We are releasing today a very interesting podcast show which is also breaking news. Before I read an article by Professor Charlotte Haendler of Southern Methodist University and Professor Rawley Z. Heimer of Arizona State University titled “The Hidden Costs of Financial Services: Consumer Complaints and Financial Restitution,” I never knew that the CFPB authorized outside third-parties access to non-public data collected about consumer complaints that it received so that those third-parties could conduct studies. Professors Haendler and Heimer used that data to determine the demographics of complainants who received the most restitution versus the demographics of those who received no or little restitution.

The study they conducted is described in the abstract of the article which is available here on SSRN:

Financial disputes are a widespread but understudied feature of consumer financial markets. Using confidential data from the Consumer Financial Protection Bureau (CFPB), we analyze nearly two million consumer complaints filed since 2014, which have led to an average payout of $1,470 per successful complaint. The volume of complaints and total restitution have increased substantially over time, suggesting significant scope for additional compensation. When understanding who secures restitution—and why—we find little evidence that differences across firms systematically drive restitution outcomes. Instead, product complexity and consumer engagement play key roles—consumers with higher income and education (high-SES) are more likely to explicitly request refunds, claim fraud, and submit supporting documentation, making firms more responsive. Leveraging previously unexamined CFPB monitoring reviews, where the agency systematically screens company responses and issues confidential reports highlighting deficiencies, we show that regulatory scrutiny increases restitution but disproportionately benefits high-SES consumers, reinforcing individual-specific mechanisms. Our results highlight the complementary nature of regulatory interventions and suggest that financial sophistication and self-advocacy are critical determinants of consumer redress.

During the webinar, the Professors answered the following questions:

1.  Why did you conduct an in-depth CFPB consumer complaints study in the first place?

2.  Why did you basically use the CFPB complaint data as a proxy for consumer disputes in the entire industry?

3.  In your paper you mostly focus on the likelihood of a complaint resulting in financial restitution (i.e., some sort of monetary relief for the troubles endured). The title of your paper is “The hidden costs of financial services: consumer complaints and financial restitution”. First of all, what do you mean by hidden costs?

4.  Was the confidential data you received from the CFPB essential in better understanding the mechanisms behind the resolution of these consumer disputes?

5.  Did you find differences in complaint outcomes depending on the type of product involved?

6.  Is there a lot of variation across companies in the likelihood to award financial restitution to a complainant?

7.   Is the likelihood of a complainant receiving restitution more about the complexity of the product and potentially how the consumer relates to it than about there being some rogue companies?

8. Do certain consumer characteristics—like income, education, and even racial and ethnic background—correlate with greater likelihood of financial restitution.

9.   How do consumer characteristics end up influencing the likelihood of restitution?

10.  Does oversight from the CFPB change how firms handle disputes and award financial restitution?

11.  What should regulators, firms, and consumers take away from this research?

This is how they answered that question:

(a)  It is critical to recognize that the capabilities to navigate the dispute process aren’t equal across consumers.

(b)  For regulators, we see that scrutiny and nudging alone do not substitute for consumer engagement. Hence the challenge is to design systems that help level the playing field, perhaps by educating the consumer more, or by flagging poorly-articulated but potentially valid complaints for extra review and documentation.

(c)  For companies, this study highlights the negotiating power of the consumer in disputes, and how this negotiating power hinges on self-advocacy and financial sophistication. It could also be a wakeup call to consider how certain demographics might be struggling to understand the financial product offered and how to cater to them to reach a greater customer base and higher levels of consumer satisfaction.

(d)  For consumers, it's a reminder that being specific, using strong language, and submitting documentation really matters in getting your voice heard.

Alan Kaplinsky, founder and former Chair and now Senior Counsel of the Consumer Financial Services Group hosted this podcast show.

The podcast show we are releasing today features Professor Jonathan Gould of University of California (Berkeley) Law School who discusses his recent article co-written with Professor Rory Van Loo of Boston University School of Law which was recently published in the University of Chicago Law Review titled “Legislating for the Future”.

The introduction of the article describes “legislating for the future” as follows:

Public policy must address threats that will manifest in the future. Legislation enacted today affects the severity of tomorrow’s harms arising from biotechnology, climate change, and artificial intelligence. This Essay focuses on Congress’s capacity to confront future threats. It uses a detailed case study of financial crises to show the limits and possibilities of legislation to prevent future catastrophes. By paying insufficient attention to Congress, the existing literature does not recognize the full nature and extent of the institutional challenges in regulating systemic risk. Fully recognizing those challenges reveals important design insights for future-risk legislation.

During the podcast, we discuss the dynamics around enacting legislation through Congress that aims to increase the stability of the financial system and prevent financial crises. We discuss with Professor Gould about why passing this sort of legislation is so difficult and what Congress might be able to do about that.

We consider the following questions:

1.  What are the basic dynamics that make it so hard to pass financial stability legislation?

2.    How does the structure of Congress affect the difficulty of passing financial stability legislation?

3.   We have seen some big bills lately, like Biden’s Inflation Reduction Act and the big taxing and spending bill from Trump this year.  Why is financial regulation harder to enact than these other types of legislation?

4.   Has it gotten easier or harder over time to enact financial regulation?

5.  What happens after financial stability legislation is enacted?

6.   What can Congress do to enhance its capacity in this area?

7.   What types of legislative drafting techniques are likely to be especially promising?

8.   What role is there for federal agencies to play in augmenting congressional capacity?

9.  What role is there for states or private plaintiffs to play in augmenting congressional capacity?

10. What relevance does this all have beyond financial regulation?

11. In light of the fact that the article was published before the 2024 election and change in administration are any of Professor Gould’s conclusions altered by more recent events?

This podcast was hosted by Alan Kaplinsky, the founder and former chair for 25 years and now Senior Counsel of the Consumer Financial Services Group.

The podcast show we are releasing this week focuses generally on the so-called “Unitary Executive Theory” and specifically on the legality of President Trump firing without cause the Democratic Commissioners of the Federal Trade Commission and the members of other independent agencies, despite language in the governing statutes that prohibit the President from firing a member without cause and a 1935 Supreme Court opinion in Humphrey’s Executor holding that the firing of an FTC Commissioner by the President is unlawful if done without cause.

Our guest is Patrick Sobkowski who teaches constitutional law, courts and public policy, and American politics at Marquette University. His scholarship focuses on constitutional and administrative law, specifically the administrative state and its relationship to the other branches of government.

Our show began with an explanation of the “Unitary Executive Theory” which is defined as a constitutional law theory according to which the President has sole authority over the executive branch including independent federal agencies. It is based on the so-called “vesting clause “of the Constitution which vests all executive power in the President. The theory often comes up in disagreements about the president's ability to remove employees within the executive branch (including Federal agencies); transparency and access to information; discretion over the implementation of new laws; and the ability to control agencies' rule-making. There is disagreement about the doctrine's strength and scope. More expansive versions are controversial for both constitutional and practical reasons. Since the Reagan Administration, the Supreme Court has embraced a stronger unitary executive, which has been championed primarily by its conservative justices.

We then discussed a litany of Supreme Court opinions dealing with the question of whether the President has the unfettered right to remove executive agency employees:

a. Myers v. US (1926)

b. Humphrey’s Executor (1935)

c. Morrison v. Olson (1988)

d. Seila Law (2020)

We then discussed Trump’s removals of the Democratic members of the National Labor Relations Board and Merit Systems Protection Board and the Supreme Court’s opinion and order staying the lower court’s order that the removals were unlawful. In addition to casting doubt on the continued viability of Humphrey’s Executor, the Court included dicta to the effect that the logic of its opinion about the NLRB and the MSPB would not apply to the Federal Reserve Board because the Fed is not really an executive agency and that its functions are more akin to the functions performed by the First Bank and Second Bank of the United States.

Alan Kaplinsky, the founder and former practice group leader for 25 years and now Senior Counsel of the Consumer Financial Services Group hosted the podcast.

The podcast recording is here.

The genesis of the podcast show we are releasing today was an article written by Nick Bourke titled “America Can Fix Its Scam Problem. But We Keep Gifting Billions to Transnational Criminals Because It Feels Too Hard” published on April 12, 2025 in Open Banker. We learned from that article about the great work being done by Aspen Institute’s National Task Force on Fraud and Scam Prevention. The purpose of the podcast is to describe the work of this Task Force 

The Aspen Institute states the following about the Task Force:

Every day, criminals steal $430 million from American families, with total fraud proceeds reaching $158 billion annually. They are a critical funding source for transnational criminal organizations, fueling drug cartels, human trafficking, and terrorism.

Fraud losses reported to the FBI increased 15-fold over roughly the last decade, and the rise of new technologies like AI has made scams more sophisticated and easier to perpetuate to harm American families.

The Aspen Institute Financial Security Program launched the National Task Force on Fraud and Scam Prevention in 2024 to develop the first coordinated U.S. national strategy aimed at stopping financial fraud at its root.

The guiding purpose of the Task Force is to bring together all parties with an interest in protecting consumers and restoring trust in our financial system. This is the first time such a broad collection of leaders from across government, law enforcement, private industry, and civil society are coming together to develop a nationwide strategy aimed at helping prevent fraud and scams.

Our guests on this podcast are: Kate Griffin, Director of Programs, Aspen Institute Financial Security Program and Nick Bourke, Senior Policy Adviser, The Aspen Institute.

Our guests covered the following topics:

1.  What is the Aspen Institute's Financial Security Program and how did the Aspen Institute come to launch the National Task Force on Fraud and Scam Prevention?  Who is participating in the Task Force?  Why is such a cross-sector (industry, consumer advocates and government) very important?  What is standing in the way of more robust, secure, cross-sector data-sharing today?

2.  How big is the fraud and scams problem in the United States right now? How has it changed over time? 

3.  What are some of the implications of this problem? How should we be thinking about this beyond the consumer-level financial impacts? Where is all this money going, and what does that mean for our national security?  How do fraud/scams compare to other forms of organized crime? Why is it so difficult for victims to recover their financial losses? Are there any efforts ongoing in Congress to alleviate this?  Despite all the anti-fraud measures, educational resources, and even public media coverage, why do scammers still seem to be gaining ground?  What are some of the biggest gaps or weaknesses in the U.S. system that scammers exploit? Are there promising models from other countries or sectors the U.S. can learn from?  How is AI changing the landscape of scams — both in how they’re perpetrated and how we might stop them?

4. What's the right balance between imposing duties on companies and offering legal safe harbors so they're not afraid to act? 

5.  Some people still feel a stigma around sharing when they have been the victim of a scam. How do we shift the environment away from victim-blaming and toward support?

6.  The Task Force is driving toward developing a "national strategy" for fighting fraud and scams. What are some of the necessary components to make this truly effective?  What do you mean by the need for a "national front door for reporting”?  

7.   Consumer education has to continue playing a role here. What kinds of public awareness campaigns or interventions have proven effective? What kinds of leadership or investment are needed from Congress, the White House, or federal agencies? 

8.  Are there any incentives that could better align corporate interests around fraud and scam prevention? Are there examples of companies that are leading the way on this issue? 

9.  What are the Task Force's next steps? When should we expect to hear more about the national strategy that's coming together?

Alan Kaplinsky, founder of and former Chair for 25 years of the Consumer Financial Services Group, hosted the podcast show.

We are releasing today on our podcast show a repurposed webinar that we produced on June 11, 2025 entitled “What is happening at the federal agencies that is relevant to the residential mortgage and settlement service industries.”

During this podcast, we will inform you about recent developments at federal agencies, including the CFPB, HUD/FHA, OCC, FDIC, FRB and USDA (collectively, the “Agencies”), as well as Congress, the White House, states and the courts. Some of the issues we consider are:

•     Changes in leadership and priorities at the CFPB, as well as efforts to significantly reduce the funding and staffing at the CFPB and related lawsuits.

•     House Republican criticism of various CFPB actions under former Director Chopra.

•     The rescission and revisiting of CFPB final rules, proposed rules and informal guidance, including the Nonbank Enforcement Order Registry final rule, Residential Property Assessed Clean Energy (PACE) Financing final rule, Residential Mortgage Servicing proposed rule, and FCRA “Data Broker” proposed rule.

•     The termination of CFPB enforcement efforts and revisiting of CFPB redlining consent orders.

•     The rescission of Community Reinvestment Act rule amendments.

•     The White House directive for the federal government to eliminate the use of disparate-impact liability.

•     The status of the HUD disparate impact rule under the Fair Housing Act.

•     HUD’s reversal of various FHA policies adopted during the Biden Administration, including guidance regarding appraisal bias and reconsideration of value.

•     Trigger leads bills.

•     White House firings of independent agency board/commission members and efforts to exert control over independent agencies.

•     State efforts to fill the void left by the actions at the CFPB.

John Socknat, co-head of our Consumer Financial Services Group, moderated and participated in the presentation, along with the following other members of the Consumer Financial Services and Mortgage Banking Groups: Richard Andreano, Jr., John Culhane and Matthew Morr.

Our podcast show being released today is Part 2 of our two-part series featuring two former CFPB senior officers who were key employees in the Enforcement Division under prior directors: Eric Halperin and Craig Cowie. Eric Halperin served as the Enforcement Director at the CFPB from 2010 until former Director, Rohit Chopra, was terminated by President Trump. Craig Cowie was an enforcement attorney at the CFPB from July 2012 until April 2015 and then Assistant Litigation Deputy at the CFPB until June 2018.

Part 1 of our two-part series was released last Thursday, June 12. 

The purpose of these podcast shows were primarily to obtain the opinions of Eric and Craig (two of the country’s most knowledgeable and experienced lawyers with respect to CFPB Enforcement) about the legal and practical impact of (i) a Memo to CFPB Staff from Mark Paoletta, Chief Legal Officer, dated April 16, 2025, entitled “2025 Supervision and Enforcement Priorities” (described below) which rescinded prior priority documents and established a whole new set of priorities which in most instances are vastly different than the Enforcement Priority documents which guided former directors,  (ii) the dismissal without prejudice of the majority of enforcement lawsuits that were pending when Acting Director Russell Vought was appointed to run the agency, and (iii) other drastic steps taken by CFPB Acting Director Russell Vought to minimize the functions and staffing at the agency. That included, among other things, an order calling a halt to all work at the agency, including the pausing of ongoing investigations and lawsuits and the creation of plans by Vought to reduce the agency’s staff (“RIF”) from about 1,750 employees to about 250 employees (including a reduction of Enforcement staff to 50 employees from 258).

We described in detail the 2025 Supervision and Enforcement Priorities as follows:

·       Reduced Supervisory Exams: A 50% decrease in the overall number of exams to ease burdens on businesses and consumers.

·       Focus on Depository Institutions: Shifting attention back to banks and credit unions.

·       Emphasis on Actual Fraud: Prioritizing cases with verifiable consumer harm and measurable damages.

·       Redressing Tangible Harm: Concentrating on direct consumer remediation rather than punitive penalties.

·       Protection for Service Members and Veterans:Prioritizing redress for these groups.

·       Respect for Federalism: Minimizing duplicative oversight and coordinating with state regulators when possible.

·       Collaboration with Federal Agencies: Coordinating with other federal regulators and avoiding overlapping supervision.

·       Avoiding Novel Legal Theories: Limiting enforcement to areas clearly within the Bureau's statutory authority.

·       Fair Lending Focus: Pursuing only cases of proven intentional racial discrimination with identifiable victims and not using statistical evidence for fair lending assessments.

Key Areas of Focus:

·       Mortgages (highest priority)

·       FCRA/Regulation V (data furnishing violations)

·       FDCPA/Regulation F (consumer contracts/debts)

·       Fraudulent overcharges and fees

·       Inadequate consumer information protection

Deprioritized Areas:

·       Loans for "justice involved" individuals

·       Medical debt

·       Peer-to-peer lending platforms

·       Student loans

·       Remittances

·       Consumer data

·       Digital payments

We also described the status of a lawsuit brought by the union representing CFPB employees and other parties against Vought seeking to enjoin him from implementing the RIF. The Court has granted a preliminary injunction which so far has largely prevented Vought from following through on the RIF. The matter is now on appeal before the DC Circuit Court of Appeals and a ruling is expected soon.

These podcast shows complement the podcast show we released on June 5 which featured two former senior CFPB employees, Peggy Twohig and Paul Sanford who opined about the impact of the April 16 Paoletta memo and proposed RIF on CFPB Supervision.

Eric and Craig considered, among other issues, the following:

1.  How do the new Paoletta priorities differ from the previous priorities and what do the new priorities tell us about what we can expect from CFPB Enforcement?

2.  What do the new priorities tell us about the CFPB’s new approach toward Enforcement priorities?

3.  What can we learn from the fact that the CFPB has dismissed without prejudice at least 22 out of the 38 enforcement lawsuits that were pending when Vought became the Acting Director?  What types of enforcement lawsuits are still active and what types of lawsuits were dismissed?

4.  What are the circumstances surrounding the nullification of certain consent orders (including the Townstone case) and the implications for other consent orders?

5. Has the CFPB launched any new enforcement lawsuits under Vought?

6. What level and type of enforcement is statutorily required?

7.  Realistically, what will 50 employees be able to do in the enforcement area?

8. What will be the impact of the Supervision cutbacks be on Enforcement since Supervision refers many cases to Enforcement?

9.  Will the CFPB continue to seek civil money penalties for violations of law?

10.  What types of fair lending cases will the CFPB bring in the future?11.  Will Enforcement no longer initiate cases based on the unfairness or abusive prongs of UDAAP?

Alan Kaplinsky, former practice group leader for 25 years and now Senior Counsel of the Consumer Financial Group, hosts the podcast show.

Postscript: After the recording of this podcast, Cara Petersen, who succeeded Eric Halperin as head of CFPB Enforcement, resigned abruptly on June 10 from the CFPB after sending out an e-mail message to all its employees (which was shared with the media) which stated, in relevant part: “I have served under every director and acting director in the bureau’s history and never before have I seen the ability to perform our core mission so under attack,” wrote  Petersen, who had worked at the agency since it became operational in 2011. She continued: “It has been devastating to see the bureau’s enforcement function being dismantled through thoughtless reductions in staff, inexplicable dismissals of cases, and terminations of negotiated settlements that let wrongdoers off the hook.” “It is clear that the bureau’s current leadership has no intention to enforce the law in any meaningful way,” Petersen wrote in her e-mail. “While I wish you all the best, I worry for American consumers.”

During this part of the podcast show, we discussed the fact that the CFPB has entered into agreements with a few companies that had previously entered into consent agreements with former Director Chopra. After the recording of this podcast, the Federal District Court that presided over the Townstone Financial enforcement litigation involving alleged violations of the Equal Credit Opportunity Act refused to approve the rescission or undoing of the consent agreement based on Rule 60(b)(6) of the Federal Rules of Civil Procedure because of the strong public policy of preserving the finality of judgments.

Our podcast shows being released today and next Wednesday, June 18 feature two former CFPB senior officers who were key employees in the Enforcement Division under prior directors: Eric Halperin and Craig Cowie. Eric Halperin served as the Enforcement Director at the CFPB from 2010 until former Director, Rohit Chopra, was terminated by President Trump. Craig Cowie was an enforcement attorney at the CFPB from July 2012 until April 2015 and then Assistant Litigation Deputy at the CFPB until June 2018.

The purpose of these podcast shows were primarily to obtain the opinions of Eric and Craig (two of the country’s most knowledgeable and experienced lawyers with respect to CFPB Enforcement) about the legal and practical impact of (i) a Memo to CFPB Staff from Mark Paoletta, Chief Legal Officer, dated April 16, 2025, entitled “2025 Supervision and Enforcement Priorities” (described below) which rescinded prior priority documents and established a whole new set of priorities which in most instances are vastly different than the Enforcement Priority documents which guided former directors,  (ii) the dismissal without prejudice of the majority of enforcement lawsuits that were pending when Acting Director Russell Vought was appointed to run the agency, and (iii) other drastic steps taken by CFPB Acting Director Russell Vought to minimize the functions and staffing at the agency. That included, among other things, an order calling a halt to all work at the agency, including the pausing of ongoing investigations and lawsuits and the creation of plans by Vought to reduce the agency’s staff (“RIF”) from about 1,750 employees to about 250 employees (including a reduction of Enforcement staff to 50 employees from 258).

We described in detail the 2025 Supervision and Enforcement Priorities as follows:

·       Reduced Supervisory Exams: A 50% decrease in the overall number of exams to ease burdens on businesses and consumers.

·       Focus on Depository Institutions: Shifting attention back to banks and credit unions.

·       Emphasis on Actual Fraud: Prioritizing cases with verifiable consumer harm and measurable damages.

·       Redressing Tangible Harm: Concentrating on direct consumer remediation rather than punitive penalties.

·       Protection for Service Members and Veterans:Prioritizing redress for these groups.

·       Respect for Federalism: Minimizing duplicative oversight and coordinating with state regulators when possible.

·       Collaboration with Federal Agencies: Coordinating with other federal regulators and avoiding overlapping supervision.

·       Avoiding Novel Legal Theories: Limiting enforcement to areas clearly within the Bureau's statutory authority.

·       Fair Lending Focus: Pursuing only cases of proven intentional racial discrimination with identifiable victims and not using statistical evidence for fair lending assessments.

Key Areas of Focus:

·       Mortgages (highest priority)

·       FCRA/Regulation V (data furnishing violations)

·       FDCPA/Regulation F (consumer contracts/debts)

·       Fraudulent overcharges and fees

·       Inadequate consumer information protection

Deprioritized Areas:

·       Loans for "justice involved" individuals

·       Medical debt

·       Peer-to-peer lending platforms

·       Student loans

·       Remittances

·       Consumer data

·       Digital payments

We also described the status of a lawsuit brought by the union representing CFPB employees and other parties against Vought seeking to enjoin him from implementing the RIF. The Court has granted a preliminary injunction which so far has largely prevented Vought from following through on the RIF. The matter is now on appeal before the DC Circuit Court of Appeals and a ruling is expected soon.

These podcast shows complement the podcast show we released on June 5 which featured two former senior CFPB employees, Peggy Twohig and Paul Sanford who opined about the impact of the April 16 Paoletta memo and proposed RIF on CFPB Supervision.

Eric and Craig considered, among other issues, the following:

1.  How do the new Paoletta priorities differ from the previous priorities and what do the new priorities tell us about what we can expect from CFPB Enforcement?

2.  What do the new priorities tell us about the CFPB’s new approach toward Enforcement priorities?

3.  What can we learn from the fact that the CFPB has dismissed without prejudice at least 22 out of the 38 enforcement lawsuits that were pending when Vought became the Acting Director?  What types of enforcement lawsuits are still active and what types of lawsuits were dismissed?

4.  What are the circumstances surrounding the nullification of certain consent orders (including the Townstone case) and the implications for other consent orders?

5. Has the CFPB launched any new enforcement lawsuits under Vought?

6. What level and type of enforcement is statutorily required?

7.  Realistically, what will 50 employees be able to do in the enforcement area?

8. What will be the impact of the Supervision cutbacks be on Enforcement since Supervision refers many cases to Enforcement?

9.  Will the CFPB continue to seek civil money penalties for violations of law?

10.  What types of fair lending cases will the CFPB bring in the future?

11.  Will Enforcement no longer initiate cases based on the unfairness or abusive prongs of UDAAP?

Alan Kaplinsky, former practice group leader for 25 years and now Senior Counsel of the Consumer Financial Group, hosts the podcast show.

Postscript: After the recording of this podcast, Cara Petersen, who succeeded Eric Halperin as head of CFPB Enforcement, resigned abruptly on June 10 from the CFPB after sending out an e-mail message to all its employees (which was shared with the media) which stated, in relevant part: “I have served under every director and acting director in the bureau’s history and never before have I seen the ability to perform our core mission so under attack,” wrote  Petersen, who had worked at the agency since it became operational in 2011. She continued: “It has been devastating to see the bureau’s enforcement function being dismantled through thoughtless reductions in staff, inexplicable dismissals of cases, and terminations of negotiated settlements that let wrongdoers off the hook.” “It is clear that the bureau’s current leadership has no intention to enforce the law in any meaningful way,” Petersen wrote in her e-mail. “While I wish you all the best, I worry for American consumers.”

Our podcast show being released today features two former CFPB senior officers who were key employees in the Supervision Division under prior directors: Peggy Twohig and Paul Sanford. Peggywas a founding executive of the CFPB when the agency was created in 2010 and led the development of the first federal supervision program over nonbank consumer financial companies. Beginning in 2012, as head of CFPB’s Office of Supervision Policy, Peggy led the office responsible for developing supervision strategy for bank and nonbank markets and ensuring that federal consumer financial laws were applied consistently in supervisory matters across markets and regions.

Paul served as head of the Office of Supervision Examinations for the CFPB from 2012-2020 with responsibility for ensuring the credible conduct of consumer protection examinations.

The purpose of this podcast show was primarily to obtain the opinions of Peggy and Paul about the legal and practical impact of (i) a Memo to CFPB Staff from Mark Paoletta, Chief Legal Officer, dated April 16, 2025, entitled “2025 Supervision and Enforcement Priorities” which rescinded prior priority documents and established a whole new set of priorities which in most instances are vastly different than the Supervision Priority documents which guided former directors and (ii) drastic steps taken by CFPB Acting Director Russell Vought to minimize the functions and staffing at the agency. That included, among other things, an order calling a halt to all work at the agency, the cancellation of all supervisory exams and the creation of plans by Vought to reduce the agency’s staff (“RIF”) from about 1,750 employees to about 250 employees (including a reduction of Supervision’s staff to 50 employees) We also described the status of a lawsuit brought by the union representing CFPB employees and other parties against Vought seeking to enjoin him from implementing the RIF. The Court has granted a preliminary injunction which so far has largely prevented Vought from following through on the RIF. The matter is now on appeal before the DC Circuit Court of Appeals and a ruling is expected soon.

Peggy and Paul describe in detail the CFPB Supervision priorities under Director Chopra and compare and contrast those priorities with the new priorities established by Paoletta which are:

1.  “Shift back” CFPB Supervision to the proportions focused on depository institutions to nonbanks to where it was in 2012 -- to a 70% depository and 30% nonbank, compared to the more recent 60% on nonbanks to 40% depositories. 

2.  Focus CFPB Supervision on “conciliation, correction, and remediation of harms subject to consumer complaints” and “collaborative efforts with the supervised entities to resolve problems so that there are measurable benefits to consumers.”

3.  Focus CFPB Supervision on “actual fraud” where there are “identifiable victims with material and measurable consumer damages as opposed to matters where the consumers made “wrong” choices.

4. Focus CFPB Supervision on the following priorities:

·       Mortgages as the highest priority

·       FCRA/Reg V data furnishing violations

·       FDCPA/Reg F relating to consumer contracts/debts

·       Fraudulent overcharges, fees, etc.

·       Inadequate controls to protect consumer information resulting in actual loss to consumers.

5.  Focus CFPB Supervision on providing redress to service members and their families and veterans.

6. The areas that will be deprioritized by CFPB Supervision will be loans for “justice involved” individuals, medical debt, peer-to-peer platforms and lending, student loans, remittances, consumer data and digital payments. 

7. Respect Federalism” and not prioritize supervision where States “have and exercise” ample regulatory and supervisory authority and participating in multi-state exams (unless required by statute).

8.  Eliminate duplicative supervision where other federal agencies have supervisory jurisdiction

9.  Not pursue supervision under “novel legal theories.”

10.  For fair lending, ignore redlining or “bias assessment” based solely on statistical evidence, and only pursue matters with “proven actual intentional racial discrimination and actual identified victims.”

Peggy and Paul also discussed their skepticism as to whether CFPB Supervision will be able to comply with its statutory duties if the RIF is carried out and Supervision’s staff is reduced to 50 employees.

Alan Kaplinsky, former longtime Chair of the Consumer Financial Group and now Senior Counsel hosted the podcast.

We are releasing today on our podcast show a repurposed webinar which we produced on May 13, 2025 entitled “What is happening at the federal agencies (other than the CFPB) that is relevant to the consumer financial services industry.”

During this podcast, we will inform you about recent developments at those other agencies, including the FTC, OCC, FDIC, FRB and DOJ (collectively, the “Agencies”) and the White House (through the issuance of Executive Orders). Some of the issues we consider are:

•        What are the strategic priorities of the Agencies, including cryptocurrency (OCC, FRB and DOJ); reducing regulatory burden, promoting financial inclusion, embracing bank-fintech partnerships and expanding responsible bank activities involving digital assets (OCC); adopt a more open-minded approach to innovation and technology adoption (FDIC); public inquiry into anti-competitive regulations (FTC and DOJ); and regulation of AI technology, boosting protections for children and teens online and strengthening enforcement against companies that sell, transfer, or disclose Americans’ geolocation information and other sensitive data to foreign adversaries, more emphasis on antitrust enforcement and less on consumer protection (FTC).

•        What is the status of proposed or final regulations of the Agencies? (e.g., FTC CARS Rule, Click-to-Cancel Rule, Junk Fees Rule, and Rule banning Noncompetes; FDIC advertisement and brokered-deposit rules, OCC rule on bank mergers; and the Community Reinvestment Act final rule)?

•        What is the status of enforcement investigations and litigation of the Agencies?

•        What impact will staff cuts have on supervisory examinations?

•        What is the impact of President Trump’s executive order requiring the Agencies to obtain approval from the White House of all proposed and final regulations?

•        Will the Supreme Court approve of President Donald Trump’s firing of the Democratic members of the FTC and NCUA and other federal agencies (who have subsequently sued Trump to challenge the firings) and, if so, what are its implications?

•        What is the significance of the FDIC and OCC agreeing to eliminate “reputation risk” as a basis for evaluating risks to banks?

•        Will the OCC adopt a regulation or other guidance, or will Congress enact legislation pertaining to debanking/fair access?

•        Will the OCC and/or FDIC issue any guidance or regulations pertaining to federal preemption of state law in light of the Supreme Court’s opinion last term in Cantero and the impending Courts of Appeal decisions in Cantero, Kivett and Conti?

•        What is the significance of the FDIC withdrawing its amicus brief in support of the Colorado Attorney General in the 10th Circuit in the lawsuit brought by industry against him challenging a Colorado statute which purported to opt out of Section 521 of DIDMCA?

•        Will there continue to be fair lending and disparate impact enforcement at any of the Agencies?

Alan Kaplinsky, former chair and now senior counsel of Ballard Spahr’s Consumer Financial Services Group, moderated the presentations of the following other members of the Consumer Financial Services Group:  Scott Coleman, Ronald Vaske and Kristen Larson.

Our podcast show being released today will focus on S.  919, the Guiding and Establishing  National Innovation for U. S. Stablecoins Act of 2025 or GENIUS Act which was reported out of the Senate Banking, Housing, and Urban Affairs Committee by a bipartisan vote of 18-6. The bill would establish a regime to regulate stablecoins.  Our guest today, Professor Art Wilmarth of George Washington University School of Law, published an op-ed on March 6 in the American Banker in which he wrote that the

“..bill would allow stablecoins, which are volatile deposit-like instruments, to be offered to the public without the essential protections provided by federal deposit insurance and other regulatory safeguards regarding banks that are insured by the Federal Deposit Insurance Corp. By placing the federal government's imprimatur on poorly regulated and unstable stablecoins, the …bill would greatly increase the probability that future runs on stablecoins would trigger systemic crises requiring costly federal bailouts to avoid devastating injuries to our financial system and economy.”

Our podcast show was designed to be of interest to both crypto neophytes and experts. During this podcast, we explore the following issues:

           1. What are stablecoins, and what are their present and potential use cases?

           2.  How do stablecoins differ from other types of crypto like bitcoin?

           3. How many companies issue stablecoins today? 

4. What is the total volume in dollars of outstanding stablecoins?  Has it been growing?  Do all stablecoin issuers also issue other types of crypto?

           5. Do any banks issue stablecoins?  If not, why not?

6.  Are there any federal or state regulations that apply to stablecoins today?  What about state money transmitter laws? 

7.  Do stablecoins provide a better way to improve the speed and reliability of payments compared to other ways of making payments? Do they offer any benefits that are NOT currently offered by tokenized bank deposits and the instant payment and settlement services offered by FedNow and the Clearing House's Real Time Payment Network?  How do stablecoins on public blockchains compare to tokenized deposits held on private electronic bank ledgers, in terms of safety, reliability, and efficiency.

8.   Professor Wilmarth describes a typical stablecoin transaction and the fact that stablecoin issuers often pay interest on stablecoins that are the equivalent of money market mutual funds and way more than banks pay on passbook or statement savings accounts or checking accounts.

           9.  How do stablecoin issuers generate revenue?

10.   What are the potential risks of stablecoins, especially if they can be offered by nonbanks and are not covered by federal deposit insurance?  Would they present the same risks as money market funds, which the Fed and Treasury bailed out in 2008 and again in 2020? Have there been any examples of these risks being realized?  Have there been any failures? What happens if a stablecoin issuer fails?  Does bankruptcy law (as amended by the GENIUS Act), provide a feasible process for dealing with failures of stablecoin issuers?  If nonbank stablecoin issuers become large financial institutions and get into serious trouble, would the federal government be able to finance another series of massive bailouts similar to those of 2007-09 and 2020-21 without risking a crisis in the Treasury bond market and/or another surge of inflation?

11.  Will Big Tech firms issuing stablecoins be able to dominate our banking system and economy and would that necessarily be a bad thing?

12. Which firms are likely to be the most significant issuers of stablecoins if nonbanks are allowed to conduct that activity?  If Big Tech firms are allowed to offer stablecoins, could they use stablecoins to offer banking services and eventually dominate the banking industry?  What should we learn from China's experience with Ant Financial Group (Alipay) and Tencent (WeChat Pay), China's two largest Big Tech firms, which became dominant providers of financial services to Chinese consumers and households?

13.  We then discussed the so-called GENIUS ACT which the Senate Banking Committee passed by an 18-6 bipartisan vote on March 13. What are the major features of the Act?

           14.  What are your major concerns about the bill?

15. What would the stablecoin market look like if Congress passed the GENIUS Act in the form that it was approved by the Senate Banking Committee?

16.  Should we require all issuers and distributors of stablecoins to be FDIC-insured banks?  Why do you believe that federal banking laws governing FDIC-insured banks provide a far better approach for regulating issuers of stablecoins?

[After the recording of this podcast, the bill ran into rough sledding on the floor for a couple of weeks with some Senators, like Senator Elizabeth Warren, raising consumer protection issues similar to those raised by Professor Wilmarth and other Senators raising concerns about President Trump’s family substantially benefiting from enactment of the bill. However, on May 19, after negotiations among Senate Democrats and Republicans to amend the Bill to add consumer protections, limits on tech companies issuing stablecoins and ethics standards for special government employees, like Elon Musk, the Bill advanced on a bipartisan procedural vote to prevent filibustering in the Senate, 66-32, making it likely that the Bill will pass the Senate by a super-majority vote. The fate of the Bill in the House is less certain.]

Alan Kaplinsky, Senior Counsel and formerly the Chair for 25 years of the Consumer Financial Services, hosted the podcast show.