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 May 9, Bloomberg reported that several banking trade associations are advocating for last-minute changes to a compromise on stablecoin yield in H.R. 3633, seeking to revise the deal brokered by Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) by advancing language proposed by the American Bankers Association and the Consumer Bankers Association that would completely bar stablecoin issuers from offering rewards, a move that underscores continuing tension between banks and the crypto industry, which had hoped to pass the legislation last summer with President Donald Trump’s support but was slowed by banking industry opposition. The Senate Banking Committee’s decision to move forward now signals renewed momentum, with the Senate Committee on Banking, Housing, and Urban Affairs scheduled to hold a markup on the Digital Asset Market Clarity Act of 2025 on May 14, 2026, at 10:30 a.m. For more information, click here and here.
On May 8, the Federal Reserve Board released its May 2026 Financial Stability Report, concluding that overall vulnerabilities in the U.S. financial system remain moderate but with notable pockets of risk, particularly in asset valuations and certain leveraged sectors. Equity and housing valuations are elevated relative to historical norms, while commercial real estate prices have stabilized after prior declines. Business and household debt as a share of GDP has fallen to levels not seen since the early 2000s, and most households and investment‑grade firms retain solid debt‑servicing capacity, though stresses are evident among some non‑investment‑grade and private credit borrowers and in higher delinquency rates for credit cards, auto loans, and Fair Housing Act (FHA)/Veterans Affairs mortgages. The report highlights that the banking system remains sound and well capitalized, even as fair‑value losses on fixed‑rate assets, though improved, remain sizable, and leverage at some nonbank financial institutions — especially large hedge funds and major life insurers — stays elevated. Funding risks are assessed as moderate: banks’ reliance on uninsured deposits is below 2022–23 peaks, government money market funds continue to grow and are viewed as relatively resilient, and certain nontraded business development companies have faced increased redemptions. In its survey of salient risks, market participants most frequently cited geopolitical shocks, a sharp rise in oil prices, risks associated with artificial intelligence and private credit, and the possibility of persistent inflation as key threats that could interact with these vulnerabilities. For more information, click here.
On May 8, Federal Reserve Governor Lisa D. Cook, speaking at the Central Bank of West African States’ Conference on Digital Assets in Dakar, outlined a balanced view of tokenization’s potential benefits and risks for the global financial system, with particular emphasis on emerging markets. She defined tokenization as the use of distributed ledger technology (DLT) to record digital representations of assets — often via smart contracts — and highlighted opportunities to improve collateral and liquidity management, streamline settlement and recordkeeping, enable intraday repo and money market fund transactions, support multiasset and multicurrency trades, foster competition, and expand fractional market access, including for smaller investors in developing economies. At the same time, she stressed that tokenization does not replace traditional market infrastructure and that it raises familiar but sometimes reshaped financial stability concerns, including liquidity transformation and run risk in tokenized products, potential amplification of shocks through new linkages between tokenized and traditional markets, 24/7 trading dynamics, and operational and cyber vulnerabilities in automated smart‑contract environments. Cook emphasized that the Federal Reserve aims to support responsible innovation while closely monitoring these evolving vulnerabilities, and she noted ongoing Fed research and international coordination with bodies such as the Bank for International Settlements and the Financial Stability Board to better understand tokenization and its implications. For more information, click here.
On May 8, an analysis was published on the Federal Reserve Bank of New York’s Liberty Street Economics blog showing that recent stress events in the nonbank financial institution (NBFI) sector have been associated with measurable “stress and strain” for U.S. banks with higher exposures to NBFIs. Using regulatory data, they note that NBFIs now account for more than half of global financial assets and that, in the U.S., bank lending to NBFIs appears to have driven all bank lending growth in 2025, with roughly fifty bank holding companies reporting total credit exposures to NBFIs in excess of 100% of Tier 1 capital. Examining three specific NBFI-related events — two September 2025 bankruptcies and the February 2026 announcement that a large business development company would wind down and end redemptions — they find that banks with higher NBFI exposure experienced persistently weaker stock performance than less-exposed banks, even after controlling for overall market movements and bank size and capital. Cross-sectional regressions of banks’ cumulative abnormal returns around each event show statistically and economically significant negative relationships with NBFI exposure, suggesting that higher NBFI lending and commitments amplify the impact of NBFI shocks on bank equity valuations. The authors conclude that while the exact transmission channels require further study, spillovers from NBFI distress to banks now appear to be an empirical regularity that should matter for investors and regulators. For more information, click here.
On May 8, U.S. Securities and Exchange Commission (SEC) Chairman Paul S. Atkins, speaking at the Special Competitive Studies Project AI+ Expo in Washington, framed artificial intelligence (AI) and on-chain financial markets as the latest in a long line of market‑transforming technologies and argued that the SEC’s role is to safeguard core principles like investor protection, fair and efficient markets, and capital formation rather than to pick technological winners or lock in today’s tools. After tracing how prior innovations like electronic trading systems were accommodated through flexible frameworks such as Regulation ATS, he endorsed a similar, incremental approach to AI and “agentic finance,” under which firms remain responsible for the outcomes of the models they deploy and for clear disclosure to investors, while the SEC focuses on outcomes rather than mandating specific models. Turning to blockchain‑based market structures, Atkins outlined several areas where he believes the SEC should provide greater clarity through notice‑and‑comment rulemaking and targeted exemptive relief, including how the “exchange,” “broker,” “dealer,” and “clearing agency” definitions apply to on-chain protocols, and how to treat “crypto vaults” that passively deploy assets for yield. He emphasized the hybrid nature of current on-chain market structures, called for close coordination with other regulators to avoid fragmented oversight, and reiterated his support for congressional action on the CLARITY Act to establish a longer‑term statutory framework for digital assets. For more information, click here.
On May 8, senior SEC leaders used a series of speeches at the 13th Annual Conference on Financial Market Regulation to emphasize a common set of themes around innovation, markets, and the role of economic analysis in regulation and enforcement. Chairman Paul Atkins stressed that both rulemaking and enforcement should be grounded in rigorous economic analysis, with SEC economists playing a central role in assessing costs, benefits, and penalties, so that the Commission’s actions remain precise, proportional, and supportive of deep, trustworthy capital markets. Commissioner Hester Peirce used the explosive growth of prediction markets, options (including zero‑days‑to‑expiration), active ETFs, and retail trading to urge regulators to deepen their understanding of modern market dynamics, exercise regulatory restraint absent clear statutory authority, and focus on innovations that help capital markets serve investors and issuers rather than trying to screen products for merit. Commissioner Mark Uyeda highlighted how academic research informs securities policy, including debates over “broken windows”-style enforcement and the rise of active ETFs, and cautioned that broad, discretionary enforcement can undermine predictability and chill beneficial market activity. For more information, click here, here and here.
On May 8, European Central Bank President Christine Lagarde used a speech at the Banco de España LatAm Economic Forum to argue that policymakers should separate the monetary and technological functions of stablecoins when assessing their role in the future of money, and that the case for promoting euro‑denominated stablecoins is weaker than it may appear once those functions are disentangled. She noted that dollar‑denominated stablecoins have grown rapidly, are highly concentrated among a few issuers, and are increasingly used to extend the reach of reserve currencies and to serve as the “cash leg” for tokenized, on‑chain settlement, but warned that large‑scale euro stablecoins could create significant trade‑offs, including financial stability risks from runs and feedback loops into underlying asset markets and weaker monetary policy transmission if deposits shift into nonbank instruments. Lagarde argued that Europe should strengthen the international role of the euro through deeper, more integrated capital markets and a larger safe‑asset base rather than relying on stablecoins, and should focus on building tokenized financial infrastructure anchored in central bank money — through initiatives such as the Eurosystem’s Pontes project and the Appia roadmap — so that private forms of tokenized money (including stablecoins and tokenized deposits) can operate safely and interoperably without entrenching “digital dollarization” or undermining the singleness of money. For more information, click here.
On May 7, Congresswoman Ashley Hinson (R‑IA) introduced a proposed change to the U.S. House of Representatives’ rules that would prohibit Members of Congress, congressional staff, and House officers from entering into agreements tied to the outcome of specific events, effectively banning their participation in prediction markets. The measure is designed to parallel a similar restriction already adopted in the Senate under the leadership of Senator Bernie Moreno (R‑OH) and is framed as part of Hinson’s broader effort to enhance accountability and prevent federal lawmakers from profiting based on nonpublic or insider information related to policy decisions. Hinson urged House Republican leadership to bring the rules change to the floor quickly and expressed the view that the proposal should receive unanimous support. For more information, click here.
On May 7, Bloomberg Law reported that Binance, which has been operating under an independent monitorship since its 2023 guilty plea and $4 billion settlement over U.S. sanctions and anti-money-laundering violations, received an April 19 letter from the U.S. Department of the Treasury requesting interviews with employees and records as part of an investigation into potential sanctions violations, including media allegations that Iran routed some funds through the exchange. According to Bloomberg Law’s account, Binance responded on April 28 and pledged full cooperation, stating that it is working constructively with the monitor and relevant agencies to strengthen its compliance and anti-money-laundering controls. The Treasury Department declined to comment. The report also notes that Binance’s co‑founder Changpeng Zhao resigned, pled guilty, served four months in jail, and was later pardoned, and that the firm’s chief compliance officer and other senior compliance staff are reported to be departing. For more information, click here.
On May 6, the American Bankers Association (ABA), joined by nearly every state bankers association, sent the U.S. Department of the Treasury (Treasury), a follow‑on request for more time to comment on Treasury’s GENIUS Act “broad‑based principles” proposed rule for determining whether a state stablecoin regime is “substantially similar” to the federal framework (RIN 1505‑AC90). In this latest letter, the trade associations ask the Treasury to extend the comment deadline on its “substantial similarity” Notice of Proposed Rulemaking to 60 days after the Office of the Comptroller of the Currency (OCC) issues its final GENIUS Act rule for OCC‑supervised issuers. The letter emphasizes that Treasury’s definition of the “federal regulatory framework” expressly incorporates OCC interpretations and regulations, that Treasury itself acknowledges it may need to revise its rule once the OCC finalizes its framework, and that state legislatures cannot realistically design durable “substantially similar” regimes while the OCC rule remains in flux. The associations also ask the Treasury to clarify how the GENIUS Act’s one‑year deadline for states to submit an “initial certification” should be applied. They urge the Treasury either to confirm that states will not be penalized for submitting certifications after that point, or to permit a status report in lieu of a full certification at the one‑year mark, arguing that this would encourage “measure twice, cut once” legislative efforts rather than rushed, potentially noncompliant state frameworks. For more information, click here.
On May 6, several Senate Democrats sent letters to three nationwide consumer reporting agencies (CRAs) requesting detailed information about how Buy Now, Pay Later (BNPL) loans are being handled in consumer reporting. The letters, led by Senator Elizabeth Warren (D‑MA), follow a prior set of information requests made in November 2025 to BNPL providers about whether and how they furnish BNPL data to CRAs. The senators note that BNPL usage has grown rapidly in recent years, including for everyday expenses and among consumers who may hold multiple BNPL loans at once. According to the letters, most BNPL providers that responded to the earlier inquiry reported that they do not automatically furnish BNPL data, citing concerns about how such data might be interpreted, how returns and disputes would be handled, and the potential impact on consumers’ credit scores. At the same time, the senators observe that the major CRAs have publicly indicated they can receive BNPL data and are at various stages of incorporating that data into consumer reports, and that all three currently receive BNPL information from at least one provider. Against that backdrop, the letters ask which BNPL companies are furnishing data and what specific data elements are provided; whether and how BNPL information is included in consumer reports and credit scores (including how multiple BNPL loans are reported, how frequently data is updated, and how returns or disputes are treated); how BNPL products are classified given their mix of installment and revolving features; and how the Metro 2 reporting format affects the ability to receive BNPL data. Responses are requested by May 18, 2026. For more information, click here.
On May 6, the Department of Housing and Urban Development (HUD) published a notice in the Federal Register announcing the annual indexing of the basic statutory mortgage limits for FHA multifamily housing programs for calendar year 2026, as required by Section 206A of the National Housing Act. The notice explains that the applicable Home Ownership and Equity Protection Act (HOEPA) adjustment reflects a 2.3% increase in the Consumer Price Index for All Urban Consumers (CPI-U), effective January 1, 2026, and that HUD has correspondingly adjusted the statutory dollar limits for various FHA multifamily programs, including §§ 207, 213, 220, 221(d)(3) and (d)(4), 231, and 234, with updated per-unit limits by program, bedroom count, and elevator/non‑elevator status. The revised limits apply to FHA multifamily mortgage insurance applications submitted or amended on or after January 1, 2026, so long as the loan has not been initially endorsed. For more information, click here.
On May 5, Federal Reserve Vice Chair for Supervision Michelle W. Bowman, speaking at the 2026 Women in Housing and Finance Symposium, warned that rapidly evolving, technology-enabled consumer fraud is inflicting substantial harm on households and undermining trust in the banking and payments system, citing Federal Reserve data showing that one in five U.S. adults experienced financial fraud in 2024 and that non-credit card fraud produced an estimated $63 billion in net losses, with a median loss of $500 per victim. She noted that fraud schemes, ranging from social media and text scams to impostor calls and malware, frequently exploit bank accounts and payment tools, with bank transfers and payments accounting for nearly 40% of reported fraud losses, and emphasized that the incidence of fraud cuts across income, race, ethnicity, and gender, though older adults are more likely to experience and suffer larger losses. Bowman outlined a coordinated response that leverages the Federal Reserve’s supervisory and payments roles, including enhanced guidance and resources for banks, improved fraud detection and classification tools on Fed payment platforms, promotion of a common fraud taxonomy to support better data sharing, and closer coordination with other federal and state regulators and law enforcement. She also previewed a forthcoming public‑private roundtable with Treasury Secretary Scott Bessent and Federal Communications Commission Chair Brendan Carr to identify effective prevention, data‑sharing, and victim‑recovery practices, stressing that combating sophisticated, organized fraudsters will require equally robust, cross-sector efforts. For more information, click here.
On May 5, the Consumer Financial Protection Bureau (CFPB) submitted its Fiscal Year 2025 Equal Employment Opportunity (EEO) Program Status Report under EEOC Management Directive 715 (MD‑715), while simultaneously informing the EEOC that it regards portions of MD‑715 as inconsistent with recent executive orders issued by Trump on diversity, equity, and inclusion, gender identity, and merit-based employment (Executive Orders 14151, 14168, and 14281). In a cover letter to the EEOC, Acting Director Russell Vought explained that MD‑715’s requests for information about “gender identity” as a protected basis, references to “diversity and inclusion principles” in agency strategic plans, and certain barrier-analysis requirements grounded in disparate impact theories conflict with those executive orders, and urged the EEOC to revise MD‑715 accordingly. The CFPB states that it has conducted the required annual self‑assessment of its EEO program, continues to “uphold a model EEO program” as outlined in MD‑715, and has certified plans to address any identified deficiencies, but it is responding to MD‑715 only to the extent consistent with the cited executive orders and is declining to answer questions it views as inconsistent with them. For more information, click here.
On May 5, Craig Trainor, assistant secretary for the Office of Fair Housing and Equal Opportunity (FHEO) at the U.S. Department of Housing and Urban Development (HUD), used the American Bankers Association’s Risk and Compliance Conference to send a clear message about how the Trump administration plans to enforce the FHA going forward, including with respect to how it will treat special purpose credit programs (SPCPs). Trainer signaled that HUD will focus on intentional discrimination claims, and a corresponding retreat from large‑scale disparate impact cases built primarily on statistical disparities. At the same time, Trainor underscored that the FHEO is closely scrutinizing SPCPs. He specifically referenced a program offered by the Washington State Housing Finance Commission that was “created to address disparities resulting from past discrimination against racial groups.” As summarized below, earlier this year the FHEO launched an investigation into that program. Trainor warned that SPCPs “that do not comply with the statutory text of the [FHA] continue to be subject to enforcement,” and he cautioned that lenders “found engaging in illegal discrimination will be held accountable.” Trainor also encouraged institutions that may have offered programs with race‑based eligibility criteria to take “immediate remedial actions” and indicated that “meaningful” remedial efforts will be viewed favorably in deciding whether and how to pursue enforcement. For more information, click here.
On May 5, the European Central Bank (ECB) published an article on “The role of the Eurosystem in the scaling-up of a tokenized financial ecosystem,” describing how the Eurosystem is supporting the safe, integrated development of DLT-based markets while safeguarding monetary policy transmission, financial stability, and payment system functioning. The piece notes that tokenization of euro-denominated debt instruments, money market fund units, and collateral (such as repos) remains modest — around €2 billion outstanding at end‑2025 — but is growing, and that in 2024 the Eurosystem conducted an extensive exploratory initiative in which real and mock DLT-based transactions (about €1.6 billion in central bank money across 58 use cases and nine jurisdictions) were settled in central bank money using three different interoperability solutions. Based on those results, the ECB’s Governing Council launched a two‑track work program: “Pontes,” a short‑term bridge that will, from the third quarter of 2026, connect DLT platforms to existing TARGET services so tokenized instruments can settle in central bank money; and “Appia,” a longer‑term roadmap to design a fully interoperable DLT‑based wholesale market architecture by 2028. In parallel, from March 30, 2026, the Eurosystem will accept marketable assets issued via DLT-based services (and settled in TARGET2‑Securities) as eligible collateral in its credit operations and is exploring under what conditions other DLT‑issued assets not yet represented in traditional settlement systems could also become eligible, signaling to market participants a clear path for integrating tokenized assets into the euro area’s collateral framework and market infrastructures. For more information, click here.
On May 4, HUD announced that the FHA has updated environmental review requirements for multifamily projects in its Multifamily Accelerated Processing (MAP) Guide, with the goal of reducing costs and delays for lenders and developers seeking FHA‑insured financing while maintaining appropriate underwriting and regulatory compliance. The changes, issued via Mortgagee Letter and effective immediately for applications that have not reached initial endorsement, remove standalone railroad vibration assessment requirements, restore prior policy for pressurized pipelines, update standards related to high‑voltage power lines and fall hazards, and clarify what constitutes noise‑sensitive outdoor uses. HUD characterized the revisions as a streamlining effort to eliminate outdated or burdensome provisions and to support increased housing production and improved affordability. For more information, click here.
On May 1, the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, and OCC jointly published updated host state loan-to-deposit ratios, as required by § 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act, to assess whether banks are using interstate branches primarily to gather deposits rather than to help meet local credit needs. The ratios, calculated using June 30, 2025 Call Report and Summary of Deposits data, compare total loans to total deposits for banks headquartered in each state or territory. In applying § 109, a bank’s statewide loan-to-deposit ratio in a host state is first compared to that state’s published ratio. If it is at least one-half, the bank is deemed compliant, while a second-step qualitative review is triggered if it falls below that threshold or data are unavailable. The agencies emphasized that the updated ratios, which replace those issued in May 2025, will be used in their annual evaluations and will continue to be published each year, consistent with the statutory mandate and prior joint rulemaking. For more information, click here.
On April 30, Trump issued an executive order establishing TrumpIRA.gov, a Treasury‑administered informational platform intended to expand retirement‑savings access for workers who lack employer-sponsored plans — such as small business employees, part‑time workers, independent contractors, and the self‑employed — by highlighting “high‑quality, low‑cost” individual retirement accounts (IRAs) offered by private financial institutions that meet specified standards. The order directs Treasury to launch the site by January 1, 2027, list IRAs that accept the Federal Saver’s Match under SECURE 2.0 (up to $1,000 per eligible saver), and identify products that provide diversified, index-based or principal‑protecting options, cap net expense ratios at 0.15%, and avoid minimum contribution or balance requirements. Treasury and the Internal Revenue Service are instructed to ensure that qualifying IRA contributors receive the Federal Saver’s Match, encourage institutions to accept those contributions, and issue guidance on the tax treatment of IRA contributions made by tax‑exempt organizations. Treasury and the Department of Labor must also issue regulations or guidance to protect workers, maintain transparency, and prevent prohibited transactions, and Treasury is directed to develop legislative recommendations to codify a permanent, low‑fee, portable retirement option for workers outside traditional employer plans. For more information, click here.
State Activities:
On May 8, the U.S. Court of Appeals for the Seventh Circuit issued an order in Illinois Bankers Association v. Raoul vacating the district court’s judgment and remanding the case for further proceedings in light of an Interim Final Rule and a preemption order issued by the Office of the Comptroller of the Currency on April 29, 2026, addressing the Illinois Interchange Fee Prohibition Act at the center of the litigation. In supplemental briefing, the plaintiffs and the Comptroller argued that the new rule and order require judgment in the plaintiffs’ favor, while the Illinois Attorney General contended they are procedurally and substantively invalid and do not alter the proper merits outcome. The Seventh Circuit concluded that the district court should address those questions, and any related issues, before the appellate court does so. The panel directed that any future appeals will return to the same panel with supplemental briefing confined to issues newly resolved by the district court and cancelled the oral argument that had been scheduled for May 13, to be reset only if further appeals are filed. For more information, click here.
On May 5, the U.S. Court of Appeals for the Second Circuit issued its long‑awaited decision on remand in Cantero, again holding that New York’s 2% interest‑on‑escrow statute (General Obligations Law § 5‑601) is preempted as applied to national banks. This follows the U.S. Supreme Court’s unanimous 2024 opinion, which vacated the Second Circuit’s earlier decision and instructed the court to apply the Barnett Bank “prevents or significantly interferes” standard through a “nuanced comparative analysis” of prior preemption precedents. In a brief opinion, the court concluded that New York’s escrow‑interest requirement is preempted even under the Supreme Court’s refined Barnett Bank framework because the “nature and degree” of interference caused by General Obligations Law § 5‑601 is “more akin” to the preempted laws. The Second Circuit’s remand decision appears to create a circuit conflict over state interest‑on‑escrow laws. The First and Ninth Circuits have both held that similar state escrow‑interest requirements are not preempted. For more information, click here.