February 20 – Read the newsletter below for the latest Mortgage Banking and Consumer Finance industry news, written by Ballard Spahr attorneys. In this issue, we examine an appeals court's stay on the small business reporting rule for many financial institutions, the striking down of the FCC telemarketing and robocall rule requiring specific consent, the recent happenings at the CFPB, the renewed Republican efforts to repeal Section 1071, and much more.
- This Week’s Podcast Episode: Alan Kaplinsky’s ‘Fireside Chat’ With Matthew J. Platkin, New Jersey Attorney General
- Podcast: Will the State Attorneys General and Other State Agencies Fill the Void Left By the CFPB?
- Podcast: The Fall of the CFPB, the Rise of the State AG
- Vought Halts Most Work at the CFPB
- Federal Judge Issues Order Prohibiting Massive Layoffs, Budget Cuts at the CFPB Pending Ruling on Motion for Preliminary Injunction
- President Trump Nominates Former FDIC Board Member Jonathan McKernan to Head the CFPB
- Appeals Court Stays Small Business Reporting Rule for Many Financial Institutions
- Appeals Court Strikes Down FCC Telemarketing, Robocall Rule That Required Specific Consent
- Republicans Renew Efforts to Repeal Section 1071
- The CFPB Revokes EWA Advisory Opinion
- House Republicans May Start Congressional Review Act Process to Nullify Overdraft Rule
- Financial Services Trade Groups Call on the CFPB to Abandon its Data Broker Proposed Rule
- State Authorities Stepping Up Consumer Protection Efforts
- City of Baltimore and National Treasury Employees Union File Separate Suits to Keep the CFPB Funded and Operating
- Looking Ahead
Today’s podcast show is a repurposing of Alan Kaplinsky’s “fireside chat” with Matthew J. Platkin, the New Jersey Attorney General, which was the first half of a webinar we produced on January 17, 2025. That webinar was Part 3 of our webinar series entitled “The Impact of the Election on the CFPB and Others.” In Part 3, we focus on the role of state attorneys general in a rapidly shifting CFPB environment.
The importance of Part 3 is underscored by the recent actions taken by President Trump to fire Rohit Chopra as Director of the CFPB and to appoint new Treasury Secretary, Scott Bessent, and then new Office of Management and Budget (OMB) Director, Russell Vought, as Acting Directors, Messrs. Bessent, and Vought have essentially temporarily stopped all activities of the CFPB for the time being.
During our “fireside chat” with General Platkin, we discussed the following topics, among others:
- What is General Platkin’s background, including his stint as Chief Counsel to the New Jersey Governor?
- Since General Platkin has been New Jersey Attorney General, what are some examples of the consent orders or lawsuits he has initiated related to consumer financial services?
- Has the New Jersey Attorney General previously collaborated with the CFPB and/or FTC in investigating certain companies or segments of the consumer financial services industry, and is that likely to change?
- What effect will there be on consumers in New Jersey if President Trump appoints (as he did) an Acting Director of the CFPB whose interpretation and enforcement of federal consumer protection laws differs markedly from Rohit Chopra?
- What will the New Jersey Attorney General’s office do in response to this anticipated shifting CFPB environment?
- Elon Musk has called for the deletion of the CFPB and Project 2025 has also called for the elimination of the CFPB. If that were to happen, what would the New Jersey Attorney General’s office do to fill this anticipated void?
- We then looked beyond New Jersey to other state attorney general’s offices similarly situated to the New Jersey Attorney General office – who will have the need to initiate more cases when resources are limited. We discussed how state Attorney General’s (including the New Jersey Attorney General) have networked with each other to investigate and sue companies that are violating consumers’ rights in multiple states. We then discussed why it is anticipated that the networking process is likely to increase.
- The areas of consumer financial protection law and segments of the consumer financial services industry that will be areas of focus for the New Jersey Attorney General during 2025?
Our next episode will be the second half of our January 17 webinar in which several Ballard Spahr colleagues will explore in depth why we expect state Attorney General’s offices to significantly ramp up their investigations involving and lawsuits filed against banks and other consumer financial services providers.
Parts 1, 2, and 3 of our webinar series appear here, here, and here. Our podcast shows (repurposing Parts 1 and 2 of our webinar series) appear here, here, here, and here. The title of Part 1 is: “The Impact of the election on the CFPB: Regulations and other written guidance, which featured Alan Kaplinsky’s “fireside chat” with David Silberman who held senior positions at the CFPB for almost 10 years during the Directorships of Cordray, Mulvaney, and Kraninger. Part 2 is: “The Impact of the Election on the CFPB: Supervision and Enforcement, which featured Alan Kaplinsky’s “fireside chat” with former Director Kathy Kraninger during Trump‘s first term in office.
To listen to this episode, click here.
Consumer Financial Services Group
Podcast: Will the State Attorneys General and Other State Agencies Fill the Void Left By the CFPB?
Today’s podcast show is a repurposing of the second half of a webinar we produced on January 17, 2025. That webinar was Part 3 of our webinar series entitled “The Impact of the Election on the CFPB and Others.” In Part 3, we focus on the role of state attorneys general in a rapidly shifting CFPB environment. Our previous podcast show, released on Tuesday, February 11t, was a repurposing of the first half of our January 17t webinar in which Alan Kaplinsky had a “fireside chat” with Matthew J. Platkin, the New Jersey Attorney General. See here.
The importance of Part 3 is underscored by the recent actions taken by President Trump to fire Rohit Chopra as Director of the CFPB and to appoint new Treasury Secretary, Scott Bessent, and then new Office of Management and Budget (OMB) Director, Russell Vought, as Acting Directors, Messrs. Bessent, and Vought have essentially stopped all activities of the CFPB for the time being.
During today’s podcast show, Mike Kilgarriff, Joseph Schuster, Adrian King, and Jenny Perkins of Ballard Spahr’s Consumer Financial Services Group discussed in detail the following issues, among others:
- CFPB post-election messaging to state attorneys general providing a roadmap to them on powers they may exercise under federal law, including the use of the UDAAP provision of Dodd-Frank (particularly the “abusive” prong)
- The probable decline in collaboration with the CFPB following the change in administration
- More networking of state attorneys general
- What can we expect from state legislatures in enacting new consumer financial services protection laws?
- What can we expect from state attorneys general and other state agencies in promulgating new consumer financial services protection laws?
- The continuing need for companies to maintain a robust compliance management system
Parts 1, 2 and 3 of our webinar series appear here, here, and here. Our podcast shows (repurposing Parts 1 and 2 of our webinar series) appear here, here, here, and here. The title of Part 1 is: “The Impact of the election on the CFPB: Regulations and other written guidance, which featured Alan Kaplinsky’s “fireside chat” with David Silberman who held senior positions at the CFPB for almost 10 years during the Directorships of Cordray, Mulvaney, and Kraninger. Part 2 is: “The Impact of the Election on the CFPB: Supervision and Enforcement, which featured Alan Kaplinsky’s “fireside chat” with former Director Kathy Kraninger during President Trump‘s first term in office.
Senior Counsel and former chair for 25 years of the Consumer Financial Services Group, Alan Kaplinsky, hosts the discussion.
To listen to this episode, click here.
Consumer Financial Services Group
Podcast: The Fall of the CFPB, the Rise of the State AG
In this episode of the Consumer Finance Monitor Podcast, Ballard Spahr partners Mike Kilgarriff and Joseph Schuster break down the seismic shifts in consumer financial regulation following the dramatic changes at the CFPB. With the b enforcement and supervisory activities on hold, state attorneys general are stepping in to fill the regulatory void. Mike and Joseph explore what this means for financial institutions, how businesses should navigate the evolving landscape, and the increasing role of state AGs in consumer protection enforcement. Tune in for insights on what’s next in the world of financial regulation.
To listen to this episode, click here.
Consumer Financial Services Group
Vought Halts Most Work at the CFPB
Acting CFPB Director Russell Vought has temporarily put a halt to virtually all of the agency’s work.
President Trump designated Vought, director of the Office of Management and Budget (OMB) as acting bureau director Friday night. He replaced Treasury Secretary Scott Bessent, who had served as acting CFPB director until Vought’s appointment.
“As Acting Director, I am committed to implementing the President’s policies, consistent with the law, and acting as a faithful steward of the Bureau’s resources,” Vought wrote, in, in a widely reported email. Administration officials have made it clear that they oppose the strict regulatory regime of Rohit Chopra, CFPB director in the Biden administration.
Elon Musk, the head of the Trump administration’s Department of Government Efficiency, went so far as to post on X Friday night, “RIP CFPB.”
On Sunday, CFPB officials announced that the agency’s offices will be closed between February 10 and February 14. They also said they will not take the next payment from the Federal Reserve for the agency’s work. The CFPB is not funded through the federal appropriations process; instead, it draws its funding from the Fed.
In a social media post, Vought said the CFPB’s current reserve fund of $711.6 million is “excessive.”
Vought also has ordered the agency to:
- Stop work on proposed rules.
- Suspend the effective dates on proposed rules that are not yet effective.
- Not initiate new investigations
- Cease work on open investigations.
In addition, the agency’s home page has been deleted. Visitors to the home page are greeted with an unplugged electrical cord and a message, “404: Page Not Found.” However, other sections of the agency’s website appear to be working.
Reaction to the Trump administration’s moves were swift.
The National Treasury Employees Union, which represents many CFPB employees, filed suit Sunday against Vought.
“CFPB employees have been placed in questionable status as they have been directed not to work but they have also not been formally placed on any authorized type of leave,” the suit, filed in the U.S. District Court for the District of Columbia states.
“Because of Defendant Vought’s directive and his shuttering of the Bureau’s headquarters for at least a week, CFPB employees are apprehensive about their employment and their futures,” the employees’ union continued.
In the suit, they ask that Vought be enjoined from further attempts to halt the CFPB’s supervision and enforcement work.
And, Senator Elizabeth Warren, (D-Mass.), who is credited with designing the CFPB as part of the Dodd-Frank Act., said that Musk and Vought are overstepping their powers.
“Congress built the CFPB, and no one other than Congress — not the President, not Musk, not Vought – can shut it down,” Warren said, in a statement.
It had been widely speculated that Vought would become acting director of the CFPB, but until Friday, he had not been confirmed as OMB director. Bessent had been confirmed as Treasury Secretary.
The Federal Vacancies Reform Act authorizes the President to appoint as an acting director of a federal agency someone who has already been confirmed by the Senate for a position in another agency. Therefore, until Friday, Bessent was eligible to serve as acting CFPB director, but Vought was not.
Vought’s appointment follows a pattern from the first Trump administration, when OMB Director Mick Mulvaney served as CFPB Director until Kathy Kraninger was nominated and confirmed.
President Trump has not yet nominated anyone as CFPB director; that person would require Senate confirmation.
Consumer Financial Services Group
A federal judge has issued an order temporarily prohibiting the Trump administration from imposing mass layoffs and budget cuts at the CFPB.
U.S. District Judge Amy Berman Jackson of the U.S. District Court of the District of Columbia has scheduled a March 3 hearing in the suit filed by the National Treasury Employees Union, the National Consumer Law Center, the NAACP, the Virginia Poverty Law Center, Pastor Eva Steege and the CFPB Employee Association.
In the suit, the groups ask the court to order the CFPB to resume all activities it is required to perform under federal law, asserting a violation of the Administrative Procedure Act and a nonstatutory right to seek to enjoin and have declared unlawful agency action that is ultra vires (beyond the agency’s legal power or authority)
At the hearing, Judge Jackson will consider the groups’ motion for a preliminary injunction extending her order until the case is concluded. Until the resolution of that motion, Jackson’s order, which was based on an agreement of the parties, directs the agency not to “delete, destroy, remove, or impair any data or other CFPB records covered by the Federal Records Act” except as allowed under federal law.
She continued, “This means that defendants shall not delete or remove agency data from any database or information system controlled by, or stored on behalf of, the Consumer Financial Protection Bureau (CFPB), and the term ‘agency data’ includes any data or CFPB records stored on the CFPB’s premises, on physical media, on a cloud server, or otherwise.”
In addition, she prohibited the CFPB from terminating any employee, except for cause, and ordered the bureau not to issue any notice of reduction-in-force to any CFPB employee. Most agency employees currently are on “administrative leave.”
Finally, Jackson prohibited the CFPB from returning any money from the bureau’s reserve fund to the Federal Reserve. There had been reports that Acting Director Russell Vought had planned to return funds to the CFPB and not ask for any additional funds from the agency. That could effectively shut down the CFPB, since the agency is funded by the Fed.
In their suit, the groups alleged that Vought had instructed agency staff not to perform any work and not to come into the office. They also said that Vought had closed the agency’s headquarters and had taken steps to cancel the lease on the buildings. They added that they believe that Vought intends to return the agency’s operating reserves to the Fed.
The plaintiffs also contend that Vought has cancelled $100 million of contracts with companies and fired 70 probationary employees.
Consumer Financial Services Group
President Trump Nominates Former FDIC Board Member Jonathan McKernan to Head the CFPB
President Trump has nominated Jonathan McKernan to be the Director of the CFPB.
If confirmed by the Senate, McKernan would replace Office of Management and Budget Director Russell Vought, who is serving as acting bureau director.
Earlier this week, McKernan stepped down as a member of the FDIC board after President Trump nominated Rodney Hood as a member. He said on a post on X that if Hood is confirmed, the number of Republicans on the Board would exceed the maximum allowed under federal law. No more than three members of the FDIC board may be members of the same party. Shortly after that, President Trump nominated McKernan as CFPB Director.
McKernan joined the FDIC board in January 2023. Before that, he served as counsel to then-Sen. Pat Toomey, R-Pa., on the staff of the Senate Banking Committee. He also was Senior Counsel at the Federal Housing Finance Agency and a Senior Policy Advisor at the Treasury Department. McKernan also was a Senior Financial Policy Advisor to then-Sen. Bob Corker, (R-Tn.).
From November 2023 to May 2024, McKernan was co–chairman of a special committee of the FDIC Board that oversaw an independent third-party review of allegations of sexual harassment and professional misconduct at the FDIC, as well as issues relating to the FDIC’s workplace culture.
Prior to his government service, McKernan worked in private practice, focusing on issues dealing with banking and consumer finance laws.
McKernan holds a Bachelor of Arts and Master of Arts in economics from the University of Tennessee and a Juris Doctor with High Honors from the Duke University School of Law.
In addition, this week, according to press reports, CFPB Assistant Director for the Office of Enforcement Eric Halperin and Assistant Director for Supervision Policy Lorelei Salas have stepped down after being placed on administrative leave.
Their resignations follow a Vought order stopping all work at the bureau.
Consumer Financial Services Group
Appeals Court Stays Small Business Reporting Rule for Many Financial Institutions
The Fifth Circuit Court of Appeals has issued a stay that blocks for many financial institutions the implementation of a CFPB rule that requires the institutions to report information contained in loan applications submitted by women-owned, minority-owned, and LGBTQI+-owned small businesses.
However, the stay only applies to plaintiffs and intervenors in the case. Those include, among others, members of the American Bankers Association, the Independent Community Bankers of America, and America’s Credit Unions.
In March 2023, the CFPB finalized the small business reporting rule, informally known as the “Section 1071 Rule.” It refers to the Section of Dodd-Frank that creates the reporting requirement.
Financial institutions that originated at least 100 covered small business loans in each of the two preceding calendar years are subject to the rule. The compliance dates for the rule, which vary based on small business lending volume, are July 18, 2025, January 16, 2026, and October 18, 2026.
The plaintiffs filed suit in the U.S. District Court for the Southern District of Texas, arguing that, among other things, that the bureau exceeded its statutory authority and relied on inaccurate data to estimate implementation costs.
The district court issued a summary judgment in favor of the CFPB. The plaintiffs appealed and asked for a stay pending appeal and for the appeals court to toll compliance deadlines.
“A new President was inaugurated January 20, 2025,” the appeals court said. “This case had already been set to be orally argued on February 3, 2025. The morning of oral argument, CFPB notified the court that ‘[c]ounsel for the CFPB has been instructed’ by new leadership ‘not to make any appearances in litigation except to seek a pause in proceedings.’”
When both sides appeared for oral arguments, only the bankers addressed the merits. The CFPB did not oppose the plaintiffs’ motion for a stay pending appeal in part to stay compliance obligations and to toll compliance dates for 90 days to “give the Acting Director time to consider the issues.”
However, the appeals court granted the bankers’ request to toll the compliance deadlines for the plaintiffs and intervenors until the appeal is resolved.
The rule is under attack on another front. On Capitol Hill, House Republicans are pushing legislation introduced by House Small Business Committee Chairman Representative Roger Williams, (R-TX.).
That bill, H.R. 976, simply would repeal the rule altogether.
While the House and Senate previously voted to override the rule under the Congressional Review Act, President Biden vetoed the legislation. The House voted to override the veto, but the Senate did not.
While legislation under the Congressional Review Act is not subject to a filibuster in the Senate, a bill to repeal section 1071 would be subject to a filibuster, so 60 votes may be needed there to repeal the rule.
Consumer Financial Services Group
Appeals Court Strikes Down FCC Telemarketing, Robocall Rule That Required Specific Consent
The 11th Circuit Court of Appeals has struck down the FCC rule that would have prohibited telemarketing or advertising robocalls to consumers unless they consent to calls from only one entity at a time, and that they consent only to calls whose subject matter is associated with the interaction that prompted the consent.
The FCC did not have the authority to issue the rule, the three-judge panel said. “Rather than respecting the line that Congress drew, the FCC stepped right over it,” the judges wrote.
Defending the rule, the FCC had argued that consumers cannot be presumed to have voluntarily consented to receive calls unless they had consented on a one-to-one basis.
The Insurance Marketing Coalition challenged the FCC rule, contending that the FCC had exceeded its authority. IMC asserted that the FCC improperly differentiated between telemarketing and advertising calls, on one hand, and non-telemarketing and non-advertising calls, on the other. IMC also contended that the two restrictions conflict with the ordinary statutory meaning of prior express consent.
In addition, the coalition argued that the 2023 order violated the First Amendment by discriminating against marketing calls.
Finally, IMC said the FCC violated the Administrative Procedure Act because the rule lacked a factual basis for the new restrictions, failed to meaningfully respond to comments submitted and failed to justify its impact on small businesses.
The appeals court said that the FCC had decreed a duty on lead generators that the TCPA does not allow the commission to impose.
“After review, we agree with IMC that the FCC exceeded its statutory authority under the TCPA because the 2023 Order’s ‘prior express consent’ restrictions impermissibly conflict with the ordinary statutory meaning of ‘prior express consent,’” the judges said.
Hours before the court issued its opinion, the FCC said it was delaying implementation of the rule by a year—until Jan. 26, 2026–or until the 11th Circuit issued its decision. The FCC said that “in the interest of justice,” it was seeking to avoid subjecting companies and callers to private suits seeking damages while the rule was still being reviewed by the appellate court. That deadline—Jan. 26, 2026—obviously is meaningless since the appeals court had delivered its decision and the future of any similar rule is in doubt, particularly with Republicans controlling the commission.
While the 11th Circuit’s decision significantly curtails the FCC’s authority to impose stricter consent requirements under the TCPA, this does not mean that telemarketing and auto-dialing regulations are becoming less complex. In fact, state “mini-TCPA” laws, which have varying consent and disclosure requirements are continually raised in lawsuits. We expect this trend to continue, and we expect states to fill the perceived gaps left by federal limitations. Businesses should closely monitor state-level developments to ensure compliance with an evolving regulatory landscape that remains dynamic despite federal setbacks.
Daniel JT McKenna and Joseph Schuster
Republicans Renew Efforts to Repeal Section 1071
Republicans on Capitol Hill are seeking to repeal a section of the Dodd-Frank Act that requires financial institutions to report information contained in loan applications submitted by women-owned, minority-owned, and LGBTQI+-owned small businesses.
“My bill seeks to eliminate costly regulatory burdens on financial institutions, ensuring greater access to credit for small businesses,” House Small Business Committee Chairman Representative Roger Williams, (R-TX.), the primary sponsor of the House legislation, said, as he introduced H.R.976. The compliance dates for the rule, which vary based on small business lending volume, are July 18, 2025, January 16, 2026, and October 18, 2026.
The House bill currently has 29 co-sponsors; Senator John Kennedy, (R-La.), is expected to introduce the Senate version of the bill.
In March 2023, the CFPB finalized the small business reporting rule, informally known as the “Section 1071 Rule.” It refers to the Section of Dodd-Frank that creates the reporting requirement.
Financial institutions that originated at least 100 covered small business loans in each of the two preceding calendar years are subject to the rule.
Using the Congressional Review Act during the last Congress, the House and Senate approved resolutions that would have nullified the rule. That resolution required a simple majority in each house in order to be approved. The resolution was approved, but then-President Joe Biden vetoed that resolution. Under rules governing the CRA, opponents of the Section 1071 rule cannot use the CRA again to try to nullify the rule.
As a result, while the House could pass the legislation by a simple majority, depending on Senate support, it could take 60 votes to break a filibuster and pass the legislation there. As we reported previously, the rule is being challenged in lawsuits.
Richard J. Andreano, Jr. and John L. Culhane, Jr.
The CFPB Revokes EWA Advisory Opinion
The CFPB rescinded an advisory opinion that had described how one particular type of “earned wage” product did not involve the offering or extension of “credit” as that term is defined in the Truth in Lending Act and Regulation Z as Rohit Chopra’s term as director was coming to an end.
That action was apparently taken because the CFPB lacked sufficient time to finalize a new interpretive rule covering earned wage access products prior to the appointment of a new acting director, since the CFPB’s proposed interpretive rule on earned wage products had criticized the advisory opinion and indicated that it would be replaced.
The original advisory opinion said that an “earned wage product is not TILA or Regulation Z credit if it meets all of several identified conditions, including: providing the consumer with no more than the amount of accrued wages earned; provision by a third party fully integrated with the employer; no consumer payment, voluntary or otherwise, beyond recovery of paid amounts via a payroll deduction from the next paycheck, and no other recourse or collection activity of any kind; and no underwriting or credit reporting.”
The 2020 opinion did not address whether earned wage access products that do not meet all of these conditions are credit under TILA and Regulation Z.
The CFPB said it was rescinding the 2020 advisory opinion because it contained a “significantly flawed” legal analysis and because it caused “substantial regulatory uncertainty.”
Discussing the legal flaws, the CFPB said the opinion’s consideration of the meaning of “debt” under state law was insufficient. In addition, the advisory opinion inferred that a consumer does not incur a liability when using the limited type of earned wage product covered by the opinion, but did not justify that inference. The 2020 advisory opinion also did not consider all relevant factors as part of the “totality of the circumstances” approach it applied to determine what is “credit.”
In addition, in the months and years following the issuance of the 2020 advisory opinion, the CFPB said, it became “increasingly evident” that it failed to clarify the status of earned wage products under TILA and Regulation Z.
“This muddying of the waters flowed directly from the extreme narrowness of the opinion,” the CFPB said. “Few if any of the products in the market at the time of or subsequent to issuance fit the mold outlined by the opinion. As a result, stakeholders were left to speculate about the CFPB’s view about the credit status of the many products actually being offered.”
John L. Culhane, Jr., John D. Socknat, and Joseph Schuster
House Republicans May Start Congressional Review Act Process to Nullify Overdraft Rule
House Republicans appear ready to start the Congressional Review Act (CRA) process to attempt to repeal the Biden administration’s controversial overdraft rule.
The rule is scheduled to go into effect October 1, but Acting CFPB Director Scott Bessent has ordered a halt to all work at the agency, and a suspension of the effective dates for all rules that have not yet taken effect, so it is unclear when the overdraft rule might take effect.
If allowed to go into effect, however, the rule could limit overdraft fees to $5 at financial institutions with more than $10 billion in assets.
During a hearing on February 5, Republicans on the House Financial Services Committee presented a draft CRA resolution to nullify the overdraft rule. (The CRA would allow Congress to nullify the rule by a simple majority vote in the House and Senate approving a resolution that is then signed by the President.)
The resolution was included in a list of legislative proposals that Committee Chairman Representative French Hill, (R-Ark.), included at the start of a hearing on the state of community banking. “We have attached several discussion drafts that will lay the groundwork for a series of conversations and hearings this Committee will lead throughout the 119th Congress to improve the regulatory landscape and provide solutions to the many challenges faced by community banks,” Hill, a former community banker said, in a statement.
Committee ranking Democrat Representative Maxine Waters, (D-CA.), objected, saying that Trump administration proposals are designed to make the rich richer. “If the community banks listening today aren’t worried about what’s happening to their customers and small business clients, they should be,” she added.
During the hearing, Cathy Owen, Chair, President and CEO of State Holding Company and Executive Chair of Eagle Bank & Trust Company in Little Rock, Arkansas, said that even though the rule was designed to require only financial institutions with more than $10 billion in assets to limit their overdraft fees, market pressures will mean that even smaller financial institutions will have to comply with it.
“If not invalidated, the rule would effectively bring an end to overdraft services for millions of consumers who – following receipt of a consumer-tested disclosure – choose to use the product to cover emergency expenses and other liquidity shortfalls, all to advance the prior administration’s political campaign against so-called junk fees,” said Owen, who was testifying on behalf of the Arkansas Bankers Association and the American Bankers Association.
However, Mitria Wilson Spotser, Vice President of Federal Policy at the Center for Responsible Lending (CRL), called on the committee to go beyond issues that she alleged would allow community banks to advance their own interests.
“Rather than allow large financial institutions to advance their own interests under the guise of improving the business environment for community lenders, CRL urges the committee to devote its attention to the important, and often bipartisan, policy opportunities that exist which can actually help community banks be greater,” she said.
Ronald K. Vaske and Kristen E. Larson
Financial Services Trade Groups Call on the CFPB to Abandon its Data Broker Proposed Rule
Seventeen financial services trade groups are calling on the CFPB to abandon its plan to amend rules under the Fair Credit Reporting Act (FCRA) to vastly expand the scope of the FCRA by redefining what a “consumer report” is and who is a “consumer reporting agency.” As previously reported, while the CFPB touts the proposal as one to cover data brokers, it is much broader than that.
“We believe that the proposal is both substantively and procedurally flawed in several key areas,” the groups, including the Mortgage Bankers Association, the Consumer Bankers Association, the American Fintech Council and the U.S. Chamber of Commerce wrote, in a letter to the CFPB.
The proposed rule would treat data brokers like credit bureaus and background check companies: Companies that sell data about income or financial tier, credit history, credit score, or debt payments would be considered consumer reporting agencies required to comply with the FCRA, regardless of how the information is used.
In their letter, the groups said that the proposed rule’s expansion of the definitions of “consumer report” and “consumer reporting agency” conflict with the statutory language of the FCRA and decades of well-settled case law.
“These proposed new interpretations exceed the statutory framework Congress created and raise significant concerns regarding legality and potential unintended consequences,” they wrote.
If finalized, the proposed rule would undermine financial institutions’ ability to fight identity fraud and comply with regulatory requirements, including those under the Bank Secrecy and Anti-Money Laundering Acts, the groups stated.
“The rule’s lack of a clear exception for such beneficial use cases could create operational challenges for financial services companies and expose consumers and financial institutions to greater risk,” according to the 17 groups.
They added that the CFPB’s cost-benefit analysis lacks supporting data. The trades state that the CFPB asserted impacts and conclusions that are either “unsubstantiated or inaccurate.”
They continued, “The Bureau acknowledges in nearly two dozen instances that it “does not have data” or sufficient information to substantiate its policy conclusions or assess the proposal’s potential impact on consumers and the financial services industry.”
Comments on the proposed rule are due March 3. However, the future of the rule—and all CFPB rulemaking—is unclear since Acting CFPB Director Russell Vought has directed agency officials to stop all work on proposed rules.
Richard J. Andreano, Jr., John L. Culhane, Jr., and Alan S. Kaplinsky
State Authorities Stepping Up Consumer Protection Efforts
In the wake of recent federal directives diminishing the Consumer Financial Protection Bureau (CFPB), state authorities are increasingly stepping in to uphold consumer protections. Michigan Attorney General Dana Nessel has been at the forefront of this movement, emphasizing the CFPB’s significant contributions and reaffirming her office’s commitment to safeguarding Michigan residents.
In a recent statement, AG Nessel not only highlighted the CFPB’s achievements but also renewed her commitment to protecting Michigan consumers as federal oversight becomes uncertain. Touting the CFPB’s success, she emphasized that the bureau has “won back for American consumers more than $20 billion, as direct payments back to wronged customers or into relief funds for impacted victims.” However, with its future now in question, Nessel made clear that her office stands ready to fill the gap:
“My office’s Consumer Protection Team will continue to enforce the Michigan Consumer Protection Act to hold businesses accountable and defend consumers from illegal and abusive business practices.”
By reaffirming her office’s role, Nessel is making it clear that state enforcement will step in where federal protections may recede. Michigan is one of the first states to take this stance, and it is likely that other state attorneys general will follow suit, ensuring that consumer protection does not fade even as the federal landscape shifts.
New York’s recent move to regulate overdraft fees provides a concrete example of how states are stepping in to protect consumers where federal oversight may be waning. The New York Department of Financial Services (DFS) has proposed new regulations aimed at curbing unfair overdraft and nonsufficient funds (NSF) fees—an issue the CFPB had previously sought to address. These rules would prohibit practices such as processing transactions in a way that maximizes fees, charging NSF fees on transactions declined instantaneously, and imposing multiple fees for the same transaction. Additionally, the proposal seeks to cap overdraft charges and require clearer disclosures to consumers.
As federal uncertainty grows, states like New York are not waiting to see how the CFPB’s future unfolds. Instead, they are taking direct action to implement consumer protections once led at the federal level.
For businesses, this shift in enforcement priorities means that compliance can no longer focus solely on federal regulations—it must account for a patchwork of state-level rules and enforcement priorities. Companies should conduct a comprehensive review of state consumer protection laws, ensuring that policies—particularly those governing fees, lending practices, and disclosures—align with evolving state regulations. To navigate this changing landscape, companies should:
- Conduct a state-by-state compliance review – Identify states with active enforcement efforts and ensure that policies align with state-specific consumer protection laws.
- Assess risk exposure under new state regulations – Pay particular attention to areas where states, like New York, are enacting stricter rules, such as overdraft fees and lending practices.
- Developing playbooks for responding to inquiries from state Attorneys General and related state regulatory bodies.
- Strengthen internal compliance programs – Implement regular audits and monitoring to ensure ongoing compliance with both state and federal requirements.
However, businesses must also recognize that state attorneys general retain the authority to enforce key federal protections, including the Dodd-Frank Act’s prohibition on unfair, deceptive, and abusive acts and practices (UDAAP). Even as federal oversight wanes, state AGs can still bring actions under these provisions, making it critical for companies to assess both state and federal risks when developing compliance strategies.
Ballard Spahr’s State Attorneys General Consumer Finance Response Team closely monitors AG enforcement trends and helps clients navigate investigations, regulatory inquiries, and compliance challenges. Our attorneys have extensive experience representing businesses in state-level investigations and enforcement actions, including matters involving consumer finance, advertising practices, data privacy, and unfair and deceptive trade practices. If you have received a civil investigative demand (CID), subpoena, or inquiry from a state attorney general, or if you need guidance on state regulatory compliance, our team is available to assist. Please contact us to discuss your specific situation.
For more insights on state attorney general enforcement trends, visit our Consumer Finance Monitor Blog and explore our recent webinars and events covering key developments in consumer financial services and regulatory enforcement, including the impact of the election on the CFPB.
Henry E. Hockeimer, Jr., Joseph Schuster, Mike Kilgarriff, Daniel JT McKenna, Adrian King, and R. Stephen Stigall
Accusing the CFPB of planning to use its funding mechanism to abolish the agency, the mayor and the city council of Baltimore (the City of Baltimore) and the Economic Action Maryland Fund (the Economic Fund), a nonprofit economic assistance organization, are asking a federal judge to keep the bureau from folding.
“The Trump administration—acting through Defendants CFPB and its Acting Director, Russell Vought—now seeks to do by fiat what opponents of the CFPB were unable to do in Congress or the courts,” the City of Baltimore and the Economic Fund, said, in a lawsuit filed in the U.S. District Court for the District of Maryland.
They further asserted that the Trump administration is effectively defunding the agency, leaving it unable to carry out its duties under federal law.
The CFPB has said it will not draw down funds from the Federal Reserve, as it has in the past. Instead, the bureau has said it will use an agency reserve fund to fund its activities.
The plaintiffs contend that the CFPB is poised to transfer that reserve fund to the Fed, “leaving the CFPB defunded and dead in the water.”
“Without [the] CFPB, people in Baltimore would be more at risk of being tricked and trapped by shady financial practices, and the city would be forced to divert resources from other essential functions just to provide the same level of protection that residents enjoy now,” according to the City of Baltimore and the Economic Fund.
They ask the court to declare that “the defunding of the CFPB to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” in violation of the Administrative Procedure Act.
And they ask for an injunction keeping the bureau from taking any action to defund the agency.
The parties in the suit have preliminarily agreed to a preliminary injunction that will keep the CFPB from transferring funds until February 28. That would allow a briefing schedule that would enable the court to rule by that date, the plaintiffs and defendants said. That agreement is pending approval by a federal judge.
Separately, the union representing CFPB employees, several other groups and a pastor have filed suit against the bureau and Acting Director Russell Vought seeking an order that would prohibit the CFPB from doing any work to stop the agency’s operations.
The groups filing the suit are the National Treasury Employees Union, the National Consumer Law Center, the NAACP, the Virginia Poverty Law Center, Pastor Eva Steege and the CFPB Employee Association.
In the suit, filed in the U.S. District Court for the District of Columbia, the plaintiffs ask the court to order the CFPB to resume all activities it is required to perform under federal law, asserting a violation of the Administrative Procedure Act and a nonstatutory right to seek to enjoin and have declared unlawful agency action that is ultra vires (beyond the agency’s legal power or authority).
Consumer Financial Services Group
The Impact of the Election on the CFPB and Others
A Ballard Spahr Webinar | March 25, 2025, 12 PM ET
Speakers: Alan S. Kaplinsky, Thomas Burke, Daniel JT McKenna, Jenny N. Perkins, and Melanie J. Vartabedian
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