Bank Regulatory News and Trends

Senate votes to repeal OCC's "true lender" rule, House expected to follow suit

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Bank Regulatory News and Trends

Bank Regulatory News and Trends

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This regular publication from DLA Piper focuses on helping banking and financial services clients navigate the ever-changing federal regulatory landscape.

In this edition:

  • Senate votes to repeal OCC’s “true lender” rule, House expected to follow suit.
  • From the Fed to the OCC: Hsu named acting Comptroller.
  • CFPB files suit against payment processor for its customers’ alleged fraud.
  • Court hears oral arguments in NYDFS challenge to OCC fintech charter.
  • Fed proposes guidelines that could allow fintechs to qualify for accounts and payments services.
  • Fed proposes Regulation II changes on debit card transactions under the Durbin Amendment.
  • Fed lets COVID-19-era SLR changes expire.
  • CFPB rescinds temporary COVID-19 “flexibilities” for lenders.
  • Federal agencies take steps to support lower-income borrowers.
  • PPP runs out of money before scheduled expiration date.
  • House passes cannabis banking bill; measure pending in Senate.
  • FinCEN issues advisory on trade in antiquities and art.
  • Biden budget plan increases funding for FinCEN.
  • Former CFPB head Cordray tapped to oversee student loans.
  • Recently enacted laws in Illinois, Nebraska and Mississippi impose new requirements on certain lenders.

Senate votes to repeal OCC’s “true lender” rule, House expected to follow suit. The US Senate on May 11 passed a resolution to repeal a rule governing partnerships between banks and third-party lenders. Senators voted 52-47 to pass a Congressional Review Act (CRA) resolution (S.J.Res. 15) to revoke the Office of the Comptroller of the Currency's “true lender” rule and bar the agency from issuing similar regulations without legislative approval. The OCC’s rule, adopted last October during the previous administration, determines when a national bank or federal savings association makes a loan and is considered the “true lender” in the context of a partnership between a bank and a third party, such as a marketplace lender. Consumer groups, Congressional Democrats and 25 state attorneys general have argued that OCC’s rule would facilitate predatory lending by evading state usury and usury-evasion laws, and that the agency exceeded its authority in promulgating the rule. The OCC, under its previous leadership during the Trump Administration, maintained that it was acting within its statutory authority and that the rule was designed to prevent the types of “rent-a-bank” schemes that opponents fear by holding banks accountable for the loans they make in the context of a partnership or loan transferal.

  • The CRA resolution did attract some bipartisan support as 49 Democrats were joined by three Republican senators in voting in favor of overturning the rule. All 47 of the votes in opposition to the resolution were cast by Republicans.
  • The resolution was sponsored by Senator Chris Van Hollen (D-MD) and had the support of Banking Committee Chair Sherrod Brown (D-OH). “While the Trump Administration aimed to dismantle consumer protections, today’s action to strike down the ‘Rent-A-Bank’ rule will help prevent predatory lenders from ripping off consumers by charging loan-shark rates under deceptive terms,” Van Hollen said in a statement released after the vote.
  • In a Senate floor statement opposing the resolution, Banking Committee ranking member Pat Toomey (R-PA) said, “Overturning the True Lender rule is a bad idea. It would reduce access to credit for consumers, especially those who need it most, stifle innovation, and inhibit the functioning of our nation’s banks and credit markets.”
  • The resolution is seen as having a good chance of passing the House and being signed by President Biden. Financial Services Committee Chair Maxine Waters (D-CA) has been a prominent critic of the OCC’s rule. While the House has its own pending resolution to repeal the true lender rule – HR 35 sponsored by Rep. Jesús “Chuy” García (D-IL), a Financial Services member – under the CRA procedure the House would vote on the Senate resolution because it has already been passed. The White House issued a Statement of Administration Policy on May 11 saying the administration supports passage of the resolution.
  • The CRA, enacted in 1996, empowers Congress to review, by means of an expedited legislative process, federal regulations issued by government agencies and, by passage of a joint resolution, to overrule a regulation.
  • As we reported in the January 12, 2021 edition of Bank Regulatory News and Trends, a coalition of attorneys general from seven states and the District of Columbia filed suit against the OCC to block implementation of the rule. Since then, 26 state attorneys general urged congressional leaders to overturn the rule, arguing in an April 21 letter that it “would sanction high-cost lending schemes devised to evade state usury laws.”

From the Fed to the OCC: Hsu named acting Comptroller. With the Biden administration still seeking a nominee to serve as Comptroller of the Currency, Treasury Secretary Janet Yellen has announced the appointment of a current senior Federal Reserve official as acting Comptroller. Michael Hsu, associate director of the Fed’s bank supervision and regulation division, was appointed acting Comptroller on May 10. Former acting Comptroller Blake Paulson, a career official seen as an ally to the previous acting Comptroller, Brian Brooks, who was appointed by President Donald Trump, will remain at the agency as a deputy comptroller and chief operating officer. As we reported in the March 3, 2021 edition of Bank Regulatory News and Trends, President Biden had been expected to nominate former Treasury official Michael Barr as Comptroller, but members of the progressive wing of the Democratic Party, including Banking Committee Chair Brown, have pushed for the nomination of Mehrsa Baradaran, an expert on racial inequities in the financial system. Over the past few weeks, reports indicate that three additional potential nominees are in the mix: Kara Stein, a former member of the Securities and Exchange Commission; Sarah Bloom Raskin, formerly a Fed Board governor and deputy secretary of the Treasury; and Raphael Bostic, president and CEO of the Federal Reserve Bank of Atlanta.

  • OCC is an independent bureau of the Treasury Department. The Comptroller is appointed to a five-year term by the president with the consent of the Senate.

CFPB files suit against payment processor for its customers’ alleged fraud. The Consumer Financial Protection Bureau has filed a complaint against a third-party payment processor and its former chief executive, essentially holding the company responsible for the actions of its clients. Some industry observers have likened the CFPB’s legal theory in the case to Operation Chokepoint, a Justice Department initiative, which ran from 2013 to 2017, that investigated banks and the business they did with companies believed to be at a high risk for fraud and money laundering, or engaged in legal conduct disfavored by DOJ.

The CFPB’s complaint was filed March 3 in the US District Court for the Northern District of Illinois. It alleges that, between 2016 and 2018, Chicago-based BrightSpeed Solutions Inc. and its founder and former CEO “knowingly processed payments for client companies that purported to offer technical-support services and products over the internet, but instead tricked consumers, often older Americans, into purchasing expensive and unnecessary antivirus software or services,” according to CFPB’s March 3 announcement of the legal action. “BrightSpeed’s unscrupulous acts harmed consumers, and in particular older Americans who are more vulnerable to scams,” said CFPB Acting Director David Uejio. “The CFPB will use all its tools at its disposal, including litigation, to take action to protect consumers.” This enforcement action is consistent with expectations that the CFPB will have increased scrutiny of financial services companies in the Biden administration.

BrightSpeed, a privately owned, third-party payment processor, was founded in 2015 and wound down business operations in March 2019.

Court hears arguments in NYDFS challenge to OCC fintech charter. The Second Circuit Court of Appeals on March 9 heard oral arguments in the New York Department of Financial Services’ legal challenge to the Office of the Comptroller of the Currency’s special purpose national bank charter, commonly known as the “fintech charter.” OCC announced in 2018 that it would begin accepting applications for special purpose national bank charters from companies, especially in the financial technology space, that seek to engage in the business of banking, other than taking deposits. Since then, state bank regulators have challenged OCC’s authority to grant the charters. NYDFS initially filed its suit against OCC in the US District Court for the Southern District of New York in 2018, arguing that an OCC charter for fintech companies would undermine the state’s authority over the approximately 600 such institutions in New York. A judge in the Southern District denied OCC’s motion to dismiss the suit in May 2019 and entered a final judgment in favor of NYDFS in October of that year, setting aside OCC’s regulations governing the charter applications. OCC appealed that decision last April, arguing that NYDFS lacks standing because its injuries were only hypothetical since OCC had not received any applications for a fintech charter application in New York. Last July, NYDFS filed an appellate brief asking the Court of Appeals to uphold the lower court’s decision in the case, Lacewell v. Office of the Comptroller of the Currency.

  • At oral argument, a panel of three Second Circuit judges noted that there have not yet been any fintech charter applications, suggesting that the NYDFS claim of injury may be speculative, at least at this point. But the judges also expressed some reservations about OCC’s interpretation that the National Banking Act gives it the authority to grant the charters.
  • As we reported in the January 12, 2021 edition of Bank Regulatory News and Trends, the Conference of State Bank Supervisors has filed suit against the OCC in the US District Court for the District of Columbia over the charter.
  • While the status of OCC’s fintech charter remains in legal limbo, fintechs are working within OCC’s existing frameworks. Multiple fintech firms have been granted full-service national bank charters and other limited purposes charters that are not “fintech” charters.
  • OCC’s fintech charters were a topic of discussion at the April 15 hearing of the House Financial Services Committee’s Subcommittee on Consumer Protection and Financial Institutions titled “Banking Innovation or Regulatory Evasion? Exploring Trends in Financial Institution Charters.”
    • Brian Brooks, former Acting Comptroller of the Currency, testified at the hearing that the special purpose charter can empower firms that “provide consumers with better alternatives to traditional banks on the one hand and strip-mall financiers, like payday lenders, on the other.”
    • Financial Services Chair Maxine Waters (D-CA) said “OCC has overstepped its authority, pretending that laws signed by Abraham Lincoln were intended to create charters for fintech or cryptocurrency.”

Fed proposes guidelines that could allow fintechs to qualify for accounts and payments services. The Federal Reserve has proposed new guidelines for what types of financial institutions can have access to accounts and payment services. The Proposed Guidelines for Evaluating Account and Services Requests, unanimously approved by the Fed’s Board of Governors on May 4, invites public comment on Account Access Guidelines to be used by Reserve Banks in evaluating requests for Fed accounts and financial services. An April 28 Fed staff memo to the Board of Governors notes that the introduction of new financial products and novel types of banking charters has compelled the central bank to review its legacy payment operations. While the documents do not use the term “fintech” per se, the Fed’s May 5 announcement refers to the recent “introduction of new financial products and delivery mechanisms for traditional banking services, notably leveraging emerging technologies, including from institutions with novel types of banking charters designed to support such innovation.” As noted in the previous item, the OCC’s proposed fintech charter is under legal challenge by state regulators. Fintech companies looking at either the OCC charter or novel charters at the state level are at the same time considering becoming part of the Fed payments system, which would give them the ability to transfer money without going through a bank. A DLA Piper Financial Services Regulatory Alert on the Fed’s announcement is available here.

  • “With technology driving rapid change in the payments landscape, the proposed Account Access Guidelines would ensure requests for access to the Federal Reserve payments system from novel institutions are evaluated in a consistent and transparent manner that promotes a safe, efficient, inclusive, and innovative payment system, consumer protection, and the safety and soundness of the banking system,” said Federal Reserve Board Governor Lael Brainard.
  • Representative Patrick McHenry (R-NC), ranking Republican member of the House Financial Services Committee, said: “I’m glad that the Fed is seeking comment on how best to include financial technology firms in their payment systems. Institutions are finding new and creative ways for technology to help traditionally underserved communities and consumers gain access to capital. Today’s announcement by the Fed is a welcome step that recognizes the important role innovation is playing in the way Americans access, utilize, and interact with the financial system. I look forward to working with regulators and stakeholders to ensure our regulatory structure continues to support this kind of growth, rather than suppresses it.”
  • Comments will be accepted for 60 days after the proposal is published in in the Federal Register.

Fed proposes Regulation II changes on debit card transactions under the Durbin Amendment. The Federal Reserve on May 7 announced a notice of proposed rulemaking that would amend Regulation II to clarify that debit card issuers are required to allow merchants a choice for routing card-not-present debit payments. The proposal will make clear that the requirement that each debit card transaction must be able to be processed on at least two unaffiliated payment card networks applies to card-not-present transactions. It would also clarify the requirements imposed on debit card issuers to ensure that at least two unaffiliated payment card networks have been enabled for debit card transactions.

A Fed staff memo to the Board of Governors notes that, “In the decade since the adoption of Regulation II, spurred by the growth in online commerce, card-not-present transactions have become an increasingly significant portion of all debit card transactions, and technology has evolved to enable multiple networks for these transactions. Despite this, two unaffiliated payment card networks are often not available to process card-not-present transactions, such as online purchases, because some issuers do not enable multiple networks for such transactions.” Fed staff further note that card-not-present transactions have become even more prevalent since the COVID-19 pandemic as consumers have shifted from in-person to remote purchases.

  • Comments will be due 60 days following the publication of the proposed rule in the Federal Register.
  • In conjunction with the proposed rule, the Fed also published a biennial report containing summary information on debit card transactions in 2019, including information on volume and value, interchange fee revenue, certain issuer costs and fraud losses. Payment card networks in the US processed 79.2 billion debit and general-use prepaid card transactions valued at $3.1 trillion in 2019, according to the report. Total transaction volume grew by 7 percent, largely consistent with the growth pattern recorded since 2009. The report is the sixth in a series published every two years as prescribed by the Electronic Fund Transfer Act (EFTA).
  • The Fed promulgated its Regulation II network exclusivity and routing restrictions in 2011, pursuant to EFTA amendments under the so-called Durbin Amendment in the Dodd-Frank Act.
  • A DLA Piper Financial Services Regulatory Alert on the proposal is available here.

Fed lets COVID-19-era SLR changes expire. The Federal Reserve announced on March 19 that the temporary change to the supplementary leverage ratio for bank holding companies issued on May 15, 2020 would expire as scheduled on March 31. As a result, as of April 1 banks have resumed holding more loss-absorbing capital against US Treasuries and Federal Reserve Bank deposits. Additionally, as part of the same announcement, the Fed said it will “shortly” seek comment on measures to adjust the SLR amid concerns it is no longer functioning as intended with the Fed’s COVID-19 monetary policy measures. The Fed said it would “take appropriate actions to assure that any changes to the SLR do not erode the overall strength of bank capital requirements.”

Last May, the Fed announced that it would permit depository institutions to choose to exclude Treasuries and central bank deposits from the calculation of the SLR, stating that the “temporary modifications will provide flexibility to certain depository institutions to expand their balance sheets in order to provide credit to households and businesses in light of the challenges arising from the coronavirus response.” But, nearly a year later, the Treasury market has stabilized. Contrary to the expectations of some industry observers, banks’ demand for Treasury securities has not diminished since the beginning of April, according several published reports.

  • SLR was introduced by the Basel Committee on Banking Supervision in 2010 and it was finalized in 2014. The Third Basel Accord (Basel III) is a global, voluntary regulatory framework on bank capital adequacy, stress testing and market liquidity risk.

CFPB rescinds temporary COVID-19 “flexibilities” for lenders. Effective April 1, CFPB has rescinded seven policy statements issued last year that provided temporary flexibilities to financial institutions in consumer financial markets including mortgages, credit reporting, credit cards and prepaid cards. From March 26 through June 3 of last year, CFPB issued a series of policy statements that temporarily provided financial institutions with flexibilities regarding certain regulatory filings or compliance with consumer financial laws and regulations. The CFPB also revoked its 2018 bulletin on supervisory communications and replaced it with a revised bulletin describing its use of matters requiring attention (MRAs) to effectively convey supervisory expectations. “Providing regulatory flexibility to companies should not come at the expense of consumers,” acting CFPB Director Dave Uejio said in a March 31 statement. “Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities.” The Bureau’s statement provides links to all seven policy statement rescissions, two interagency statements that the CFPB issued in conjunction with other federal financial services regulatory agencies last year but is now withdrawing as a signatory of, and Bulletin 2018-01: Changes to Types of Supervisory Communications.

Federal agencies take steps to support lower-income borrowers:

  • Fannie and Freddie to offer new refinance option for low-income families. The Federal Housing Finance Agency (FHFA) on April 28 announced that Fannie Mae and Freddie Mac will offer a new refinance option for low-income borrowers with single-family mortgages backed by the Government Sponsored Enterprises (GSEs). FHFA said eligible borrowers will benefit from a reduced interest rate and lower monthly payment. The agency estimates that borrowers who take advantage of the new option could save an average of between $100 and $250 a month. According to an FHFA fact sheet, the new refinance option includes:
    • A requirement that the lender provides a savings of at least $50 in the borrower’s monthly mortgage payment and at least a 50-basis point reduction in the borrower’s interest rate
    • A maximum $500 credit from the lender for an appraisal if the borrower is not eligible for an appraisal waiver (Fannie and Freddie will provide the lender a credit of $500 upon the loan’s sale to a GSE) and
    • A waiver of the 50-basis point up-front adverse market refinance fee for borrowers with loan balances at or below $300,000.
  • Treasury to invest $9 billion to support lenders serving lower-income communities. The Treasury Department on March 4 announced the launch of the Emergency Capital Investment Program (ECIP), a new program to provide long-term, low-cost equity and subordinated debt financing for participating institutions to support low- and moderate-income historically disadvantaged communities impacted by COVID-19. The new program, authorized by Congress under the fiscal year 2021 Consolidated Appropriations Act, was created to encourage low- and moderate- income community financial institutions to augment their efforts to support small businesses and consumers in their communities. Treasury’s $9 billion investment under ECIP will complement the $3 billion of grants being provided by the Community Development Financial Institutions (CDFI) Fund. Treasury has extended the ECIP application deadline through July 6.
    •  More information about the program, including a link to the application portal, is available here. Treasury has also published detailed instructions on how to apply.

PPP runs out of money before scheduled expiration date. The Paycheck Protection Program, a central element in the federal economic response to the COVID-19 pandemic, is nearly out of funding, weeks before its scheduled May 31 expiration date. President Biden on March 30 signed bipartisan legislation to extend the program an extra two months beyond the previously scheduled March 31 expiration. The nearly $1 trillion program, administered by the Small Business Administration (SBA), offers loans through federally insured banks or other approved lenders that could be converted into grants if businesses maintain their payroll. The most recent round of PPP loans launched in early January with $284 billion in funding, after funding for the program had previously been depleted. The American Rescue Plan, which was passed in March, added another $7.25 billion to the program. Going forward, the program will only accept new applications from community financial institutions, lenders that primarily focus on serving borrowers in low-income communities that have historically been locked out of the financial system. The SBA will continue to fund outstanding approved PPP applications from other lenders but won’t accept any new applicants. “After more than a year of operation and serving more than 8 million small businesses, funding for the bi-partisan Paycheck Protection Program has been exhausted,” an SBA spokesperson said in a May 5 statement to media outlets. SBA’s PPP homepage contains the caveat that the program would continue “until May 31, 2021 or until remaining funds are exhausted.” Members of Congress from both parties have indicated a willingness to provide additional resources to continue the program.

House passes cannabis banking bill; measure pending in Senate. On April 19, the House of Representatives approved, on a bipartisan 321-101 vote, legislation that would ensure that legal cannabis businesses have access to banking services. The SAFE Banking Act of 2021 (HR 1996, short for Secure And Fair Enforcement Banking Act) provides protections from money laundering laws for any proceeds derived from these businesses in states that have some form of legalized cannabis. Representative Ed Perlmutter (D-CO), the sponsor of the legislation, noted that 47 states, four territories and Washington, DC have legalized some form of recreational or medical marijuana, while hemp and its derivative cannabidiol (CBD) were legalized nationally under the 2018 Farm Bill. But he said current law restricts legitimate licensed marijuana and CBD-related businesses from accessing banking services and products, such as depository and checking accounts, resulting in businesses operating on a cash-only basis, presenting public safety risks for these businesses and the surrounding communities. The SAFE Banking Act passed the House in various forms in 2019 and 2020 but stalled in the Senate.

  • On March 23, Senator Jeff Merkley (D-OR) introduced the Senate version of the SAFE Banking Act (S 910), joined by 29 co-sponsors from both sides of the aisle. The previous Chair of the Senate Banking Committee, Mike Crapo (R-ID), opposed the legislation and it did not advance out of committee during the 2019-2020 session. But current Banking Chair Sherrod Brown (D-OH) and Ranking Member Pat Toomey (R-PA) have both expressed their support for giving compliant state-legal cannabis businesses access to the banking system.
  •  Representative Perlmutter also released an April 19 letter signed by a bipartisan group of governors of 20 states and 1 US territory urging Congressional leaders to pass the SAFE Banking Act. “The cash-only environment also burdens state and local government agencies that must collect tax and fee payments in person and in cash, which creates additional public expenses and employee safety risks,” the governors wrote.

FinCEN issues advisory on trade in antiquities and art. The Financial Crimes Enforcement Network is informing financial institutions about its efforts related to trade in antiquities and art. The March 9 FinCEN Notice provides updated information about provisions in the Anti-Money Laundering Act of 2020 (AMLA 2020) regarding the definition of persons “engaged in the trade of antiquities” and a new mandate to perform a study of the facilitation of money laundering and the financing of terrorism through the trade in works of art. The advisory also urges financial institutions with existing Bank Secrecy Act (BSA) obligations to be aware that illicit activity associated with the trade in antiquities and art may involve their institutions, and provides specific instructions for filing Suspicious Activity Reports (SARs) related to trade in antiquities and art.

  • As we reported in the January 12, 2021 edition of Bank Regulatory News and Trends, ALMA 2020 was enacted at the beginning of this year as part of the fiscal year 2021 National Defense Authorization Act (NDAA). The updated AML law mandates the most sweeping changes to US anti-money laundering law since the USA PATRIOT Act of 2001, including a crackdown on anonymous shell companies.
  •  The legislation requires FinCEN to craft rules incorporating antiquities dealers into the definition of “financial institution” under the BSA, based on concerns that certain elements within the art and antiquities trade have been used as conduits for money laundering and terrorist financing. Under the statute, FinCEN must also undertake a study of the art trade to determine what markets should be subject to the regulations. Some industry observers believe this could lead to the inclusion of art dealers in the definition, raising concerns about the effects on small- and mid-sized antiquities and art shops.

Biden budget plan increases funding for FinCEN. President Biden’s request for fiscal year 2022 discretionary spending includes a 50-percent funding increase for the Financial Crimes Enforcement Network as the administration implements a recently enacted law intended to crack down on shell companies, as discussed in the previous item. The president’s budget blueprint, released on April 9, is considered a precursor to the full annual budget expected to be released in the coming weeks. Under the title “Increases Corporate Transparency and Safeguards the Financial System,” the president’s proposal calls for $191 million for FinCEN, $64 million above the 2021 enacted level, “to create a database that tracks the ownership and control of certain companies and organizations and help combat the use of complex corporate structures to shield illegal activity.”

Former CFPB head Cordray tapped to oversee student loans. Richard Cordray, the first director of the Consumer Financial Protection Bureau, has been named to the post of Chief Operating Officer of Federal Student Aid. Cordray will oversee the federal government’s $1.6 trillion student loan portfolio and other financial aid programs. In a May 3 announcement, Education Secretary Miguel Cardona praised Cordray for his “strong track record as a dedicated public servant who can tackle big challenges and get results.” Cordray, who has also served as attorney general of Ohio and ran unsuccessfully for governor of that state, was known for pursuing aggressive enforcement actions against banks and other lenders during his tenure at CFPB. Rohit Chopra, President Biden’s nominee for CFPB director, served with Cordray as the consumer bureau’s top student loan official during much of the Obama administration.

Recently enacted laws in Illinois, Nebraska and Mississippi impose new requirements on certain lenders.

Illinois Governor J.B. Prtizker (D) on March 23 signed into law a bill (SB 1792), known as the Illinois Predatory Loan Prevention Act (Illinois PLPA), that contains the following significant changes to the existing Illinois Consumer Installment Loan Act (CILA), the Illinois Sales Finance Agency Act (SFAA) and the Illinois Payday Loan Reform Act (PLRA):

  • Imposes a 36-percent interest rate cap, calculated in accordance with the Military Lending Act on all loans, including those made under the CILA, SFAA and the PLPRA
  • Eliminates the $25 document preparation fee on CILA loans
  • Repeals the Small Loan section of the CILA that previously allowed for small loans in excess of 36 percent up to $4,000
  • Asserts jurisdiction over bank-origination partnership programs if, “among other things”:
    • The person or entity holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan or
    • The person or entity markets, brokers, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase loans, receivables or interests in the loans or
    • The totality of the circumstances indicate that the person or entity is the lender and the transaction is structured to evade the requirements of the Illinois PLPA. Circumstances that weigh in favor of a person or entity being a lender include, without limitation, where the person or entity (i) indemnifies, insures or protects an exempt person or entity for any costs or risks related to the loan; (ii) predominantly designs, controls or operates the loan program; or (iii) purports to act as an agent, service provider or in another capacity for an exempt entity while acting as a lender in other states.

Loans that violate the Illinois PLPA, which became effective upon signing, are considered void and unenforceable.

Nebraska Governor Pete Ricketts (R) on March 17 signed into law an amendment (LB 363) which, among other items, extends licensing requirements under the Nebraska Installment Loan Act to “any person that holds or acquires any rights of ownership, servicing, or other forms of participation in a loan under the Nebraska Installment Loan Act or that engages with, or conducts loan activity with, an installment loan borrower in connection with a loan under the act[.]” Previously, licensure was only required under the Act for sales finance companies, defined as companies that purchase contracts for the sale of goods or services that impose interest on a borrower and allow the borrower to repay in one or more installments. The amendment, which is effective immediately, does not define what constitutes “engaging with” or “conducting loan activity,” but to be certain, some companies that were previously not required to be licensed (eg, those engaged in servicing retail installment contracts) are now squarely within Nebraska’s licensing regime, and it is clear the legislature’s intent was to extend the scope of such regime even further. Affiliates of licensees are not also required to be licensed if the activities of the affiliate in Nebraska are limited solely to the securitization of the loans made by the licensed entity and the servicing rights to the loans are retained by the licensee or otherwise transferred to a financial institution.

Mississippi Governor Tate Reeves (R), on the same date that Nebraska expanded the scope of its licensing requirements, signed into law legislation (HB 1075) that will, among other things, re-enact licensing requirements for non-bank lenders who provide “credit availability transactions” to customers through fully amortized loans, whether secured or unsecured, repayable in substantially equal installments over a term of 4 to 12 months. The Mississippi Credit Availability Act, which takes effect July 1, will allow the Commissioner of Banking and Consumer Finance to issue temporary licenses while an application for a license is pending if the applicant’s principals and owners are “substantially identical to those of an existing licensed credit availability licensee.”