Banking Brief: Financial Services Insights

While AI presents challenges and opportunities to all types of organizations, banks must be especially aware of the risks of unchecked AI use. A well-defined policy identifies permissible AI tools, establishes protocols for their use, enforces ethical safeguards, and ensures rigorous vetting of practices and procedures.

On January 16, 2025, Representative Andy Barr (R-KY) introduced a bill aimed at increasing the formation of new banks by easing regulatory requirements, particularly for de novo and rural financial institutions. Banks, financial institutions, and industry stakeholders should monitor this legislation closely, as it could present new opportunities for growth and investment.

It is critical for commercial lenders and credit officers to recognize when the risk and complexity of a loan transaction exceeds the capability or intent of automated lending software. Here are five common triggers for when lenders should consider involving their counsel in all or part of a commercial lending transaction.

Federal contractors have until December 9, 2024, to file an objection to the public release of their Type 2 Consolidated EEO-1 Report for the year 2021. Failure to submit an objection by this deadline could result in the disclosure of sensitive employment and demographic data to the public.

The Consumer Financial Protection Bureau (CFPB) has proposed a new rule that could impact lenders using forms of artificial intelligence in their lending practice.

The Interchange Fee Prohibition Act (IFPA), signed into law in June of 2024 by Illinois Governor J.B. Pritzker, prohibits banks, savings associations, credit union, and others from receiving or charging an interchange fee on the tax and gratuity (tips) portions of debit and credit transactions, as well as placing restrictions on the use or transmittal of electronic payment transactions data.

Banks own and operate a surprising amount of real estate for their branches and offices. There were over 77,500 bank branches in America as of the end of 2023. By comparison, McDonalds has about 13,000 stores in the US. That’s a lot of property, and it comes with a lot of legal considerations.

After an Event of Default occurs, it is important to understand the options available to the Lender other than demanding repayment or simply waiving the default.  A Forbearance Agreement allows the Lender to preserve, rather than waive, the default, while also obtaining key releases from the Borrower and allowing for strategic and customized modifications to the relationship.

Many financial institutions are familiar with the term “sovereign citizen” but aren’t quite sure what the term entails or how to handle the demands of those who refer to themselves as “sovereign citizens.” This movement has seemingly increased in recent years, spreading through social media platforms such as Facebook, TikTok, and Instagram.

This past week, Indiana Governor Eric Holcomb signed H.B. 1284 and S.B. 188 into law, each of which will become effective on July 1, 2024.