December 18 – Read the newsletter below for the latest Mortgage Banking and Consumer Finance industry news, written by Ballard Spahr attorneys. In this issue, our lawyers discuss H-1B and H-4 visa appointment disruptions, HUD’s updated 2026 loan limits for FHA forward mortgages and HECMs, insights into the new White House’s AI plan, and more.
- Podcast Episode: AI in Financial Services: Understanding the White House Action Plan—and What It Leaves Out—Part 1
- Podcast Episode: AI in Financial Services: Understanding the White House Action Plan—and What It Leaves Out—Part 2
- Podcast Episode: The CFPB’s Reg B Proposal: Key Changes and Industry Impact
- CFPB Funding Issues Seem to Be Coming to a Head
- CFPB Tells President, Congress It Will Need $279.6 Million to Continue Statutorily Required Operations Through September 30, 2026
- CFPB Examiners to Read ‘Humility Pledge’ When They Begin Exams
- Trump Administration Asks U.S. Supreme Court to Allow President to Fire FTC Member Without Cause
- HUD Recently Announced the 2026 Loan Limits for FHA Forward Mortgages and HECMs
- Three Nonprofit Organizations Represented by Public Citizen Litigation Group Open Up New Front in War Against the CFPB
- Progressive State Leaders Committee Chooses Chopra to Lead Working Group
- Federal Court Enjoins DEI and Gender Executive Orders
- While Congress Slept: Health Benefit Developments During the Shutdown
- H-1B and H-4 Visa Appointment Disruptions
- IRS Relief Alleviates Some—But Not All—ACA Reporting Issues
This episode features Part 1 of our October 30, 2025, webinar, “AI in Financial Services: Understanding the White House Action Plan—and What It Leaves Out.” In this installment, a panel of leading experts breaks down the rapidly evolving role of artificial intelligence in financial services—from foundational concepts to the latest regulatory developments.
Moderated by Alan Kaplinsky, senior counsel, founder and former longtime leader of Ballard Spahr’s Consumer Financial Services Group, and Greg Szewczyk, chair of the firm’s Privacy and Data Security Group, the discussion cuts through hype and uncertainty to provide clear, practical insights. Alan and Greg guide an energetic conversation about how AI has become a strategic priority for banks, credit unions, payments companies, and Fintechs.
Our panel includes:
- Charley Brown, leader of Ballard Spahr’s technology and patents teams, who explains how institutions can protect and capitalize on AI-enabled technologies;
- Dean Ball, former White House senior advisor and one of the architects of the White House AI Action Plan, who provides a rare inside look at the policy landscape;
- Kristian Stout, Director of Innovation Policy at the International Center for Law and Economics, who examines the intersections of AI, regulation, and competition; and
- Charlie Bullock, Senior Research Fellow at the Institute for Law and AI, who outlines practical frameworks for responsible, compliant AI governance.
Together, they unpack the complex patchwork of state, federal, and international rules now shaping AI deployment in financial services. The discussion highlights how automated decision-making laws, privacy requirements, and emerging definitions of “artificial intelligence” are forcing institutions to rethink compliance programs, manage risk differently, and anticipate new regulatory expectations. You’ll also hear real-world examples of how organizations are grappling with these challenges in practice.
This episode provides an essential foundation for understanding where AI and financial services intersect, and where the regulatory environment is headed. Be sure to tune in for Part 2, where our experts delve even deeper into the future of AI, innovation, and legal risk in the financial sector.
Consumer Finance Monitor is hosted by Alan Kaplinsky, senior counsel at Ballard Spahr and founder of the firm’s Consumer Financial Services Group. We encourage listeners to subscribe on their preferred podcast platform for weekly insights into the consumer finance industry.
To listen to this episode, click here.
Consumer Financial Services Group
This episode features Part 2 of our October 30, 2025, webinar, “AI in Financial Services: Understanding the White House Action Plan—and What It Leaves Out.” In this installment, our panel dives deeper into the evolving intersection of artificial intelligence, regulation, and innovation in financial services.
Moderated by Alan Kaplinsky, senior counsel, founder and former longtime leader of Ballard Spahr’s Consumer Financial Services Group, and Greg Szewczyk, chair of the firm’s Privacy and Data Security Group, the discussion cuts through hype and uncertainty to provide clear, practical insights. Alan and Greg lead a lively discussion exploring the practical and policy-driven challenges posed by AI, particularly how existing legal frameworks often struggle to keep pace with rapid technological advancement.
Our panel includes:
- Charley Brown, leader of Ballard Spahr’s technology and patents teams, who explains how institutions can protect and capitalize on AI-enabled technologies;
- Dean Ball, former White House senior advisor and one of the architects of the White House AI Action Plan, who provides a rare inside look at the policy landscape;
- Kristian Stout, Director of Innovation Policy at the International Center for Law and Economics, who examines the intersections of AI, regulation, and competition; and
- Charlie Bullock, Senior Research Fellow at the Institute for Law and AI, who outlines practical frameworks for responsible, compliant AI governance.
Throughout the episode, the panel addresses crucial topics including privacy challenges, explainability requirements for AI-driven decisions, and the potential for AI to level the playing field for smaller institutions. Whether you’re in the C-suite, a compliance officer, or simply interested in how Washington’s decisions shape the future of finance, this episode delivers a clear-eyed look at what the White House action plan covers and what crucial issues still need attention.
Consumer Finance Monitor is hosted by Alan Kaplinsky, senior counsel at Ballard Spahr and founder of the firm’s Consumer Financial Services Group. We encourage listeners to subscribe on their preferred podcast platform for weekly insights into the consumer finance industry.
To listen to this episode, click here.
Consumer Financial Services Group
Podcast Episode: The CFPB’s Reg B Proposal: Key Changes and Industry Impact
This podcast brings listeners a timely and insightful discussion as our panel examines the CFPB’s proposed amendments to Regulation B under the Equal Credit Opportunity Act (ECOA). As our regular listeners know, we recently released an episode, and we are providing this additional special episode in light of a development we consider both time-sensitive and exceptionally important.
The discussion is hosted by Alan Kaplinsky, senior counsel, founder and former chair for 25 years of Ballard Spahr’s Consumer Financial Services Group, and features these distinguished experts in the field:
- Bradley Blower, founder of Inclusive Partners LLC.
- John Culhane, Jr., senior partner and charter member of Ballard Spahr’s fair lending team.
- Richard Andreano, Jr., practice group leader for Ballard Spahr’s Mortgage Banking Group and the head of Ballard Spahr’s fair lending team.
Together, the panel takes listeners through the sweeping changes proposed to Reg B, including the elimination of the longstanding disparate impact provisions, significant revisions to discouragement standards, and new limitations on special purpose credit programs for for-profit entities. The conversation covers the legal and political motivations behind the proposal, references to recent Supreme Court decisions, and the implications for lenders, regulators, and consumers. The group also addresses the unusually short 30-day comment period and speculates on why the CFPB may be moving quickly to finalize the rule. Tune in for expert analysis, must-know takeaways, and predictions about industry impact and possible legal challenges. This episode is essential listening for anyone invested in the future of consumer financial services and fair lending.
We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.
To listen to this episode, click here.
Consumer Financial Services GroupCFPB Funding Issues Seem to Be Coming to a Head
As we have previously reported, a lawsuit was brought early this year by the unions representing CFPB employees against Acting CFPB Director Vought and the CFPB in the D.C. District Court.
The court months ago enjoined the CFPB from terminating some 1,400 employees and taking certain other actions in pursuit of Vought’s goal of minimizing the CFPB while the lawsuit is pending.
Vought recently filed a notice with the court advising Judge Jackson that the CFPB is rapidly running out of funds and is unable to request additional funds because of a written legal opinion given to Vought by the Department of Justice’s Office of Legal Counsel (OLC) that he may not lawfully request any funds from the Federal Reserve Board while there is no “combined earnings of the Federal Reserve System.”
Under the Dodd-Frank Act, the CFPB may be funded only out of such “combined earnings” and since September 2022, the Federal Reserve System, on a combined basis, has been incurring massive losses. Vought is seeking clarification from the district court that it will not be in violation of the injunction if the CFPB needs to terminate employees and take certain other enjoined actions because of its lack of funds and its inability because of the OLC opinion, to request additional funds from the Fed.
The labor unions responded to the CFPB’s notice by arguing that there is no legal impediment precluding Vought from seeking additional funds from the Fed because “combined earnings” in the Dodd-Frank Act means combined revenues and not combined profits. They further argue that the injunction should be “clarified” so as to require the CFPB to seek additional funding from the Fed.
The CFPB responded by making the following points, taken from the table of contents of its brief:
“I. Plaintiffs Are Functionally Seeking a New Order—or a Modification to the Preliminary Injunction—to Compel the Acting Director to Request Funding from the Federal Reserve.
II. Plaintiffs Have Not Established that the Court May Order the Acting Director to Seek Funding from the Federal Reserve.
- The Court May Not Modify the Preliminary Injunction Because Defendants’ Appeal of the Preliminary Injunction Order Remains Pending.
- Plaintiffs Cannot Establish a Likelihood of Success on the Merits of Their Claims for Wholesale Supervision of CFPB Activities Pleaded in the Amended Complaint Because the D.C. Circuit’s Opinion Is the Law of the Circuit and Law of the Case.
- Plaintiffs Have Not Established Any of the Criteria for Obtaining the Mandatory Injunctive Relief That They, in Effect, Are Seeking.
III. Plaintiffs Are Incorrect that the “Combined Earnings of the Federal Reserve System” Refers to the Federal Reserve’s Revenues Rather than Its Profits.
- Plain Meaning.
- Statutory Context and Structure.
- Background Presumptions and Legislative Context.
- Legislative History and Purpose.
IV. If the Court Grants Relief to Plaintiffs, It Should Identify with Specificity What It Is Ordering Defendants to Do.
V. Any Order that Explicitly or by Implication Compels the Acting Director to Seek Funding from the Federal Reserve Should Be Temporarily Stayed.”
The latest development in the case is that a group of former Fed employees has filed a motion to submit an amicus brief in support of the plaintiffs.
The proposed amicus brief makes the following points, taken from the table of contents of the brief:
“1. The Federal Reserve continues to generate “combined earnings” even under OLC’s definition of that term.
2. The OLC opinion’s analysis of “combined earnings” is mistaken.
- The opinion’s interpretation of “combined earnings” is based on private-enterprise concepts that do not apply to the nation’s central bank.
- The opinion offers an implausible account of why Congress might have intended to limit the CFPB’s funding to the Federal Reserve’s “profits.”
3. Congress could have foreseen that the Federal Reserve would at times lacks “profits.”
4. Transferring money to the CFPB when the Federal Reserve lacks “profits” does not impede the Federal Reserve’s independence or operations.
- The opinion fails to consider the implications of its own interpretation on the operations and independence of the Federal Reserve.”
The CFPB opposed the motion only on the basis that it was untimely filed. The district court nonetheless granted the motion.
In deciding how much weight to give to this amicus brief, we think that Judge Jackson should consider the following factors:
None of the proposed amici were in the accounting department at the Fed and none of them purport to be experts with respect to generally accepted accounting principles (GAAP) or with respect to Fed accounting principles to the extent that they differ from GAAP.
None of them were involved in drafting or advising the Fed or Congress about the language in Dodd-Frank which dealt with how the CFPB would be funded.
Most importantly, they all left the Fed before September 2022 when the Federal Reserve System started and continued to lose money on a combined basis and therefore, none of them were ever consulted about how that would impact funding for the CFPB.
Even if the Federal Reserve System has finally turned the corner and now has profits on a combined basis (which has not yet been established by any court or the Fed itself), the amici fail to explain how the CFPB can lawfully fund the CFPB when 10 of the 12 Federal Reserve Banks still have approximately $240 billion of accumulated losses incurred after September 2022 which are reflected as deferred assets on the balance sheets of those Reserve Banks.
We will continue to monitor developments in this case.
Alan S. Kaplinsky and John L. Culhane, Jr.
In Fiscal Year 2026, ending September 30, 2026, the CFPB will need $279.6 million just to maintain its activities that are required by law, Bureau Acting Director Russell Vought wrote in letters to House and Senate appropriators and President Trump.
Under Section 1017 of Dodd-Frank, the CFPB may be funded only from the “combined earnings” of the Federal Reserve System (see here, here, and here; see our Podcast here). In the past, under the leadership of then-Director Rohit Chopra, the Bureau requested funds from the Fed after September 2022, when the Fed started losing money on a combined basis, and the Fed provided those funds.
Apparently, in making those requests, the CFPB took the position that “earnings” means “revenue” and not “profits.”
However, in a November 7 opinion interpreting Section 1017, the Justice Department’s Office of Legal Counsel determined that the Fed does not have “combined earnings” because it has been losing money due to the interest rate environment and, therefore, no funds may be lawfully provided to the Bureau.
In a letter to Congressional appropriators and President Trump, Acting CFPB Director Russell Vought, wrote that, “Because the Federal Reserve currently has no profits, OLC has concluded that the Federal Reserve System has no combined earnings from which the Bureau can legally request funds at this time.”
Under the position taken in the DOJ opinion, Congress would have to appropriate funds for the Bureau during the times that the Fed is unable to provide funds.
Trump administration officials, including Vought, have said they want to abolish the CFPB. In an October media appearance, Vought said he expects the Bureau to cease operations in two or three months. In his letters to Congressional appropriators and President Trump, Vought said he expects the CFPB to run out of funds sometime during the First Quarter of Fiscal Year 2026.
In his letters, Vought does not request any funding for the Bureau. He wrote that he simply was fulfilling his responsibility under the law to inform the President and members of Congress that the Bureau is running out of money.
The National Treasury Employees Union has sued Vought and others, charging that the administration’s plan to terminate 1,400 employees amounted to shutting down the agency, something only Congress could do. In a recent filing, the Union asserted that the administration was using a “novel” definition of “combined earnings” to try to accomplish the same result.
A divided three-judge panel of the D.C. Circuit Court of Appeals had dissolved a lower court injunction blocking the firings, which it said the Trump administration could resume. However, when it dissolved the injunction, the panel withheld the mandate in the case to give the plaintiffs the opportunity to file a petition for a rehearing en banc. The plaintiffs subsequently did so. The D.C. Circuit has not yet acted on the petition for a rehearing en banc.
Vought notes in his letter that the injunction requires the CFPB to operate at a budget level based on the original Dodd-Frank provision that capped the funds that the CFPB could request from the Fed at 12% of the Fed’s 2009 operating expenses, adjusted for inflation. However, the One Big Beautiful Bill reduced the cap to 6.5% of the Fed’s 2009 operating expenses. The letter indicates that the 12% and 6.5% amounts are $785 million and $466.80 million, respectively. His letter also advises that to comply with the injunction, the Bureau would need $677.5 million, in Fiscal Year 2026.
The letters were sent to President Trump, Sen. Susan Collins, (R-ME), Chair of the Senate Appropriations Committee; Sen. Patty Murray, (D-WA), Vice Chair of the Senate Appropriations Committee.; Rep. Thomas Cole, (R-OK), Chair of the House Appropriations Committee and Rep. Rosa DeLauro, (D-CT), the ranking Democrat on the House Committee.
Alan S. Kaplinsky, John L. Culhane, Jr., and Richard J. Andreano, Jr.CFPB Examiners to Read ‘Humility Pledge’ When They Begin Exams
The Trump administration is ordering all CFPB examiners to read a “Humility Pledge” to officials at supervised entities before conducting exams.
In making the announcement, CFPB officials sharply criticized the Biden administration’s approach to exams. “Previously, under the leadership of Director Chopra and Biden’s Director of Supervision Lorelei Salas, a former Soros activist who was put on leave in February 2025, this division was the weaponized arm of the CFPB,” the CFPB said.
The Bureau continued that while “these exams were previously done with unnecessary personnel, outrageous travel expenses, and with the thuggery pervasive in prior leadership, they will now be done respectfully, promptly, professionally, and under budget.”
Bureau officials said that examiners no longer will ask what they called invasive and irrelevant questions or demand expansive information they do not need.
“The Bureau’s goal is to work collaboratively with the entities to review entities’ processes for compliance and/or remedy existing problems,” the agency said.
The president of the union representing CFPB employees blasted Bureau Acting Director Russell Vought for the plan.
“Instead of traumatizing CFPB workers with his roleplay fantasies, Vought should resign so we can finally do our jobs protecting Americans from Wall Street fraud again,” CFPB Union President Cat Farman, said.
Here is the “Humility Pledge” that examiners will read:
CFPB HUMILITY IN SUPERVISION PLEDGE
The upcoming Supervision examination cycle is going to be fundamentally different from the prior ones under the former Director Chopra. For 2026 examinations, in line with the Memorandum on Supervision and Enforcement Priorities (April, 2025) the Bureau will focus its supervision resources on pressing threats to consumers, particularly service members and their families, and veterans, and in the areas that are clearly within the Bureau’s statutory authority. The Bureau will also avoid, where possible, duplication of supervision, where States or other regulators are already doing that job.
For this round of examinations, there will be greater transparency regarding the process and clarity regarding expectations. Bureau-supervised entities will receive advance notice of scheduled examinations providing them with the opportunity to plan. Requests related to exams will focus on Bureau priorities and hew to the defined scope of the exam and not venture into areas outside the scope. The scope of the exams will be on identified priority markets and the resulting findings will focus on pattern and practice violations of law where there is tangible and identifiable consumer harm.
Likewise, Matters Requiring Attention will focus on pattern and practice violations of law where there is substantive and identifiable consumer harm or clear violations of the disclosure requirements.
No longer will the Bureau ask for expansive data sets or other information which may seem unrelated to the exam or include information inconsistent with Bureau priorities. Any follow-up requests by examiners will first be discussed with an entity and will be tailored to the scope of the exam and the information already received from the entity. Examination times, which used to be 8 weeks, will be reduced commensurate with the defined scope of exams.
Examiners will be encouraged and incentivized to complete the work promptly and under budget. Supervised entities can expect timely responses from the Bureau and appropriate follow-up on outstanding and open matters such as exams and MRAs.
In sum, the Bureau’s goal is to work collaboratively with the entities to review entities’ processes for compliance and/or remedy existing problems. The Bureau is doing so by encouraging self-reporting and resolving issues in Supervision, where feasible, instead of via Enforcement.
Noticeably absent from the CFPB’s notice regarding the humility pledge is any indication of when examinations of supervised entities will begin and whether, consistent with its April 2025 Memorandum on Supervision and Enforcement, the CFPB intends to examine only or mostly large banks (those having assets of $10 billion or more) and not nonbanks subject to CFPB supervision. That is not surprising in light of the fact that Acting Director Vought has previously stated that (i) the CFPB will run out of funds within a month or so and (ii) he will not request any additional funds from the Fed, given an opinion he recently received from DOJ’s Office of Legal Counsel stating that the CFPB may not lawfully be funded by the Fed because it has no “combined earnings.” In light of those two statements, one might reasonably question why the CFPB released the Humility Pledge now.
Alan S. Kaplinsky, John L. Culhane, Jr., and Richard J. Andreano, Jr.Trump Administration Asks U.S. Supreme Court to Allow President to Fire FTC Member Without Cause
The U.S. Supreme Court should abandon a 90-year-old precedent and decide that President Trump should be permitted to fire Rebecca Slaughter from the Federal Trade Commission (FTC) without cause, Solicitor General D. John Sauer told the Court on December 8 during oral arguments.
“I think broad delegations to unaccountable independent agencies raise enormous constitutional and real-world problems for individual liberty,” Justice Brett Kavanaugh, said. Although, as we address below, Justice Kavanaugh expressed concern about the implications for the Federal Reserve Board if the Court determines that a President can fire an FTC Commissioner without cause.
Justice Sonia Sotomayor said that the Trump administration is “asking us to destroy the structure of government and to take away from Congress its ability to protect its idea that the government is better structured with some agencies that are independent.”
After being dismissed from the FTC without cause earlier this year, Alvaro Bedoya and Slaughter promptly filed suit, contending that their dismissals were illegal since the FTC is supposed to be an independent agency.
They said that President Trump’s decision was in direct violation of federal law, citing the 1935 Supreme Court ruling, Humphrey’s Executor, in which the court upheld the constitutionality of the for-cause removal standard applicable to FTC commissioners (Bedoya subsequently resigned from the commission and no longer is part of the suit.)
President Trump has attempted to fire Democrats from several other boards and commissions, including the National Labor Relations Board, the Merit Systems Protection Board, and the National Credit Union Administration. Several of the ousted board and commission members have likewise filed suit.
Judge Loren AliKhan of the U.S. District Court of the District of Columbia ruled that Slaughter had been illegally fired, as did two of the judges on the U.S. Court of Appeals for the District of Columbia’s three-judge panel. However, Chief Justice John Roberts issued a stay of the appellate court’s order.
In 1935, in Humphrey’s the Court ruled that FTC members could only be fired for cause. Attorneys for Slaughter cited that precedent in arguing that she could only be removed for cause.
However, Chief Justice John Roberts said that a great deal of time has passed since that decision. He referred to Humphrey’s as a “dried husk,” adding that the current FTC bears little resemblance to the FTC that existed when Humphrey’s was decided.
Humphrey’s was “addressing an agency that had very little, if any executive power,” Roberts added.
Arguing on behalf of the Trump administration, Sauer said that Humphrey’s was “grievously wrong when decided.” He said that the decision insulates the commission from political accountability.
Sauer said that President Trump should be permitted to fire Slaughter since the FTC now exercises some executive powers. “All executive power is vested in the President,” he said. He added, “The President is going to have all the executive power that the constitution dictates.”
In response, Slaughter’s attorney, Amit Agarwal, said Slaughter’s firing was not legal. “The President’s constitutional duty to execute the law does not give him the power to violate that law with impunity,” he told the court.
He added that the administration fired Slaughter “without cause in violation of the FTC Act as authoritatively construed by this Court.”
Agarwal said the FTC case has broad implications for other independent agencies.
He said that if an FTC member can be removed without cause, “everything would be on the chopping bloc.”
Justice Ketanji Brown Jackson seemingly agreed, having previously said to General Sauer, “[Y]ou’re asking us to ask the question with respect to each agency, what are they doing. That’s the necessary result of the argument that you’re making in this case. And I guess my point is one way to avoid these difficult line-drawing problems would be to let Congress decide.” She later added that an agency that exercises some executive functions is not necessarily an executive agency.
The Justices presented tough questions to both Sauer and Agarwal, with many focusing on what factors distinguish an executive agency fully subject to the control of the President from an independent agency that is less subject to the control of the President. There were no good answers.
With regard to the Federal Reserve Board, in questioning Sauer, Justice Kavanaugh stated “can I ask you about the Federal Reserve. The other side says that your position would undermine the independence of the Federal Reserve and they have concerns about that, and I share those concerns.” He then asked Sauer how he would distinguish the Fed from agencies such as the FTC.
Sauer responded that the Court has previously observed “that the Federal Reserve is a quasi-private uniquely structured entity that follows a distinct historical tradition of the First and Second Banks of the United States.” Sauer added that the Fed “has been described as sui generis.” That is not a clear path for distinguishing the Fed from agencies such as the FTC.
Many news organizations have predicted that the Supreme Court will rule in favor of the Trump administration. While it appears that the Justices are concerned about the implications on other federal agencies, particularly the Fed, of a ruling that a President may fire an FTC Commissioner without cause, it does appear that the Court is heading for such a ruling.
Richard J. Andreano, Jr., John L. Culhane, Jr., and Alan S. KaplinskyHUD Recently Announced the 2026 Loan Limits for FHA Forward Mortgages and HECMs
The U.S. Department of Housing and Urban Development (HUD) recently announced the 2026 loan limits for FHA insured forward mortgage loans and FHA insured Home Equity Conversion Mortgages (HECMs). The announcements were made in Mortgagee Letter 2025-23 and Mortgagee Letter 2025-22, respectively.
For forward mortgage loans in non-high-cost areas, the amount for a single unit home increased from $524,225 in 2025 to $541,287 in 2026. In high-cost areas, the amount for a single unit home increased from $1,209,750 in 2025 to $1,249,125 in 2026. In Alaska, Guam, Hawaii, and the U.S. Virgin Islands, the amount for a single unit home increased from $1,814,625 for 2025 to $1,873,625 for 2026. For HECMS, the maximum claim amount for all areas increased from $1,209,750 in 2025 to $1,249,125 for 2026.
Each Mortgagee Letter includes a link to a HUD website that can be used to find the applicable limit for specific areas nationwide.
On December 5, 2025, Rise Economy, the National Reinvestment Coalition and the Woodstock Institute filed a lawsuit against the CFPB and its Acting Director Russell Vought in the Federal District Court for the Northern District of California (San Francisco) seeking declaratory and injunctive relief related to Vought’s determination not to seek funding from the Federal Reserve Board because of an opinion provided to the CFPB by the Office of Legal Counsel of the Department of Justice (OLC) that it would be unlawful for the CFPB to make such a request based on there being no “combined earnings of the Federal Reserve System.” The lawsuit was brought under Section 706 of the Administrative Procedure Act which directs courts to hold unlawful and set aside agency actions that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
The Plaintiffs’ Claim for Relief alleges the following:
- The “Defendants” decision not to request funding from the Federal Reserve Board of Governors based on their determination that the Federal Reserve System does not currently have ‘combined earnings’ is “final agency action.”
- Vought “is required by law to determine the amount of funding reasonably necessary to carry out the CFPB’s authorities so that the Board of Governors of the Federal Reserve System can transfer that amount to the CFPB subject to a cap….Contrary to that statutory command, Defendant Vought has not determined the amount of funding reasonably necessary to carry out the CFPB’s authorities and communicated that determination to the Board of Governors of the Federal Reserve System … so that the necessary funds can be transferred to the CFPB.”
- “No statute authorizes Defendants to make determinations about the status of Federal Reserve System finances, or the funding available from the Federal Reserve System, or to decline to request funding based on such determinations.”
- “Defendants’ refusal to request funding from the Federal Reserve System is based on an incorrect interpretation of the term ‘combined earnings’ of the Federal Reserve System.”
- “In any event, the Federal Reserve System currently has ‘combined earnings,’ even under Defendants’ incorrect interpretation of the term.”
- “Defendants’ refusal to request from the Board of Governors of the Federal Reserve System funds reasonably necessary to support the CFPB’s authorities was thus arbitrary, capricious, and not in accordance with law.”
The Plaintiffs have asked the court to:
- “Declare that Defendants’ determination not to request funding from the Federal Reserve Board of Governors is unlawful.”
- Set aside Defendants’ determination not to request funding from the Federal Reserve Board of Governors.
- “Issue preliminary and permanent relief requiring Defendants to request funding from the Federal Reserve Board of Governors in the amount, determined reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law, taking into account such other sums made available to the Bureau from the preceding year (or quarter of such year).”
Here are a few observations and questions about this new lawsuit:
There is a question that comes to mind in light of the following: (a) the lawsuit brought by the NTEU and certain other organizations against Vought and the CFPB early this year in the Federal District Court for the District of Columbia challenging Vought’s actions to shut down the CFPB, an already pending preliminary injunction issued by Judge Amy Berman Jackson precluding the terminations of 1,400 or so CFPB employees and certain other actions; (b) a reversal of Judge Jackson’s opinion by the D.C. Circuit Court of Appeals based on there not being any “final agency action,” with the D.C. Circuit withholding the issuance of its mandate; (c) a pending petition for rehearing en banc; and (d) most importantly, a notice to Judge Jackson asking her to clarify her preliminary injunction in light of Vought’s decision not to seek any further funding for the CFPB as a result of the OLC opinion. With that background, the question is, why did the Plaintiffs file this new lawsuit and why did they file it in the Northern District of California?
We think it was filed in order to have a “clean” complaint based entirely on current events involving the alleged shutdown of the CFPB including Vought’s formal decision not to seek any additional funding for the CFPB because of a lack of combined earnings of the Federal Reserve System rather than to rely upon the D.C. lawsuit which is in a convoluted procedural posture and where the preliminary injunction issued by the district court was based on a factual record that is obsolete and where that injunction was reversed by a panel of the D.C. Circuit based on the record not reflecting “final agency action.”
We think that Public Citizen chose the Northern District of California for filing its lawsuit because the 9th Circuit Court of Appeals is known for having liberal judges.
The case has been assigned to Senior Judge Edward J. Davilla who was appointed to the bench by President Obama.
In light of the fact that the CFPB has now raised before Judge Jackson the core funding issue that is the gravamen of the new lawsuit, a second question is whether the CFPB will respond by seeking to have venue transferred to Judge Jackson since it seems to be inefficient for two courts to be dealing with the same complex issue.
A third question is whether the CFPB may move to dismiss the lawsuit based on the argument that the Federal Reserve Board is an indispensable party. The same motion may also be appropriate in the D.C. case with regard to the funding issue. A court order directing the CFPB to request funds from the Fed would be an exercise in futility if the Fed believes that remitting funds to the CFPB would be unlawful in light of its financial situation or its interpretation of the CFPB funding language in Dodd-Frank.
A fourth question is whether the three Plaintiffs have standing to file the lawsuit. In that connection, the three organizations assert that, in order to perform their businesses, they need data supplied by the CFPB under the Home Mortgage Disclosure Act, the CFPB’s consumer complaint portal, and a final regulation pertaining to small business loan data collection.
A fifth question is whether, if the court determines that “combined earnings of the Federal Reserve System” means profits and not revenues, there will be a need to conduct probing discovery from the Federal Reserve Board.
A sixth question is whether, if the court concludes that “combined earnings of the Federal Reserve System” means profits, there will be a need to conduct further discovery to determine whether the Federal Reserve System has “combined earnings” as of today or whether, in light of the fact that the Federal Reserve System has had approximately $240 billion of accumulated losses/deferred assets since September 2022, it has to zero out those accumulated losses/deferred assets before remitting funds to the CFPB?
A seventh, and, for now, our final question, is whether, if the court concludes that “combined earnings” of the Federal Reserve System means profits, will that implicitly invalidate all actions taken by the CFPB after September 2022 until now including, among other things, regulations, examinations and enforcement?
Although the Defendants have not yet responded to the complaint, the Plaintiffs filed a motion for summary judgment on December 9. Even though such an early motion is permitted, courts almost always postpone consideration of the motion because:
- The defendant has not yet answered or had any chance to develop facts.
- Rule 56(d) allows the nonmovant (the defendant) to show by affidavit or declaration that they need discovery to oppose the motion. Courts routinely grant this relief.
- Many judges view a very early summary judgment motion as premature or inefficient and will defer it until after at least some discovery.
We will cover the motion for summary judgment in a later blog post and we will continue to follow these cases and to report on further developments as they arise.
Alan S. Kaplinsky, John L. Culhane, Jr., and Richard J. Andreano, Jr.Progressive State Leaders Committee Chooses Chopra to Lead Working Group
The Progressive State Leaders Committee has tapped former CFPB Director Rohit Chopra to head a new Consumer Protection and Affordability Working Group. The Group is the 501(c) (4) affiliate of the Democratic Attorneys General Association.
“As part of its greater effort to tackle unfair and anticompetitive practices that drive up the cost of living and to protect consumers by filling essential gaps created by the enforcement failures of the Trump administration, the Consumer Protection and Affordability Working Group’s main priorities will be to promote a fair economy, make life more affordable for Americans, protect people’s personal data, and defend consumers from online abuses,” the committee said, in announcing the choice. “The working group will develop strategies and toolkits around potential nationwide initiatives on health care, technology, and financial services.”
In addition to serving as CFPB Director during the Biden administration, Chopra served as an FTC Commissioner from 2018 to 2021.
“At a time when technology is quickly advancing with the rise of AI and the cost of living is skyrocketing, it is crucial that attorneys general take steps to address these emerging issues, and the establishment of this group will help us engage more effectively in this new landscape,” said Sean Rankin, president of the PSLC.
“As Americans face an onslaught of price hikes and fees, state attorneys general are tackling today’s cost-of-living crisis by implementing policies that help families and businesses that play by the rules,” Chopra said, in discussing the effort he will lead. “And as new technologies seek to reshape our everyday lives, state attorneys general will play a key role by investigating consumer abuses and blocking anticompetitive practices. I’m looking forward to teaming up again with state attorneys general, whose voices and actions are pivotal in this moment.”
Consumer Financial Services GroupFederal Court Enjoins DEI and Gender Executive Orders
The City of Seattle recently succeeded in securing a partial injunction against the Trump administration’s enforcement of two executive orders (EOs) under which the administration threatened to withhold millions in federal grant funding to the City. Judge Barbara J. Rothstein’s decision in the Western District of Washington, if upheld on appeal, has significant implications for federal grant recipients and the conditions that may be imposed on federal funding related to diversity, equity, and inclusion (DEI) and gender issues.
Background
The two executive orders at issue, EO 14173 (the DEI Order) and EO 14168 (the Gender Order), were issued by the Trump administration earlier this year. The City of Seattle challenged the legality of the DEI and Gender Orders, arguing that they violate constitutional principles and exceed statutory authority by conditioning federal funding on compliance with the administration’s policy directives. The City asserted that these orders threaten the loss of approximately $370 million in federal funds supporting critical infrastructure, public safety, and social programs, due to Seattle’s policies promoting DEI and gender equality.
The DEI Order requires federal agencies to include terms in all contracts and grants mandating that recipients certify compliance with federal anti-discrimination laws and affirm that they do not operate any programs promoting DEI initiatives that violate such laws. The Gender Order directs agencies to ensure that federal funds are not used to “promote gender ideology,” as defined by the administration, and to assess grant conditions accordingly. Federal agencies implemented these requirements in their grant agreements and application processes, warning recipients of potential audits, funding clawbacks, and/or termination for noncompliance.
Court’s Analysis
Judge Rothstein granted the preliminary injunction on October 31, 2025, enjoining enforcement of the two EOs. According to the court, the DEI Order “does not simply require that grant recipients comply with federal antidiscrimination laws,” but rather “is meant to advance the Trump administration’s own interpretation of ‘discrimination.’” The court found that Seattle is likely to succeed on the merits of its claims under the Administrative Procedure Act (APA), specifically that the administration’s actions:
- Violate the Separation of Powers and Exceed Statutory Authority: The court held that the executive branch may not unilaterally impose new funding conditions not authorized by Congress. The DEI and Gender Orders were found to advance the administration’s own interpretations of anti-discrimination law and “gender ideology,” rather than simply requiring compliance with existing federal law. The court emphasized that only Congress has the power to set conditions on federal appropriations, and that the executive’s attempt to do so was unconstitutional and in excess of statutory authority.
- Are Arbitrary and Capricious: The court determined that the administration failed to provide a reasoned explanation for the new funding conditions, and that the orders were designed to advance a particular policy agenda rather than ensure lawful use of federal funds. The court noted that the administration’s interpretation of anti-discrimination laws was inconsistent with established legal precedent and, in some cases, directly conflicted with statutory requirements to promote diversity and inclusion.
- Cause Irreparable Harm: The court credited Seattle’s evidence that the threatened loss of federal funding would cause immediate and irreparable harm to essential city services, public safety, infrastructure projects, and vulnerable populations. The court also recognized that the uncertainty and instability created by the EOs themselves constituted an ongoing injury.
Relief Granted
The court enjoined the federal government from enforcing the challenged provisions of the DEI and Gender Orders against Seattle, ordered that any actions taken to implement or enforce those provisions be treated as null and void, and required the government to take immediate steps to effectuate the order. The court denied the government’s requests for a stay pending appeal and for Seattle to post a bond.
Key Takeaways
- The decision underscores there are limits to congressional authority over federal appropriations and executive power in setting grant conditions.
- The Court held that federal agencies may not impose new or expanded conditions on grant funding that are not expressly authorized by Congress.
- Grant recipients facing the threat of funding loss due to such executive actions may be entitled to injunctive relief.
This ruling provides important guidance for public entities and other federal grant recipients navigating the intersection of federal funding, executive policy directives, and constitutional limitations. Recipients should closely monitor further developments, including any appeals of this decision, and review their compliance obligations in light of this decision.
Brian D. Pedrow, Shirley S. Lou-Magnuson, and Noah Jennings
While Congress Slept: Health Benefit Developments During the Shutdown
Although much of our attention this fall was focused on the government shutdown, health plan sponsors may be interested in several less-publicized developments affecting group health plans.
The Upshot
- Two universities have been accused in lawsuits of breaching their fiduciary duties in offering a health benefit option that is always or almost always unfavorable from a financial perspective when compared with another health plan option.
- A court has vacated provisions in the regulations under Section 1557 of the Affordable Care Act that treat discrimination based on gender identity as sex discrimination.
- New FAQs allow employers to provide fertility benefits under a separate plan that stands apart from any other group health plan.
The Bottom Line
The two lawsuits and the administrative guidance, along with factors affecting the cost of health coverage, bear watching as each of these matters is likely to lead to further developments in 2026.
As all eyes were focused on the looming and eventual federal government shutdown this fall, actions affecting health benefit plans continued in the courts and some administrative agencies. Plan sponsors may wish to consider how these changes will affect their benefits in the coming year.
Plan Sponsor Responses to New Plan Design Litigation
In the wake of two novel cases, some plan sponsors spent the shutdown taking a closer look at the choices offered through their medical plans.
In cases filed this year against Northwestern University and the University of Rochester, plan participants have alleged that the coverage options offered through their respective medical plans breached ERISA’s fiduciary duties. Their complaints are founded on a new and unprecedented allegation; the plaintiffs claim that, in nearly all fact settings, the PPO option elected by the plaintiffs resulted in higher total expenditures (accounting for participant contributions and cost-sharing expenses, like deductibles and copayments) than they would have incurred if they had elected the high-deductible option offered under the plan. The plaintiffs argue that it was a fiduciary breach (1) to offer such skewed options, and (2) to fail to notify participants that one option is financially superior to another.
The merits of both cases are being tested in the courts. In October, Northwestern filed a motion to dismiss, arguing, in part, that the plaintiffs incurred no harm and, in fact, received the benefits offered to them at the cost they were told. Nevertheless, in view of the allegations, some plan sponsors have chosen to analyze their own coverage options to see whether one option (such as a high premium PPO option) results in higher total costs for participants, regardless of their medical claims, when compared to other options (such as a low premium high deductible option) covering the same expenses. If this proves to be the result for their designs, plan administrators may want to consider whether it would be sensible to enhance their messaging to participants to further address the relative financial merits of their medical plan options.
Court Vacates ACA Nondiscrimination Regulations on Gender Identity
A federal district court in Mississippi has issued an order that universally vacates provisions in the regulations under Section 1557 of the Affordable Care Act (ACA) that treat discrimination based on gender identity as sex discrimination. Under this ruling, various provisions in the Section 1557 regulations would no longer apply. Some of these vacated provisions relate specifically to matters of gender identity, including those that prohibit limits on health services based on gender identity and limits on coverage for health services related to gender transition. Other parts of the order extend more broadly. For example, by its terms, the order vacates the procedural requirements for health plans and health care providers to maintain nondiscrimination policies and issue nondiscrimination notices because those requirements refer to a definition of sex discrimination that includes gender identity. The order does not simply restrict those policies and notices from applying to gender identity; rather the requirement to maintain these policies and produce these notices has been vacated entirely. The order takes a similar approach to certain requirements affecting Medicaid programs.
The decision proceeds in the same direction charted by the Trump administration on gender identity and gender transition issues. Additionally, the broad application to procedural requirements in Section 1557 aligns with the course followed in regulations issued during the first Trump administration. Future regulations may follow suit.
In issuing its decision, the court declined to apply the Supreme Court’s ruling in Bostock v. Clayton County, which held that sex discrimination under Title VII of the Civil Rights Act included discrimination based on gender identity. The prohibition against sex discrimination in Section 1557 is grounded in Title IX (not Title VII). Citing to the Supreme Court’s recent decision on gender affirming care for minors in United States v. Skrmetti, the court found that Congress did not intend that Title IX encompass discrimination based on gender identity. However, the ruling stands in contrast to some rulings, issued in the wake of the Bostock decision, that found that the scope of Title IX is informed by the scope of Title VII.
Health plan sponsors and health care providers should continue to follow this, and other litigation relating to the scope of Section 1557. For example, the Ninth Circuit has recently remanded a case to a federal district court to re-examine its analysis of sex discrimination under Section 1557 in view of Skrmetti). Plan sponsors and providers should also stay attuned for any updated regulatory guidance that the Trump administration issues under Section 1557.
FAQs Address Fertility Benefits
While an increasing number of employers have been enhancing the fertility benefits offered through their medical plans, the Departments of Labor, Health and Human Services, and the Treasury have issued a new set of FAQs permitting employers to offer fertility benefits as a stand-alone option. The guidance treats certain stand-alone fertility benefit arrangements as “excepted benefits,” which are exempt from a range of otherwise applicable rules. In particular, excepted benefits do not have to meet the Affordable Care Act requirement to provide 100% coverage for certain preventive care expenses, which a plan providing only fertility benefits would fail to meet. In addition, excepted benefits do not need to meet the prohibition against annual and lifetime dollar caps on essential health benefits. Thus, even if fertility benefits are deemed to be essential health benefits (generally determined state-by-state), a qualifying stand-alone fertility plan may establish dollar limits on the benefits it provides. In short, this means that certain fertility benefits may be provided to participants who are not enrolled in the employer’s medical plan (similar to the eligibility rules for many employee assistance programs).
To be regarded as an excepted benefit, the new guidance requires stand-alone fertility benefit plans to meet certain requirements. Most significantly, group health plan sponsors will need to make sure that their stand-alone fertility benefit plans are either insured or provide limited benefits and that they do not coordinate in specified ways with the benefit coverage of any plan that the plan sponsor maintains.
The publication of these FAQs coincided with the administration’s announcement of an arrangement with a pharmaceutical manufacturer to make certain fertility drugs available at a reduced cost through the government discount program known as TrumpRx.
Shutdown Resolution
The government shutdown did not result in the changes that Democrats in Congress sought: to reverse cuts in Medicaid benefits and restore certain subsidies available for coverage under the public health insurance exchanges established by the Affordable Care Act. As a result, it is expected that the number of uninsured and underinsured individuals will increase, with a downstream effect on the cost of employer-provided group health benefits. The affordability of health coverage continues to be a hot-button issue as the enhanced subsidies will soon expire, and as Congress approaches the end of the year with a new budget deadline awaiting in January.
Ballard Spahr lawyers continue to follow these, and other legal developments affecting employer-sponsored health benefit plans and are prepared to answer your questions about this ever-evolving legal environment.
D. Finn Pressly and Edward I. Leeds
H-1B and H-4 Visa Appointment Disruptions
U.S. employers and employees with nonimmigrant visa status should be aware of significant disruptions in the scheduling of H-1B and H-4 visa interviews at U.S. embassies and consulates around the world, with the potential for broader disruptions. Many interviews scheduled on or after December 15, 2025, are being unilaterally rescheduled to several months later—some as late as June 2026—to allow for implementation of new Department of State security procedures, which require U.S. consulates to vet the “online presence” of H-1B and H-4 visa applicants.
Key Points:
Risk of Extended International Travel Disruption
- H-1B workers and H-4 dependents should only travel outside the U.S. if they already possess an H-1B or H-4 visa stamp that will be valid when they return to the country.
- Travel is strongly discouraged for those who need an H-1B or H-4 visa renewal or initial issuance unless they are prepared to remain abroad for several months.
- Applicants for other visa types (renewal and initial issuance) should be aware of potential process changes and delays when planning international travel.
Rescheduled Interview Dates
- Applicants whose visa interview was set for December 15, 2025, or later, should be prepared for the possibility of a revised date. Many interviews have been moved to mid-2026.
- If a visa applicant’s interview is rescheduled, the applicant should not try to attend the original appointment.
Further Operational Constraints Expected
- Visa applicants should anticipate fewer daily interview slots for some time while the new security reviews are implemented—a situation that may cause further delays beyond what has already occurred.
Check Consular Communications
- Visa applicants should log in regularly to their online visa profile for appointment updates and official notices from the consulate.
Biometrics (VAC) Appointments
- Biometric appointments are not impacted; visa applicants should attend as originally scheduled unless specifically notified.
Limited Rescheduling Options
- Visa applicants may only reschedule their interview once via the online system if they cannot attend their new appointment date.
- Fee receipts older than one year cannot be reused. If expired, applicants must start a new application process with payment.
Travelers Should Notify Employers Promptly
- Impacted travelers should inform HR/management immediately if affected; work planning adjustments may be needed due to extended absence.
Additional Financial Risks: $100,000 Fee Exposure
- In some circumstances, H-1B visa applicants who experience long delays may inadvertently trigger the $100,000 H-1B fee. Travelers are encouraged to notify their employers and consult with immigration counsel before finalizing travel plans.
Ballard Spahr’s Immigration Team can assist with questions regarding individual circumstances before making any international travel arrangements.
Dustin J. O'Quinn, Christopher A. Motta-Wurst and Juan Steevens
IRS Relief Alleviates Some—But Not All—ACA Reporting Issues
As employers gear up for another round of Affordable Care Act (Forms 1094 and 1095) reporting, they should consider guidance that may have been issued too late in the last reporting cycle for them to take into account but could provide partial relief for this annual headache this time around. The guidance makes it permissible for employers to post a website notice of availability of Forms 1095-B and 1095-C (Notice of Availability or Notice) with respect to the ACA forms rather than distributing the forms to every individual. This posting can be a useful cost-saving tool, but keep in mind that some states now have their own reporting requirements that may still require the ACA forms or similar state-issued forms to be automatically provided to individuals.
Notice of Availability: The Paperwork Burden Reduction Act, which was passed in December 2024, offers employers the choice to post a Notice of Availability rather than deliver a form to each individual. The Internal Revenue Service (IRS) issued guidance regarding this Notice option in February 2025. Because of this timing, some employers were not able to take advantage of the relief in connection with 2024 reporting. However, as the due date for reporting on 2025 approaches, employers should review this relief and determine whether they want to – and can — take advantage of the opportunity this year.
To avoid sending forms to all individual recipients, employers must:
- Post a Notice of Availability that is clear and conspicuous, in a location on the company’s website that is reasonably accessible to anyone who should receive a form. The Notice must use a font size large enough to call a viewer’s attention to the information. For example, a statement on the main page or a link on the main page could read “Tax Information.” The page with the actual instructions could include a statement in all capital letters, “IMPORTANT HEALTH COVERAGE TAX DOCUMENTS.”
- Include in the Notice of Availability:
- A statement that the individual may obtain a paper copy of the Forms 1095-B and 1095-C upon request;
- An email address or physical address to which a request for a paper statement can be sent; and
- A telephone number that the individual can use for questions.
Deadlines: Employers who choose to publish the Notice of Availability in lieu of delivery to their employees must post a compliant Notice no later than March 2, 2026, with respect to 2025 coverage. The posting must remain on the website until at least October 15, 2026.
Reporting to the IRS Remains in Place: Remember, the Notice of Availability applies only to forms that are required to be sent to employees. Employers must continue to submit ACA forms to the IRS by the requisite deadline.
State Law Requirements: Several states, including California, New Jersey, Rhode Island, Massachusetts, and Washington, D.C., have separate reporting and filing requirements with respect to employer health coverage. Employers seeking to comply with these state laws should keep in mind that they may vary from the federal rules with regard to timing and other requirements.
Subscribe to Ballard Spahr Mailing Lists
Copyright © 2025 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.
This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.