To keep you informed of recent activities, below are several of the most significant federal and state events that have influenced the Consumer Financial Services industry over the past week.
Federal Activities
State Activities
Federal Activities:
- On February 7, Russell Vought, recently confirmed as director of the Office of Management and Budget, took over as acting director of the Consumer Financial Protection Bureau (CFPB or Bureau). Vought has already made significant moves to halt much of the CFPB’s work. In an internal email, CFPB staff and contractors were informed that the Bureau’s headquarters would be closed for the week, and all staff were required to work remotely. Vought also issued directives to cease virtually all CFPB activities, including supervision, examinations, stakeholder engagement, and pending investigations. Staff were instructed to suspend the effective dates of all rules that have been issued, but have not yet gone into effect. In a post on X, Vought announced that the CFPB would not be taking its next draw of unappropriated funding, citing the Bureau’s current balance of $711.6 million as excessive: “This spigot, long contributing to CFPB’s unaccountability, is now being turned off.” On Sunday, February 9, the National Treasury Employees Union, which includes members who are employed by the CFPB, filed a lawsuit in the District Court for the District of Columbia, noting the actions of the acting director and arguing that the effort to “shut down” the CFPB was unconstitutional because it violated the congressional mandate in the Dodd-Frank Act for the Bureau to perform the functions outlined in the statute. For more information, click here.
- On February 6, the CFPB requested and was granted a 90-day stay in the litigation involving trade associations Cornerstone Credit Union League (Cornerstone) and the Consumer Data Industry Association (CDIA). This case, which challenges the CFPB’s final rule on the prohibition of medical debt information in consumer reports, has been temporarily halted as the Bureau undergoes significant leadership changes. For more information, click here.
- On February 5, the Federal Deposit Insurance Corporation (FDIC) released 175 documents concerning its supervision of banks engaged in, or seeking to engage in, crypto-related activities. This release marks a significant step toward transparency in the regulatory oversight of cryptocurrency and blockchain technologies. Acting Chairman Travis Hill provided a statement regarding the document release: “I have been critical in the past of the FDIC’s approach to crypto assets and blockchain. As I said last March, the FDIC’s approach ‘has contributed to a general perception that the agency was closed if institutions are interested in anything related to blockchain or distributed ledger technology.’ Upon becoming Acting Chairman, I directed staff to conduct a comprehensive review of all supervisory communications with banks that sought to offer crypto-related products or services. While this review remains underway, we are releasing a large batch of documents today, in advance of a court-ordered deadline of Friday. Our decision to release these documents reflects a commitment to enhance transparency, beyond what is required by the Freedom of Information Act (FOIA), while also attempting to fulfill the spirit of the FOIA request.” For more information, click here.
- On February 5, Scott Turner was confirmed by the U.S. Senate as the 19th secretary of the U.S. Department of Housing and Urban Development (HUD) with a bipartisan vote of 55-44. Sworn in by Associate Justice Clarence Thomas, Turner expressed his commitment to lowering housing costs, expanding housing supply, and promoting financial inclusion. He emphasized the importance of reducing regulatory burdens to facilitate homeownership and support underserved communities. Turner, who previously led the White House Opportunity and Revitalization Council and held various roles in finance and community development, aims to restore HUD’s core mission of fostering strong, sustainable communities and affordable housing. For more information, click here.
- On February 4, the Federal Communications Commission (FCC) proposed a $4,492,500 fine against Telnyx LLC for allegedly allowing illegal robocalls on its network. The FCC’s Notice of Apparent Liability for Forfeiture (NAL) serves as a formal notification of the apparent violations and the proposed monetary penalty. It is not a final FCC action. Telnyx will have the opportunity to respond to the allegations, submit evidence, and present legal arguments before the FCC makes a final determination. The NAL outlines that Telnyx failed to take necessary measures to prevent malicious actors from using its network to make illegal robocalls. These calls, placed from what is referred to in the NAL as the MarioCop Accounts because of the account holders’ email addresses, impersonated a fictitious FCC “Fraud Prevention Team” and targeted FCC staff and their family members, among others. The robocalls allegedly aimed to intimidate and defraud recipients, with one individual reporting a demand for $1,000 in Google gift cards to avoid supposed legal consequences. For more information, click here.
- On February 4, President Trump’s crypto czar, David Sacks, held a press conference on Capitol Hill to outline the Trump administration’s new approach to cryptocurrency regulation. Joined by congressional leaders, including Senate Banking Committee Chairman Tim Scott, Senate Agriculture Committee Chairman John Boozman, House Agriculture Committee Chairman Glenn “GT” Thompson, and House Financial Services Committee Chairman French Hill, Sacks announced the formation of a bicameral crypto committee. This committee aims to create a stablecoin bill and a comprehensive federal regulatory framework for digital assets. Highlighting the need for regulatory clarity to foster innovation and protect consumers, Sacks emphasized the importance of keeping digital asset innovation onshore. The press conference also introduced Senator Bill Hagerty’s new bill on stablecoins and discussed the potential for a bitcoin reserve. The overarching goal is to establish a clear regulatory environment that supports U.S. innovation and market integrity in the digital asset space. For more information, click here.
- On February 4, Senators Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) introduced bipartisan legislation aimed at immediately capping credit card interest rates at 10% for a period of five years. According to Sanders, the impact of the legislation could be substantial. For instance, a $5,000 credit card balance at a 28% interest rate, with minimum monthly payments of $166, would take more than 24 years to pay off and accrue nearly $11,000 in interest. Under the proposed 10% cap, the same balance would reduce the interest paid by more than $7,000. This is not the first attempt by Hawley to legislatively cap credit card interest rates. In September 2023, Hawley introduced the “Capping Credit Card Interest Rates Act” (S.B.2760), which would have capped annual percentage rates at 18%, and expressly prohibited nonfinance charge fees from being used to evade the limitation. This bill died in committee. It remains to be seen whether Sanders’ and Hawley’s new legislation will face a different reception in the new Congress. For more information, click here.
- On February 4, the Commodity Futures Trading Commission (CFTC) Acting Chairman Caroline D. Pham announced a reorganization of the Division of Enforcement to better combat fraud and assist victims, while ending the practice of regulation by enforcement. The reorganization simplifies the previous task forces into two new groups: the Complex Fraud Task Force, led by Deputy Director Paul Hayeck, and the Retail Fraud and General Enforcement Task Force, led by Deputy Director Charles Marvine. This restructuring aims to enhance the efficiency and effectiveness of the CFTC’s enforcement efforts, focusing on preventing fraud, manipulation, and abuse, and ensuring market integrity. The new structure is designed to leverage staff expertise more effectively, providing better governance and oversight to prevent overreach and enhance fairness and due process. For more information, click here.
- On February 4, Commissioner Hester M. Peirce of the Securities Exchange Commission (SEC) announced the launch of the Crypto Task Force, aimed at providing regulatory clarity and fostering innovation in the crypto industry. Reflecting on the evolution of road trips from her childhood to the present, Peirce likened the new task force to modern technology making journeys more enjoyable and less risky. She criticized the SEC’s past approach to crypto regulation as inconsistent and enforcement-heavy, leading to legal and commercial uncertainty. The task force will focus on creating a clear regulatory framework, protecting investors, and allowing industry innovation. Peirce emphasized the importance of collaboration with other regulators and the public, inviting input and engagement to navigate this new regulatory journey. For more information, click here.
- On February 3, the CFPB filed an “Emergency Notice” in the U.S. Court of Appeals for the Fifth Circuit with respect to the ongoing litigation challenging the CFPB’s Small Business Lending Data Collection final rule under Section 1071 of the Dodd-Frank Act (the 1071 Rule). The notice announced that, with the removal of CFPB Director Rohit Chopra over the weekend, “Counsel for the CFPB has been instructed not to make any appearances in litigation except to seek a pause in proceedings.” The notice is in line with an email that went to all CFPB staff directing staff to halt most all of the CFPB’s activities in connection with the appointment of Treasury Secretary Scott Bessent to serve as the agency’s acting director. The CFPB is also seeking a “pause” in other litigation and, presumably, is halting nonpublic enforcement proceedings as well. For more information, click here.
- On February 3, a five-count criminal indictment was unsealed in federal court in New York, charging Canadian citizen Andean Medjedovic with exploiting vulnerabilities in the KyberSwap and Indexed Finance decentralized finance protocols to fraudulently obtain approximately $65 million from investors. From 2021 to 2023, Medjedovic allegedly manipulated the protocols’ automated smart contracts through deceptive trading, causing the contracts to miscalculate key variables and allowing him to withdraw funds at artificial prices. Additionally, Medjedovic is accused of laundering the proceeds through complex transactions and attempting to extort the victims of the KyberSwap exploit. He faces multiple charges, including wire fraud, unauthorized damage to a protected computer, attempted extortion, and money laundering, with potential penalties of up to 20 years in prison for each count. For more information, click here.
- On January 31, President Donald J. Trump signed an executive order initiating a massive 10-to-1 deregulation initiative aimed at fostering economic growth and reducing regulatory burdens. The order mandates that for every new rule, regulation, or guidance issued by an agency, at least 10 existing ones must be repealed. The director of the Office of Management and Budget will oversee the standardized measurement and estimation of regulatory costs, ensuring that the total incremental cost of all new regulations for fiscal year 2025 is significantly less than zero. The goal is to halt the regulatory expansion of the Biden administration, which imposed $1.7 trillion in costs, and to promote entrepreneurship, innovation, and consumer choice by reducing unnecessary and burdensome federal regulations. For more information, click here.
- On January 31, the FDIC announced its order against WEX Bank requiring the bank to pay a $650,000 civil money penalty for engaging in deceptive acts and unfair practices. The violations included allegedly failing to disclose personal guarantor liability, charging undisclosed fees, and imposing higher fees than disclosed. WEX Bank consented to the order without admitting or denying the violations. For more information, click here.
- On January 31, Michelle W. Bowman, a member of the Board of Governors of the Federal Reserve System, delivered remarks at the New England CEO Summit in Portsmouth, NH. Bowman provided an update on the Federal Open Market Committee’s (FOMC) decision to maintain the federal funds rate target range at 4-1/4 to 4-1/2 percent and to continue reducing the Federal Reserve’s securities holdings. She discussed the current economic outlook, noting strong economic activity and a labor market near full employment, while highlighting ongoing inflation risks. Bowman emphasized the importance of a gradual approach to policy adjustments and the need for clarity on the administration’s economic policies. She also addressed issues facing mutual and community banks, including challenges in raising capital and regulatory burdens. Bowman advocated for regulatory tailoring to support a diverse and resilient banking system and stressed the need for transparency and efficiency in regulatory processes. For more information, click here.
State Activities:
- On February 4, the California Department of Financial Protection and Innovation (DFPI) announced a consent order with Patelco Credit Union for cybersecurity violations, resulting in a $100,000 penalty. This action follows a June 2024 ransomware attack that disrupted services for Patelco’s 500,000 members by shutting down essential computer functions and compromising personally identifiable information. The consent order mandates Patelco to rectify deficiencies in its cybersecurity programs to meet state and federal requirements, retain an independent compliance consultant, and report on its cybersecurity measures. For more information, click here.
- On January 31, Chief Judge John J. McConnell, Jr. of the U.S. District Court for the District of Rhode Island issued a temporary restraining order (TRO) in State of New York v. Donald Trump blocking the federal government from pausing, freezing, or otherwise impeding the disbursement of federal financial assistance to states. The court found that the states were likely to succeed on the merits of their claims that the executive’s actions violated the Administrative Procedure Act and the separation of powers doctrine. The TRO was issued in response to an abrupt “pause” on federal funding, which the states argued would cause irreparable harm by disrupting vital services. Despite the Office of Management and Budget’s rescission of the directive, the court determined that the policies remained in effect, necessitating the TRO to maintain the status quo until a preliminary injunction hearing could be held. For more information, click here.
