eliminated as part of President-elect Trump’s cost-cutting initiative, we are expecting important changes in the leadership and focus of the agency which will give due recognition to the concerns and interests of industry and which will foster (maybe even nurture) innovative consumer financial products and services.
On November 12, we held a post-election webinar that took a 30,000 foot view of the impact of the election on the CFPB as a whole. This three-part series on December 16, January 6, and January 8 will do a deep dive into three subjects: 1. CFPB rules; 2. CFPB supervision and enforcement; and 3. State AGs filling the void. In addition to Ms. Kraninger and Mr. Silberman, my Ballard Spahr colleagues: Joseph Schuster, Mike Kilgarriff, Adrian King, Jenny Perkins and John Culhane will also be presenting. I will host the program.
All are welcome to attend what promises to be an enlightening series of complementary webinars. Here is the invitation which includes the registration link for all three webinars. You may feel free to transfer it to others. CLE credit is available.
Our goal at Ballard Spahr is to be your primary source for up-to-date information and analysis of developments in the consumer financial services industry resulting from the elections.
Today’s podcast episode is a re-purposing of a webinar we recorded on November 12, 2024. Our special guests for that webinar were Colin Carr, Vice-President of Congressional affairs at the Consumer Bankers Association and Ian Katz, Managing Director at Capital Alpha Partners. John Culhane, a partner in the Consumer Financial Services Group at our firm, also spoke at the webinar.
The webinar begins with Colin giving us an overview of President-elect Trump’s victory and the Senate and House elections which resulted in the Republicans achieving close majorities in both chambers. As a result, the Republicans may not have too much difficulty in confirming President-elect Trump nominees for various positions and may also be able to override final rules published in the Federal Register by the CFPB and other agencies after August 1 of this year under the Congressional Review Act. (This includes the so-called “open banking” rule pertaining to consumer control of their records at banks under Section 133 of Dodd-Frank.)
Ian then addresses certain leadership changes at the CFPB, FDIC, OCC, FRB, and FTC and the possibility of President-elect Trump using recess appointments to nominate the leaders of those agencies.
John Culhane then takes a deep dive into the current status and expected outcome of agency regulations (both legislative and interpretive), proposed regulations and other written but less formal guidance and circulars. This includes the CFPB’s $8. credit card late fee rule, the small business data collection rule under Section 1071 of Dodd-Frank, the Buy-Now, Pay-Later interpretive rule, “open banking “ rule, and the changes to the UDAAP Exam Manual which described any form of discrimination as being an unfair trade practice, all of which are the subject of pending litigation. We also discuss the FTC’s “CARS” rule and the “Click to Cancel” rule, which are also subject to pending litigation. Finally, we discussed the FDIC’s “brokered deposits” rule.
We explain how final legislative rules can only be overturned or modified through Congressional Review Act override (if they were adopted after August 1, 2024) or by proposing a repeal or modification under the Administrative Procedure Act (which is the same lengthy procedure utilized to promulgate the regulation) or by a final judgment of a court invalidating the rule.
We also discuss whether the new CFPB Director may concede that the CFPB has been unlawfully funded under Dodd-Frank since the FRB may only fund the CFPB out of “combined earnings of the Federal Reserve Banks” and because there have been no such combined earnings since September, 2022.
Alan Kaplinsky, senior counsel and former practice group leader for 25 years of the Consumer Financial Services Group at Ballard Spahr hosts the episode. To listen to this episode, click here.
This Week’s Podcast Episode: An Empirical Study of Boilerplate in Consumer Contracts
On January 4 of this year, we released a podcast show entitled; “A Look at a New Approach to Consumer Contracts.” Our special guest at that time was Professor Andrea Boyack, a Professor at the University of Missouri School of Law. That podcast was based on a then recent law review article published by Professor Boyack entitled “The Shape of Consumer Contracts,” 101 Denv L. Rev. 1 (2023). Today, we are joined again by Professor Boyack who has written a follow-up article entitled: “Abuse of Contract: Boilerplate Erasure of Consumer Counterparty Rights,” University of Missouri School of Law Legal Studies Research Paper No. 2024-03, which is the subject of our new show.
The abstract of her article accurately describes the points that Professor Boyack made during the podcast show:
Contract law and the new Restatement of the Law of Consumer Contracts generally treats the entirety of the company’s boilerplate as presumptively binding. Entrusting the content of consumer contracts to companies creates a fertile legal habitat for abuse through boilerplate design.
There is no consensus on how widespread or severe abuse of contract is. Some consumer law scholars have warned of dangers inherent in granting companies unrestrained power to sneak waivers into their online terms, but others contend that market forces adequately constrain potential abuse. On the other hand, in the absence of adequate consumer knowledge and power, market competition might instead fuel the spread of abusive boilerplate provisions as companies compete to insulate themselves from costs. The new Restatement and several prominent scholars claim that existing protective judicial doctrines siphon off the worst abuses among adhesive contracts. They are willing to accept those abuses that slip through the cracks as the unavoidable cost of a functioning, modern economy.
The raging debate over how to best constrain contractual abuse relies mainly on speculation regarding the proliferation and extent of sneak-in waivers. This article provides some necessary missing data by examining the author’s study of 100 companies’ online terms and conditions (the T&C Study). The T&C Study tracked the extent to which the surveyed companies’ boilerplate purported to erase consumer default rights within four different categories, thereby helping to assess the effectiveness of existing market and judicial constraints on company overreach. Evidence from the T&C Study shows that the overwhelming majority of consumer contracts contain multiple categories of abusive terms. The existing uniformity of boilerplate waivers undermines the theory that competition and reputation currently act as effective bulwarks against abuse. After explaining and discussing the T&C Study and its results, this article suggests how such data can assist scholars and advocates in more effectively protecting and empowering consumers.
We also discuss two separate CFPB initiatives pertaining to consumer contracts. On June 4 of this year, the CFPB issued Circular 2024-03 (Circular) warning that the use of unlawful or unenforceable terms and conditions in contracts for consumer financial products or services may violate the prohibition on deceptive acts or practices in the Consumer Financial Protection Act. We previously drafted a blog post and Law360 article about this circular.
The CFPB has also issued a proposed rule to establish a system for the registration of nonbanks subject to CFPB supervision that use “certain terms or conditions that seek to waive consumer rights or other legal protections or limit the ability of consumers to enforce their rights.” Arbitration provisions are among the terms that would trigger registration. The CFPB has not yet finalized this proposed rule and it seems likely that it will never be finalized in light of its very controversial nature and the fact that Director Chopra will be replaced on January 20 with a new Acting Director.
Alan Kaplinsky, the former chair of Ballard Spahr’s Consumer Financial Services Group for 25 years and now senior counsel, hosts this episode.
To listen to this episode, click here.
VA Proposes Changes to Loan Reporting and Guaranty Loss Rules
The U.S. Department of Veterans Affairs (VA) recently proposed rules to modify the requirements for the reporting of VA guaranteed mortgage loans, and the rules regarding when the VA would assert a defense for a partial or total loss of a guaranty for a VA guaranteed mortgage loan. Comments on the proposal are due by January 21, 2025.
Reporting of Loans
The VA proposes to require that lenders report information to the VA, and remit the funding fee, using an application program interface (API) that it designates in the Federal Register. The VA would provide at least 60 days’ notice before a lender is required to use a newly designated API for reporting and remitting.
For loans closed on an automatic basis, not later than 15 days after the loan closing date the lender would need to submit the following to the VA via the API:
- The appropriate funding fee,
- Required information regarding the loan, including but not limited to the loan application (e.g., Uniform Loan Application Dataset), closing disclosures (e.g., Uniform Closing Dataset), and any other information required by the VA as necessary to issue a loan guaranty certificate,
- Required lender certifications related to the loan, and
- The applicable veteran certification regarding the occupancy of the property.
The use of the API would replace the current approach by which lenders use the VA Funding Fee Payment System to remit the funding fee and report the required information using the VA’s online application WebLGY.
For loans that must be approved by the VA before closing, the lender would be required to report certain pre-closing and underwriting loan documents to the VA, and would be required to use an API if so designated by the VA. The documents would include:
- The loan application (e.g., Uniform Residential Loan Application),
- Credit reports obtained in connection with the loan,
- Certain VA forms as required by the VA,
- The applicable veteran certification regarding the occupancy of the property, and
- Any other information requested by the VA.
The VA advises that it expects to require the use of an API for the required reporting for prior approval loans, but that the API is not ready for use.
After the loan closes, not later than 15 days after the loan closing date the lender would need to submit the following to the VA via the API that also is used for loans closed on an automatic basis:
- The appropriate funding fee,
- Required information regarding the loan, including but not limited to the loan application (e.g., Uniform Loan Application Dataset), closing disclosures (e.g., Uniform Closing Dataset), and any other information required by the VA as necessary to issue a loan guaranty certificate,
- Evidence that any conditions identified by the VA in the certificate of commitment are satisfied,
- Evidence showing the property securing the loan is the property for which the certificate of commitment was issued,
- Evidence that all property purchased or acquired with the proceeds of the loan has been encumbered as required by VA,
- Required lender certifications related to the loan, and
- The applicable veteran certification regarding the occupancy of the property.
Partial or Total Loss of Guaranty
The VA proposes to rewrite section 36.4328 of its existing regulations regarding how lender or holder noncompliance with VA requirements can affect the guaranty and VA’s payment of the guaranty. The VA explains that “[t]he rule has not been updated for some time, and VA believes modernizing the style would promote transparency, help stakeholders better understand VA’s longstanding policy, and improve VA’s oversight function.”
Under the proposal, if a lender made a material misrepresentation when reporting a loan to the VA and the VA identifies the misrepresentation before issuing the loan guaranty certificate (LGC), the VA will notify the lender of VA’s findings and VA will issue the LGC with a maximum guaranty amount of one dollar. Explaining this approach, the VA advises that “[f]or example, in a situation where a lender reported to VA a $400,000 loan but VA found an improper charge of $100, VA would . . . notify the lender that the LGC is issued in the amount of $1 rather than the expected $100,000.” In cases in which the lender made a material misrepresentation when reporting a loan to the VA and the VA identifies the misrepresentation after the LGC is issued, the VA will notify the lender as follows: (1) if the originating lender is the current loan holder, that the maximum guaranty amount on the loan has been reduced to one dollar, and (2) if the originating lender is not the current loan holder, that the VA is requiring the lender to indemnify VA for a guaranty or insurance claim for the life of the loan, including any subsequent interest rate reduction refinancing loans, which often are referred to as “IRRRLs”.
The VA explains the inclusion of a subsequent IRRRL in the indemnification as follows:
“Interest rate reduction refinance loans, unlike purchase loans and cash-out refinance loans, are guaranteed using the veteran’s same entitlement from the loan being refinanced and do not require a new, full underwriting. Because of this, the same risks associated with noncompliance in the original underwriting violations are associated with the interest rate reduction refinance loan. If VA were not to apply the indemnification, unscrupulous lenders could avoid accountability because of a loophole (for example, through strategic noncompliance, then an interest rate reduction refinance loan, along with another origination fee to the lender, to thwart enforcement). Thus, VA believes it is necessary to close the loophole by ensuring the indemnification continues to cover interest rate reduction refinances, as well as the original loan, during the five-year indemnification period.” (Citations omitted.)
In notifying the lender of the reduced LGC amount or indemnification, the VA will also identify corrective action(s), if any, that the VA determines are necessary to remediate the effects of the material misrepresentation. If the lender is able to remediate the effects of the material misrepresentation, after VA receives confirming evidence, the VA may either restore the guaranty to the full amount or cancel the indemnification, as applicable. While the proposed rule provides that in this situation “the VA may either restore the guaranty to the full amount or cancel the indemnification” in the preamble to the proposal the VA states that it “would either restore the guaranty to the full amount or cancel the indemnification.” (Emphasis added.)
The VA explains in the preamble to the proposal that “[c]onsistent with current policy, VA would not limit the application of the regulation to commissions of fraud, as violations resulting from misrepresentations that were made without malintent can be just as damaging to veterans and the Government as an act of fraud. It is longstanding policy that, when VA finds a veteran has been wrongly charged a fee, for example, VA does not need a finding of fraud to instruct the lender to reimburse the veteran for the improper charge. VA instructs the lender that the charge must be reimbursed. VA notes, too, that the applicable statute does not, in authorizing VA to assert defenses, mention intent.” The VA also notes that while it has for some time offered lenders the opportunity to indemnify the VA against any eventual loss when the lender violated one of VA’s regulations, it has not sought to codify the procedure explicitly until now.
With regard to a party that acquires a VA loan after origination, which the VA refers to as a “holder,” the proposed rule provides that (1) the VA would not have liability on account of a guaranty or insurance, or any LGC, with respect to a transaction in which VA determines the holder or holder’s agent participated in fraud in procuring the guaranty or insurance, and (2) the VA would not have liability on a guaranty or insurance claim if the holder commits fraud in obtaining a claim payment from VA on the guaranty or insurance of a loan. The proposal also provides that the VA may adjust the amount of the guaranty or insurance, or any LGC, if the VA determines the holder knew or should have known, at the time the holder reports the loan for a guaranty claim, of a material misrepresentation as to the quantum or quality of, or title to, the property securing the loan such that the property would not have been acceptable to prudent lending institutions, investors, informed buyers, title companies, and attorneys, generally, in the community in which the property is situated. The VA proposes to remove from the existing rule nine specific potential reasons for an adjustment. However, the VA advises in the preamble that “[s]takeholders should not misconstrue this change to mean that VA would no longer consider the failures outlined in the current rule as reasons to adjust the guaranty. Rather, VA simply believes that the new rewrite would eliminate the need to enumerate them in the current way.”
The proposal also provides that the VA may adjust the amounts payable to the holder if VA determines that (1) the holder failed to comply with the statutory requirements under 38 U.S.C. chapter 37 or the implementing regulations concerning guaranty or insurance of loans to veterans at 38 CFR part 36, which would relate to the servicing of the loan, or (2) the holder knew or should have known of a material misrepresentation in reporting to the VA or in submitting a claim to VA for payment of the guaranty or insurance. The burden of proof would be on the holder to establish that no increase of ultimate liability is attributable to such failure or misrepresentation.
In cases in which, after a claim has been paid or the loan has been transferred to the VA, the VA discovers any fraud, material misrepresentation, or failure to comply with VA regulations and determines that an increased loss to the Government resulted therefrom, then the transferor or person to whom such payment was made shall be liable to the VA for the amount of the loss caused by such fraud, material misrepresentation, or failure.
Richard J. Andreano, Jr. and Reid F. Herlihy
The CFPB Extends Effective Date of Medical Debt Advisory Opinion
Saying that it wants to provide sufficient time to brief issues in pending litigation, the CFPB has announced that it is extending the effective date of its advisory opinion on medical debt from Dec. 3, 2024 to Jan. 2, 2025.
ACA International, the association representing the accounts receivable industry, has filed suit in the U.S. District Court for the District of Columbia contending that the bureau’s advisory opinion on medical debt was overtly political, issued in violation of the Administrative Procedures Act (APA) and should be nullified.
In October the CFPB issued an advisory opinion stating that debt collectors are strictly liable under the Fair Debt Collection Practices Act and Regulation F for engaging in such practices as attempting to collect a medical debt that was not owed and or was unsubstantiated.
In addition to the ACA lawsuit, R.M Galicia Inc., a debt collector that operates as Progressive Management Systems and engages in medical debt collection, has filed its own suit in the same court.
John L. Culhane, Jr., Reid F. Herlihy, and Joseph Schuster
ACA International Files Suit Challenging CFPB Medical Debt Advisory Opinion
ACA International, the association representing the accounts receivable industry, has filed suit against the CFPB, alleging that the bureau’s advisory opinion on medical debt was overtly political, issued in violation of the Administrative Procedures Act (APA) and should be nullified.
The association charged that although the CFPB was designed to be independent, the bureau’s advisory opinion was announced at an event at the White House and was first introduced by Vice President Kamala Harris, who at the time was running for president.
Moreover, the agency issued the rule in violation of the APA, ACA International alleged.
In October, the CFPB issued an advisory opinion stating that debt collectors are strictly liable under the Fair Debt Collection Practices Act and Regulation F for engaging in such practices as attempting to collect a medical debt that was not owed and or was unsubstantiated.
The association contended that the advisory opinion establishes rules that would improperly thrust debt collectors into the patient-provider health care decision making process and would require the medical debt and health care billing industry to dramatically change their conduct in that the opinion would require medical debt collectors to “ensure that every aspect of a billed procedure was actually performed on a patient.”
“The Advisory Opinion establishes expectations that are impossible to meet and contrary to the plain text of the FDCPA, as well as the CFPB’s previous determinations when it finalized Regulation F, 12 C.F.R. Part 1006,” ACA alleged in its suit, filed in the U.S. District Court for the District of Columbia.
In a statement as the lawsuit was filed, ACA charged that a CFPB press release that accompanied the advisory opinion “demonstrated a fundamental misunderstanding of health care receivables and the health care industry, while unfairly portraying health care providers and their service partners as bad actors who work to harm patients.”
Among other things, the ACA asks the district court to issue declarations that the CFPB’s advisory opinion is:
- Arbitrary, capricious, or otherwise contrary to law within the meaning of the APA.
- In excess of statutory jurisdiction, authority, or limitations, or short of statutory right within the meaning of the APA.
In addition to the ACA lawsuit, R.M Galicia Inc., a debt collector that operates as Progressive Management Systems and engages in medical debt collection, has filed its own suit in the U.S. District Court for the District of Columbia. The company’s allegations are similar to those of ACA; it charged that the rule was issued in violation of the APA because, among other things, the bureau failed to open the new policy to comment before it was issued.
On Capitol Hill, Representative Gary Palmer, (R-Al.), on November 13, introduced a resolution under the Congressional Review Act to nullify the rule. The resolution, H.J.Res. 220, would have to pass both Houses and then be signed by the President before the rule would be nullified.
John L. Culhane, Jr. and Reid F. Herlihy
HUD Announces the 2025 Loan Limits for FHA Forward Mortgages and HECMs
The U.S. Department of Housing and Urban Development (HUD) recently announced the 2025 loan limits for FHA insured forward mortgage loans and FHA insured Home Equity Conversion Mortgages (HECMs). The announcements were made in Mortgagee Letter 2024-21 and Mortgagee Letter 2024-22, respectively.
For forward mortgage loans in non-high cost areas, the amount for a single unit home increased from $498,257 in 2024 to $524,225 in 2025. In high cost areas, the amount for a single unit home increased from $1,149,825 in 2024 to $1,209,750 in 2025. In Alaska, Guam, Hawaii and the U.S. Virgin Islands, the amount for a single unit home increased from $1,724,725 in 2024 to $1,814,625 for 2025. For HECMS, the maximum claim amount for all areas increased from $1,149,825 in 2024 to $1,209,750 in 2025.
Each Mortgagee Letter includes a link to a HUD website that can be used to find the applicable limit for specific areas nationwide.
FHFA Announces 2025 Conforming Mortgage Loan Limits
The Federal Housing Finance Agency (FHFA) recently announced the conforming loan limits for residential mortgage loans acquired by Fannie Mae and Freddie Mac in 2025. Fannie Mae addresses the limits in Lender Letter 2024-03.
As was expected based on the continuing increase in housing prices, the limits increased significantly. The standard loan limit for a one-unit home increased from $766,550 in 2024 to $806,500 for 2025. For high-cost areas, and also for Alaska, Guam, Hawaii, and the U.S. Virgin Islands, the loan limit for a one-unit home increased from $1,149,825 for 2024 to $1,209,750 for 2025.
The FHFA announcement that is linked above includes links to:
- A list of conforming loan limits for all counties and county-equivalent areas in the U.S.,
- A map showing the conforming loan limits across the U.S.,
- A detailed addendum of the methodology used to determine the conforming loan limits, and
- A list of FAQs that covers broader topics that may be related to conforming loan limits.
Fannie Mae advises that the loan limits apply to the original loan balance, and not the loan balance at the time of delivery.
The CFPB Suggests That State Privacy Laws Can—and Should—Regulate Financial Data
On November 12, 2024, the Consumer Financial Protection Bureau (CFPB) released a report examining the carve outs and limitations contained in comprehensive state privacy laws relating to financial institutions. In an accompanying press release, the CFPB stated that in its assessment, “privacy protections for financial information now lag behind safeguards in other sectors of the economy.”
As the CFPB’s report notes, 18 states had passed comprehensive privacy laws (19, counting Florida, which has particular thresholds). However, all of these state privacy laws have some level of carve outs or limitations for financial institutions. Some state laws have a full entity-level exemption, where financial institutions regulated by the Gramm-Leach-Bliley Act (GLBA) are entirely exempt from the scope of the law. Under other laws, non-public personal information (NPI) regulated by the GLBA is exempted from scope of the state privacy law. Additionally, state privacy laws also contain exemptions for information regulated by the Fair Credit Reporting Act (FCRA). Accordingly, financial information processed by financial institutions is, in large part, exempted from state privacy laws.
The CFPB report goes on to describe that the federal laws regulating financial information do not contain the same consumer privacy rights that are contained in state privacy laws—rights such as the right to know what data businesses have about them, to correct inaccurate information, or to request the business delete the information about them.
Importantly, the report’s conclusion is that state policymakers should assess gaps in existing state privacy laws, and that they should consider whether their consumers are adequately protected under their state laws. Seen in the context of the recent election, this advice is not surprising. Indeed, recent CFPB initiatives like the Open Banking Rule—which would afford consumers with rights similar to those offered under state privacy laws—could be halted by the new administration through the Congressional Review Act or enjoined by ongoing litigation. It is therefore expected that the current CFPB leadership would look for ways to secure its achievements through other avenues.
What is notable, however, is how this change would reshape the scope of state privacy laws. To date, the discussion on financial institution exemptions has been on entity-level versus data-level. No states have adopted comprehensive privacy laws that fully cover NPI that is already regulated by the GLBA. But, with the report, the CFPB now argues that the GBLA’s general preemption provision would not prohibit such application. If a state takes the CFPB up on its request, it would mark a radical shift in privacy law—and operational changes—in the financial world.
Gregory P. Szewczyk and Kelsey A. Fayer
Percentage of U.S. Unbanked Households Dropped to Record Low Level in 2023
The percentage of unbanked households in the U.S. fell to its lowest level in 2023—4.2 percent, the FDIC recently reported.
The agency’s annual National Survey of Unbanked and Underbanked Households collected responses from almost 30,000 households in June 2023. In addition to issuing a full report on the survey, the FDIC also issued an executive summary of the report.
The FDIC reported that while the percentage of unbanked has fallen by about half for minority groups, since 2011, they still remain significantly higher for lower-income, less-educated, Black, Hispanic, disabled, and single-parent households.
While unbanked rates among minority households fell by about half since 2011, they remain significantly higher than White households. Only 1.9 percent of White households were unbanked, compared with Black (10.6 percent); Hispanic (9.5 percent); American Indian or Alaska Native (12.2 percent) households.
The FDIC also reported that:
- 66.2 percent of unbanked households rely entirely on cash, while 33.8 percent rely on prepaid cards or nonbank online payment services such as PayPal, Venmo, or Cash App to conduct transactions.
- 14.2 percent of households, representing 19 million households, are underbanked, which the FDIC defines as a household with a bank or credit union account that primarily uses nonbank services to meet their core financial needs.
- 48.3 percent of households use mobile phones as their primary method to access their accounts, which the FDIC refers to as “mobile banking”. Over the past decade, the use of mobile banking as a means of account access increased almost nine fold, while use of bank tellers fell more than half and use of online banking, which the FDIC defines as banking via a computer or tablet, decreased more than a third.
- 76.4 percent of households have a credit card, which the FDIC noted is the most common mainstream credit product. However, 15.7 percent have no access to mainstream credit. “These households likely did not have a credit score with the nationwide credit reporting agencies, which could make it more difficult to obtain mainstream credit should a credit need arise,” the FDIC noted.
- 3.9 percent of households use Buy Now, Pay Later short-term loans. This marked the first time the FDIC included that category in the survey.
- 4.8 percent of U.S. households own or use crypto or digital assets in the previous 12 months. The FDIC found that 92.6 percent of those households held those assets as an investment, with only 4.4 percent using it as a form of payment.
The FDIC drew the following conclusions from the survey. First, economic inclusion strategies that worked in the past may not work today. Second, banks should pursue technological developments to engage unbanked consumers even though significant potential problems may exist for those attempting to do so. Third, efforts to increase access to safe and affordable mainstream credit remain important and should continue. And fourth, banks should look for ways to provide more information to consumers about how the use of credit and the types of credit used impact credit histories and credit scores.
John L. Culhane, Jr. and Richard J. Andreano, Jr.
In the wake of the Office of Administrative Law’s approval of its registration and reporting requirements for providers of income-based advances, private postsecondary education financing, debt settlement services, and student debt relief services, California’s Department of Financial Protection and Innovation (DFPI) has issued an invitation for comment on “what other industries…the DFPI should establish registration and reporting requirements for under the [California Consumer Financial Protection Law].”
The DFPI is empowered by the CCFPL to create through rulemaking “registration requirements applicable to a covered person engaged in the business of offering or providing a consumer financial product or service.” Cal. Fin. Code § 90009(a). It is worth noting that the CCFPL limits the DFPI to providers of consumer financial products and services, so the DFPI cannot require registration of providers of commercial financing, for instance. An effort to create registration requirements for such providers through legislation failed earlier this year.
The CCFPL also limits the DFPI’s authority with a provision stating that registration requirements cannot be created for “[a] covered person who is licensed by the department under another law and who is providing a financial product or service within the scope of that license.” Cal. Fin. Code § 90009(a). However, the DFPI successfully maneuvered its way around this limitation in its first set of registration requirements by creating exemptions for covered persons already providing the product or service within the scope of another license.
The DFPI lists nine specific questions for which it is seeking comments:
- For what additional industries should the DFPI establish registration requirements under Financial Code section 90009, subdivision (a)?
- What consumer protection risks do those industries present to consumers that would make it appropriate to prioritize the registration of those industries over others?
- The DFPI invites stakeholders to submit examples of acts or practices in those industries that stakeholders find concerning.
- For each industry suggested for registration, what trade associations, if any, represent that industry?
- For each industry that a stakeholder states should be a priority for registration, what rules should the DFPI establish to facilitate oversight of the industry, what records should the DFPI require those registrants to maintain, and what requirements should the DFPI impose to ensure that covered persons are legitimate and able to perform their obligations to consumers? (Fin. Code § 90009, subd. (b).)
- What data should the DFPI require registrants to submit in annual or special reports to the DFPI? (Fin. Code § 90009, subd. (f)(2).) Why should the DFPI collect this data?
- For each industry that a stakeholder states should be a priority for registration, are there terms applicable to the industry that are not currently defined under the CCFPL? Should DFPI consider promulgating regulation text defining these terms? What should be the content of these definitions?
- For each industry suggested for registration, provide any information relevant to estimating the number of players in the industry. How many companies would be impacted by a registration requirement?
- For each industry suggested for registration, the DFPI invites stakeholders to provide a description of the economic impact (if known), including potential costs and benefits, of the recommendation for California businesses and consumers.
The DFPI also invites stakeholders to provide example language for regulations. Comments are due by December 12, 2024.
John A. Kimble, John D. Socknat, and John L. Culhane, Jr.
The Impact of the Election on the CFPB - A Three-Part Webinar Series
A Ballard Spahr Webinar | December 16, 2024, 12:00 PM – 1:15 PM ET
Speakers: Alan S. Kaplinsky, John L. Culhane, Jr., Mike Kilgarriff, Adrian R. King, Jr., Jenny N. Perkins, and Joseph Schuster
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