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 March 3, the Federal Deposit Insurance Corporation (FDIC) board of directors approved a delay in the compliance date for certain provisions under the FDIC’s Sign and Advertising Rule. This delay specifically affects requirements related to the display of the FDIC’s official sign on insured depository institutions’ (IDI) digital channels, as well as provisions related to IDIs’ automated teller machines (ATM) and similar devices. Initially, full compliance with these amendments, adopted on December 20, 2023, was set for May 1, 2025. However, the compliance date for Sections 328.4 and 328.5 has now been postponed to March 1, 2026, to allow the FDIC additional time to propose adjustments to the regulation. The remaining provisions of the rule will still take effect on May 1, 2025. For more information, click here.
On February 27, the Securities and Exchange Commission’s (SEC) Division of Corporation Finance released its views on “meme coins.” Meme coins are characterized as a type of crypto asset inspired by internet memes, characters, current events, or trends. The SEC opined that, while the offer and sale of meme coins may not be subject to federal securities laws, fraudulent conduct related to meme coins could still be subject to enforcement actions. For more information, click here.
On February 27, Jonathan McKernan, nominee for director of the Consumer Financial Protection Bureau (CFPB), testified before the Senate Committee on Banking, Housing, and Urban Affairs. McKernan expressed his honor in being nominated by President Trump and his commitment to advancing the president’s pro-growth agenda. He highlighted his extensive experience, including his recent role on the FDIC’s board of directors, where he navigated significant bank failures and worked to establish a culture of accountability. McKernan criticized the CFPB for acting beyond its statutory authority and emphasized the need for the CFPB to be accountable to elected officials. If confirmed, he pledged to faithfully execute the law, focusing CFPB’s regulation on real consumer risks and targeting enforcement on bad actors. For more information, click here.
On February 26, Representative Joseph D. Morelle (D-NY), ranking member of the U.S. House Committee on House Administration, wrote to Trump urging him to rescind the “Ensuring Accountability for All Agencies” executive order issued on February 18. Morelle argued that the executive order, which seeks to bring independent regulatory agencies under White House control, violates the constitutional principle of separation of powers and undermines the independence of agencies like the Federal Election Commission (FEC). He emphasized that Congress, not the president, has the authority to establish and assign functions to federal agencies. Morelle warned that the order could lead to political corruption and weaken public trust in the electoral system, particularly as the FEC is currently reviewing complaints related to Trump’s campaign finance violations. He called on Trump to allow the FEC and other independent agencies to conduct their investigations without political interference. For more information, click here.
On February 26, Russell T. Vought, director of the Office of Management and Budget, and Charles Ezell, acting director of the Office of Personnel Management, issued a memorandum to the heads of executive departments and agencies. The memorandum provided guidance on developing Agency Reduction in Force (RIF) and Reorganization Plans (ARRPs) as part of Trump’s “Department of Government Efficiency” Workforce Optimization Initiative. The initiative aims to reduce government costs and inefficiencies by eliminating nonessential functions, consolidating management layers, and reducing the federal workforce. Agencies are required to submit Phase 1 ARRP by March 13, focusing on initial cuts and reductions, and Phase 2 ARRP by April 14, outlining a vision for more efficient operations. The guidance emphasizes the elimination of nonstatutory functions, consolidation of duplicative areas, and reduction of the federal real property footprint, while ensuring that essential services to citizens are not adversely affected. For more information, click here.
On February 26, the Federal Bureau of Investigation (FBI) issued a public service announcement (PSA) alerting that the Democratic People’s Republic of Korea (North Korea) was responsible for the theft of approximately $1.5 billion in virtual assets from the cryptocurrency exchange Bybit, which occurred around February 21. The FBI has identified this specific North Korean cyber activity as “TraderTraitor.” The actors involved have rapidly converted some of the stolen assets into Bitcoin and other virtual currencies, dispersing them across thousands of addresses on multiple blockchains, with the expectation that these assets will be further laundered and eventually converted to fiat currency. The FBI urges private sector entities, including RPC node operators, exchanges, bridges, blockchain analytics firms, DeFi services, and other virtual asset service providers, to block transactions associated with addresses used by TraderTraitor actors to launder the stolen assets. The PSA also provided specific Ethereum addresses linked to the theft and the North Korean actors. For more information, click here.
On February 25, the U.S. District Court for the Eastern District of Kentucky granted a joint motion to stay proceedings in the case of Forcht Bank, N.A., et al. v. Consumer Financial Protection Bureau, et al. The plaintiffs in the case are challenging the CFPB’s open banking rule, alleging that the CFPB exceeded its authority and violated the Administrative Procedure Act. The stay, requested by both parties, allows the CFPB and Vought, to reconsider their position on the rule in light of recent leadership changes. The court also extended the deadlines for compliance with the challenged rule and modified the summary judgment briefing schedule accordingly. For more information, click here.
On February 24, the defendants, including Vought in his official capacity as acting director of the CFPB, filed an opposition to the plaintiffs’ motion for a preliminary injunction in the case of National Treasury Employees Union (NTEU), et al. v. Russell Vought, et al. The defendants argued that the plaintiffs, which include CFPB employee organizations and consumer advocacy groups, failed to establish a likelihood of success on the merits of their claims. The defendants contended that the directive issued by Vought on February 8 to pause certain CFPB activities unless required by law or expressly approved, was consistent with the president’s regulatory freeze order and did not violate statutory or constitutional provisions. They also emphasized that the CFPB continues to perform its statutory obligations and that the plaintiffs’ claims are improperly seeking judicial oversight of agency management. The defendants further argued that the plaintiffs have not demonstrated irreparable harm and that the balance of equities and public interest weigh against granting the preliminary injunction. For more information, click here.
On February 24, the FDIC submitted a notice of change in position to the U.S. District Court for the District of Kansas, informing the court that the acting solicitor general has determined that the multiple layers of removal restrictions for administrative law judges (ALJ) in 5 U.S.C. § 7521 do not comply with the separation of powers and Article II of the Constitution. Consequently, the U.S. will no longer defend these provisions in litigation. This case stems from CBW Bank’s action for declaratory and injunctive relief, alleging that the FDIC’s administrative proceedings to impose civil monetary penalties violate the Constitution, including Article II, Article III, and the Seventh Amendment. Despite the change in position, the FDIC continues to argue that the court should dismiss CBW Bank’s Article II claim and deny the motion for a preliminary injunction, asserting that CBW has not demonstrated that the removal protections have affected the proceedings or that the ALJ would have been removed absent these protections. The FDIC also maintains that CBW has not shown entitlement to injunctive relief under the remaining preliminary injunction factors. For more information, click here.
On February 24, the U.S. Attorney’s Office for the Southern District of New York announced that Aux Cayes Fintech Co. Ltd, operating as “OKEx” and “OKX,” pled guilty to operating an unlicensed money transmitting business and agreed to pay more than $504 million in penalties. OKX, a Seychelles-based cryptocurrency exchange, allegedly violated U.S. anti-money laundering laws by failing to implement required policies, facilitating more than $5 billion in suspicious transactions. Despite an official policy against U.S. customers, OKX allegedly actively sought them and advised on circumventing regulations. The plea agreement includes criminal forfeiture of $420.3 million, a criminal fine of $84.4 million, and ongoing cooperation with an external compliance consultant through February 2027. For more information, click here.
On February 21, the SEC reportedly informed regional directors at its 10 regional offices that it plans to eliminate their roles as part of cost-saving measures required by the new administration. The plan to remove the regional directors has not been made public at this time, but at least two anonymous sources reportedly spoke to Reuters about the announcement made on Friday. The SEC’s regional offices examine regulated entities in their region. They often identify and lead investigations and enforcement actions, with guidance from the regional directors. If regional directors are eliminated, it will undoubtedly impact the SEC’s investigation and enforcement efforts. For more information, click here.
On February 21, the CFPB and SoLo Funds, Inc. filed a joint stipulation of voluntary dismissal with prejudice in the U.S. District Court for the Central District of California. This stipulation effectively ends the litigation between the parties, with each bearing its own costs, expenses, and attorneys’ fees, and waiving all rights to appeal. The lawsuit, initiated by the CFPB in 2024, alleged that SoLo Funds engaged in deceptive practices related to the total cost of loans, servicing, and collection of void and uncollectible loans in violation of the Consumer Financial Protection Act. Additionally, the CFPB claimed that SoLo Funds provided consumer reports governed by the Fair Credit Reporting Act FCRA but failed to ensure the maximum possible accuracy of those reports. For more information, click here.
On February 21, the states of New York and New Jersey, the District of Columbia, and 21 other states filed a brief as amici curiae in the U.S. District Court for the District of Columbia in support of the NTEU’s motion for a preliminary injunction against Vought and other defendants. The amici curiae argue that the dismantling of the CFPB will cause irreparable harm to states and consumers by eliminating critical consumer protection services, disrupting supervision of very large banks, and increasing the burden on states to enforce consumer protection laws. They emphasize that the CFPB has been an invaluable partner in providing statutorily mandated services, collaborating on enforcement actions, and supervising compliance with consumer protection laws. The brief underscores the immediate and significant negative impacts on states and their residents if the CFPB’s functions are not preserved. For more information, click here.
On February 21, SEC Commissioner Hester M. Peirce issued a statement titled “There Must Be Some Way Out of Here,” addressing the need for greater clarity in the regulation of crypto assets. She emphasized the importance of public input in assisting the SEC’s task force, which is working on developing a clearer regulatory framework for crypto assets. The statement outlined various questions the task force is considering, including the classification of crypto assets, the application of federal securities laws, and the potential for a safe harbor for blockchain projects. Peirce invited feedback from a wide range of stakeholders to help shape the regulatory landscape, stressing that the views expressed are her own and not necessarily those of the commission. For more information, click here.
On February 20, the Department of Justice, through a statement from Chief of Staff Chad Mizelle, announced that it has determined the multiple layers of removal restrictions shielding ALJs are unconstitutional. Mizelle emphasized that unelected and constitutionally unaccountable ALJs have wielded significant power for an extended period, which contradicts the principles of constitutional accountability. In alignment with Supreme Court precedent, the Department is taking steps to ensure that Executive Branch officials are accountable to the president and, ultimately, to the American people. For more information, click here.
On February 19, Jennifer L. Fain, Inspector General of the FDIC, responded to Senators Elizabeth Warren, Raphael Warnock, Chris Van Hollen, and Lisa Blunt Rochester regarding their concerns about the FDIC’s decision to rescind over 200 bank examiner jobs. Fain explained that the FDIC had initiated an evaluation in October 2024 to assess risks related to succession management and employee retention. However, the hiring freeze and deferred resignation offers, along with recent executive orders aimed at restructuring federal agencies, have impacted this evaluation. The Office of Inspector General will adjust its oversight work to analyze these changes and their effects on the FDIC. Fain emphasized that succession management remains a significant challenge for the FDIC and that ongoing adjustments will be made to ensure stability and confidence in the nation’s banking system. She assured the senators that updates would be provided as the situation evolves. For more information, click here.
On February 19, the U.S. Court of Appeals for the Second Circuit affirmed the judgment of the Eastern District of New York in Saint-Jean v. Emigrant Mortgage Company, Inc. et al., a case involving eight Black homeowners in New York City who sued Emigrant Mortgage Company and affiliated entities, alleging violations of federal, state, and city antidiscrimination laws through “reverse redlining” practices. The plaintiffs claimed that Emigrant targeted Black and Latino individuals in poor neighborhoods with high-equity homes, offering them mortgage refinancing loans with extraordinarily high default interest rates, and subsequently foreclosing on these loans when the individuals defaulted. The district court had entered a final judgment awarding four homeowners $722,044 in compensatory damages and four others nominal damages following a jury verdict in favor of the homeowners. On appeal, Emigrant argued that the district court erred in finding the homeowners’ claims timely under the doctrine of equitable tolling and the discovery rule of accrual, in its jury instructions on disparate impact and disparate treatment theories of discrimination, and in holding that a release-of-claims provision in a loan modification agreement signed by two homeowners was unenforceable as a matter of law. The Second Circuit concluded that the district court did not abuse its discretion and affirmed the judgment. For more information, click here.
State Activities:
On February 21, Senator Benjamin Allen (D) introduced Senate Bill 766, known as the California Combating Auto Retail Scams (CARS) Act. This bill aims to impose stringent new regulations on auto dealers in the state, many of which echo back to the Federal Trade Commission’s (FTC) own CARS Rule. Key provisions of the bill include, making it a violation for dealers to misrepresent material information about vehicle sales, including costs, financing terms, benefits of add-ons, and the availability of vehicles at advertised prices; requiring dealers to make certain disclosures clear and conspicuous, including the offering price, total amount the consumer will pay, required downpayment, and that the purchase of any add-on is not required; and prohibiting dealers from charging for add-on products or services that do not benefit the purchaser or lessee, such as nitrogen-filled tires, duplicative warranty coverage, a GAP agreement if the consumer’s vehicle or neighborhood is excluded from coverage or the loan-to-value ratio would not result in a financial benefit to the consumer, or a service contract that includes a limit that would not cover the market value price for the repair of a covered item or if the contract is void due to preexisting conditions. For more information, click here.
