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 August 18, the U.S. Department of the Treasury issued a notice inviting public comments on innovative methods to detect and mitigate illicit finance risks involving digital assets. This initiative is part of the GENIUS Act, which aims to establish a comprehensive regulatory framework for payment stablecoin issuers and enhance U.S. leadership in digital finance. The Treasury seeks input on technologies such as APIs, AI, digital identity verification, and blockchain monitoring, focusing on their effectiveness in combating illicit activities like money laundering. Comments are due by October 17 and can be submitted via Regulations.gov. For more information, click here.
On August 15, the U.S. Court of Appeals for the District of Columbia issued a decision in the case of National Treasury Employees Union (NTEU) v. Consumer Financial Protection Bureau (CFPB). The appellate court vacated the district court’s preliminary injunction, which had previously restricted the CFPB’s actions to halt the CFPB’s operations and terminate its employees. The NTEU, representing CFPB employees, filed a lawsuit challenging Acting Director Russell Vought’s actions, alleging they were unconstitutional and violated the Dodd-Frank Act. The district court held that the CFPB’s shutdown attempts were not consistent with its statutory obligations under Title X of Dodd-Frank. As a result, the court granted a preliminary injunction requiring the CFPB to reverse its shutdown efforts, reinstate its workforce, and continue performing its statutory duties, but the CFPB appealed, leading to a partial stay of the injunction. The D.C. Circuit Court found that the district court lacked jurisdiction over claims related to employment loss, which must be addressed through the Civil Service Reform Act’s specialized review scheme. Furthermore, the court determined that the remaining claims did not target final agency action reviewable under the Administrative Procedure Act nor unconstitutional action reviewable in equity. On the same day, the court issued an order withholding the issuance of the mandate until seven days after the disposition of any timely petition for rehearing or petition for rehearing en banc. This order allows any party to move for expedited issuance of the mandate for good cause shown. For more information, click here.
On August 15, the Federal Reserve Board announced its decision to sunset the novel activities supervision program, which was initially established to oversee certain crypto and fintech activities within banks. The board has gained substantial insights into these activities, their associated risks, and the banks’ risk management practices. Consequently, the board will integrate this knowledge into the standard supervisory process, effectively rescinding the 2023 supervisory letter that created the program. This transition marks a return to the normal supervisory process for monitoring banks’ novel activities. For more information, click here.
On August 12, the U.S. Department of Labor’s Employee Benefits Security Administration announced the rescission of a December 2021 supplemental statement that had discouraged fiduciaries from considering alternative assets in 401(k) retirement plans. This move follows President Trump’s executive order, “Democratizing Access to Alternative Assets for 401(k) Investors,” which directs the department to reassess its guidance to ensure that asset allocation funds including alternative investments are accessible to plan participants. The previous statement, issued under the Biden administration, suggested that most fiduciaries were ill-equipped to evaluate private equity investments, which had a chilling effect on the market. U.S. Secretary of Labor Lori Chavez-DeRemer criticized the prior guidance as government overreach, asserting that fiduciaries should determine the best investment options for Americans. Deputy Secretary Keith Sonderling echoed this sentiment, emphasizing the importance of innovative retirement products in achieving the American Dream. The rescission aims to restore a neutral, principle-based approach to fiduciary decisions, consistent with the Employee Retirement Income Security Act, allowing fiduciaries to consider all relevant factors without undue scrutiny on specific investment types. For more information, click here.
On August 11, Senate Banking Democrats, led by Senator Elizabeth Warren, sent a letter to key financial regulators, including Federal Reserve Vice Chair for Supervision Michelle Bowman, Comptroller of the Currency Jonathan Gould, and Federal Deposit Insurance Corporation (FDIC) Acting Chairman Travis Hill, urging for an extension of the comment deadline on the proposed reduction of the enhanced supplementary leverage ratio (eSLR). This safeguard, established post-2008 financial crisis under the Dodd-Frank Act, is crucial for maintaining the resilience of large and complex banks. The senators emphasized the need for comprehensive economic impact analyses and clear explanations of the rationale behind the proposed changes, warning that insufficient scrutiny could lead to severe economic consequences for taxpayers, small businesses, and low- to middle-income households. They highlighted potential risks, such as a significant reduction in GSIB capital levels and increased costs to the Deposit Insurance Fund, and requested detailed answers by September 2, along with a 90-day extension for public comment. For more information, click here.
On August 11, Paxos, a blockchain infrastructure and tokenization platform, applied for a national trust charter with the Office of the Comptroller of the Currency (OCC), seeking to convert its existing New York Department of Financial Services trust charter into a national one. Paxos aims to leverage OCC oversight to enhance its commitment to safety and transparency, offering a unified regulatory framework across multiple jurisdictions. The national trust charter would provide Paxos with significant business advantages by reducing the need for state-by-state compliance. For more information, click here.
On August 9, Vice Chair for Supervision at the Board of Governors of the Federal Reserve System Michelle W. Bowman delivered a speech at the Kansas Bankers Association 2025 CEO & Senior Management Summit in Colorado Springs, emphasizing the importance of community banks in the U.S. economy. Bowman discussed her dissent at the recent Federal Open Market Committee (FOMC) meeting, advocating for a gradual reduction in the federal funds rate due to signs of economic fragility and a less dynamic labor market. She highlighted the resilience of the U.S. economy despite slowing growth and increased labor market challenges, noting the need for policy adjustments to maintain full employment and price stability. Bowman also addressed the unique challenges faced by community banks, underscoring the need for regulatory reforms tailored to their needs. She announced an upcoming conference focused on community banking issues and emphasized the importance of fraud prevention, particularly in light of advancements in artificial intelligence. For more information, click here.
On August 9, Bo Hines, former crypto liaison for Trump, announced his resignation from his senior White House position after nearly seven months of advancing Trump’s blockchain agenda. Hines, who had previously been a relatively unknown figure in national politics, gained prominence through his role in implementing a blockchain-friendly agenda, including the passage of a stablecoin bill and several blockchain-related executive orders. Despite receiving more than 50 job offers from the private sector, Hines is considering five opportunities within the crypto industry, with no immediate plans to return to politics. As he transitions back to the private sector, Hines aims to continue influencing the U.S.’s leadership in the crypto space, while also taking on a part-time role at the White House focusing on artificial intelligence. For more information, click here.
On August 8, the CFPB published four advance notices of proposed rulemaking (ANPRs) in the Federal Register, inviting public comment on the criteria for defining “larger participants” in the consumer reporting, debt collection, international money transfer, and automobile financing markets. The CFPB is reconsidering these definitions to ensure they reflect current industry conditions and do not impose undue compliance burdens on smaller entities. For the consumer debt collection market, the CFPB is questioning whether the current threshold of $10 million in annual receipts is appropriate given industry consolidation and updated Small Business Administration (SBA) standards. In the international money transfer market, the CFPB is exploring whether to raise the threshold from one million to 10 million transfers, which would reduce the number of entities classified as larger participants. The automobile financing market’s threshold of 10,000 annual originations is under review to better focus supervisory resources on the most active participants. Lastly, the CFPB is considering aligning the consumer reporting market threshold with the SBA’s $41 million size standard to alleviate compliance burdens on smaller businesses. For more information, click here.
On August 7, Trump signed an executive order aimed at prohibiting politicized or unlawful debanking practices, ensuring fair access to banking services for all Americans. The order mandates federal banking regulators to eliminate concepts like reputational risk from their guidance that enable such debanking. It instructs the SBA to require financial institutions to reinstate clients previously denied services due to unlawful debanking. Additionally, the secretary of the Treasury is tasked with developing a strategy to combat these practices, potentially through legislative or regulatory solutions. The order also calls for a review of financial institutions’ past and current policies, with remedial actions such as fines or consent decrees, and requires the referral of cases of religious-based debanking to the attorney general. Trump emphasized that banking decisions should be based on objective, risk-based analyses, responding to systemic abuses that undermine free expression and economic opportunity. He highlighted instances where banks denied services based on political affiliations, including his own experiences, and criticized practices like Operation Chokepoint that target lawful industries for political reasons. The Trump administration has already taken steps to end such regulatory efforts, particularly against the digital assets industry, to uphold economic freedom and protect constitutional rights. For more information, click here.
On August 7, Trump announced his intention to nominate Stephen Miran, the chair of the Council of Economic Advisors, to the Federal Reserve Board of Governors, replacing Adriana Kugler. Miran, who has been a key economic advisor during Trump’s second term, is expected to serve through January 2026, completing Kugler’s unexpired term. Trump emphasized Miran’s unparalleled expertise in economics, although Miran’s role is likely temporary as Trump continues to search for a permanent replacement for Chair Jerome Powell, whose term expires in May. Miran will need Senate confirmation, which is anticipated to occur after the Senate reconvenes in September. For more information, click here.
On August 6, the U.S. District Court for the District of North Dakota granted Corner Post, Inc.’s motion for summary judgment and denied the Board of Governors of the Federal Reserve System’s cross-motion, effectively vacating Regulation II. The court found that Regulation II, which set interchange transaction fees, was contrary to the Durbin Amendment and exceeded the board’s statutory authority. The ruling emphasized that the board improperly included costs beyond incremental ACS costs in the fee standard and failed to tailor fees to specific issuers and transactions, contrary to the statutory requirements. The court’s decision will stay the vacatur pending any appeal to prevent an unregulated market, allowing the board’s pending updates to Regulation II to proceed. For more information, click here.
On August 6, a group of Republican members of the Senate Banking Committee sent a letter urging federal bank regulators to review the Matters Requiring Attention (MRA) supervisory process. In their letter, the senators commended recent efforts by the Federal Reserve, OCC, and FDIC to enhance regulatory frameworks but highlighted concerns about the MRA process’s lack of structure and transparency. They pointed out that MRAs, which are informal findings issued by bank examiners, have become inconsistent and ineffective. The senators requested a joint assessment to improve the MRA framework, ensuring it serves as a reliable supervisory tool rather than a mere “check-the-box” exercise. For more information, click here.
On August 5, the Federal Reserve Board and the FDIC released the public sections of resolution plans, commonly known as living wills, for the eight largest and most complex domestic banking organizations and 56 foreign banking organizations. These plans, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, outline strategies for orderly resolution under bankruptcy in the event of financial distress or failure. To enhance transparency, the public sections summarize key elements of the resolution plans, which are divided into public and confidential sections by regulation. Additionally, the FDIC disclosed public sections of resolution plans for 12 large insured depository institutions (IDIs) under the FDIC’s IDI Rule, aimed at facilitating efficient resolution under the Federal Deposit Insurance Act. These public sections are accessible on the FDIC’s and the Federal Reserve Board’s websites. For more information, click here.
On August 5, the U.S. Securities and Exchange Commission’s (SEC) Division of Corporation Finance issued a statement clarifying the application of federal securities laws to a specific type of Protocol Staking known as “liquid staking.” This statement builds upon previous guidance regarding various types of Protocol Staking, including self-staking and custodial staking, by addressing liquid staking activities where crypto asset owners deposit their assets with third-party providers and receive Staking Receipt Tokens in return. These tokens allow holders to maintain liquidity and participate in crypto applications without withdrawing their staked assets. The division concluded that liquid staking activities, as described, do not involve the offer and sale of securities under the Securities Act of 1933 or the Securities Exchange Act of 1934, unless the deposited assets are part of an investment contract. Consequently, participants and providers involved in liquid staking do not need to register these transactions with the SEC, provided they adhere to the outlined conditions. For more information, click here.
On August 5, the Federal Reserve Bank of Kansas City published an article discussing the growing popularity and potential risks of “Buy Now, Pay Later” (BNPL) services. These services, which allow consumers to purchase goods and pay in installments, have become increasingly popular among millennials, Gen Z, and financially vulnerable groups. The article highlights a Kansas City Fed study that found a significant correlation between BNPL users’ late payments and their financial vulnerability, suggesting that some users may overspend or overextend their debt through BNPL. While BNPL can provide access to interest-free credit for those who might not qualify for traditional credit products, the ease of making purchases can lead to financial strain if consumers fall behind on payments. Financial experts like Tina Herndon and Jennifer Wallis advise caution, emphasizing the importance of understanding the terms and conditions and the potential impact on credit scores. The article underscores the need for consumers to be aware of the fine print and to make informed decisions rather than impulsive ones when using BNPL services. For more information, click here.
On August 4, the Financial Crimes Enforcement Network (FinCEN) issued a notice urging financial institutions to be vigilant in identifying and reporting suspicious activities involving convertible virtual currency (CVC) kiosks, commonly known as cryptocurrency ATMs. These kiosks, while convenient for consumers, have been increasingly exploited by scammers and illicit actors for fraudulent schemes and money laundering, particularly by transnational criminal organizations. The notice highlights a significant rise in complaints and victim losses associated with CVC kiosks, as reported by the FBI’s Internet Crime Complaint Center. FinCEN’s analysis of Bank Secrecy Act (BSA) data reveals that these kiosks are also used to launder drug proceeds. The notice provides red flag indicators to assist in detecting and reporting suspicious activities and reminds institutions of their reporting obligations under the BSA. Financial institutions are encouraged to use the key term “FIN-2025-CVCKIOSK” in their suspicious activity reports to help combat these illicit activities. For more information, click here.
On August 2, the U.S. Senate passed H.R. 2808, known as the “Homebuyers Privacy Protection Act,” into law. This bipartisan legislation, which passed the Senate by unanimous consent following its approval in the House, amends the Fair Credit Reporting Act (FCRA) to eliminate the practice of selling mortgage “trigger leads” under abusive circumstances. Mortgage trigger leads are generated when a consumer applies for a mortgage, prompting consumer reporting agencies (CRAs) to sell this information to third parties. This practice often results in consumers being inundated with unsolicited offers and communications. Under the act, CRAs can only provide consumer reports to third parties if the transaction involves a firm offer of credit or insurance, and the third party has either obtained consumer authorization or meets specific criteria related to existing mortgage or banking relationships. If signed by Trump, the act will take effect 180 days after enactment. For more information, click here.
State Activities:
On August 7, Superintendent Adrienne A. Harris of the New York State Department of Financial Services announced a $48.5 million settlement with Paxos Trust Company due to anti-money laundering deficiencies and diligence failures related to its partnership with Binance. Paxos will pay a $26.5 million penalty and invest an additional $22 million to enhance its compliance program. The DFS investigation revealed Paxos’s inadequate transaction monitoring and compliance systems, which heightened money-laundering risks and failed to address red flags associated with Binance’s operations. Notably, Binance’s lax geofencing allowed U.S. users access to an unregulated exchange, facilitating $1.6 billion in transactions with illicit actors. The settlement follows DFS’s earlier directive for Paxos to cease minting Binance USD stablecoins, marking a significant regulatory action that prompted similar responses from federal and international regulators. For more information, click here.
On August 1, Illinois Governor J.B. Pritzker enacted Senate Bill (SB) 2457, permanently extending the state’s Collection Agency Act, strengthening oversight and revising licensing rules for collection agencies and debt buyers. SB 2457 removes the act’s scheduled repeal date of January 1, 2026, under the Regulatory Sunset Act, and introduces key amendments including expanded exemptions for certain entities, clarified out-of-state licensing rules, and enhanced enforcement provisions for the Illinois Department of Financial and Professional Regulation (IDFPR). Notable changes include exempting licensed student loan servicers and other entities from licensing, allowing out-of-state agencies to operate without an Illinois license under specific conditions, refining child support collection rules, and expanding IDFPR’s enforcement powers. The law also updates procedural rules and maintains an annual meeting mechanism for discussions with industry representatives. For more information, click here.
