To keep you informed of recent activities, below are several of the most significant federal and state events that have influenced the Consumer Financial Services industry over the past week.
Federal Activities:
On February 20, the Chairman of the House Financial Services Committee, French Hill, along with Subcommittee Chairmen Dan Meuser, Andy Barr, and Bryan Steil, sent a letter to Federal Deposit Insurance Corporation (FDIC) Acting Chairman Travis Hill, providing recommendations to clarify digital asset regulations and prevent the debanking of digital asset firms. The lawmakers highlighted concerns about the Biden-Harris administration’s regulators pressuring banks to deny services to these firms. They proposed five key recommendations: issuing written, public guidance; providing concrete rationales for account closures; eliminating “reputational risk” as a supervisory factor; implementing a balancing test for regulations; and ensuring uniform application of supervisory guidance. These measures aim to enhance transparency, accountability, and fairness in the regulation of digital assets. For more information, click here.
On February 19, President Trump issued an executive order titled “Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency’ Deregulatory Initiative.” The order purportedly aims to focus the executive branch’s enforcement resources on regulations clearly authorized by constitutional federal statutes and to reduce the administrative state. It directs agency heads, in coordination with their Department of Government Efficiency (DOGE) team leads and the director of the Office of Management and Budget (OMB), to review all regulations under their jurisdiction for consistency with the law and administration policy. The review targets regulations that are unconstitutional, based on unlawful delegations of power, impose significant costs without public benefits, or impede national interests such as technological innovation and economic development. Agencies are instructed to de-prioritize enforcement of regulations that exceed constitutional powers and to consult on new regulations to ensure they align with the administration’s deregulatory goals. The order also outlines the implementation process and exempts certain actions related to national security and other specified areas. For more information, click here.
On February 19, Trump issued an executive order titled “Commencing the Reduction of the Federal Bureaucracy,” purportedly aimed at significantly reducing the size of the federal government and increase its accountability. The order mandates the elimination of nonstatutory components and functions of several governmental entities, including the Presidio Trust, the Inter-American Foundation, the U.S. African Development Foundation, and the U.S. Institute of Peace. It also directs the termination of specific Federal Advisory Committees and the Presidential Management Fellows Program. Agency heads are required to report compliance and identify statutorily required functions within 14 days. For more information, click here.
On February 19, the Securities and Exchange Commission (SEC) voluntarily dismissed its appeal of the lawsuit challenging the dealer rule brought by the Blockchain Association and the Crypto Freedom Alliance of Texas. The SEC’s dealer rule, proposed in February 2024, sought to require companies that routinely trade U.S. securities to register as dealers. According to Blockchain’s announcement, this dismissal marks the end of the dealer rule and signifies a shift in the SEC’s approach under new leadership, moving away from the previous administration’s aggressive stance against crypto. For more information, click here.
On February 19, the National Consumers League (NCL) and four small business owners filed a motion to intervene in support of the Federal Communications Commission (FCC) and the U.S. in the case of Insurance Marketing Coalition Ltd. v. FCC. This motion seeks to challenge the panel’s January 24, 2025, decision that vacated the FCC’s 2023 Order, known as the One-to-One Rule. Under the Telephone Consumer Protection Act (TCPA), sellers and telemarketers are prohibited from making certain telemarketing calls using an automatic telephone dialing system or artificial or prerecorded voice messages without “prior express consent.” In December 2023, the FCC issued an order adopting a new definition of “prior express written consent” that would have prohibited consumers from giving consent to receive marketing calls from more than one company at a time. The Eleventh Circuit held that the FCC exceeded its authority under the TCPA because the consent restrictions conflicted with the ordinary meaning of “prior express consent.” The proposed intervenors argue that the One-to-One Rule would dramatically decrease the prevalence of unwanted telemarketing calls, which impose real costs on small businesses and advocacy organizations like the NCL. The motion highlights that the FCC, under the current administration, is unlikely to seek rehearing of the panel’s decision. The proposed intervenors cite this change in leadership as underscoring their need to step in and defend the rule. For more information, click here.
On February 18, Trump issued an executive order titled “Ensuring Accountability for All Agencies,” which purportedly aims to enhance the supervision and control of executive branch officials by the president to ensure accountability to the American people. The order mandates that all executive departments and agencies, including independent regulatory agencies, submit significant regulatory actions for review by the Office of Information and Regulatory Affairs (OIRA) before publication. It also requires the director of the OMB to establish performance standards for independent agency heads and adjust their apportionments to align with the president’s policies. Additionally, independent regulatory agencies must regularly consult with the Executive Office of the President and establish a White House liaison position to ensure coordination of policies and priorities. The order emphasizes the president’s and attorney general’s authority to provide binding legal interpretations for the executive branch. For more information, click here.
On February 17, Federal Reserve Governor Michelle W. Bowman delivered remarks at the American Bankers Association’s Conference for Community Bankers in Phoenix, AZ. She provided an update on her views regarding monetary policy and the economy, highlighting the Federal Open Market Committee’s recent decisions to adjust the federal funds rate and the importance of a cautious approach to policy adjustments. Bowman emphasized the need for ongoing maintenance of the regulatory framework, particularly for community banks, to ensure it remains effective and does not hinder their operations. She discussed the importance of transparency and accountability in bank supervision, the challenges in the bank applications process, and the necessity of reviewing and updating outdated regulations. Bowman called for a balanced approach to regulation that supports growth and innovation while maintaining safety and soundness in the banking system. For more information, click here.
On February 14, the Stablecoin Working Group at the Digital Chamber of Commerce released a comprehensive set of policy priorities reportedly aimed at fostering a robust and secure payment stablecoin ecosystem. These priorities emphasize the need for strong consumer protections, including transparent disclosures and effective recourse mechanisms. The group advocates for the promotion of the U.S. dollar’s dominance in global stablecoin payments and recommends that stablecoins, including interest-bearing ones, be recognized as payment mechanisms rather than securities. They call for enabling competition by allowing nonbanks and insured depository institutions to issue stablecoins and support the ability of stablecoin issuers to be chartered by state or federal bodies, preferably the OCC. To ensure financial stability, the group stresses the importance of holding high-quality, liquid reserves and granting stablecoin issuers access to Fed Master Accounts. Additionally, they highlight the need for innovative anti-money laundering and sanctions compliance processes, caution against overly broad regulatory terminology, and oppose arbitrary caps on stablecoin issuance. The group also recommends a study on the implementation of the Money Transmission Modernization Act and opposes the issuance of a retail central bank digital currency by the Federal Reserve. Finally, they underscore the importance of maintaining appropriate reserve compositions, robust disclosures, and governance frameworks to preserve market integrity and stability. For more information, click here.
On February 13, the U.S. Department of Justice announced that two Estonian nationals, Sergei Potapenko and Ivan Turõgin, pleaded guilty to operating a $577 million Ponzi scheme through their company, HashFlare, which falsely claimed to mine cryptocurrency. They agreed to forfeit more than $400 million in assets, which will be used to compensate victims. They face up to 20 years in prison each, with sentencing scheduled for May 8. On February 14, the U.S. Attorney’s Office for the District of Nevada announced that Brent C. Kovar, a Las Vegas business owner, was indicted for running a $24 million Ponzi scheme through his company, Profit Connect. Kovar allegedly misled investors by claiming his company used artificial intelligence (AI) to mine cryptocurrency and guaranteed high returns. He faces multiple counts of wire fraud, mail fraud, and money laundering, with a potential maximum sentence of 330 years in prison. His trial is set to begin on April 8. For more information, click here and here.
On February 12, Federal Reserve Governor Christopher J. Waller delivered remarks at “A Very Stable Conference” in San Francisco, discussing the evolving stablecoin market and its potential challenges. He emphasized the importance of stablecoins in improving retail and cross-border payments, defining them as digital assets designed to maintain a stable value relative to a national currency and backed by safe, liquid assets. Waller highlighted the necessity for stablecoins to demonstrate both a clear use case and a viable business model to be economically sustainable. He explored various use cases, including as a safe store of value, a means to access and hold U.S. dollars, and for cross-border and retail payments. Waller also addressed the need for a clear regulatory framework in the U.S. to ensure the safety and soundness of stablecoins, while cautioning against regulatory fragmentation that could hinder their scalability and global operation. He concluded by expressing hope that the stablecoin market will grow based on its benefits to consumers and the economy, supported by innovative private sector solutions and clear public sector regulations. For more information, click here.
State Activities:
On February 19, 22 state attorneys general and the District of Columbia, filed an amici curiae brief in support of the mayor and City Council of Baltimore’s motion for a preliminary injunction in the case against the Consumer Financial Protection Bureau (CFPB) in the U.S. District Court for the District of Maryland. The brief argues that dismantling the CFPB would cause irreparable harm to states and their residents by removing essential consumer protection services, disrupting the supervision of large banks, and increasing the burden on states to protect consumers. The states emphasize the CFPB’s critical role in enforcing consumer protection laws, collaborating on investigations, and providing resources and data that states rely on to safeguard their residents. The brief urges the court to grant the preliminary injunction to prevent the dismantling of the CFPB and maintain its vital functions. For more information, click here.
On February 14, New York Governor Kathy Hochul signed into law Senate Bill S804, which amends the General Business Law to clarify the procedures for notifying the Department of Financial Services (DFS) about data breaches. Sponsored by Senator Leroy Comrie, this legislation specifies that only entities under the jurisdiction of the DFS are required to provide such notifications. The bill purportedly aims to ensure that data breaches are reported to the appropriate agency, enhancing the state’s ability to protect consumer data. For more information, click here.
On February 14, New York Governor Kathy Hochul signed into law Assembly Bill A431, which mandates that student loan servicers submit an annual report detailing private education debts. The bill requires servicers to list all private education creditors associated with the debts of New York residents and provide additional information for each creditor. The law purportedly aims to enhance transparency and oversight of private education debt, ensuring that EFS receives comprehensive data on student loan activities. For more information, click here.