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To keep you informed of recent activities, below are several of the most significant federal events that have influenced the Consumer Financial Services industry over the past week.
Federal Activities:
On November 4, the Office of the Comptroller of the Currency (OCC) issued a supervisory framework describing how examiners should evaluate banks’ use of “super intelligence” (SI), the term the publication uses for technologies previously encompassed by artificial intelligence. The framework covers SI used in credit decisioning, payments, fraud detection, customer service, operations, risk management, and market activities, with particular focus on generative and agentic systems. The OCC stresses that SI is not a separate risk category. Its risks should be managed within banks’ existing risk management frameworks, guided by the principle of proportionality: the greater the potential consequences of a system’s failure or misuse, the stronger the controls may need to be. Risk turns on factors such as the consequences of failure, the degree of autonomy, and the extent of human oversight, rather than on technological sophistication alone. The framework organizes 16 supervisory components around six pillars (purpose, risk, control, oversight, resilience, and assurance) and highlights risks specific to generative and agentic technology, including hallucinations, prompt injection, model and data poisoning, and scope drift. For consumer-facing uses, the OCC makes clear that SI does not alter banks’ existing legal obligations, and inaccurate or misleading outputs about fees, rates, account status, or policies could create compliance exposure. The OCC also offers an illustrative four-tier methodology, ranging from Tier 1 “Critical” uses such as autonomous payment agents and real-time credit decisioning to Tier 4 “Low” uses such as fully human-controlled internal productivity tools. Describing the framework as a “living document,” the OCC expects to update it as the technology and supervisory understanding evolve, and it offers banks a useful roadmap for calibrating controls and human oversight to what an SI system is permitted to do and the consequences of failure. For more information, click here.
On November 3, the National Credit Union Administration (NCUA) announced the 14th round of regulatory changes under its Deregulation Project, an ongoing review of NCUA regulations to ensure they focus on credit unions’ safety, soundness, and resilience. The round includes two final rules and one interim final rule, and NCUA is seeking public comment on the interim final rule. That rule removes 12 C.F.R. 723.9, a transitional provision in the commercial lending regulation. The provision was adopted in the 2016 commercial lending rule to address credit unions operating under certain NCUA-approved waivers or supervisory actions during the move to a principles-based framework. The Board determined it has served its purpose and that removing it will reduce regulatory complexity and improve clarity. In the first final rule, the Board made permanent the regulatory treatment of Paycheck Protection Program (PPP) loans under 12 C.F.R. Parts 702 and 723. That treatment has been in place since April 27, 2020, and was originally adopted during the COVID-19 pandemic to implement the CARES Act. In the second final rule, the Board amended 12 C.F.R. 701.39 by removing paragraph (a)(1), which defined the phrase “except as otherwise provided by law or except as otherwise provided by federal law” in the statutory lien context. The Board found the definition unnecessary because credit unions are already responsible for identifying and complying with applicable laws, and the change does not affect a credit union’s statutory lien authority or existing legal obligations. NCUA classified all three items as obsolete regulations. Comments may be submitted through the Federal eRulemaking Portal using the docket numbers, and detailed summaries of each item are available on the NCUA’s Deregulation Project page. For more information, click here.
On November 2, the Federal Trade Commission (FTC) and the State of Washington announced a proposed settlement with payment processor Riverside Payments Inc., its affiliate Cascade Equipment Leasing LLC, and their owners and executives, Brandon Skinner and Jason Reese, resolving allegations that the defendants deceived small businesses about the costs and cancellation terms of payment-processing services. According to the complaint, Riverside falsely promised savings, at times claiming businesses could save 40% to 60%, when customers typically ended up paying more than they had with their prior providers. The complaint alleges that Riverside’s quote sheets omitted fees such as activation, batch, data security noncompliance, and inactivity fees. It further alleges that key terms were buried in a 26-page electronic contract, including automatic renewal after an initial three-year term, a $695 early termination fee, and an auto-renewing equipment lease from Cascade that ran one year longer than the processing contract. The FTC and Washington also allege that Riverside advertised a “risk-free” cancellation guarantee, including a promise to switch unsatisfied customers back to their prior processor and pay them $500, while making cancellation nearly impossible, with callbacks that often never came. Additionally, the complaint alleges that Riverside made false and unsubstantiated earnings claims to recruit commissioned sales agents, advertising $75,000 to $95,000 per year when agents averaged just $3,787. The FTC alleges the conduct violated the FTC Act and the Gramm-Leach-Bliley Act, which prohibits obtaining consumers’ financial information through false or fraudulent statements. The proposed order imposes a $32,083,921 judgment that will be suspended upon payment of $600,000 due to inability to pay, with the full amount due if the defendants are found to have misrepresented their finances. It also requires defendants to notify customers of a 60-day period during which the early termination fee and any rescission penalty will be waived. The order prohibits misrepresentations about costs, savings, cancellation conditions, earnings, and negative option features, and requires clear and conspicuous disclosure of material terms, express informed consent to negative option billing, and a simple cancellation method. For more information, click here.
On October 30, the Federal Deposit Insurance Corporation (FDIC) Board of Directors approved a notice of proposed rulemaking that would rescind the FDIC’s part 370 recordkeeping rule, which applies to insured depository institutions (IDIs) with 2 million or more deposit accounts. Under the proposal, the Large-Bank Deposit Insurance Determination Modernization rule at 12 C.F.R. 360.9 (§ 360.9) would be amended to generally apply to the IDIs currently subject to part 370. Both rules are intended to facilitate the FDIC’s ability to conduct a deposit insurance determination if a bank with a large number of deposit accounts fails. The proposed amendments would relieve affected IDIs of the requirement to build and maintain deposit insurance calculation systems. They would also better align recordkeeping and reporting burdens and benefits for these firms without materially impeding the FDIC’s ability to calculate deposit insurance. The proposal would not impose new requirements or additional burdens on IDIs already covered by § 360.9. Comments are due by January 4, 2027. For more information, click here.
On October 30, the Financial Crimes Enforcement Network (FinCEN) issued an alert and a notice as part of Treasury’s participation in the White House Task Force to Eliminate Fraud. Treasury Secretary Scott Bessent announced the actions in St. Cloud, MN, alongside other senior U.S. officials, as part of several initiatives to combat fraud that has wasted billions of dollars in the state. Bessent said Treasury has stopped nearly $190 million in funds tied to overseas fraud and returned more than $100 million to U.S. victims. The alert asks financial institutions to watch for suspicious activity involving certain cross-border payments that involve U.S. money services businesses (MSBs). Between 2021 and 2025, U.S. financial institutions reported more than $8 billion in potentially suspicious wire payments sent through U.S.-based MSBs at the direction of foreign agents. FinCEN warns that bad actors may exploit MSBs’ cross-border relationships to move funds through the U.S. financial system while obscuring the ultimate beneficiaries and purposes of the transactions, which can help conceal illicit activity such as funding for terrorist organizations. The notice is intended to help financial institutions detect and report suspicious activity involving the exploitation of charities and nonprofit organizations, which fraudsters may use to facilitate terrorist financing, fraud, and other illicit activity. It describes three types of schemes: sham charities that falsely advertise a legitimate purpose but use funds for illicit activity, including terrorism; fraud schemes that falsely advertise a legitimate purpose but use funds to support the perpetrators’ lifestyles; and embezzlement by insiders who abuse a position of trust at a legitimate organization. For more information, click here.
On October 29, the OCC submitted a letter to the California Air Resources Board (CARB) raising serious legal and policy concerns about two California climate disclosure laws and urging CARB to clarify that national banks and federal savings associations are not required to comply with them. The letter explains that the laws would be inconsistent with OCC regulation and safety and soundness, impose undue burden (particularly on smaller banks), and harm California customers and disrupt customer relationships. It also states that the laws raise constitutional concerns, including under the Supremacy Clause, and that applying them to banks may run afoul of the legal framework for preemption and visitation, which are critical components of the dual banking system. According to the OCC, applying the laws to federally chartered banks is likely to decrease competition, drive up prices, and reduce Californians’ access to financial services. The OCC said the letter reflects its commitment to ensuring that banks can engage in the business of banking without improper interference from state laws, and that it will continue to monitor state law developments nationwide and act where appropriate. For more information, click here.
State Activities:
On November 4, the New York State Department of Financial Services (DFS) issued an industry letter to entities regulated under the New York Banking Law that updates its April 4, 2017, guidance on the Exempt Income Protection Act (EIPA) and annual minimum wage increases. The EIPA and Article 52 of the New York Civil Practice Law and Rules use a formula based on the greater of the federal or New York State minimum wage to determine the amount in a judgment debtor’s bank account that is exempt from a restraining notice or levy. The letter explains that, under Labor Law § 652 as amended, minimum wage rates for 2027 and after will be set annually by the commissioner of labor under a formula in Labor Law § 652(1-b). The new rates take effect on January 1, and the commissioner must publish them by October 1. The letter also notes that since 2024, New York City has had a single minimum wage for all employers regardless of size. This replaces the small and large employer distinction that existed when the 2017 guidance was issued. DFS directs institutions to make sure their processes for handling restraining notices and levies reflect current minimum wage rates and use the correct rates. It also provides a revised method for calculating exempt amounts that does not refer to employer size and replaces the corresponding method in the 2017 guidance. If, after reasonable due diligence, an institution obtains the account holder’s most current employment address, it should calculate exempt wages based on that information. If it cannot obtain that information, it may use the highest minimum wage in effect in the state at the time of the calculation. For more information, click here.
On October 23, the Washington Department of Financial Institutions (DFI) filed a CR-102 notice of proposed rulemaking to amend its Consumer Loan Act rules in chapter 208-620 WAC to implement the Predatory Loan Prevention Act (SSB 6025). The centerpiece is a new section setting out DFI’s interpretation of § 2 of SSB 6025. Under it, a person that claims to act as an agent, service provider, or in another capacity for an exempt entity is treated as a lender that must hold a consumer loan company license if the loan exceeds the permitted interest rate and either (1) the person holds, acquires, or maintains the “predominant economic interest” in the loan, or (2) the “totality of the circumstances” shows the person is the true lender and the transaction is structured to evade the act. A person has the predominant economic interest if it puts its own money at risk, bears the loan’s benefits and risks, or advertises, arranges, or facilitates the loan while holding a right, or right of first refusal, to buy it or obtaining more than a 50% economic interest. The totality-of-the-circumstances factors include designing, controlling, or operating the loan program; acting as a lender in another jurisdiction while claiming to be an agent or service provider; indemnifying or insuring the exempt entity against loan-related risks; holding itself out as the lender or failing to clearly disclose the exempt entity as the lender; and funding the exempt entity’s loans. The proposal also provides that making, offering, assisting, or arranging a loan above the permitted rate is “engaging in device, subterfuge, or pretense to evade the requirements of the act.” It further restructures the licensing provision to require a license “from any location” to lend to, service student loans for, or advertise to Washington residents or persons physically located in Washington, and to service or modify residential mortgage loans on Washington real estate. It also removes the refund provision for unlicensed activity and repeals the related fee-refund section. DFI will hold a public hearing on December 15, written comments are due the same day, and DFI intends to adopt the rule on December 16, 2026. For more information, click here.
On October 21, the New York State DFS, through Acting Superintendent Kaitlin Asrow, proposed a consolidated amendment to two provisions of Title 3 of the New York Codes, Rules and Regulations: Supervisory Policy G 7.1 on the legalization of foreign documents and Supervisory Procedure G 105.2 on applications to change the location or designation of a principal office. The amendments would take effect upon publication of the Notice of Adoption in the State Register. The changes to G 7.1 expand the examples of foreign-executed documents that must be submitted to DFS to include applications by a foreign banking corporation to open a representative office, in addition to a branch or agency, as well as appointments of a New York branch manager. They also update the cross-references to Supervisory Procedures FB 101.3(p) and FB 102.3(o). The policy continues to explain that documents bearing an apostille validly issued under the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents need no further legalization. The proposal adds language clarifying that an e-apostille, meaning an apostille issued in electronic form and signed with a digital certificate, is treated the same way. It also makes technical wording updates, such as referring to the “Hague Convention” and “department.” The changes to G 105.2 revise the application requirements for a change of location or designation of principal office. The application must still be accompanied by a certified copy of a resolution of the applicant’s board of directors, trustees, or other governing board, or a certified statement that such a resolution has been passed. The proposal removes the parenthetical allowing certain banking organizations eligible for the expedited branch application process to submit a statement in lieu of a copy. It adds alternatives to the resolution, including (a) a certified governing document that grants named officers, directors, or trustees authority to authorize the application, together with the appropriate authorization, (b) a resolution of an authorized board committee together with a secretary’s certificate attesting to the resolution and the committee’s authority, or (c) a certified governing board or committee resolution delegating authority to specified individuals, together with the appropriate authorization. For more information, click here.