Legal Alert

Mortgage Banking Update - March 20, 2025

March 20, 2025

March 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 California's proposal to update the CCPA on location data rules, the Federal Reserve's identification of top fair lending violations, the Department of the Treasury's suspension of enforcement of the Corporate Transparency Act, and much more.

Ballard Spahr Launches State Attorneys General Consumer Response Team to Respond to State Issues
Podcast: Professor Hal Scott Doubles Down on His Argument That CFPB Is Unlawfully Funded Because of Combined Losses at Federal Reserve Banks
CFPB Extends Comment Period For Data Broker NPRM
Federal Reserve Identifies Top Fair Lending Violations
Department of the Treasury Suspends Enforcement of the Corporate Transparency Act and Plans to Revise Rule to Limit Scope
Banking Committee Sends Nomination of Jonathan McKernan as CFPB Director to Full Senate
CFPB Inaction Harming State Consumer Protection Efforts, Democratic AGs Allege in Amicus Brief
As Trump Administration Rolls Back CFPB’s Work, New York Wants to Fill the Void
California Proposes CCPA Update on Location Data Rules
Federal Court Refuses to Lift Preliminary Injunction Blocking DEI Executive Orders, While EEOC, USDOE, and State AGs Address DEI in Education
President Trump EEOC Says 'Anti-American Bias' Is New Focus of Discrimination Enforcement
FinCEN Issues Southwest Border Geographic Targeting Order Aimed to Combat Mexican-Based Drug Cartels
Looking Ahead

Ballard Spahr Launches State Attorneys General Consumer Response Team to Respond to State Issues

State attorneys general are not waiting to see what the future holds for the CFPB. With federal oversight receding, states are stepping up enforcement activities and strengthening their consumer protection laws.

This shift—accelerated by efforts to limit the CFPB’s authority under the Trump administration—creates a complex landscape where businesses must navigate a patchwork of state-level statutes, regulations, and enforcement priorities.

Ballard Spahr has a dedicated State Attorneys General Consumer Response Team that helps banks and other financial institutions understand and adapt to the evolving regulatory environment and mitigate risks in an era of heightened state-level enforcement. Ballard Spahr brings an unmatched combination of experience to state attorney general (AG) enforcement matters. Our team is uniquely positioned to defend clients in high-stakes investigations, with:

Former senior officials and leaders from state AG offices, who understand enforcement priorities and regulatory strategy from the inside, including the former First Deputy Attorney General of Pennsylvania and the former Deputy Solicitor General in the Washington State Office of the Attorney General.
Litigators with extensive experience negotiating, resolving, and, when necessary, litigating against state AGs in complex, multistate enforcement actions.
A powerhouse Consumer Financial Services (CFS) Group with a top-tier Chambers ranking and decades of regulatory and transactional experience, ensuring that our clients receive a fully integrated approach to enforcement defense, compliance strategy, and litigation risk management.

We have handled some of the most significant multistate probes of the last decade—cases that have been the subject of front-page media coverage, as well as congressional scrutiny. We have represented financial institutions in 50-state AG inquiries, including matters that spun off multiple lawsuits, parallel regulatory actions, and years of state oversight.

We advise banks and nonbanks on identifying and complying with regulatory requirement in all fifty states and the U.S. territories. As we worked with financial services clients across the country, we have developed innovative tools to help our attorneys and their clients navigate today’s complicated regulatory environment. Our Licensync tool helps manage state-level and other approvals, licenses, registrations, and enforcement actions to track deadlines and avoid penalties for noncompliance.

We’ve handled high-profile investigations across consumer finance sectors, including student loans, mortgage lending and servicing, auto finance, fintech, and retail banking. Our team provides the strategic guidance clients need to adapt to state-level regulations and mitigate risks—including state-level compliance reviews, risk exposure assessments, investigation response playbooks, compliance program enhancement, and more.

State AGs also retain authority to enforce key federal protections, including the Dodd-Frank Act’s prohibition on unfair, deceptive, and abusive acts and practices by financial institutions. 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. Increasingly, attorneys general are collaborating across state lines to pursue multistate investigations and enforcement actions.

We can help companies:

Conduct a comprehensive review of state consumer protection laws to ensure policies governing fees, lending practices, and disclosures align with evolving state regulations.
Conduct a state-by-state compliance review to identify states with active enforcement efforts and ensure that policies align with state-specific consumer protection laws.
Assess risk exposure under new state regulations, paying particular attention to states, such as New York, that are enacting stricter rules on overdraft fees, lending, and other practices.
Develop playbooks for responding to inquiries from state attorneys general and related state regulatory bodies.
Strengthen internal compliance programs by implementing regular audits and monitoring to ensure ongoing compliance with both state and federal requirements.

The lawyers on our State Attorneys General Consumer Finance Response Team advise businesses and organizations to keep them well-prepared to meet current conditions and be ready for what lies ahead. 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.

Consumer Financial Services Group

Podcast: Professor Hal Scott Doubles Down on His Argument That CFPB Is Unlawfully Funded Because of Combined Losses at Federal Reserve Banks

On June 6 of last year, Professor Hal Scott of Harvard Law School was our podcast guest. On that occasion he delved into the thought-provoking question of whether the Supreme Court’s decision on May 16 in the landmark case of CFSA v. CFPB really hands the CFPB a winning outcome, or does the Court’s validation of the agency’s statutory funding structure simply open up another question – namely, whether the CFPB is legally permitted under Dodd-Frank to receive funds from the Federal Reserve even though the Federal Reserve Banks have lost money on a combined basis since September 2022. Dodd-Frank provides that the CFPB is to receive its funding out of the Federal Reserve Banks “combined earnings.” The Wall Street Journal published an op-ed by Professor Scott on May 20 titled, “The CFPB’s Pyrrhic Victory in the Supreme Court” in which he explains that even though the CFPB’s funding mechanism as written was upheld in CFSA v. CFPB, this will not help the agency now or at any time in the future when the Federal Reserve operates at a deficit.

A lot has happened since Professor Scott’s last appearance on our podcast show. Several enforcement lawsuits filed by the CFPB were faced with motions to dismiss filed by the defendants alleging that the lawsuits could not be financed by the CFPB with funds that were unlawfully procured The CFPB gave short shrift to this argument but never could adequately explain how “earnings” as used in Dodd-Frank really means “revenues” and not profits. While three courts rejected the motions to dismiss, those courts decided to do so without dealing with the core issue of whether “earnings” means profits or revenues.

President Trump became President on January 20 and, shortly thereafter, Rohit Chopra was terminated. The new Acting Director, Russell Vought, proceeded to shutter the CFPB by, among other things, terminating or putting on administrative leave with instructions to do no work most of its employees and refusing to seek a quarterly funding from the Federal Reserve. Mr. Vought did not base this refusal on the premise that the receipt of such funding would be illegal. Two lawsuits have been filed against the Acting Director challenging the legality of the apparent dismantling of the CFPB. While the CFPB is defending these cases on the basis that the President and the Acting Director have the Constitutional right to downsize and alter the policies of the CFPB, they have surprisingly not made the argument that the CFPB’s funding is unlawful.

Professor Scott on Feb 1, 2025, published another op-ed in the Wall Street Journal entitled “Rohit Chopra is out. Now Shutter the CFPB” and two articles on the website of the Committee on Capital Markets Regulation (of which Professor Scott is the President and Director) entitled “Understanding the CFPB’s Funding Problem” and “The Fed’s Accounting Methodology Cannot Expand its Statutory Authority to Fund the CFPB.” Our podcast show released today takes a very deep dive into those articles and explains Professor Scott’s position that the Fed’s accounting for the massive losses of the Federal Reserve Banks (which creates a deferred asset account composed of anticipated future earnings of the Federal Reserve banks which the Federal Reserve banks will not need to remit to the treasury because the banks may recoup its accumulated losses since September 2022) has no bearing on whether the Fed has been lawfully funding the CFPB out of “combined earnings” of the Federal Reserve banks. Professor Scott also rebuts several counterarguments made by those who claim that the CFPB has been lawfully funded throughout.

Professor Scott also discusses why he believes that congress may use a budget appropriations bill whose passage requires only a majority, not 60, vote in the Senate in order to subject the CFPB to funding through the congressional appropriations process.

Our blogs about the Supreme Court decision in CFSA v. CFPB can be found here and here. To read our blog about Professor Scott’s op-ed in the Wall Street Journal, which includes a link to the op-ed, click here. To read his more recent op-ed in the Wall Street Journal, click here to read his two articles published on the website of the Committee on Capital Markets Regulation entitled, click here and here.

To listen to this episode, click here.

Consumer Financial Services Group

CFPB Extends Comment Period For Data Broker NPRM

The CFPB has extended the comment period for its Notice of Proposed Rulemaking on data brokers until April 2, 2025; the comment period had been slated to expire on March 3, 2025.

The bureau said it was extending the comment period to allow interested persons more time to consider and submit their comments on the rule.

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.

As previously reported, while the CFPB touts the proposal as one to cover data brokers, it is much broader than that. Among other things, if adopted as proposed it would also greatly expand the definitions of consumer report and consumer reporting agency and severely restrict the “written instructions” (written authorization) permissible purpose.

Seventeen financial services trade groups recently called on the CFPB to abandon the plan. “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.

Consumer Financial Services Group

Federal Reserve Identifies Top Fair Lending Violations

In the latest edition of its Consumer Compliance Outlook, the Federal Reserve (Fed) identified the four most significant fair lending violations that it found in examining state member banks in 2022. These are violations that were typically identified in examinations as matters requiring attention or as matters requiring immediate attention.

Fair Lending Risk Assessment. The Fed cited the failure to conduct a rigorous and separate fair lending risk assessment as the most significant violation observed by examiners.

“An institution’s overall fair lending risk management program should be commensurate with the size, complexity, and fair lending risk profile of its lending,” the Fed stated. “Supervisors expect institutions with heightened fair lending risk to conduct a fair lending risk assessment to ensure the risk is being appropriately measured and mitigated.”

Instead, some financial institutions with heightened fair lending risks relied on their compliance risk assessments. A compliance risk assessment is considered inadequate because it is more general and less nuanced than a fair lending risk evaluation and therefore, it may fail to identify problems, the Fed warned.

Fair Lending Training. The Fed cited the failure to conduct fair lending training as the second most significant violation observed by examiners.

“Effective, complete, and recurring training is an essential part of a fair lending compliance management program,” the Fed said.

Simply relying on compliance departments is considered problematic, since those departments may become complacent and may overlook the benefits of targeted training.

Grossing Up Nontaxable Income. The Fed cited the failure to gross up nontaxable income as the third most significant violation observed by examiners.

“If a lender’s system analyzes gross income and fails to gross up the income when the applicant’s income is nontaxable, the practice raises fair lending risk,” the Fed stated. “It may result in discounting an applicant’s income on a prohibited basis, and could also result in discriminatory loan denials due to insufficient income.”

The Fed emphasized that banks need to have policies and procedures in place that require underwriters to gross up nontaxable income when underwriting is based on gross income.

Exception Monitoring. Finally, the Fed cited the failure to monitor loan officer discretion as the fourth most significant violation observed by examiners.

One solution is to eliminate discretion by stating in the loan policy that exceptions are not permitted.

“Alternatively, banks that allow loan officers to retain discretion to make exceptions to policy can limit that risk by tracking and maintaining oversight over how loan officers use those exceptions,” the Fed said.

Recommendations. The Fed concluded by emphasizing the importance of attending to these matters.

“While banks are responsible for all aspects of their fair lending compliance management program, compliance officers may benefit from reviewing these more frequently issued matters and comparing them to their current practices,” the Fed said. “Banks should raise specific fair lending issues and questions with their primary regulator.”

Ballard Spahr’s Consumer Financial Services Group also assists bank and nonbank lenders with establishing fair lending compliance programs and conducting fair lending risk assessments.

John L. Culhane, Jr., Ronald K. Vaske, and Richard J. Andreano, Jr.

Department of the Treasury Suspends Enforcement of the Corporate Transparency Act and Plans to Revise Rule to Limit Scope

Does it matter if a law is valid if the government refuses to enforce it? For months, we have watched (and blogged on) courts grappling with the constitutionality and enforceability of the Corporate Transparency Act (CTA). While, as we have blogged most recently here, courts have produced mixed returns on the validity of the CTA, the Department of the Treasury (Treasury) has now significantly mooted those questions. On March 2, Treasury announced in a press release that it will not enforce significant provisions of the CTA.

Hold on Current Enforcement

The press release is short and states, in pertinent part, that the Treasury Department “will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines.” The Department’s decision does not remove the CTA from the laws of the United States. It still means that reporting companies have to comply with their BOI filing obligations, as put forth in the regulations; but there will be no penalties or fines should a report be filed late, not updated on time, etc. The tumultuous litigation developments leave entities subject to the CTA in constant flux: one week, the CTA is stayed nationwide, another week the deadlines are back in force but extended. In the absence of a fine or penalty for noncompliance with the CTA, reporting companies will undoubtedly ask their advisors as to whether or not to file BOI reports as they become due. Operationally, is it better to file the BOI report and be “on the safe side” (but having to expend resources) or are the risks tolerable if the entity foregoes to expend the efforts and does not submit the appropriate BOI report in a timely manner? Of course, the CTA is still good law. So, the question is, effectively, is it more efficient to just break the law if there will be no penalties – for now.

Future Enforcement and Rule Change

The press release also signals how the new administration would like to reshape the CTA. According to the press release, the Department of the Treasury “will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either” and “will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.”

A potentially narrower application scope begs the question how the executive department can follow the congressional goal of the CTA: increasing accountability in entities operating within or organized in the United States to combat money laundering, fraud, corruption, tax crimes, and other civil and criminal violations, nationally and internationally. In its final rule on the BOI reporting regime, FinCEN estimated about 71,000 foreign entities “operating in the United States that may be subject to BOI reporting requirements” in 2024, with about 10,900 new foreign entities subject to reporting per year after 2024. Limiting “the scope of the rule to foreign reporting companies only” would unquestionably result in the nonavailability of a massive amount of BOI to law enforcement and agencies.

The government’s reasoning for these next steps is that they are, “in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest.” The CTA has been criticized as being too burdensome on small entities and that FinCEN has considerably underestimated the amount of time required to accurately complete a BOI report. It remains to be seen how the new proposed rule alleviates and address concerns on small businesses – and whether it imposes an obligation on smaller entities at all.

Perhaps the promised rule changes will address these questions. You will hear here if they do.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.

Siana Danch and Terence M. Grugan

Banking Committee Sends Nomination of Jonathan McKernan as CFPB Director to Full Senate

The Senate Banking Committee on March 6 approved the nomination of Jonathan McKernan to be Director of the Consumer Financial Protection Bureau.

The committee voted 13-11; the nomination now goes to the full Senate. McKernan, a former FDIC Board Member, would replace Acting Director Russell Vought.

Support for McKernan has divided along party lines, with Democrats saying that he would help dismantle an agency that the Trump administration has said no longer should exist.

McKernan is “clearly being sent in by Co-Presidents Trump and Elon Musk to unleash scammers, fraudsters and cheats,” Banking Committee ranking Democrat Senator Elizabeth Warren, (D-Mass.) said during the hearing.

Banking Chairman Tim Scott, (R-S.C.), disagreed. “As the Director of the Bureau of Consumer Financial Protection, Jonathan McKernan will ensure accountability and much needed reforms to curtail the weaponization of this rogue agency,” Scott said, in a statement released following the vote.

McKernan has said he would continue the bureau’s work that is required under federal law.

Consumer Financial Services Group

CFPB Inaction Harming State Consumer Protection Efforts, Democratic AGs Allege in Amicus Brief

The Trump administration’s efforts to “effectively shutter the CFPB” amounts to a “total dereliction of all mandatory statutory duties,” that will harm state consumer protection efforts, Democratic state attorneys general have told a Washington, D.C. federal judge.

“The CFPB has, to date, been an invaluable partner to many states in performing a variety of consumer-protection functions mandated by Congress,” the 23 state officials said, in an amicus brief in a suit filed by the National Treasury Employees Union.

The state officials also have filed a similar brief in a lawsuit filed by the mayor and city council of Baltimore. That suit levels similar allegations.

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.

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 they said the bureau is required to perform under federal law, asserting a violation of the Administrative Procedure Act and a non-statutory right to seek to enjoin and have declared unlawful agency action that is ultra vires (beyond the agency’s legal power or authority).

Judge Amy Berman Jackson ruled on March 3 that her order that changes at the agency be delayed until at least March 10, when she will hold an evidentiary hearing.

Democratic attorneys general are contending that a shutdown of the CFPB’s operations would seriously harm their own efforts.

“Although some States have similar mechanisms in place, those mechanisms by themselves cannot replace overnight the CFPB’s vast nationwide complaint intake system,” the Democratic attorneys general wrote. “In the CFPB’s absence, consumers will be left without critical resources.”

Inaction by the CFPB places a huge burden on states that have allocated their budget based on assistance by the bureau, according to the AGs.

The administration has sent conflicting messages about the future of the bureau. Jonathan McKernan, the Trump administration’s nominee for CFPB director, told a Senate committee on Thursday that the bureau will continue to function. However, bureau employees have been sent home and CFPB headquarters has been closed. The agency has had the name of the bureau taken off windows at the bureau.

That causes a serious problem, the attorneys general said, adding that states and the CFPB have worked together on issues and problems that are statutorily mandated.

“The sudden withdrawal of these CFPB services, supervision, and collaborative assistance will thus inflict immediate harm on States and their residents,” according to the AGs. Indeed, these problems have already begun, they added.

The AGs contend that those harms include the inability to:

Refer complaints to the CFPB. “States have suddenly lost the CFPB’s significant expertise and resources that can be invaluable in ongoing matters that protect their residents,” the AGs said.
Communicate directly with the CFPB on collaborative investigations, active litigation, or joint supervisory examinations.
Use data that the CFPB is required to collect under the Home Mortgage Disclosure Act.
Provide state residents with funds already awarded—but not distributed—under the Civil Penalty Fund.

State attorneys generals filing the amicus brief represent New York, New Jersey, the District of Columbia, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, North Carolina, Oregon, Rhode Island, Vermont, Washington, and Wisconsin.

Mike Kilgarriff

As Trump Administration Rolls Back CFPB’s Work, New York Wants to Fill the Void

As the Trump administration attempts to drastically cut CFPB funding and staffing, New York regulators and legislators are attempting to fill what could be a void in consumer protection efforts.

“We’re hiring,” Adrienne A. Harris, the state’s Superintendent of the Department of Financial Services, said during a presentation on March 12 at the Brookings Institution. She delivered a message to financial services professionals, “We welcome you.” Harris went on to tout her department’s work, saying that the NYDFS has taken 111 enforcement actions since she became superintendent in January, 2022.

A day later, the Department of Financial Services announced that it was hiring former CFPB Deputy Enforcement Director Gabriel O’Malley to head the agency’s Consumer Protection and Financial Enforcement Division. O’Malley left the CFPB in February, after more than a decade at the bureau.

The NYDFS has also been active on the regulatory front, having proposed its own overdraft rule governing state-chartered financial institutions earlier this year.

That rule, as outlined by Harris and the NYDFS would, among other things, prohibit:

Overdraft and NSF fees on overdrafts of less than $20.
Overdraft fees that exceed the overdrawn amount.
NSF fees than exceed the amount of the NSF transaction
More than three overdraft or nonsufficient funds (NSF) fees per consumer account per day.

The NYDFS is now soliciting comment on the proposed rule.

On the legislative front, on March 13, state Attorney General Letitia James announced the introduction of legislation, the Fostering Affordability and Integrity through Reasonable Business Practices Act (the FAIR Business Practices Act), that would expand the state’s ban on deceptive business practices to also protect against unfair and abusive practices. The Biden administration’s former CFPB director and former FTC chair supported such efforts.

In announcing the legislation, James’s office said the legislation would “protect New Yorkers from a wide array of scams, including deed theft, artificial intelligence (AI)-based schemes, online phishing scams, hard-to-cancel subscriptions, junk fees, data breaches, and other unfair, deceptive, and abusive practices. Forty-two other states and federal law already prohibit unfair practices, making New York’s current law both antiquated and inadequate.”

“The FAIR Business Practices Act would also help stop lenders, including auto lenders, mortgage servicers, and student loan servicers, from deceptively steering people into higher cost loans. It would reduce unnecessary and hidden fees, stop unfair billing practices by health care companies, and prevent companies from taking advantage of New Yorkers with limited English proficiency.”

The AG’s office specifically cited the federal rollback, in endorsing the legislation.

“At a time when the federal government is making life harder, we want to make life easier for New Yorkers,” James said.

In addition, Rohit Chopra, the CFPB director during the Biden administration, called for enactment of the legislation. “With stronger laws on the books, Attorney General James and state law enforcement across the country can stop the scourge of junk fees and other crimes against consumers,” Chopra said.

Former FTC chair Lina Kahn echoed those sentiments. “Strong consumer protection tools are essential for protecting Americans from unfair and abusive business practices,” she said. “At the FTC, we used these tools to tackle a range of exploitative tactics, from outrageous subscription traps and predatory scams to dangerous commercial surveillance. By passing a strong consumer protection bill, New York lawmakers can empower Attorney General James to fully defend New Yorkers’ pocketbooks, privacy, and economic freedoms.”

Adrian R. King, Jr., Mike Kilgarriff, Marjorie J. Peerce, and John L. Culhane, Jr.

California Proposes CCPA Update on Location Data Rules

On February 21, 2025, representatives in the California legislature introduced California Assembly Bill 1355, also known as the California Location Privacy Act (AB 1355). AB 1355 seeks to amend the California Consumer Privacy Act (the CCPA) by imposing several new restrictions on the collection and use of consumer location data.

Under AB 1355, “location data” means device information that reveals, directly or indirectly, where a person or device is or has been within the State of California, with precision sufficient to identify the street-level location of such person or device within a range of five miles or less. AB 1355 provides examples including, but not limited to:

An IP address capable of revealing the physical or geographical location of an individual;
GPS coordinates;
Cell-site location information;
Information captured by an automated license plate recognition system that could be used to identify the specific location of an automobile at a point in time;
Information or image captured by a speed safety system or other traffic monitoring system that could be used to identify the specific location of an automobile at a point in time; and
A video or photographic image that is used as a probe image in a facial recognition technology system that could be used to identify the specific location of an individual at a point in time.

AB 1355 would impose the following restrictions on this broad category of location data:

Opt-In Consent: Prior to collecting or using an individual’s location data, a covered entity would be required to obtain the individual’s express opt-in consent to collect and use their location data for the purpose of providing the goods or services requested.

Restrictions on Use and Disclosure: Even if consent is collected, covered entities would be prohibited from (i) collecting more precise location data than necessary to provide the goods or services requested, (ii) retaining location data for longer than necessary to provide the goods or services requested, (iii) selling, renting, trading, or leasing location data to third parties, (iv) deriving or inferring from location data any information that is not necessary to provide the goods or services requested, or (v) disclosing the location data to any government agency without a valid court order. The intent of these restrictions is to create “no-go zones” where data revealing visits to certain locations, such as reproductive health clinics or places of worship, cannot be used for discriminatory or otherwise improper or unlawful purposes.

Location Privacy Policy: A covered entity would be required to maintain a “location privacy policy” that is presented to consumers at the point of collecting such location information. The location privacy policy would be required to include, among other things, (i) the type of location data collected, (ii) the disclosures required to provide the requested goods or services, (iii) the identities of service providers and third parties to whom the location data is disclosed or could be disclosed, (iv) whether the location data is used for targeted advertising, and (v) the data security, retention, and deletion policies.

Changes to Location Privacy Policy: A covered entity would be required to provide notice of any change to its location privacy policy at least 20 business days in advance.

Enforcement and Penalties: The California Attorney General, along with district attorneys, would be able to bring a civil action against a covered entity for violations of AB 1355, which may result in a civil penalty up to $25,000 per offense.

These proposed changes that are similar to the approach to consumer location data already adopted under Maryland’s Online Data Privacy Act, which takes effect October 1, 2025. If enacted, AB 1355, however, would represent a significant departure from the opt-out framework currently set forth under California law under the CCPA, where businesses can generally sell and share sensitive personal information, such as geolocation information, unless the person opts out and directs the business to limit its usage.

Gregory P. Szewczyk, Mo Pham-Khan, and Parisa Zarelli

Federal Court Refuses to Lift Preliminary Injunction Blocking DEI Executive Orders, While EEOC, USDOE, and State AGs Address DEI in Education

Last week brought further developments related to the Trump administration’s efforts to curtail what it views as illegal diversity, equity, and inclusion (DEI) initiatives. A federal court denied the Trump administration’s motion to stay a preliminary injunction blocking the enforcement of most elements of President Trump’s Executive Orders 14173 Ending Illegal Discrimination and Restoring Merit-Based Opportunity and 14151 Ending Radical and Wasteful Government DEI Programs and Preferencing (collectively, the DEI Executive Orders). Relatedly, the Equal Employment Opportunity Commission (EEOC) and U.S. Department of Education (USDOE) have taken action to advance President Trump’s focus on restraining DEI initiatives, particularly in educational institutions. Some state AGs are pushing back. Click below to read the full alert.

Read full alert here.

Denise M. Keyser, Christine Thelen, and Dana Mydland

President Trump EEOC Says 'Anti-American Bias' Is New Focus of Discrimination Enforcement

On February 19, the EEOC, through its acting chair Andrea Lucas, pledged rigorous enforcement of civil rights laws against companies that show bias for foreign workers, including visa holders, over U.S. citizens. The change comes amidst the Trump administration’s wider focus away from protecting immigrants and other demographic groups that have been historically viewed as primary targets of discrimination.

In Lucas’ view, discrimination against American nationals is a “large scale problem.” She further claimed that employers in multiple industries have policies and preferences that prefer immigrants over American nationals. Lucas argued that employers might illegally prefer “non-American workers” because of perceptions that their labor costs are lower, that they are more easily exploited, or that foreign workers have a better work ethic. However, none of these “excuses” are valid reasons to favor any national origin group over another, including American nationals, according to Lucas.

Title VII’s provisions, which cover national origin but not citizenship, have not typically been used to pursue claims of favoritism toward non-American workers. However, there are recent examples where the EEOC has taken analogous positions in enforcing laws against national original discrimination. In February 2025, a major hotel in Guam paid $1.4 million to settle an EEOC claim alleging unlawful preferences for Japanese applicants and employees over American nationals. In August 2024, a California laundry facility agreed to pay $1.1 million to settle an EEOC claim alleging discrimination against non-Hispanic applicants, which constituted an illegal preference based on race and national origin.

Employers should review their hiring and employment policies and practices to ensure that preferences are not given to a particular group over another. Job postings and unofficial policies that disproportionately favor immigrants, H1-B visas, or nationals of certain countries will likely be considered illegal discrimination by the new administration. This may be particularly prevalent in certain industries that have historically been supported by worldwide talent. Especially for those employers, we recommend working with your employment counsel to conduct a privileged audit of such hiring and retention practices before they are targeted as a part of this new wave of enforcement actions.

Ballard Spahr’s Labor and Employment Group frequently advises employers on issues related to labor employment and policy. We will continue to monitor the new administration’s agenda and the impact of further anti-discrimination laws and interpretation. Please contact us if we can assist you with these matters.

Brian D. Pedrow, Shirley S. Lou-Magnuson, and Noah Jennings

FinCEN Issues Southwest Border Geographic Targeting Order Aimed to Combat Mexican-Based Drug Cartels

We have written previously about the new administration’s significant shifts in its approach to criminal enforcement and prosecution of money laundering cases. Specifically, we wrote about shifts at the U.S. Department of Justice (DOJ) as seen in United States Attorney General Pamela Bondi’s February 5, 2025, memorandum outlining the ways in which the DOJ will aim to eliminate cartels. With respect to money laundering, the memo establishes that DOJ will “prioritize investigations, prosecutions, and asset forfeiture actions that target activities” of cartels. Later in the month, on February 20, 2025, the U.S. Department of State designated six Mexico-based drug cartels Foreign Terrorist Organizations and Specially Designated Global Terrorists. Now, the U.S. Department of Treasury has joined in. On March 11, 2025, Treasury’s Financial Crimes Enforcement Network (FinCEN) announced its issuance of a Geographic Targeting Order (GTO) that strongly signals its own efforts to combat cartel activity by requiring more information about cash transactions from money services business along the Mexican border.

FinCEN’s GTO requiring all money services businesses (MSBs) – check cashing companies, currency transmitters, and foreign exchange dealers, among other financial services businesses – located in 30 ZIP codes across the southwest border in California and Texas to file Currency Transaction Reports (CTRs) with FinCEN at a $200 threshold in connection with cash transactions. Aligning with DOJ’s priorities with what Treasury Secretary Scott Bessent called a “whole-of-government approach,” FinCEN announced that the purpose of the GTO was to “further combat the illicit activities and money laundering of Mexico-based cartels and other criminal actors along the southwest border of the United States.” Secretary Bessent continued that the “issuance of this GTO underscores [the United States’] deep concern with the significant risk to the U.S. financial system of the cartels, drug traffickers, and other criminal actors along the Southwest border.”

Federal law requires financial institutions to report currency (cash) transactions over $10,000 conducted by, or on behalf of, one person, as well as multiple currency transactions that aggregate to be over $10,000 in a single day. These transactions are reported on CTRs. To this end, financial institutions must obtain personal identification about the individual conducting the transaction such as a Social Security number as well as a driver’s license or other government issued document. With the new GTO, FinCEN significantly lowers the $10,000 dollar threshold, requiring MSBs along the southwest border to flag cash transactions at only $200. Of note too is the fact that the GTO does not change Suspicious Activity Report-filing obligations but states that FinCEN “encourages the voluntary filing of [Suspicious Activity Reports] where appropriate to report transactions conducted to evade the $200 reporting threshold imposed . . . .”

The GTO takes effect on April 14, 2025, and will remain in effect for 180 days. The GTO, of course, may be renewed.

What does this means for financial institutions?

MSBs that operate in the impacted areas along the southwest border should consider the impact on customer-facing functions. Customer-facing employees will need to be trained on the new limits. The MSBs may even need to increase staffing to the extent that completing CTRs for more customers simply takes more time.

MSBs should also consider the impact on noncustomer facing employees. MSBs’ compliance teams will want to take steps such as assessing resources needed to comply with the order and manage what may be a significant increase in the number of CTRs completed by customer-facing employees and reviewing and updating their compliance procedures. Given the new priorities of both DOJ and FinCEN and its focus on combatting illicit finance by drug cartels and other illicit actors along the southwest border, MSB compliance teams should prepare for additional scrutiny of their current CTR and SAR-filing procedures and likely increased law enforcement outreach in the form of requests for SAR-supporting materials, grand jury subpoenas, and less formal inquiries.

Banks that have MSBs as customers should consider what changes, if any, they should make to the policies and procedures in their own anti-money laundering programs.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.

Matthew T. Smith

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

Mortgage Banking Update - March 20, 2025

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