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California Assembly Bill 2521 amends Section 800 of the Military and Veterans Code, relating to the military.

Existing law, the California Military Families Financial Relief Act, authorizes a reservist who is called to active duty to defer payments on mortgages, credit cards, retail installment accounts and contracts, real property taxes and assessments, vehicle leases, and obligations owed to utility companies, for the period of active duty plus 60 calendar days, or 180 days, whichever is the lesser, as specified. Existing law requires the reservist or his or her designee to deliver to the obligor (1) a copy of his or her activation or deployment order and any other information that substantiates the duration of the service member’s military service, and (2) a letter signed by the reservist, under penalty of perjury, requesting a deferment of financial obligations, in order for the obligation or liability to be subject to the provisions of the act.

This bill would delete the requirement to provide a signed letter, under penalty of perjury, and instead would require the reservist or his or her designee to deliver a written request by the reservist for a deferment of financial obligations to the obligor.

These provisions are effective on January 1, 2019.

Ballard Spahr LLP--David Mooers-Putzer and Constantinos Panagopoulos

On June 29, 2018, the California Commissioner of Business Oversight warned California residential mortgage lenders and servicers that their failure to file annual reports could lead to enforcement actions. The same day, the California Department of Business Oversight issued its annual report for calendar year 2017 on the operation of licensed lenders and servicers. The report relied on mandatory self-reported data from lenders and servicers. However, 8% fewer licensees filed reports for 2017 than for 2016. The Commissioner called the decline "disturbing" and warned that the Department would take appropriate action under the law to deal with licensees that do not file their reports.

California's Residential Mortgage Lending Act requires licenses for any person "engage[d] in the business of making residential mortgage loans or servicing mortgage loans." Cal. Fin. Code § 50002(a). Banks, savings and loan associations, savings banks, and credit unions that are federally chartered or chartered in other states, among other entities, are exempt from licensure. Cal. Fin. Code § 50002(c). All licensed lenders and servicers must annually file a report with the California Department of Business Oversight. Cal. Fin. Code § 50307.

Failure to report immediately authorizes an audit by the Department of Business Oversight. Cal. Fin. Code § 50307(c). Ordinarily, audits only occur once every four years. Cal. Fin. Code § 50302(a). If the Department discovers any violation of the Residential Mortgage Lending Act, it may suspend or revoke any licenses. Cal. Fin. Code § 50327. Other possible penalties include fines, censure, suspension for up to one year, and total bars on working as a lender or servicer. Cal. Fin. Code §§ 50318(a), 50500–50501, 50513.

According to the Department's 2017 report, both the total number and dollar amount of non-bank mortgage lending declined by nearly 30% in 2017. Overall mortgage market activity followed a similar but less dramatic trend, with the total number of brokered loans declining by 24.3% and the aggregate dollar amount of brokered loans down 14.3%. Interestingly, foreclosures and consumer complaints also declined. There were 27.7% fewer foreclosures in 2017 than 2016. Finally, aggregate servicer activity increased by 2.13%.

Buckley Sandler, LLP--InfoBytes Blog

On July 3, the New York Department of Financial Services (NYDFS), at the direction of Governor Andrew Cuomo, released guidance encouraging New York state chartered banks and credit unions to consider establishing relationships with regulated and compliant medical marijuana and industrial hemp-related businesses operating in New York. According to the guidance, these businesses often rely solely on cash to conduct transactions, because of a lack of access to traditional financial services. The press release announcing the guidance cites to the New York Compassionate Care Act, enacted in 2014, which provides medical patients suffering from “debilitating symptoms and diseases” access to, under strict requirements, medical marijuana. NYDFS is encouraging New York financial institutions to form appropriate banking relationships with these business, because “[p]roviding access to regulated banking services is an essential part of taking the legal cannabis industry out of the shadows and establishing it as a transparent, regulated, tax-paying part of our economy, and a necessary part of fulfilling the goal of relieving the suffering of seriously ill patients.”

NYDFS will not impose any regulatory action on a New York financial institution that establishes a business relationship with legal medical marijuana and industrial hemp-related businesses, as long as the institution also complies with other applicable guidance and regulations, such as the Financial Crimes Enforcement Network’s 2014 guidance—which clarifies expectations under the Bank Secrecy Act (BSA) for financial institutions providing services to these businesses.

The Indiana Department of Financial Institutions has published the annual update to the Consumer Credit Fees (IC 28-11-3-5) schedule, effective July 1, 2018 through June 30, 2019. These fees relate to the licensing of mortgage lenders, lenders, credit sellors/lessors, and depository institutions. 

Refer to the schedule of fees for complete details. 

Michigan House Bill 5811 amends 2003 PA 238, entitled “An act to provide for the qualification, appointment, and regulation of notaries; to provide for the levy, assessment, and collection of certain service charges and fees and to provide for their disposition; to create certain funds for certain purposes; to provide for liability for certain persons; to provide for the admissibility of certain evidence; to prescribe powers and duties of certain state agencies and local officers; to provide for remedies and penalties; and to repeal acts and parts of acts,” by amending sections 15, 25, and 27 (MCL 55.275, 55.285, and 55.287), section 15 as amended by 2006 PA 510, section 25 as amended by 2006 PA 426, and section 27 as amended by 2006 PA 155, and by adding sections 26b and 54.

These provisions are effective immediately and this act takes effect on September 30, 2018.

Rhode Island Senate Bill 2145 authorizes a city or town clerk/recorder of deeds, at the clerk's/recorder's option, to accept electronic documents for recording real property and land records and to index and store those documents. These provisions are effective on July 1, 2019.

Rhode Island Senate Bill 2560 repeals the current state provisions regarding notaries and adopts an adapted version of the "Revised Uniform Law on Notarial Acts."  These provisions are effective on January 1, 2019.

Bankers Advisory--Elizabeth Dailey

Connecticut has modified provisions under its Banking Law concerning consumer credit licenses. The new provisions expand the authority granted to the Banking Commissioner in various circumstances. The effective dates for these provisions range from July 1, 2018 to July 1, 2019.

Investigations

Under the new provisions, the authority granted to the Banking Commissioner for investigative purposes has been expanded. The Commissioner may now obtain any records, information, or evidence for investigations relating to any license issued on the system, including the issuing, renewing, suspending, or terminating of such licenses, or for investigations of licensed persons to determine compliance with applicable law. The types of information available to the Commissioner include criminal records, credit reports obtained from a consumer reporting agency, and any other evidence deemed necessary by the Commissioner during the course of the investigation.

The Commissioner is granted total control over any evidence obtained for the purpose of conducting the investigation, and he or she is permitted to hire attorneys, accountants, and any other necessary specialists to assist in the investigation. The Commissioner may also enter into agreements or relationships with other government officials and use public or privately available analytic systems to assist with investigations.

Licensing

The new licensing provisions state that if a license expires due to the licensee’s failure to renew, the Commissioner may, within one year, initiate a suspension or revocation proceeding.

Withdrawal of an application for a license is effective upon receipt by the Commissioner of notice of intent to withdraw. The Commissioner may deny a license within one year of the effective date of withdrawal.

Annual Assessment

The Commissioner shall collect, from each Connecticut bank and credit union, an annual assessment sufficient to meet the expenses for the Department of Banking. A new provision under this section provides that if the Commissioner determines that the amount to be collected from an uninsured bank is unreasonably low or high based on the bank’s size and risk profile, the Commissioner may require the bank to pay a fee in lieu of the annual assessment. If a bank does not pay the required fee by the time specified by the Commissioner, said bank shall pay an additional two hundred dollars to the Commissioner.

For the full text of House Bill 5490, please refer to https://www.cga.ct.gov/2018/ACT/pa/pdf/2018PA-00173-R00HB-05490-PA.pdf.

In this report, the Department of Business Oversight (DBO) has compiled data submitted by residential mortgage lenders and mortgage loan servicers licensed under the California Residential Mortgage Lending Act (CRMLA). The licensees submitted the data pursuant to Financial Code section 50307(a). The statute requires licensees to submit to the Commissioner of Business Oversight an annual report that contains information the Commissioner deems relevant to calculating licensees’ annual assessment. The assessment calculation is governed by Financial Code section 50401(a). 

EXECUTIVE SUMMARY

The following are highlights from the 2017 CRMLA consolidated annual report:

• Loans originated - The number and principal amount of loans originated by licensees in 2017 decreased significantly from 2016, according to the data. The number of loans declined from 602,430 to 431,052, a decrease of 28.4 percent. The aggregate principal amount of loans originated in 2017 totaled $150.7 billion, a 27.3 percent decrease from 2016. However, the 2017 aggregate principal amount represented a 290.4 percent increase from 2008’s low point of $38.6 billion.
• Loans brokered - The number of loans brokered in 2017 fell 24.3 percent from 2016, to 9,496 from 12,536. The aggregate principal amount of brokered loans in 2017 totaled $5 billion, down 14.3 percent from 2016.
• Loans serviced - The aggregate average monthly amount of loans serviced by licensees increased 2.13 percent in 2017, to $854.8 billion from $852.9 billion in 2016.
• Adjustable rate and other non-traditional mortgage loan products - The number of licensees that reported making or arranging adjustable rate mortgages in 2017 went up to 214 from 212 in 2016, the data showed. The number of licensees making or arranging other non-traditional mortgages increased from 128 in 2016 to 140 in 2017. Licensees retained on their books $1.4 billion of adjustable rate mortgages in 2017 and sold to investors another $7.4 billion of such mortgages.
• Consumer complaints - Licensees reported 12,963 consumer complaints concerning non-traditional mortgage loans, an 11 percent decrease from 2016. 
• Foreclosures - Licensees reported completing 11,478 foreclosures in 2017. That was down 27.7 percent from the 2016 total of 15,883.
• Licensees - The number of licensed lenders and servicers at the end of 2017 was 2.2 percent higher than it was at the end of 2016, at 418 compared to 409. The number of branches grew 8.8 percent, to 5,929 from 5,449. The 2017 numbers continued a steady rise since 2010. In that year, licensees totaled 289, and branches numbered 1,829.

See the complete report for additional details.

Rhode Island House Bill 7385 repeals the July 1, 2018, sunset clause in Chapters 325 and 406 of the 2013 Public Laws in regard to § 34-24-3.2 "mediation conference prior to mortgage foreclosure."

The act now expires July 1, 2023. 

Ballard Sparh, LLP--David M. Strauss; Malia K. Rogers; Taylor Steinbacher; Gregory Szewczyk

As we discussed in our prior alert, California voters had been poised to consider a citizen-initiated ballot measure that would have significantly expanded the privacy rights of California citizens and provided substantial penalties for noncompliant companies. In response to that ballot measure, the California legislature hastily pushed through privacy legislation despite the "grave, grave concerns" expressed by lawmakers.

Lawmakers were willing to enact the flawed legislation based on an assurance from the leader of the ballot measure that he would not submit the measure if the legislation was passed. However, because the deadline to submit ballot measures was June 28, 2018, lawmakers had to rush the legislation through both houses. And, since state law requires that legislation be in print for at least 72 hours before a vote, lawmakers had no opportunity to offer amendments.

Lawmakers were willing to engage in such a rushed course of action because, if the ballot measure had become law, both houses would have been required to approve any changes by a 70 percent vote instead of a simple majority. Also, because the legislation does not go into effect until January 1, 2020, lawmakers theoretically can fix any problems in the intervening time frame.

Despite its tumultuous legislative history, the legislation—titled the California Consumer Privacy Act of 2018—grants significant privacy rights to California residents. Any entity that does business in California and qualifies as a "business" under the Act will need to comply with the law or risk substantial financial penalty.

Consumer Rights

The legislation provides for the following consumer rights:

• A consumer (defined as a California resident) has the right to request that a business (defined below) that collects a consumer's personal information (defined below) disclose to that consumer the categories and specific pieces of personal information that the business has collected.

• A business that collects a consumer's personal information shall, at or before the point of collection, inform consumers as to the categories of personal information to be collected and the purposes for which the categories of personal information shall be used. A business is forbidden from collecting additional categories of personal information or using personal information collected for additional purposes without providing notice to the consumer.

• A consumer has the right to request that a business delete any personal information about the consumer that the business has collected.

• A consumer has the right to request that a business that collects personal information about the consumer disclose: (a) the categories of personal information it has collected about that consumer, (b) the categories of sources from which the personal information is collected, (c) the business or commercial purpose for collecting or selling personal information, (d) the categories of third parties with whom the business shares personal information, and (e) the specific pieces of personal information it has collected about that consumer.

• A consumer has the right to request that a business that sells the consumer's personal information, or that discloses it for a business purpose, disclose: (a) the categories of personal information that the business collected about the consumer, (b) the categories of personal information that the business sold about the consumer and the categories of third parties to whom the personal information was sold, by category or categories of personal information for each third party to whom the personal information was sold, and (c) the categories of personal information that the business disclosed about the consumer for a business purpose.

• A consumer has the right, at any time, to direct a business that sells personal information about the consumer to third parties not to sell the consumer's personal information.

• A business cannot sell the personal information of consumers if the business has actual knowledge that the consumer is younger than 16 years old, unless the consumer—in the case of consumers who are between 13 and 16—or the consumer's parent or guardian, in the case of consumers who are younger than 13, has affirmatively authorized the sale of the consumer's personal information.

To comply with these requirements, businesses are required to make available two or more methods for submitting consumer verified requests and the information must be provided to the consumer within 45 days of the verified request.

Relevant Definitions

The law defines "business" as an entity doing business in California that:

(a) has annual gross revenues in excess of $25,000,000;

(b) alone or in combination, annually buys, receives for the business' commercial purposes, sells, or shares for commercial purposes, alone or in combination, the personal information of 50,000 or more consumers, households, or devices; or

(c) derives 50 percent or more of its annual revenues from selling consumers’ personal information.

Because the law defines "consumer" as a California resident, the second and third categories should be interpreted to relate to California, and not nationwide, numbers.

The law defines "personal information" incredibly broadly as any "information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer or household." The law lists numerous categories of information that qualify as personal information

Online Privacy Notice Requirements

The law requires entities to list specific information in their online privacy policies, including:

• a description of the consumers' rights as discussed above;

• a list of the categories of personal information that the business has collected about consumers in the preceding 12 months;

• a list of the categories of personal information it has sold about consumers in the preceding 12 months; and

• a list of the categories of personal information it has disclosed about consumers for a business purpose in the preceding 12 months.

If applicable, a business also must provide a clear and conspicuous link on the business' homepage titled “Do Not Sell My Personal Information,” which should lead to a web page enabling a consumer—or a person authorized by the consumer—to opt out of the sale of the consumer's personal information. That information also should be provided in the business' online privacy policy.

Enforcement

The law creates a complicated enforcement mechanism for private litigants and the California Attorney General's office.

First, the legislation authorizes consumers to bring a civil action if their "nonencrypted or nonredacted personal information . . . is subject to an unauthorized access and exfiltration, theft, or disclosure as a result of the business' violation of the duty to implement and maintain reasonable security procedures and practices appropriate to the nature of the information to protect the personal information." The law provides for statutory damages of not less than $100 and not greater than $750 "per consumer per incident."

Prior to initiating an action, the consumer must provide a business with 30 days' written notice, and the consumer cannot bring a claim for statutory damages if the business provides a written statement that the violations have been cured and will not continue. If an action is filed, the consumer must provide the Attorney General with notice, and the Attorney General's office is given leave to prosecute the violation.

For Attorney General enforcement actions, the statute allows the Attorney General to seek statutory damages of $2,500 for each violation or $7,500 for intentional violations.

Members of Ballard Spahr's Privacy and Data Security Group provide a full range of counseling, transactional, regulatory, investigative, and litigation services across industry sectors and help clients around the world identify, manage, and mitigate cyber risk. Our team of nearly 50 lawyers across the country includes investigators and advocates with deep experience in cyber-related internal and governmental investigations, regulatory compliance and enforcement matters, cyber-related crisis management, and civil and criminal litigation.

Copyright © 2018 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

North Carolina House Bill 852 makes corrections and other amendments to various statutes impacting real property ownership and recording requirements. Provisions in this bill range from effective immediately to effective on October 1, 2018.

PART I. MORTGAGE AND DEED OF TRUST CHANGES

• § 39‑13.  Spouse need not join in purchase‑money mortgage (effective immediately, June 25, 2018)
• § 161‑10.  Uniform fees of registers of deeds (effective October 1, 2018)
• § 161‑14.1.  Recording subsequent entries as separate instruments (effective October 1, 2018)

PART II. PROBATE AND REGISTRATION CHANGES

• § 47‑17.1.  Documents registered or ordered to be registered in certain counties to designate draftsman; exceptions  (effective immediately, June 25, 2018)
• § 47‑18.3.  Execution of corporate instruments; authority and proof  (effective immediately, June 25, 2018)

PART III. REGULATE SOLICITATION OF COPIES

• § 75‑43.  Solicitation of a fee for copy of recorded documents (effective October 1, 2018