Banking Brief: Financial Services Insights

On May 12, 2025, the Consumer Financial Protection Bureau (CFPB) filed a notice that seeks to rescind changes made in 2022 for administrative adjudications. The rules for administrative adjudications allowed the CFPB to enforce many cases in-house instead of in federal court. Recission of these rules would decrease the authority of the director of the CFPB in the management of cases, in turn leading to fewer regulations for lenders.

Financial institutions that use code-based tracking technologies may soon find themselves facing increased scrutiny and legal exposure as the next wave of class action litigation begins. A recent class action lawsuit alleging Everwise Credit Union disclosed sensitive personal and financial information underscores the importance of transparency and consent in the handling of personal and financial information.

The Federal Reserve Board (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) have recently taken steps to permit traditional financial institutions to incorporate crypto and digital asset services.

On April 23, 2025, President Donald J. Trump signed an executive order titled “Restoring Equality of Opportunity and Meritocracy.” This order states that the U.S. aims to limit the use of disparate-impact liability in order to stay aligned with the Constitution, federal civil rights laws, and core American values. For banks and other financial organizations, this signals a big change in how they will be regulated.

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.

The spate of class-action lawsuits against banks and credit unions (“Financial Institutions”) involving overdraft fees has prompted Indiana Financial Institutions to amend their existing account agreements to provide for arbitration (in lieu of costly litigation) and to prohibit consumers from initiating or joining into class-actions against Financial Institutions (“Arbitration/Class Action Waivers”). 

With the advent of the federal Corporate Transparency Act (“CTA”) that begins on January 1, 2024, financial institutions will need to re-think their information and certification requirements for account and loan customers.

Before responding to a creditor’s citation to discover assets ("CDA"), financial institutions should consider whether the court presiding over the judgment can lawfully direct them to act against a debtor's accounts. Even if a CDA is correctly filed and served, this does not necessarily mean that courts have proper jurisdiction. Thus, responding to these requests can lead to unsavory consequences.

Indiana recently enacted laws allowing creditors involved in consumer credit transactions secured by motor vehicles or other titled assets to record their liens electronically.

On June 14, 2023, the Office of the Comptroller of the Currency (OCC) published its Semiannual Risk Perspective which identifies key issues facing the federal banking system.

Since early 2023, there has been consistent reporting of possible turbulence and increased default risk relating to commercial real estate loans. These concerns are driven by historic levels of maturing debt, which is in many cases secured by real estate that has taken a sharp hit in value.

Recently, the Consumer Financial Protection Bureau (CFPB) released a report on the use of chatbots, such as ChatGPT, etc., by financial institutions. The report highlighted that chatbot use, as automated teller machines and offshore customer call centers before them, are increasingly used by financial institutions to streamline processes and lower operating costs. The CFPB report details a number of challenges in the use of chatbots, as well as guidance for successful deployment by financial institutions.

On June 6, 2023, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency jointly released final guidance on managing risks associated with third-party relationships. The guidance is intended to promote consistency in supervisory approaches and replaces each agency’s existing guidance on the topic.

With the economy tightening and interest rates continuing to increase to amounts greater than have been seen in the recent past, lenders are facing more requests for assistance from debtors who are unable to repay their loans in accordance with their original terms. Hence, workouts are becoming an evermore important tool for lenders seeking to protect the collectability of their loans.

Reports of potential trouble in commercial real estate lending have steadily increased this year. 

With the take-over of Silicon Valley Bank and the bankruptcy filing of its parent, the closing of Signature Bank, and the $30 billion rescue package for First Republic Bank from eleven of the largest banks in the U.S. on March 16, the banking industry has entered into a new world.

On February 14, 2022, BlockFi Lending LLC (BlockFi) settled charges with the SEC and state securities regulators for a total of $100 million in penalties.