July 2, 2018 California Privacy Compromise Legislation Signed into Law States Win on Remote Sales Tax Collection Wage Garnishment Study Committee Recommends Drafting Committee States Reach Consent Order with Equifax on Data Breach Measures ABA RCC Tackles Banking Cannabis Regulators Host Financial Exploitation Webinar NCSL Legislative Summit Registration Open Editors Note Working Group on State Issues State Legislative Calendar Calendar of Upcoming Events California Privacy Compromise Legislation Signed into Law Legislation creating new data privacy requirements for businesses that handle consumer data in California passed both the Assembly and Senate and was signed into law by the Governor in a rush procedure on June 28th, the deadline to pull the initiative from the November ballot. The legislative compromise will take the question out of voters hands, averting the need for a statewide media campaign that was expected to cost $100 million and making it easier for legislators to amend the law after further deliberation. The business community sent a letter of qualified opposition to the bill, raising several concerns with the provisions and calling it a serious threat to the California economy, but ultimately encouraging its adoption as a marginally better alternative to the ballot initiative. Effective on Jan. 1, 2020, the new law grants consumers a right to request that a business disclose what personal information it has about individual consumers, what it uses the data for and how it is shared. It also requires businesses to delete that data upon request, among other provisions. Unlike the proposed ballot initiative, which would have granted a private right of action with statutory damages for any violation of the Act, the law limits enforcement authority to the state s attorney general. Consumers have a right to sue in response to a data breach, however, after notice to the Attorney General and a 30 day window to cure. The legislation also adds an exemption for consumer data collected, processed, sold or disclosed pursuant to the Gramm-Leach-Bliley Act (GLBA), which governs bank use of customer information. The GLBA exemption is severely limited, however, to situations where the state law is in conflict with the requirements of GLBA. The California Bankers Association, along with a coalition of financial trades, has already reached out to the bill s sponsors to explain the consequences of the limiting language and the need for a robust exemption for financial institutions. There are still significant problems created by this legislation for the business community generally, and for banks specifically. In the coming months, there will be a concerted effort to enact clean-up legislation that will address the most egregious of these concerns.
States Win on Remote Sales Tax Collection The Supreme Court ruled last month that state and local governments have the authority to collect sales taxes from remote sellers, reversing the Court s 1992 decision (Quill Corp. v. North Dakota), which required a physical presence in the state before retailers could be compelled to collect sales tax. In the recent case South Dakota v. Wayfair, the Court changed course, siding with South Dakota and noting that "Quill s physical presence rule intrudes on States reasonable choices in enacting their tax systems. And that it allows remote sellers to escape an obligation to remit a lawful state tax is unfair and unjust. The retail marketplace has changed significantly since Quill was decided in 1992, with nearly 10% of all shopping now completed online. State and local governments estimate that they are losing up to $26 billion a year in uncollected sales tax. In addition to South Dakota, Alabama, Indiana, Iowa, Maine, Massachusetts, North Dakota, Rhode Island, Tennessee, Vermont, Washington and Wyoming have all already enacted laws requiring online sellers to remit sales tax, even if they have no physical presence in the state. The Supreme Court s decision will have a significant impact on state revenue streams, especially in states like South Dakota, Washington, Texas and Florida that do not collect income tax and rely heavily on sales tax collections as a result. Wage Garnishment Study Committee Recommends Drafting Committee The Uniform Law Commission (ULC) study committee on Garnishment of Wages in Bank Accounts recommended that the project progress to the drafting phase. The study committee was tasked with determining the need for and feasibility of uniform state legislation regarding the garnishment of wages in bank accounts and appropriate exemptions of certain asset classes from claims of creditors. Ultimately, the committee determined that the differences in state law as well as the concerns of industry (including from banks and representatives of the payroll industry) justified developing a uniform approach to the issue. The recommendation, which was sent to the ULC Scope and Program Committee, will be considered during the Uniform Law Commission annual meeting at the end of July. In discussing the participation of industry groups, the recommendation memo quotes the American Bankers Association (ABA) as stating the overwhelming response from bankers is a desire for uniformity. To provide context for that quote, the discussion (during a committee sponsored conference call) focused on whether the potential scope of a drafting project should address only a garnishment of wages in bank accounts, or broader scope dealing with all aspects of the state-by-state garnishment process. Based on banker feedback, ABA learned that banks generally believe that there are inefficiencies in the current patchwork of state garnishment laws and that uniformity in this area could be beneficial. However, banks are also concerned that the project could wind-up placing restrictions on banks that would make it more difficult for banks to serve their customers in an efficient and effective manner. Banks intend to remain engaged in this project and look forward to working with the drafting committee to ensure that any potential uniform law strikes a proper balance between consumer protections and the desire for uniform processes to help banks streamline their garnishment procedures. If approved as a drafting project, the committee will likely begin meetings in the fall of 2018. Drafting projects are typically on a two-year time frame with two line-by-line readings before the entire ULC required before adoption. If you have any questions, or wish to be engaged in an ABA Working Group on this project, please contact Andy Guggenheim.
States Reach Consent Order with Equifax on Data Breach Measures Equifax entered into a consent order in June with financial regulators from eight states Alabama, California, Georgia, Maine, Massachusetts, New York, North Carolina and Texas describing the specific steps it would take to ensure the protection of consumer data in its possession, and subjecting itself to enforcement action by those state regulators if it fails to execute on the agreement. The consent order requires annual security audits, updated data protection policies, closer oversight of technology vendors, and improvements to software patch management controls. According to Equifax, last year s breach that resulted in the exposure of the personal data of more than 145 million Americans occurred when a previously detected weakness was left unpatched for several months. Equifax noted that the provisions of the consent order align with their internal remediation plans, which are already underway. Federal government regulators are still conducting their own investigations into Equifax s data security standards and conduct following the breach, with the Federal Trade Commission, the Consumer Finance Protection Bureau and the Securities and Exchange Commission still pursuing ongoing investigations, among others. ABA RCC Tackles Banking Cannabis ABA s Regulatory Compliance Conference (RCC) brings together over 2,000 bankers, regulators and bank-vendors for a robust four day discussion on bank compliance issues. Featured presentations included panel discussions on the TILA-RESPA Integrated Disclosure Rule, hot topics on BSA-AML compliance and cyber security. This year s conference also featured a flash session titled Banking Cannabis. The session, hosted by ABA staff, explained that despite cannabis being legal to some degree in 30 states, Puerto Rico, Guam and the District of Columbia, cannabis remains illegal pursuant to the Controlled Substances Act of 1970. Thus, banks serving customers in the cannabis industry face significant risks including loss of charter, jail time or fines. Despite the federal law making cannabis illegal, guidance from the Department of Justice (DOJ) to federal prosecutors provided a roadmap for enforcement priorities and an enumerated list of activities surrounding cannabis that DOJ saw as a priority. This DOJ guidance was re-enforced by guidance from the Department of the Treasury Financial Crimes Enforcement Network (FinCEN), which outlined corresponding reporting obligations under the Bank Secrecy Act, including when to file Suspicious Activity Reports (SARs). While the DOJ guidance was revoked in January 2018, the FinCEN guidance remains in effect. The clear conflict between state and federal law has been recognized by Congress, with two legislative approaches being offered that would provide clarity to the banking industry. In response, the American Bankers Association has stated that it believes the time has come for Congress and the regulatory agencies to provide greater legal clarity to banks operating in states where marijuana has been legalized for medical or adult use. Those banks, including institutions that have no interest in directly banking marijuana-related businesses, face rising legal and regulatory risks as the marijuana industry grows. ABA welcomes recent proposals in both the Senate and the House that seek to provide greater clarity and bridge the gap between state and federal laws. We look forward to working with policymakers of both parties on proposals that provide the legal and regulatory certainty banks need to best serve their communities. Regulators Host Financial Exploitation Webinar In advance of Elder Financial Exploitation Awareness Day on June 15th, the Bureau of Financial Protection (formerly CFPB) hosted a webinar to discuss a joint memo between the Bureau and FinCEN
encouraging coordination among financial institutions, law enforcement and adult protective services in order to protect older adults from financial exploitation. Over 2,675 people participated in the webinar, including law enforcement and financial institution staff. The primary purpose of the presentation was to explain how federal law enforcement uses Suspicious Activity Reports (SARs) and to encourage banks to use SARs to report suspected elder financial abuse. Presenters for the webinar included staff from the Bureau, FinCEN, the New Jersey Department of Justice, the Oklahoma Bankers Association and Bank of the West. While multiple federal law enforcement agencies have some responsibility over elder financial exploitation, the regulators stressed that banks are in a unique position to detect fraud because of their direct relationships with consumers. By working with law enforcement through SAR filings, banks can alert law enforcement of suspected exploitation. When filing a SAR identifying potential exploitation, banks were urged to click the EFE checkbox to flag the issue as elder financial exploitation. For more information on federal elder financial exploitation resources, please click HERE. NCSL Legislative Summit Registration Open Registration remains open for the 2018 National Conference of State Legislatures (NCSL) Legislative Summit. NCSL s signature event attracts over six thousand attendees including state legislators, legislative staff, and policy advocates from all 50 states, the US territories and foreign governments. Attendees gather to hear policy focused presentations and panel discussions on a wide array of policy issues including banking. This year, ABA will participate as a major sponsor of the event. Moreover, ABA s Rob Rowe will participate in a panel discussion on financial services for marijuana. Other panels will include sports betting, online sales tax and cryptocurrency. ABA will also provide feedback and coordinate industry advocacy on any policy proposals introduced at the meeting that may impact banking. For more information, or to register for the Legislative Summit, please click HERE. Editor s Note: Contribute to the Uniform State Laws Bulletin The Uniform State Laws Bulletin invites recipients to contribute content, including published articles, to our Bulletin. We are open to ideas and suggestions you would like to see featured in our next edition. If you are aware of any recent changes to laws or regulations affecting uniform laws practice in your state or region, we would like to include those as well. Please send your suggestions to Andy Guggenheim at 202-663-5507 or Sabrina Bergen at 202-663-5030. ABA Working Group on State Issues The American Bankers Association Working Group on State Issues (WGSI), which provides ABA members and state bankers associations with updates on state legislative activity, has ended its weekly call schedule for the year. For the remainder of 2018, ABA will hold calls monthly and provide a weekly e- mail update of relevant state activity. Membership in WGSI is free to ABA members who are active in state legislation and to personnel from state bankers associations. All WGSI conference calls are held on Fridays, at 11 AM Eastern. The call-in number is 1-800-579-2540;
the ID code is WGSI. To join WGSI or if you have any questions, please contact Andy Guggenheim at 202-663-5507 or Sabrina Bergen at 202-663-5030. State Legislative Calendar 2018 regular legislative sessions are ongoing in: California, Delaware, Massachusetts, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Rhode Island, Wisconsin and Washington, DC Legislative sessions are complete in: Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota, Mississippi, Nebraska, New Hampshire, New Mexico, New York, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, and Wyoming New York adjourned 6/20 Calendar of Upcoming Events National Council of Insurance Legislators Summer Meeting July 12-15 Salt Lake City, UT National Association of Counties Annual Conference July 13-16 Nashville, TN National Association of Secretaries of State July 13-16 Philadelphia, PA Council of State Governments Midwest Legislative Conference July 15-18 Winnipeg, Manitoba, Canada National Governors Association July 19-22 Santa Fe, NM Council of State Governments Southern Legislative Conference July 21-25 St. Louis, MO National Conference of State Legislatures Legislative Summit July 30 August 2 Los Angeles, CA National Association of Insurance Commissioners Summer National Meeting August 4-7 Boston, MA Council of State Governments Eastern Regional Conference August 5-8
Rye Brook, NY American Legislative Exchange Council Annual Meeting August 8-10 New Orleans, LA The Uniform State Laws Bulletin is a service of the American Bankers Association. ABA Members: To unsubscribe and to manage your subscriptions, please visit ABA E-Mail Bulletins and check or uncheck the appropriate boxes. For other inquiries, please contact ABA s Andy Guggenheim or Sabrina Bergen. 2018 American Bankers Association 1120 Connecticut Avenue, NW Washington, DC 20036