Mortgage Banking Update - August 7, 2025

August 7 – Read the newsletter below for the latest Mortgage Banking and Consumer Finance industry news, written by Ballard Spahr attorneys. In this issue, our lawyers examine the Eighth Circuit's decision to void the FTC "Click to Cancel" Rule, a lawsuit filed by community groups seeking to force the CFPB to implement the Section 1071 Rule, the return of the U.S. Department of Labor Self-Audit PAID Program, and much more.

• Podcast Episode: Loper Bright Enterprises One Year Later: The Practical Impact on Business, Consumers and Federal Agencies
• Podcast Episode: The Hidden Costs of Financial Services: Consumer Complaints and Financial Restitution
• Senate Passes House Version of Trigger Leads Bill
• Banking Agencies Propose to Rescind 2023 Community Reinvestment Act Rule
• Federal Judge Rejects Request to Release ESSA Bank From Redlining Settlement
• FDIC Proposes to Replace Supervision Appeals Review Committee With an Independent Office
• CFPB Reaches Settlement With FirstCash in Connection With Alleged MLA Violations
• Eighth Circuit Voids FTC 'Click to Cancel' Rule
• Federal Judge Rules NCUA Board Members Were Fired Illegally, but Appeals Court Puts FTC Reinstatement on Hold
• Reinstated Democratic NCUA Board Members Fired by President Trump Return to Work, as the Supreme Court Allows Trump's Firing of Democrats on the Consumer Products Safety Commission
• Appeals Court Puts Reinstatement of Two Democratic Members of NCUA Board on Hold
• Community Groups File Lawsuit Seeking to Force CFPB to Implement the Section 1071 Rule
• A New Era for U.S. AI Policy: How America's AI Action Plan Will Shape Industry and Government
• U.S. Department of Labor Self-Audit PAID Program Returns, Allowing Employers to Identify and Resolve FLSA and FMLA Violations
• Reversing Course, CFPB Says it Will Issue Revised Open Banking Rule
• Looking Ahead

Podcast Episode: Loper Bright Enterprises One Year Later: The Practical Impact on Business, Consumers and Federal Agencies

Our podcast commemorates the one-year anniversary of the U.S. Supreme Court's opinion in Loper Bright Enterprises – the opinion in which the Court overturned the Chevron Deference Doctrine. The Chevron Deference Doctrine stems from the Supreme Court's 1984 decision in Chevron v. Natural Resources Defense Council. The decision basically held that if federal legislation is ambiguous the courts must defer to the regulatory agency's interpretation if the regulation is reasonable. My primary goal was to identify a person who would be universally considered one of the country's leading experts on administrative law and, specifically the Chevron Deference Doctrine and how the courts have applied the Loper opinion. I was very fortunate to recruit Cary Coglianese, Edward B. Shils Professor of Law at Penn Law School and Director of the Penn Program on Regulation. In this episode we explore two of his recent and widely discussed papers, titled "Loper Bright's Disingenuity" and "The Great Unsettling: Administrative Governance After Loper Bright".

Here are the questions that we discussed with Professor Coglianese:

1. Let's start at the beginning. What is the Chevron case all about?
2. How did the Court in Loper Bright explain why it was overruling Chevron?
3. You have a new article coming out later this year in the University of Pennsylvania Law Review called "Loper Bright's Disingenuity," co-authored with David Froomkin of the University of Houston. What do you and Professor Froomkin mean by the title of your article?
4. In your article, you critique what you call the Court's "facile formalism." What do you mean by that?
5. You also criticize the way the Court based its decision in Loper Bright on the Administrative Procedure Act or APA. What exactly was problematic about the Court's APA analysis?
6. Let's shift gears from your analysis of the logic of the Loper Bright opinion to talk about what the decision's effects have been so far and what its effects ultimately might be on the future of administrative government in the United States. You have another article on Loper Bright that was recently published in the Administrative Law Review and coauthored with Dan Walters of Texas A&M Law School. It has another provocative title: "The Great Unsettling: Administrative Governance After Loper Bright." What do you mean by the "Great Unsettling"?
7. Although you say that it is hard to predict exactly what impact Loper Bright will have on the future of administrative government, you also acknowledge that the decision has created a "symbolic shock" and is likely to "punctuate the equilibrium of the administrative governance game as we have come to know it." Can we see any effects so far in terms of how Loper Bright is affecting court decisions? For example, let's start with the Supreme Court itself. Has it had anything more to say about Loper Bright in decisions it's handed down this past year?
8. If we look at the lower courts, what can we discern about how Loper Bright has been received in federal district courts or courts of appeals? Are there any trends that can be observed?
9. I'd like to bring things full circle by raising a metaphor you and Professor Walters use in your article, "The Great Unsettling." You say there that the Loper Bright "decision might best be thought of as something of a Rorschach test inside a crystal ball." What do you mean? Can you tell us what you see inside your crystal ball?

Alan Kaplinsky, the founder and former chair and now senior counsel of the Consumer Financial Services Group hosted the podcast show.

To listen to this episode, click here.

Consumer Financial Services Group

Podcast Episode: The Hidden Costs of Financial Services: Consumer Complaints and Financial Restitution

Recently, we released 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 nonpublic 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:

1. It is critical to recognize that the capabilities to navigate the dispute process aren't equal across consumers.
2. 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.
3. 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 wake-up 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.
4. 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.

To listen to this episode, click here.

Consumer Financial Services Group

Senate Passes House Version of Trigger Leads Bill

As previously reported, both the House and Senate passed bills to ban "trigger leads," except in limited circumstances, although the versions of the bills that were previously passed are slightly different. The one difference is that the House-passed version calls for a Government Accountability Office study on the value of trigger leads by text message.

By unanimous consent, the Senate has now passed the House version of the legislation, which is titled the Homebuyers Privacy Protection Act (H.R. 2808). The legislation now moves to President Trump for his signature.

We have addressed the trigger leads bills earlier, including here.

As provided in the legislation, a creditor will be able to obtain a trigger lead from a consumer reporting agency only if:

1. The creditor makes a firm offer of credit to the consumer, and
2. The creditor submits documentation to the agency certifying that the creditor:
3. 1. Has the authorization of the consumer to obtain a consumer report on the consumer;
   2. Originated the consumer's current residential mortgage loan;
   3. Services the consumer's current residential mortgage loan; or
   4. Is an insured depository institution or credit union and holds a current account for the consumer.

In a press release Bob Broeksmit, President and CEO of the Mortgage Bankers Association (MBA), addressing the passage of the legislation by the Senate, stated:

Richard J. Andreano, Jr.

Banking Agencies Propose to Rescind 2023 Community Reinvestment Act Rule

Federal bank regulators have released a proposal to rescind the Community Reinvestment Act (CRA) final rule that was issued in October 2023.

The FDIC, OCC, and the Federal Reserve Board said they would replace it with the CRA regulations that were issued in 1995 and are now in place, with certain technical amendments.

Comments on the proposal are due on or before August 18, 2025.

"If adopted, the proposal would restore certainty in the CRA framework for stakeholders in light of pending litigation and limit regulatory burden on banks, while ensuring that banks continue to serve their communities," the agencies said, in a joint statement. The preamble to the proposal includes this more in-depth statement:

"The agencies believe that returning to the regulatory framework established by the 1995 CRA regulations is the most effective way to provide certainty regarding the applicable CRA requirements. Since the issuance of the preliminary injunction enjoining the 2023 CRA Final Rule, the agencies' observations are that not all stakeholders understand whether they should prepare to comply with the 2023 CRA Final Rule or even which regulatory framework is currently applicable. Proceeding with the litigation, particularly given its early stage, would maintain these uncertain circumstances for an indefinite period and would therefore be inconsistent with the objective of restoring certainty in the CRA regulatory framework."

The American Bankers Association, Independent Community Bankers of America, and U.S. Chamber of Commerce, along with state and municipal trade associations, had filed suit challenging the October 2023 rule in the U.S. District Court for the Northern District of Texas.

The plaintiffs requested a preliminary injunction and in March 2024 that was granted by the district court. In April 2024, the agencies appealed the preliminary injunction to the Fifth Circuit, but in March 2025, with a new administration in place, the agencies filed an unopposed motion to stay the appeal. At the same time, the agencies said they would propose rescinding the rule.

Prior to the decision by the Federal Reserve Board, the Fed staff provided members of the board with a memo recommending rescission of the 2023 rule to restore certainty and to reduce the burden on banks.

"[T]he final rule, if fully implemented, would have raised the asset-size thresholds for small, intermediate, and large banks, to which categories CRA examinations are tailored, and revised the performance tests and other aspects of the 1995 CRA regulations," the staff said.

The staff noted that since the injunction was issued, not all stakeholders knew whether they should prepare to comply with the 2023 final rule, or which regulatory framework is applicable.

The Fed staff said that under the 2023 rule, some banks would have additional regulatory requirements. In addition, the staff said that all banks would incur costs to ensure that their compliance with the rule.

In June of 2020, the OCC issued its own CRA rule, without the cooperation of the FDIC or the Fed. The OCC's rule itself was rescinded in December of 2021. Now it appears that the 2023 rule will also be rescinded.

Given the complexity of the 2023 rule, and the data-gathering burdens to which it would have subjected many institutions, the proposal to rescind will likely be cheered by financial institutions. Some form of CRA modernization is likely needed, however, because determining an institution's CRA assessment areas by looking at the locations of its branches and ATM's makes little sense today given the tools and technology that can be used to establish a banking relationship.

Scott A. Coleman, Richard J. Andreano, Jr., and John L. Culhane, Jr.

Federal Judge Rejects Request to Release ESSA Bank From Redlining Settlement

A federal judge has rejected the Trump administration's request to release from court supervision a bank that had been accused of discriminatory lending.

U.S. District Judge Michael M. Baylson of the U.S. District Court for the Eastern District of Pennsylvania found that continued oversight was needed to make sure the terms of the settlement with ESSA Bank were followed.

"Continued enforcement of the Consent Order is essential to remedy ESSA's alleged discrimination against Black and Hispanic communities in the Philadelphia area and to fulfill federal laws combating discrimination and ensuring fair, equal access to credit for all communities," the judge found.

As previously reported, in 2023 the Justice Department (DOJ) announced that ESSA had agreed to pay more than $3 million to resolve allegations that it engaged in a pattern or practice of redlining, in violation of both the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA), from 2017 through at least 2021. In bringing the redlining claim, DOJ asserted that during this period ESSA failed to provide mortgage lending services to and did not serve the credit needs of majority-Black and Hispanic neighborhoods in the Philadelphia Metropolitan Statistical Area (MSA), particularly those in Philadelphia County.

The settlement required ESSA to invest at least $2.92 million in a loan subsidy fund to increase access to credit for home mortgage, improvement and refinance loans, as well as home equity loans and lines of credit, in majority-Black and Hispanic neighborhoods in the bank's lending areas. Under the terms of the settlement, ESSA agreed to spend $125,000 on community partnerships and $250,000 on advertising, consumer financial education, and credit counseling. The agreement also required the bank to hire two new mortgage loan officers to serve its branches in West Philadelphia. In addition, the bank was required to conduct a research study to help identify the financial services needs in communities of color.

The Trump administration contended that because ESSA had fully disbursed the loan subsidy fund, demonstrated a commitment to remediation, and substantially complied with its other obligations, it did not require additional supervision for the remaining parts of the settlement. The bank fully disbursed the fund in two years and the administration asked that the consent order be ended with three years remaining.

The National Fair Housing Alliance, the Housing Equality Center of Pennsylvania, and POWER Interfaith objected to the administration's request.

Judge Baylson agreed with those groups.

"ESSA's partial satisfaction of the Consent Order does not achieve its purpose—to remedy ESSA's previous discriminatory lending practices and promote equal access to mortgage credit to prevent future discrimination," he wrote. "Upholding these commitments serves not only legal compliance, but also the broader public interest in fairness and equity."

He called the government's contention that ESSA had achieved the purpose of the consent order because it had paid out the loan subsidy fund "unpersuasive."

"Several terms of the Consent Order remain unmet and/or require continued compliance over several years ... and are highly relevant to achieving the Consent Order's purpose," he wrote.

As previously reported, the Trump administration has obtained early termination of certain redlining consent orders, and a motion by the administration to terminate a Lakeland Bank redlining consent order is also being opposed by the Housing Equality Center of Pennsylvania and the National Fair Housing Alliance as well as well as the New Jersey Citizen Action Education Fund.

Any future motions filed by the Trump administration for the early termination of redlining consent orders likely will face opposition from community groups.

Richard J. Andreano, Jr. and John L. Culhane, Jr.

FDIC Proposes to Replace Supervision Appeals Review Committee With an Independent Office

The FDIC is proposing to replace its Supervision Appeals Review Committee (SARC) with an independent, standalone office, known as the Office of Supervisory Appeals (OSA).

Under the proposal, the OSA would be the final level of review of material supervisory determinations, independent of the divisions that make supervisory decisions. FDIC officials believe the changes would facilitate an appeals process that would be consistent over time.

The FDIC is currently accepting public comments on the proposal. The deadline for submitting comments is September 16.

"Establishing the office as a standalone entity within the FDIC whose sole function is to resolve appeals would ensure that reviewing officials have the capacity to review each case with the proper level of attention and diligence, and would be scalable should the volume of appeals increase," Acting FDIC Chairman Travis Hill recently said, in explaining the FDIC's proposed change.

Hill said the SARC typically consists of FDIC board members and deputies of FDIC board members. He added that people who serve on the SARC have many other duties and may not have participated in a bank exam.

In 2020, the FDIC proposed replacing the SARC with an independent, standalone office staffed with officials whose only job would be reviewing and deciding on supervisory appeals. Hill said the office became fully operational, but following a leadership change at the agency, it was disbanded before hearing a single appeal.

"The rationale for instituting the new office four years ago remains the same today," Hill said.

He said that a "more robust appeals process with an independent body will further help ensure that examiners are applying policies consistently across the country."

Hill added that, by recruiting outside the agency, the agency anticipates attracting impartial candidates who are less likely to have established relationships with people involved in the supervisory process. However at least one individual on any three-person appeals panel would need to have direct supervisory experience from a supervisory agency, according to Hill.

He said that in comparison to previous guidelines, the proposal would expand the pool of potential candidates eligible to serve on term appointments as reviewing officials by broadening the types of experience the FDIC would accept. Under the proposal, such candidates would include former bankers and former industry professionals with relevant supervisory experience and might also include employees with relevant experience from other government agencies who would serve through interagency agreements.

Scott A. Coleman, John L. Culhane, Jr., and Richard J. Andreano, Jr.

CFPB Reaches Settlement With FirstCash in Connection With Alleged MLA Violations

The CFPB has reached a settlement in its lawsuit against FirstCash, Inc. and its 19 subsidiaries alleging violations of the Military Lending Act (MLA). The parties have jointly filed a stipulated final judgment and proposed order in the U.S. District Court for the Northern District of Texas.

FirstCash, Inc., a Delaware nonbank corporation with its principal place of business in Fort Worth, Texas, owns and operates more than 1,000 retail pawnshops, offering pawn loans through its wholly owned subsidiaries.

The MLA protects active duty servicemembers and some dependents in connection with extensions of consumer credit. Those protections include a maximum allowable interest rate of 36 percent, a prohibition against required arbitration and certain mandatory loan disclosures.

The CFPB had alleged that since October 3, 2016, FirstCash violated the MLA by making MLA-covered loans that exceeded the maximum allowable interest rate of 36 percent. The CFPB also contended that the loan agreements with covered borrowers violated the MLA by requiring arbitration of disputes and by failing to make all of the required loan disclosures. The CFPB also alleged that the company violated a 2013 order against a predecessor entity.

If approved by the court, the proposed order would require the defendants to:

• Set aside $5 million to ensure full redress to servicemembers and their families who were harmed in connection with thousands of unlawful pawn loans.

• Pay a $4 million fine to the CFPB's Civil Penalty Fund.
• Comply with the MLA and offer an MLA-compliant loan product to servicemembers and their families or comply with a regulatory safe harbor intended to screen for MLA- protected borrowers.

The proposed order states that "Defendants neither admit nor deny the allegations in the Amended Complaint, except Defendants admit the facts necessary to establish the Court's jurisdiction over them and the subject matter of [the] action."

Consumer Financial Services Group

Eighth Circuit Voids FTC 'Click to Cancel' Rule

A federal appeals court has nullified the Federal Trade Commission's amendments to its Negative Option Rule intended to make it easier for people to cancel subscriptions.

Custom Communications, the U.S. Chamber of Commerce, and other groups filed suit challenging the amendments to the rule, contending that the FTC did not follow proper procedures in enacting them.

A three-judge panel from the U.S. Court of Appeals for the Eighth Circuit agreed and found that the "Commission's rulemaking process was procedurally insufficient and Petitioners demonstrated prejudicial error".

On October 16, 2024, the FTC issued its final amendments to the Negative Option Rule, which applied to all negative option programs and included a "click to cancel" provision intended to make it easier for consumers to cancel their enrollment in order to halt continued charges.

"Negative option" is a term used to describe commercial transactions in which an underlying condition or term will continue unless the consumer takes an affirmative action to either cancel the agreement or reject the goods or services. These plans typically take the form of agreements or subscriptions that automatically renew, continuity plans (where a consumer agrees in advance to receive goods or services periodically), or free trial marketing (where a consumer receives goods or services for free or for a nominal price for a limited time period). The amendments issued by the FTC expanded the coverage of the rule beyond pre-notification plans – in which sellers send periodic notice offering goods or services to consumers and then charge them for the goods or services if they fail to affirmatively decline – to all other forms of negative option marketing.

The FTC said the final rule was intended to provide a consistent legal framework.

Under federal law, the FTC must issue a preliminary regulatory analysis when a proposed rule would have an annual effect on the national economy surpassing $100 million.

The FTC said that the rule would not have an annual $100 million impact on the economy.

However, an Administrative Law Judge found that the proposed rule would have an annual effect surpassing the $100 million threshold.

The FTC was not excused from having to prepare the analysis if its initial economic analysis was deemed inaccurate, the judges wrote. They said that after the Administrative Law Judge's decision, the FTC could have reissued its Notice of Proposed Rulemaking with the required preliminary analysis.

The petitioners made additional arguments about why the rule should be nullified, but the appeals court said those arguments were not needed.

"We hold the FTC's rulemaking process was procedurally insufficient and Petitioners demonstrated prejudicial error, we need not address Petitioners' other substantive challenges to the Rule," the judges wrote. "While we certainly do not endorse the use of unfair and deceptive practices in negative option marketing, the procedural deficiencies of the [FTC's] rulemaking process are fatal here."

Excusing the FTC's noncompliance with the requirement for a preliminary analysis could open the door to future manipulation of the rulemaking process, according to the judges.

"Furnishing an initially unrealistically low estimate of the economic impacts of a proposed rule would avail the [FTC] of a procedural shortcut that limits the need for additional public engagement and more substantive analysis of the potential effects of the rule on the front end," the court concluded.

The CFPB's Circular 2023-01 on negative option marketing was also rescinded earlier this year.

While the amendments to the Negative Option Rule are no longer effective, state regulators could use their UDAP authority under state laws modeled on Section 5 of the FTC Act or their UDAAP authority under Section 1042 of the Consumer Financial Protection Act to attack any subscription practices that they deem to be unfair, deceptive, or abusive to consumers.

Kristen E. Larson

Federal Judge Rules NCUA Board Members Were Fired Illegally, but Appeals Court Puts FTC Reinstatement on Hold

A Federal Judge has ruled that two NCUA board members were illegally fired by President Trump and has restored their positions on the board.

Judge Amir H. Ali, of the U.S. District Court for the District of Columbia, said that Democrats Todd Harper and Tanya Otsuka could only be removed for cause. President Trump had fired them without cause.

"The Court declares the terminations of Plaintiffs Todd M. Harper and Tanya F. Otsuka unlawful," the judge ruled. "Harper and Otsuka remain members of the NCUA Board and may be removed by the President prior to the expiration of their terms only for cause."

The judge continued, "In sum, the text and history of the NCUA statute, along with the structure and function of the NCUA Board, confirm Congress restricted the President's power to remove Board members."

Interestingly, the NCUA board is scheduled to meet on July 24. It remains to be seen if additional court action will occur that stays the reinstatement pending a decision on the merits.

After they were fired, Harper and Otsuka immediately filed suit, naming President Donald Trump, Treasury Secretary Scott Bessent, NCUA Chairman Kyle Hauptman, and others as defendants. They argued that they could only be fired for cause. "The identical, one-sentence emails sent to both Mr. Harper and Ms. Otsuka at the same time on the same day say nothing about the reasons for the termination, and do not attempt to assert a basis for cause," the two stated.

The two went on to assert that their terminations disregarded the protections that Congress established to preserve the board's independence, and they asked to be reinstated as members of the board.

Judge Ali agreed. He said that when Congress rewrote the law governing the NCUA, it removed language stating that agency leadership served at the pleasure of the President.

"In arguing that Board members nonetheless serve at the pleasure of the President, the government asks this Court to read that language back into the statute even though Congress took it out," the judge wrote.

The Federal Credit Union Act, unlike the Federal Trade Commission Act and the other statutes that govern removal of members or commissioners of other agencies where President Trump has fired such members or commissioners without cause, does not contain express language allowing the President to remove such members or commissioners only for good cause.

The judge wrote, "The Court accordingly holds that Congress's for-cause removal restrictions for NCUA Board members do not pose any constitutional problem. And because the government does not dispute that the plaintiffs were terminated without cause, those removals were unlawful."

In contrast, in a case addressing the termination by President Trump of Democrat Rebecca Slaughter as an FTC Commissioner, a three-judge panel of the Circuit Court of Appeals for the District of Columbia put on hold a district court ruling that restored Slaughter's position on the FTC.

Judge Loren AliKhan, of the U.S. District Court for the District of Columbia had ruled that Slaughter could only be removed for "inefficiency, neglect of duty, or malfeasance in office." The judge used the same reasoning as Judge Ali did in the NCUA case.

The appeals court granted the government's emergency motion to give the court enough time to consider the motion for a stay pending appeal. The panel said that the ruling should not be considered a decision on the merits of the case.

Alan S. Kaplinsky, John L. Culhane, Jr., and Richard J. Andreano, Jr.

Reinstated Democratic NCUA Board Members Fired by President Trump Return to Work, as the Supreme Court Allows Trump's Firing of Democrats on the Consumer Products Safety Commission

Two reinstated National Credit Union Administration (NCUA) board members participated in a board meeting on July 24, even as the Supreme Court signaled that three Democratic members of the Consumer Product Safety Commission (CPSC) could be fired without cause in the context of granting a stay of a lower court order reinstating them to CPSC.

Judge Amir H. Ali, of the U.S. District Court for the District of Columbia determined that the Democrat NCUA board members Todd Harper and Tanya Otsuka could only be removed for cause. President Trump had fired them without cause and, thus, Judge Ali ruled that President Trump had fired them illegally.

Because no stay of Judge Ali's order had yet been granted, Harper and Otsuka participated in the July 24 NCUA board meeting. Harper joked about his absence from the board, saying, "It's been three months. Have I missed anything?"

Otsuka made additional comments about her absence from the board, focusing on the need for an independent agency. She said the ability for the NCUA board to function as a regulator "depends on a strong independent agency that focuses on the long-term safety and stability of our financial system."

She said she is planning to examine the actions of the agency while she and Harper had been absent, adding, "I am glad to be back to work with my fellow board members."

In the Supreme Court case, CPSC commissioners Mary Boyle, Alexander Hoehn-Saric, and Richard Trumka, appointed by President Biden, filed suit after they were fired by President Trump. They argued that they could be fired only for "neglect of duty or malfeasance in office." U.S. District Judge Matthew Maddox of the District of Maryland agreed and ordered that they be reinstated, citing Humphrey's Executor v. United States in which the Supreme Court ruled that Congress can create independent agencies with members who can only be removed for cause.

After the Fourth Circuit declined to stay that order, the Administration sought emergency review by the Supreme Court.

The Supreme Court disagreed in a short order, citing Trump v. Wilcox, a case in which it stayed district court orders reinstating Democratic members of the National Labor Relations Board and the Merit Systems Protection Board who had been fired by President Trump pending the disposition of those cases on appeal.

The Supreme Court said that the Trump administration did not have to reinstate the three CPSC commissioners while the litigation continues.

The Court said that the decision it issued in Wilcox "reflected our judgment that the Government faces greater risk of harm from an order allowing a removed officer to continue exercising the executive power than a wrongfully removed officer faces from being unable to perform her statutory duty."

The Court has issued interim orders in these cases. The Court said that although its interim orders are not conclusive, they provide guidance about how a court should exercise its discretion in similar cases.

The Court's three liberal Justices, Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson dissented.

"Once again, this Court uses its emergency docket to destroy the independence of an independent agency, as established by Congress," Kagan wrote.

She continued, "By allowing the President to remove Commissioners for no reason other than their party affiliation, the majority has negated Congress's choice of agency bipartisanship and independence."

In yet another case, a three-judge panel of the Circuit Court of Appeals for the District of Columbia has put on hold a district court ruling that would have allowed Rebecca Slaughter to return as a commissioner of the FTC.

Alan S. Kaplinsky, Richard J. Andreano, Jr., and John L. Culhane, Jr.

Appeals Court Puts Reinstatement of Two Democratic Members of NCUA Board on Hold

The reinstatement of two Democratic NCUA board members has been put on hold by the U.S. Circuit Court of Appeals for the District of Columbia.

In a short order, a three-judge panel of the court ruled that the reinstatement of Todd Harper and Tanya Otsuka should be paused, at least temporarily.

"ORDERED that the district court's summary judgment order, dated July 22, 2025, be administratively stayed pending further order of this court," the appeals court said. "The purpose of this administrative stay is to give the court sufficient opportunity to consider the emergency motion for stay pending appeal and should not be construed in any way as a ruling on the merits of that motion."

Judge Amir H. Ali, of the U.S. District Court for the District of Columbia, had determined that the Democrat NCUA board members Todd Harper and Tanya Otsuka could only be removed for cause. President Trump had fired them without cause and, thus, Judge Ali had ruled that President Trump had fired them illegally.

The Trump administration appealed that ruling. Because no stay of Judge Ali's order had yet been granted, Harper and Otsuka participated in a July 24 NCUA board meeting.

Harper and Otsuka must now file a response to the administration's motion for an emergency stay by August 4. The administration must file any reply by August 11.

Given the developments in other related cases that we have blogged about, Harper and Otsuka face the proverbial uphill battle.

John L. Culhane, Jr., Richard J. Andreano, Jr., and Alan S. Kaplinsky

Community Groups File Lawsuit Seeking to Force CFPB to Implement the Section 1071 Rule

The saga of the CFPB's section 1071 small business data collection and reporting rule continues. Rise Economy, fka California Reinvestment Coalition (Rise), the National Reinvestment Coalition (NCRC), the Main Street Alliance (MSA), and Reshonda Young (a small business owner and member of MSA) filed a complaint against Acting CFPB Director Russell Vought and the CFPB seeking to force the agency to implement the section 1071 rule. The complaint was filed with the U.S. District Court for the District of Columbia.

Rise and Ms. Young were among the plaintiffs that previously had filed a lawsuit against the CFPB to have it complete the section 1071 rulemaking required by Dodd-Frank. That led to a July 2022 stipulation and order in which the CFPB agreed to issue the 1071 rule by March 31, 2023. The CFPB released the rule on March 30, 2023.

As previously reported, the 1071 rule is subject to a stay issued by the U.S. Court of Appeals for the Fifth Circuit. The stay only applies to the plaintiffs, intervenors, and their respective members. As previously reported, the CFPB has announced that it will not prioritize enforcement of the rule, it has extended the compliance dates for the rule, and it has announced that it will reopen rulemaking.

The complaint initially focuses on the reason why Congress included a requirement for the 1071 rule in Dodd-Frank:

A central theme of the complaint is the need for the loan data that is required by the 1071 rule:

The complaint addresses the challenge to the 1071 rule before the Fifth Circuit, and states that while the CFPB initially opposed a request by the plaintiffs to stay the rule pending a decision on the merits of the case, the CFPB subsequently dropped its opposition and the Fifth Circuit then issued a stay. The complaint then asserts that the "Defendants achieved through acquiescence in court litigation what they could not through direct agency action: a stay of the [1071 rule]." After noting that the stay only applies to the parties in the case and their respective members, the complaint then addresses the CFPB statement in which it indicated that it would not prioritize enforcement or supervision actions for any violations of the rule, and the CFPB interim final rule in which the agency, without opportunity for notice and comment, extended the compliance dates for the rule The earliest compliance date is now July 1, 2026, for lenders with the largest small business lending volume (the original compliance date for such lenders was October 1, 2024, and that date was extended to July 18, 2025, based on a prior court stay). Citing a press report, the complaint also states that "on July 8, 2025, CFPB placed the top agency official responsible for overseeing fair lending, Frank Vespa-Papaleo, on administrative leave, further signaling a departure from enforcement of fair lending rules."

The complaint asserts that the interim final rule extending the compliance dates and the "CFPB's refusal to implement [the] Section 1071 [rule] violate the Administrative Procedure Act and the Equal Credit Opportunity Act. CFPB is unlawfully withholding and unreasonably delaying agency action, amending its duly promulgated regulations without observance of procedure required by law, not acting in accordance with the Equal Credit Opportunity Act, and acting arbitrarily and capriciously."

The complaint delves extensively into allegations of how the plaintiffs are injured by the lack of the implementation of the 1071 rule. This may reflect a potential concern about challenges to their standing to file the lawsuit.

While the challenge under the Administrative Procedure Act to the interim final rule extending the compliance dates for the 1071 rule is a typical type of challenge to such a rule, the request to have the court order the CFPB to implement the rule could be frustrated by the current Fifth Circuit stay, at least with respect to the parties covered by the stay. Perhaps the plaintiffs believe that the implementation of the rule with respect to lenders not covered by the stay is better than no implementation at all. Perhaps the plaintiffs also believe that before the district court rules on the merits of the case, the case before the Fifth Circuit will be resolved, with the stay being lifted and the rule being held to be valid, thus paving the way for the district court to order the CFPB to implement the rule on a broader basis.

Richard J. Andreano, Jr. and John L. Culhane, Jr.

A New Era for U.S. AI Policy: How America's AI Action Plan Will Shape Industry and Government

On July 23, 2025, the federal government unveiled America's AI Action Plan (the Plan), a sweeping policy roadmap aimed at clearing away regulatory barriers, supercharging U.S. investment in infrastructure and talent surrounding artificial intelligence (AI), and asserting U.S. leadership in global AI markets. The Plan creates both opportunities and challenges for business. Businesses can expect new incentives, shifting compliance requirements, and heightened competition in the race to develop and deploy advanced AI.

Click here to read the full alert.

Kenneth R. Davis II and Harlan Mechling

U.S. Department of Labor Self-Audit PAID Program Returns, Allowing Employers to Identify and Resolve FLSA and FMLA Violations

The U.S. Department of Labor (DOL) announced several self-audit programs to assist employers, unions, and benefit plan officials with voluntarily assessing and correcting their compliance with federal labor laws. One of those programs is the Wage and Hour Division (WHD) Payroll Audit Independent Determination (PAID) program. The PAID program encourages employers to self-identify and resolve minimum wage and overtime violations under the Fair Labor Standards Act (FLSA), and certain leave violations under the Family and Medical Leave Act (FMLA).

Initially launched by the WHD in April 2018 as a six-month nationwide pilot, the PAID program aimed to "facilitate[] resolution of potential violations, without litigation, and ensure[] employees promptly receive the wages they are owed" under the FLSA. However, WHD ended the program in January 2021, stating that the "program deprived workers of their rights and put employers that play by the rules at a disadvantage." The revival and expansion of the PAID program reflects a shift in the DOL's priorities under the Trump and Biden administrations.

Under the PAID program framework, an employer first reviews the program's compliance assistance materials and conducts a self-audit of compensation and/or leave practices. Next, the employer contacts WHD to discuss any noncompliance issues the employer wishes to resolve and, unless WHD denies the employer's request to participate in the program, the employer submits required information to WHD. Then, WHD reviews and evaluates the submission. Finally, WHD issues a summary of unpaid wages or remedies due, along with forms describing the settlement terms (including the release of claims) for each employee. Within 15 days of receiving the summary of unpaid wages or remedies due from WHD, the employer must pay all back wages due (for FLSA violations) or implement all remedies (for FMLA violations). WHD estimates that the audit process will typically take fewer than 90 days to complete.

All private employers covered by the FLSA or the FMLA are eligible to participate in the PAID program. However, employers who participated in the program within the past three years, who are currently under WHD investigation, who are currently litigating similar claims, or who have received communications from an employee's representative or counsel seeking resolution outside of the program, are not eligible. Additionally, employers found to have violated the FLSA or the FMLA within the past three years may also be ineligible. WHD maintains discretion to determine whether to accept employers into the program, examining potential participants on a case-by-case basis.

The PAID program addresses potential violations of FLSA minimum wage and overtime rules, such as "off-the-clock" work, incorrect overtime payment calculations, or improper salary payments to exempt employees. The program also addresses certain FMLA leave violations, including miscalculating leave, incorrect eligibility assessments, improper attendance penalization, or improperly categorizing leave as an unexcused absence.

Employee participation in the PAID program is voluntary. They can choose to accept or reject the payments or other remedies offered, and employers are prohibited from retaliating against the employee for their choice. Employees who accept the settlement sign a release to receive payment or other remedies offered. Employee releases under the program are limited to the identified potential violations and the specific time periods for which the employer is paying the back wages or providing other remedies.

Employees who reject the settlement offer under the program retain their private right of action against employers. Additionally, the program is limited to resolving federal FLSA and FMLA violations. Participating in the PAID program does not cut off employee rights under other laws, such as the Americans with Disabilities Act, the Pregnant Workers Fairness Act, and/or other state or local laws.

The PAID program allows employers and employees to resolve potential federal minimum wage, overtime, and leave claims without formal investigation or litigation. Employees receive the full amount of the back wages owed under the FLSA or other FMLA remedies due, and employers are not required to pay additional civil monetary penalties.

Employers should be aware that participation in the PAID program does not waive WHD's right to conduct future investigations of employers, and that self-audits under the program are subject to the same Freedom of Information Act requirements and defenses as WHD investigations or audits.

More information regarding the PAID program is available on WHD's website, including compliance assistance materials and additional guidance regarding the program.

Ballard Spahr's Labor and Employment Group regularly advises clients on navigating federal and state minimum wage, overtime, and leave issues, including conducting compliance audits. We will continue to monitor developments under the new administration and their impact on employers. Please contact us if we can assist you with these matters.

Denise M. Keyser and Alayna M. Piwonski

Reversing Course, CFPB Says it Will Issue Revised Open Banking Rule

In a surprise announcement, the CFPB has said it will issue a revised Section 1033 open banking rule rather than simply killing the Biden administration rule.

"In light of recent events in the marketplace, the Bureau has now decided to initiate a new rulemaking to reconsider the Rule with a view to substantially revising it and providing a robust justification," the administration said, in requesting a stay of a lawsuit filed by Forcht Bank and banking trade groups in the U.S. District Court for the Eastern District of Kentucky.

The CFPB said that it "seeks to comprehensively reexamine this matter alongside stakeholders and the broader public to come up with a well-reasoned approach to these complex issues that aligns with the policy preferences of new leadership and addresses the defects in the initial rule."

Judge Danny C. Reeves granted the stay, saying, in part that "the parties and judicial economy are better served if a stay is issued, because it allows time for CFPB to administratively modify the rule with appropriate input from interested parties."

The CFPB said it plans to engage in an "accelerated" rulemaking, in its request for a stay, filed on July 29. The CFPB said that within three weeks, it plans to issue an advanced notice of proposed rulemaking that will be the starting point for the accelerated process. The CFPB said officials envision the process culminating in a new final rule that substantially revises the rule.

Section 1033 requires the CFPB to issue rules that would allow consumers to obtain transaction data and other information concerning a consumer financial product or service that the consumer obtained from the covered entity.

The Biden administration's rule would have had far-reaching implications for financial institutions, fintech companies, and consumers alike. This previously untapped legal authority would have given consumers the right to control their personal financial data and assign the task of implementing personal financial data sharing standards and protections to the CFPB.

In a timeline providing background on the rule, the Biden administration said that Section 1033 required the CFPB to issue rules that would allow consumers to obtain, "transaction data and other information concerning a consumer financial product or service that the consumer obtained from the covered entity." The Biden administration also said that the section directs the CFPB to promote development and use of standardized formats for information made available to consumers.

When the final rule was released on October 22, 2024, it was immediately met with criticism from industry groups. Forcht Bank, the Bank Policy Institute and Kentucky Bankers Association filed a lawsuit the day the final rule was released, seeking injunctive relief, alleging that the CFPB exceeded its statutory authority.

When the Trump administration took office, the CFPB withdrew the rule, citing the President's directive to review existing regulations. The CFPB said that the agency had determined that the rule exceeded the CFPB's statutory authority and was arbitrary and capricious.

Kristen E. Larson and Ronald K. Vaske

Looking Ahead

New Consumer Financial Services Fintech Business Opportunities Arising From Deregulation at the CFPB

A Ballard Spahr Webinar | August 12, 2025, 12 PM ET

Speakers: Alan S. Kaplinsky, John L. Culhane, Jr., Kristen Larson, Joseph J. Schuster, John D. Socknat, and Ronald K. Vaske

The Supreme Court's Landmark Ruling on Universal Injunctions in the Birthright Citizenship Cases

A Ballard Spahr Webinar | August 13, 2025, 12 PM ET

Speakers: Alan S. Kaplinsky and Burt M. Rublin

MBA – Compliance and Rick Management Conference

September 28-30, 2025 | Grand Hyatt, Washington, D.C.

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