US Federal Banking Law

On Tuesday, May 19th, President Trump issued two Executive Orders regarding financial services. The first, Integrating Financial Technology Innovation into Regulatory Frameworks, addresses the role of fintechs in the financial system, including supporting bank-fintech partnerships, charters, and access to Federal Reserve payment systems. The second, Restoring Integrity to America’s Financial System, covers banking products and services provided to immigrants and related BSA/AML and ability-to-repay requirements. Neither will result in immediate changes. Rather, the EOs direct the federal...

It seems the OCC does not believe the GENIUS Act creates a new charter type, contrary to speculation late last year. They would, however, be pleased to offer applicants charters they already have. In the preamble to its proposed GENIUS Act rule, the OCC adopts a narrower reading than it could have of the savings clause that follows the Act's list of activities permitted to a stablecoin issuer. The savings clause says that nothing in the activities provision "shall limit a permitted payment stablecoin issuer from engaging in payment stablecoin activities or digital asset service provider...

The drama around yesterday's Fed decision to grant Morgan Stanley a 23A exemption makes the exemption a tempting target for criticism. But a minor factual error in Governor Bowman's statement defending the decision reveals critical context that puts the decision in perspective. In case you missed it, the Fed Board voted 4-3 to approve an exemption letting Morgan Stanley move a significant trading operation from its European non-bank subsidiary to its US FDIC-insured bank. Such a transaction would usually be prohibited by the restrictions on bank transactions with their affiliates in the...

Set to be published in the Dec. 23rd Federal Register, the CFPB is issuing an advisory opinion (Advisory Opinion) to resolve “regulatory uncertainty” regarding the application of TILA/Reg Z to earned wage access (EWA) products. The Advisory Opinion explains why “Covered EWA” is not credit under Regulation Z. It also explains why, to the extent any EWA product is credit under Regulation Z, expedited delivery fees and tips are not, in the normal course, finance charges under Regulation Z. The CFPB also is withdrawing the 2024 proposed interpretive rule on EWA. The Advisory Opinion is effective...

In a pending case brought by the union representing CFPB employees, the Administration has informed the court that CFPB will run out of funding early next year and that the Administration will not seek additional funding for the agency. This memorandum examines the implications for the CFPB’s key functions – rulewriting, supervision, enforcement, and publication of market data – should the agency cease operations in early 2026. The Dodd-Frank Act provides the CFPB with exclusive authority to prescribe rules implementing federal consumer financial laws. These laws include ECOA, EFTA, FDCPA,...

Before you get too excited about the "skinny" master account (aka payment account) proposed by Fed Governor Waller, it's important to read his words carefully. Waller repeatedly stressed that the account would be available to "legally eligible" entities. Under current law, this means depository institutions. Waller's proposal is not a recipe for payment service provider (PSP) access as adopted by the UK, EU, Canada, and others. It is a Fed compromise offer for the many "Tier 3" depository institutions that are currently eligible for master accounts that the Fed does not want to give them. To...

Controversy is clustering around the GENIUS Act provision granting state depository institutions national money transmission and custody powers when acting through a stablecoin issuer subsidiary. Bank trades and state regulators are pushing to repeal the provision, saying it gives preemption power to uninsured banks like Wyoming's SPDI. But how do they know the provision applies to uninsured banks? And why didn't more people notice that sooner rather than later? The answer lies in the convoluted way the Act defines "state chartered depository institution." The definition's cross-references...

How long will a GENIUS Act application really take? If you just look at the law's timelines and make some reasonable assumptions, you can be forgiven for estimating "somewhere between 120-180 days." If you've been in the bank reg world for a while, you know the real answer is "you will never know ahead of time." Why? Meet "substantially complete." The GENIUS Act requires primary federal regulators to "render a decision on the application" within 120 days of receiving a "substantially complete application," or the application is deemed approved. This four-month timeline may appear short...

Combining ILC and GENIUS Act applications is an intriguing possibility for a fintech looking to break out of the sponsor-bank paradigm. In this scenario, the company applies for a new ILC charter whose business plan includes a subsidiary issuer. The federal approver and regulator for both applications would be the FDIC. The approach has pluses and minuses. On one hand, the ILC and its subsidiary would enjoy: ✅ Nationwide deposit-taking and lending powers with the ability to export home state interest rates; ✅ Full credit and debit card issuance and acquiring capabilities; ✅ Eligibility for...

The GENIUS Act purports to create three major types of stablecoin issuer. But by my count, there are at least 14 different forms that a permitted payment stablecoin issuer can take. The 14 forms differ from each other across 12 key dimensions. Some of these dimensions arise from the GENIUS Act itself. Others come from laws triggered by other characteristics of the issuer or its owner. Of these 14 forms, only ten "basic forms" are available as initial pathways to stablecoin issuance. The remaining four "evolved forms" are created when a smaller state qualified issuer crosses the $10b issuance...

Of the myriad structural choices facing a prospective GENIUS Act stablecoin issuer, the most significant is between depository and non-depository options. I see three key differences between these categories (though some play out differently for new issuers vs. existing ones.) 1️⃣ Capabilities The stablecoin issuance powers of the two categories are similar. But depository institution options provide additional capabilities such as: Federal Reserve master account eligibility, Cleaner preemption of multi-state money transmission and custody licensing, and The prospect of engaging in a wider...

No one knows exactly when the federal application window for GENIUS Act stablecoin issuers will officially open. But it's hard to see it happening much earlier than the statutory deadline in mid-July 2026. The Act mandates that the four primary federal payment stablecoin regulators issue regulations to carry out the licensing provisions and start accepting applications "before" July 18, 2026. It doesn't say how long before the deadline applications must be accepted, but the timeline is likely to be tight. One reason is the interagency process. Under the Act, federal regulators must...

Under the GENIUS Act, is a Puerto Rico-based stablecoin issuer a U.S. issuer or a foreign issuer? It seems like it could be either -- or even both. Reading the GENIUS Act as a banking lawyer, one thing leaps out: this is a banking law. The Act borrows heavily from existing banking statutes. In the process, it imports many features that make bank reg fun for me, but bewildering to outsiders. Among the many examples is the treatment of Puerto Rico-based issuers. In this respect, the GENIUS Act mirrors a peculiarity of U.S. law as it applies to banks: ➡️ Under the Federal Deposit Insurance Act...

A common misconception is that the GENIUS Act allows only sub-$10b issuers to be state-qualified and imposes federal regulation on all larger issuers. Neither is true. For a state issuer that reaches the threshold, the default path is transition to hybrid supervision, under the federal framework, by both a state and a federal regulator. The state issuer doesn't have to convert to a federal charter unless it wants to. The hybrid framework has some odd quirks: Nonbank issuers transition to supervision administered by the state and OCC "acting in coordination." Meanwhile, (uninsured) depository...

As fintechs work on GENIUS Act stablecoin strategies, one thing is becoming clear: The Act offers the equivalent of a national money transmission license for many previously non-crypto use cases. It could come to displace the traditional state money transmission licenses for many fintechs. This realization has partly sunk in with the trade associations and advocacy organizations that wrote Congress last week requesting repeal of the GENIUS Act's Section 16(d), which grants nationwide money transmitter powers to state depository institutions that own permitted payment stablecoin issuers. But...

On Friday, May 30th, the CFPB filed a motion for summary judgment in Forcht Bank v. CFPB asking the court to vacate the entire rule implementing Section 1033 (Rule). The motion argues that the Rule is unlawful under the Administrative Procedure Act (APA) as it exceeds the agency’s statutory authority and is arbitrary and capricious. The CFPB states that the change in position is the result of the agency’s review of existing rules under Executive Order 14219 to ensure they are based on the best reading of the underlying statute and do not impose undue burdens on small businesses and impede...

With the anticipated “streamlining” of the Consumer Financial Protection Bureau’s (CFPB) jurisdiction and authority, it is possible that the Federal Trade Commission (FTC) may assume an enhanced role in overseeing the activities of financial services providers. To appreciate the FTC’s role, the attached chart compares the powers and authorities of the FTC and the CFPB. The key takeaways from the chart are: The Agencies’ Missions Overlap: The CFPB implements and enforces federal consumer financial law for the purpose of ensuring that all consumers have access to markets for consumer financial...

Under current law, the operations of the CFPB are funded by a transfer of “earnings” from the Federal Reserve System to the CFPB. Since the Federal Reserve System is operating at a loss due to rising interest rates and arguably has no earnings, the Administration has been urged to shut down the agency by executive order. (See Chopra is Out. Now Shutter the CFPB, by Hal Scott in the Wall Street Journal, February 3, 2025.) As discussed below, such an order would have some unintended effects on the application of federal consumer financial laws to banks and certain nonbanks. Executive orders...

On December 3rd, the CFPB proposed a rule expanding the coverage of FCRA to data brokers, clarifying the definition of consumer report, limiting the use of credit header data, and expanding the consumer consent requirements to furnish a consumer report. Comments on the Proposed Rule are due March 3, 2025. With an expanded definition of “consumer report” and “consumer reporting agency” (“CRA”), particularly that a person selling any of four types of information about a consumer (credit history, credit score, debt payments, and income or financial tier) for any purpose generally would qualify...

On September 17th, the FDIC issued a notice of proposed rulemaking (NPR or Proposed Rule) that would impose on FDIC-insured depository institutions (IDIs) new recordkeeping requirements for custodial deposit accounts with transactional features. Comments are due 60 days after publication in the Federal Register. In addition to inviting comments on all aspects of the Proposed Rule, the FDIC requests comments on specific questions (see attached). The Proposed Rule is partially in response to the bankruptcy of Synapse, a technology company that worked with several IDIs and fintech companies....

On June 3, 2024, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) published its final rule creating a registry (“Registry”) of nonbank covered persons subject to certain agency and court orders (“Final Rule”). The Final Rule is effective on September 16, 2024, but the implementation dates vary based on type of entity (as discussed below). In short, under the Final Rule, nonbank covered persons subject to certain final public orders obtained or issued by a government agency in connection with the offering or provision of a consumer financial product or service must report the...

On May 16, 2024, the U.S. Supreme Court affirmed the mechanism established by Congress to fund the Consumer Financial Protection Bureau (CFPB). The case was brought by trade associations whose members were adversely impacted by a CFPB rule. The plaintiffs argued that the method by which funds are made available to the CFPB violates the Constitutional Appropriations Clause that provides that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” By a 7 to 2 majority, the Supreme Court disagreed, and upheld the constitutionality of the funding system....

Today, the CFPB issued its final rule on credit card late fees under TILA. This memorandum provides a brief overview of the final rule. New Safe Harbor for Credit Card Late Fees: The new safe harbor for credit card late fees is $8 (as opposed to $30/$41 under the previous rule) and is no longer adjusted for inflation. The rule eliminates for late fees a higher safe harbor dollar amount for subsequent violations of the same type that occur during the same billing cycle or in one of the next six billing cycles. The proposed provisions to restrict late fee amounts to 25% of the required minimum...

We advise banks, fintechs, mortgage companies and others on regulatory compliance across the full spectrum of consumer protection and prudential requirements. Our regulatory practice covers consumer compliance (TILA, RESPA, UDAP/UDAAP, FCRA, HMDA, fair lending), safety and soundness issues, payments rules, and regulatory change management. We help clients understand the impact of new regulations, build compliance programs, and maintain comprehensive regulatory inventories. Services provided by the Regulation & Compliance practice include: Capital Analysis: We assess treatment of assets,...

We assist financial institutions and fintechs with charter strategy, regulatory applications, and transactions, including bank-fintech partnerships and acquisitions. Our practice covers the full range of licensing options including commercial bank charters, ILC charters, trust bank charters, and money transmission licenses. We prepare regulatory applications, conduct due diligence on acquisition targets, advise on control issues under the Bank Holding Company Act, Bank Merger Act, and Change in Bank Control Act, and help structure bank-fintech partnerships to address regulatory expectations....

We provide comprehensive legal counsel to banks ranging from community institutions to the largest national and regional banks, as well as specialized trust, wealth management, and employee benefits institutions. Our services span regulatory compliance and examination support, licensing and charter applications, M&A transactions, and public policy advocacy before Congress and federal banking regulators. Capital Analysis: We assess treatment of assets, instruments, and transactions under bank or GSE capital rules. Consumer Compliance: We assist clients with compliance matters on a variety of...

Capitol FinLaw has deep roots in mortgage finance policy, with experience spanning origination, servicing, insurance, and securitization issues. Clients include mortgage lenders and servicers, mortgage and property insurers, service providers, credit reporting agencies, and industry trade associations. Services we provide to mortgage clients include: Consumer Compliance: We assist clients with compliance matters on a variety of federal banking and consumer financial services laws including TILA, RESPA, HMDA, FCRA, CRA, privacy, fair lending, compliance management, and UDAP/UDAAP. Impact...

Our fintech work spans regulatory, strategic, and policy engagements for a diverse range of payment ecosystem participants and digital lenders. Our lawyers have experience working with both traditional and innovative institutions, including: retail and commercial payments and lending fintechs (including buy-now-pay-later providers), fintech banks and neobanks, prepaid program managers and issuers, money transmitters, finance companies, crypto and digital asset service providers, payment processors, payment system infrastructure operators, and payments and credit units of technology companies....

Jim Sivon specializes in financial services law. He primarily works with financial institutions, fintechs, financial trade associations and consulting firms. Jim provides clients with strategic legal advice on charter options, including commercial bank charters, industrial loan company (ILC) charters, national trust bank charters, narrow state charters, money transmission licenses and options for foreign banks; prepares and shepherds regulatory applications related to corporate transactions and product approvals, including charter applications, Change in Bank Control filings, Bank Holding...

Katie Wechsler heads the firm's consumer and housing finance practice. She represents financial institutions and trade associations before Congress and the federal regulatory agencies, with a particular focus on federal consumer financial laws, mortgage lending and servicing, and the implementation and supervision of consumer financial protection requirements. Katie has developed a detailed understanding of the CFPB's authority, including the implementation of section 1033 (personal financial data rights) and section 1071 (small business data collection). Katie previously served as counsel...

BJ Sanford advises payments and fintech companies, U.S. and foreign banks, trade associations, investors, and policy and consulting firms. His practice centers on payments regulation, public policy, and the regulation of bank activities and structure. He also advises clients on regulatory capital, bank investments and control, affiliate transactions, the U.S. operations of foreign banks, and regulatory examinations. Payments regulation. BJ advises payments firms and banks on payment regulation, product development, and compliance with rules including Regulation E, Regulation Z, Regulation II...

Nancy Worth specializes in matters involving the federal financial regulatory agencies, with a particular focus on federal consumer law and fair lending. She advises on supervision and compliance matters relating to mortgages, credit cards, and other lending products, and on examination guidance, applications, reports of examination, enforcement actions, and consumer complaints. Her practice extends to commenting on agency review of legislation and Consumer Financial Protection Bureau regulations. Nancy previously served as Special Counsel for the Office of the Comptroller of the Currency...

Mitch Plave specializes in financial services regulation and administrative law. Mitch previously served as Special Counsel for the Office of the Comptroller of the Currency (OCC) for over 27 years. At the OCC, he led the administrative law practice and played a key role in implementing significant cases and executive orders relating to rulemaking and the issuance of agency guidance. In connection with his leadership on administrative law and procedure, he represented the OCC at the Administrative Conference of the United States. Mitch was also the lead counsel on matters relating to the...