Monthly Bulletin – September 2024

Superior Court Rules on Challenge to Crypto Kiosk Withdrawal Limit

On Sept. 4, the Department of Financial Protection and Innovation (DFPI) announced that the Superior Court for Los Angeles County upheld the Digital Financial Assets Law’s landmark consumer protections for users of crypto asset kiosks, commonly known as “Bitcoin ATMs.” The limits were challenged by the plaintiff, the Alliance for the Fair Access to Cryptocurrency Terminals (the Alliance), who alleged in a lawsuit filed in January 2024 that the $1,000 per customer per day crypto kiosk withdrawal limit in the Digital Financial Assets Law was unreasonable and exceeded the Legislature’s authority.

With its ruling, the Court found that the cap on daily transactions at crypto kiosks was a reasonable method for limiting fraud.

“The law’s common-sense restrictions, including a $1,000 daily limit at crypto kiosks, protect consumers from fraudulent transactions and limit the use of kiosks for illicit purposes. The Department will continue implementing this important legislation, which will strengthen responsible innovation in the state’s crypto industry and protect Californians,” said DFPI Commissioner Clothilde Hewlett.

In addition to the daily limit at issue in the now-dismissed lawsuit, DFAL protects users of crypto kiosks by limiting fees operators may charge and mandating new disclosures. Kiosk operators in California will also need to apply for a DFAL license.

Guidance Regarding Borrowers Affected by Landslides in Rancho Palos Verdes

On Sept. 3, 2024, Governor Gavin Newsom proclaimed a state of emergency in the City of Rancho Palos Verdes, Calif. The DFPI has issued guidance directed to financial institutions, lenders, and mortgage servicers in California whose customers may be experiencing financial hardship as a result of ongoing land movement that has disrupted utility services and evacuation warnings for impacted residents in the City of Rancho Palos Verdes, California.

The Commissioner encourages financial institutions, lenders, and servicers to work constructively with their customers and propose solutions to meet their lending needs as the recovery continues. The Commissioner also acknowledges that some licensees may experience an increase in delinquent or nonperforming loans and troubled debt restructures. This guidance does not modify any existing law or regulation. Read the full guidance.

Update on Patelco Credit Union Cyberattack

On Aug. 21, The California Department of Financial Protection and Innovation (DFPI) posted a Consumer Alert to update consumers on the Patelco Credit Union ransomware attack of June 29, 2024. On Aug. 16, perpetrators threatened to expose confidential consumer information on the dark web. Following a Patelco notice to customers on Aug. 20, the DFPI alert highlights tips related to ransomware attacks and phishing attempts. The DFPI Consumer Services Office continues to monitor and respond to calls and complaints from Patelco customers.

DFPI Alert on Fraudulent Asset Recovery Scam Posing as DFPI

On Sept. 3, the DFPI received information about scammers fraudulently claiming to be from the “Department of Financial Protection and Innovation” and using the same letterhead and logo of the DFPI.

The imposters appear to be targeting victims outside the United States through emails. They claim to be part of the DFPI’s “Global Anti-Scam Unit” and the “DFPI Global Fraud Unit.” The emails also refer to “DFPI Digital Forensics Experts.” The imposters claim that they can assist in recovering “lost funds and assets.” The imposters also appear to be asking for personal information from victims, include information about accounts.

Although the DFPI does try to help victims of fraud, it does not have a “Global Fraud Unit” or a “Global Anti-Scam Unit,” and it does not have “Digital Forensic Experts” that can help you recover money lost to fraud.

The DFPI urges consumers to exercise extreme caution before responding to any solicitation offering investment or financial services, especially if they ask you to pay fees upfront before delivering a product or service or ask you to provide personal information including account information. To check whether an investment or financial service provider is licensed in California, or to submit a complaint, consumers should go to the DFPI website at dfpi.ca.gov/consumers/ or call 1-866-275-2677.

Some Escrow Reports Due Sept. 13

Escrow agents are required to submit to the Commissioner an annual report prepared by an independent certified public accountant or an independent public accountant (Financial Code section 17406) within 105 days after the close of the escrow agent’s fiscal year. The annual report includes audited financial statements and required supplemental information.

If your fiscal year ended on May 31, 2024, your annual report is due Sept. 13, 2024. Please have your CPA email your report to [email protected] by the deadline using a secured, encrypted delivery system. The use of a secured dropbox is also acceptable. If your CPA is unable to submit the annual report electronically, it can be mailed to Queen Padilla, Senior Financial Institutions Examiner, Escrow Law, Department of Financial Protection and Innovation, 320 West Fourth Street, Suite 750, Los Angeles, CA 90013.

Penalties for failure to file the annual report by the due date or to include required information are $100 per day for the first five days a report is late and $500 per day thereafter (Financial Code section 17408). Failure to file a report or to include any required information may also result in the suspension or revocation of an escrow agent’s license or prompt an immediate examination (Financial Code section 17602.5).

For questions about the annual reports, email [email protected].

Upcoming Consumer Webinars

• SAVE/Debt Relief Student Loan Update is scheduled for Sept. 17 at 12 p.m. This session will explain the recent court-ordered temporary pause on the SAVE repayment plan and the latest in debt relief, which was announced on July 31. Speakers are national student loan expert Betsy Mayotte from the Institute of Student Loan Advisors and DFPI Student Loan Ombudsperson Celina Damian. (Registration).
• Path to Homeownership Workshop is scheduled for Oct. 2 at 12 p.m. This session will share tips on the home-buying process, how to prepare and avoid mistakes, and the resources and financial assistance needed to achieve the dream of homeownership. Special guest speakers include the California Housing Finance Agency (CalHFA) and the Department of Real Estate (DRE). (Registration).
• DFPI Financial Resource Fair is scheduled for Oct. 5 from 10 a.m. to 1 p.m. This event will connect San Francisco residents with essential tools and information on college savings, education, housing, workforce development, and personal finances. The event is co-sponsored by the DFPI, the Southeast Community Center, and the San Francisco Public Utilities Commission and will be held at the Southeast Community Center at 1550 Evans Ave. in San Francisco.

Past presentations in the series may be viewed on the DFPI YouTube site.

CSBS Community Bank Sentiment Index Survey

Banks are encouraged to participate in the 2nd quarter 2024 Conference of State Bank Supervisors (CSBS) Community Bank Sentiment Index (CBSI) survey, which is open until Sept. 27. The survey gauges the economic outlook of community banks across the nation on a quarterly basis.

The CBSI captures what community bankers nationwide think about the future and is included in the Federal Reserve Economic Data, the online database maintained by the Federal Reserve Bank of St. Louis, known informally as the FRED. Responses are analyzed and compiled into a single number. Anything above 100 indicates a positive sentiment, and anything below 100 indicates a negative sentiment. For more information about the CBSI, visit csbs.org/cbindex.

CSBS Establishes Artificial Intelligence Advisory Group

On Aug. 22, the Conference of State Bank Supervisors (CSBS) announced the establishment of a new advisory group to provide counsel and perspective to CSBS and state financial supervisors on the development and use of artificial intelligence (AI) in the financial services sector. The CSBS Artificial Intelligence Advisory Group includes experts from academic institutions, the financial industry, and nonprofit organizations. 

“Artificial intelligence presents significant opportunities for consumers, financial institutions, and regulators if responsibly developed and deployed,” said CSBS President and CEO Brandon Milhorn. “The CSBS Artificial Intelligence Advisory Group brings a diverse range of experiences and insights that will help support our members as they consider legal, policy, and supervisory activities related to artificial intelligence.”

The CSBS contact is Susanna Barnett, [email protected], (202) 407-7156.

Updated Examiner Guidance on Financial Institutions’ Information Technology

On Aug. 29, the Federal Financial Institutions Examination Council (FFIEC) issued a new publication to help examiners assess information technology practices.

“Development, Acquisition, and Maintenance” provides examiners with fundamental examination expectations regarding entities’ development and acquisition planning and execution, governance and risk management, and maintenance and change management practices. It discusses the interconnectedness of an entity’s assets and processes and those of its third-party service providers, along with information to help examiners assess whether management adequately addresses risks and complies with applicable laws and regulations.

The publication reflects the changing technological environment and increasing need for security and resilience. It also highlights the importance of providing examiners with current information regarding safety and soundness, consumer protection, and provision of secure and resilient business services to customers. This new booklet replaces the “Development and Acquisition” booklet issued in April 2004.

The complete FFIEC Information Technology Examination Handbook is available at ithandbook.ffiec.gov.

LICENSEE ACTIVITY

Commercial Bank Activity

New Bank

Elemi Bank
16000 Ventura Boulevard, Encino
Correspondent: James B. Jones
Carpenter & Company, 23 Corporate Plaza Drive, Suite 150, Newport Beach, CA 92660
Tel: 949-261-8888
Approved: 8/15/24

Acquisition of Control

Stearns Living Trust, Glenn B. Stearns, Trustee, to acquire control of Infinity Bank
Approved: 5/14/24

Steven C. Zola, to acquire control of Montecito Bank & Trust
Approved: 8/20/24

Merger

California Bank of Commerce, Walnut Creek, merged with and into Bank of Southern California, N.A., San Diego
Effected: 7/31/24

Territorial Savings Bank, Honolulu, Hawaii, to merge with and into Bank of Hope, Bank of Los Angeles, California
Filed: 8/01/24

Change of Name

Santa Cruz Community Bank to change its name to West Coast Community Bank
Filed: 8/15/24

Credit Union Activity

Merger

ACU Credit Union, Abilene, Texas, to merge with and into University Credit Union, Los Angeles, California
Filed: 7/26/24

Premium Finance Company Activity

New Premium Finance Company

Preferred Premium Finance Inc.
250 Rincon Street, Corona
Opened: 8/01/24

Money Transmitter Activity

New Transmitter

Ramp Payments Corporation
Approved: 8/06/24

Rippling Payments, Inc.
Approved: 8/15/24

Acquisition of Control

Corpay, Inc., to acquire control of GPS Capital Markets, LLC
Filed: 8/14/24

Worldpay, LLC, to acquire control of RealNet Payments LLC
Approved: 8/15/24

Voluntary Surrender

Choice Money Transfer, Inc.
Effected: 8/01/24