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Mortgage Banking Update - July 23, 2026

July 23, 2026

July 23 – 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 latest CFPB news, Colorado’s latest opt-out developments, the FTC’s proposed policy on the use of AI-powered tools by financial services firms, and other noteworthy updates. We also celebrate 15 years of our blog, Consumer Finance Monitor.

All content can be found previously published on Ballard Spahr’s Insights page.

 

 

Consumer Finance Monitor Podcast: Risk-Based AML/CFT Reform: What Financial Institutions Need to Know About the Joint Banking Agency and FinCEN Proposals

The latest episode of the Consumer Finance Monitor podcast examines a significant and coordinated regulatory initiative that could reshape anti-money laundering and countering the financing of terrorism (AML/CFT) compliance across the financial services industry.

In this episode, host Alan Kaplinsky and guest Celia Cohen, a partner in Ballard Spahr’s White Collar Defense and Investigations Group, analyze the joint notice of proposed rulemaking issued by the federal banking agencies Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and National Credit Union Administration—alongside a parallel proposal from Financial Crimes Enforcement Network (FinCEN).

Together, these proposals represent one of the most important efforts in years to modernize AML/CFT compliance frameworks, moving the system toward a more risk-based, effectiveness-driven model.

Key Topics Discussed Include:

  • A Shift Away from “Check-the-Box” Compliance
  • “Establish and Maintain” — and Prove It Works
  • SAR Filings and the Challenge of Judgment Calls
  • Impact Across Financial Institutions
  • Regulatory Signals: A Coherent Direction
  • What Institutions Should Be Doing Now

The Consumer Finance Monitor podcast will continue tracking developments as the rulemaking process advances and will revisit the topic when final rules are issued.

Consumer Finance Monitor is hosted by Alan Kaplinsky, senior counsel at Ballard Spahr, and the founder and former chair of the firm’s Consumer Financial Services Group. 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 Group

 

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Consumer Finance Monitor Podcast: Agentic Commerce Is Coming – Will the Legal System Be Ready?

Artificial intelligence (AI) is rapidly evolving from a tool that assists human decision-making into technology capable of acting independently. The next frontier, often referred to as agentic AI or agentic commerce, envisions AI agents negotiating contracts, making purchases, authorizing payments, and completing commercial transactions with little or no human intervention.

While enormous investments are being made to develop this technology, far less attention has been devoted to an equally important question: What legal infrastructure will govern autonomous commercial transactions? That is the focus of our latest episode of the Consumer Finance Monitor podcast being released today.

Our guests are Bridget McCormack, President and CEO of the American Arbitration Association–International Centre for Dispute Resolution (AAA) and former Chief Justice of the Michigan Supreme Court, and David Hoffman, the William A. Schnader Professor of Law at the University of Pennsylvania Carey Law School. They are the authors of the thought-provoking paper, Agentic Commerce Needs Legal Infrastructure—and the Courts Are Coming, which is published here on AAA’s website.

During our discussion, Bridget and David explain why the legal system is unprepared for a world in which AI agents, not humans, enter into contracts and conduct transactions at machine speed. Traditional contract law is built around concepts such as human assent, notice, disclosure, authorization, and intent. Those doctrines become much more difficult to apply when the “buyer” or “seller” is an autonomous AI system acting within broad parameters established by its human principal.

We explore a number of important issues, including:

  • What distinguishes “agentic commerce” from today’s AI-assisted transactions.
  • Why traditional contract formation concepts, including clickwrap agreements, disclosures, and consent, may become increasingly difficult to apply.
  • How existing agency law principles, including ratification, could bind companies to contracts negotiated by their AI agents.
  • Why autonomous transactions may generate entirely new forms of litigation, including class actions arising from errors replicated across thousands, or even millions, of AI-driven transactions.
  • The challenges of proving what an AI agent actually agreed to and the need for reliable records of contract formation.
  • The growing importance of arbitration and other dispute resolution mechanisms as commerce increasingly moves to automated and, in some cases, irreversible payment systems such as stablecoins.
  • Practical steps companies should consider now before deploying autonomous commercial agents.

The conversation also examines whether courts, legislatures, the American Law Institute, or organizations such as the American Arbitration Association are best positioned to develop the legal framework that agentic commerce will require.

Although much of today’s discussion focuses on commercial transactions generally, the implications for consumer financial services providers are significant. Financial institutions, Fintech companies, payment providers, lenders, and other participants in the consumer finance ecosystem are already investing heavily in AI. As autonomous systems begin negotiating and executing transactions on behalf of businesses and consumers, fundamental questions regarding contract formation, liability, dispute resolution, and regulatory compliance will inevitably arise.

One of the central themes of the discussion is that the technology is advancing much faster than the law. As Professor Hoffman observes, courts have historically adapted existing legal doctrines to new technologies one case at a time. Whether that evolutionary process will be sufficient for agentic commerce, or whether more comprehensive legal reforms will be needed, remains an open question.

This episode builds on our earlier May 21, 2026 podcast with Professor Mark Geistfeld discussing the American Law Institute’s Principles of the Law, Civil Liability for Artificial Intelligence. Together, the two programs examine both the tort law and contract law challenges posed by increasingly autonomous AI systems.

If your organization is exploring AI-powered commercial agents, or simply wants to understand where the law is headed, this is an episode you will not want to miss.

The episode is linked here.

Our podcast with Professor Geistfeld is available here on our May 21, 2026, blog.

Consumer Financial Services Group

 

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Consumer Finance Monitor Celebrates 15 Years of Covering the Consumer Financial Services Industry

This week marks a milestone that is professionally meaningful to our Consumer Financial Services Group. Fifteen years ago, on July 21, 2026, the very day the Consumer Financial Protection Bureau (CFPB) officially opened its doors and began operations, Ballard Spahr launched ConsumerFinanceMonitor.com.

At the time, we believed that the creation of the CFPB would fundamentally reshape the consumer financial services industry. It was apparent that banks, nonbanks, Fintech companies, mortgage lenders and servicers, credit card issuers, auto finance companies, debt collectors, debt buyers, consumer reporting agencies, payment providers, and countless other participants in the financial services marketplace would need timely, practical, and thoughtful analysis of the Bureau’s actions and the rapidly evolving regulatory landscape.

We also believed there was an opportunity to provide that analysis in a new way. Consumer Finance Monitor became the first blog launched by Ballard Spahr, reflecting the firm’s commitment to delivering legal insights in real time rather than waiting for traditional client alerts.

Over the past 15 years, the blog has chronicled virtually every major development affecting the consumer financial services industry. We have written thousands of posts analyzing:

  • CFPB rulemakings, enforcement actions, supervisory developments, and litigation;
  • Significant federal and state legislation affecting consumer financial services;
  • Important decisions issued by the U.S. Supreme Court, federal courts of appeals, district courts, and state appellate courts;
  • Regulatory initiatives by federal banking agencies, the FTC, state attorneys general, and state financial regulators;
  • The rapid evolution of Fintech, artificial intelligence, payments, open banking, and digital assets; and
  • Emerging issues that often become tomorrow’s headline developments.

The blog has also followed the CFPB through every chapter of its history—from its launch under Director Richard Cordray, through the leadership of Mick Mulvaney, Kathy Kraninger, Rohit Chopra, and now the Bureau’s dramatic transformation under the current Administration. Few could have imagined in July 2011 how much the agency and the industry it regulates would evolve over the next decade and a half.

While the CFPB has always occupied center stage, beginning with President Trump’s first term in office our name was changed from CFPBMonitor to Consumer Finance Monitor and our coverage was expanded to cover all important developments legal developments in the consumer financial services area, not just the CFPB. Consumer Finance Monitor has become a resource for developments involving federal banking regulators (including the CFPB, FTC, OCC, FRB, AND FDIC), state regulators, Congress, the courts, and the many issues that affect providers of consumer financial products and services.

One of the most gratifying aspects of this journey has been the opportunity to engage with our readers, clients, in-house counsel, regulators, academics, journalists, and other practitioners have made Consumer Finance Monitor part of their daily routine. We are deeply grateful for your readership, your comments, your questions, and your continued support.

The blog has also served as the foundation for other educational initiatives. In 2017, we launched the Consumer Finance Monitor Podcast, which has grown into one of the leading law firm podcasts covering consumer financial services. Through hundreds of episodes featuring regulators, academics, industry leaders, consumer advocates, and our own lawyers, we have continued our mission of helping our audience understand not only what is happening, but why it matters.

Alan Kaplinsky, founder and former practice group leader and now senior counsel of the Consumer Financial Services Group stated: “When we launched our Consumer Finance Monitor blog in 2011 and podcast show in 2011, our goals were to be the (a) first law firm to create a blog and a podcast show devoted to legal developments pertaining to consumer financial services area and (b) best in class. We have achieved both goals as has been recognized by the numerous awards and accolades we have received. I am very proud of these achievements which involved many members of our Group.”

Looking back, it is remarkable that the histories of Consumer Finance Monitor and the CFPB began on precisely the same day. For fifteen years, the blog has documented the Bureau’s evolution from a newly created federal agency into one of the most influential and, at times controversial, financial regulators in the country. As the CFPB enters what may be its most consequential period of change since its creation, we remain committed to providing timely, objective, and practical analysis of these developments.

On behalf of everyone who has contributed to Consumer Finance Monitor over the past fifteen years, thank you for reading, subscribing, and participating in this ongoing conversation. We are proud of what we have accomplished together and look forward to continuing to serve the consumer financial services community in the years ahead.

Here’s to the next chapter!

Consumer Financial Services Group

 

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CFPB Issues RFI on TRID Rule, Rescission, and Reverse Mortgages

The CFPB recently issued a request for information (RFI) on the Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) rule, the right of rescission under TILA, and reverse mortgages. Comments are due by August 10, 2026.

The RFI is based on the March 2026 Executive Order (EO) 14393 entitled “Promoting Access to Mortgage Credit.” The EO focuses on promoting mortgage originations by community banks and banks with less than $100 million in assets. After addressing the general goals of the EO, the CFPB quotes the EO provision directing it to “consider, as appropriate and consistent with applicable law:

(i) proposing amendments to Regulation Z that tailor the following requirements for smaller banks: [ability to repay] and [qualified mortgage (QM)] requirements (including potentially a broader QM safe harbor for portfolio loans) and the requirements of the Truth in Lending Act . . ., Real Estate Settlement Procedure[s] Act, . . . and [TRID rule];

(ii) replacing TRID timing rules with a materiality-based standard that preserves consumer clarity and reduces closing delays; [and]

. . . .

(vii) exempting rate-and-term refinancing (including cash-out refinancing) from rescission rights.”

However, the CFPB states that it “recognizes certain regulations may contribute to higher costs for borrowers needing access to mortgage credit.” As a result, most of the requests for comments on issues are not specifically related to smaller banks.

TRID Rule

The CFPB observes that in November 2019 it published a request for information “as part of its assessment of the TRID Rule’s effectiveness and invited the public to submit comments and information on a variety of topics” and that in October 2020 it issued its TRID Rule Assessment Report that describes the comments and summarizes the information received. The CFPB then summarizes various aspects of the TRID rule, including the initial and revised Loan Estimate requirements and related timing and waiting period requirements, the limitations on the ability of a creditor to increase certain charges (which are referred to as “tolerances”) without a changed circumstance that permits an increase beyond the limitations, and the Closing Disclosure requirements and related timing and waiting period requirements. (The tolerances are addressed below.)

Timing Requirements. Under the TRID rule, a creditor must issue a Loan Estimate that details the estimated loan terms and settlement charges, and that is subject to the tolerances on the ability to increase various charges that are disclosed, within three business days after the creditor has received only six items of information. The items are the consumer’s name, income, social security number (to obtain a credit report), the property address, an estimate of the value of the property, and the mortgage loan amount sought. Upon learning of a changed circumstance that permits an increase in one or more settlement charges beyond the applicable limits, a creditor has three business days to issue a revised Loan Estimate with the increased charge(s).

A consumer must receive a Closing Disclosure with the final loan terms and settlement charges at least three business days before consummation. Any changes must be reflected in a revised Closing Disclosure provided at consummation. However, if the changes result in the previously disclosed annual percentage rate (APR) becoming inaccurate under Regulation Z, the consumer must receive a revised Closing Disclosure with updated information at least three business days before consummation (which may require a delay in consummation).

Addressing the TRID rule timing requirements for the Loan Estimate and Closing Disclosure, the RFI includes the following questions:

  • Question 1. Do the timing requirements materially affect consumers’ ability to obtain mortgage credit? If so, in what ways and to what extent is credit availability affected?
  • Question 2. Do the timing requirements increase costs for mortgage brokers, creditors, or consumers? If so, do these costs outweigh any benefits to consumers provided by such timing requirements? If so, how do these costs compare to the costs of implementing changes to the timing requirements?
  • Question 3. Are there certain transaction types or specific scenarios that are inhibited or complicated by the timing requirements?
  • Question 4. Are there opportunities to provide initial Loan Estimates earlier in the mortgage origination process to meet the statutorily required waiting periods while allowing consumers time to shop and reducing closing delays?
  • Question 5. Are there ways to reduce the incidence of revised disclosures being issued while providing consumers with timely updates to settlement costs and avoiding closing delays?
  • Question 6. Are there opportunities to provide Closing Disclosures earlier in the mortgage origination process to meet the statutorily required waiting periods while allowing consumers time to understand loan costs, prepare for loan consummation, and avoid closing delays?
  • Question 7. What additional guidance or model forms could the CFPB issue to better facilitate consumers’ decision to waive the statutorily required waiting periods for a bona fide personal financial emergency?
  • Question 8. Are there any materiality-based standards that could replace or supplement timing rules, recognizing TILA’s timing requirements for delivery of disclosures after application and before consummation—including issuance of a revised disclosure upon a change in APR above the prescribed tolerance? If so, how should CFPB consider defining and structuring these standards (e.g., as an optional supplement to TILA’s timing requirements or a complete substitution for them)? Would these materiality-based standards result in improved administrative efficiencies while preserving or improving consumer clarity and reducing closing delays?

The assessment of the timing requirements must account for the TRID rule requirement that a creditor issue a detailed Loan Estimate subject to tolerances on the ability to increase various charges based on scant information. One example of the absurd limitations on the information that the creditor may require before issuing a Loan Estimate is that with a purchase money loan the property address item would not be the consumer’s existing residence, and the creditor would have to issue a Loan Estimate if it received the other five items without being allowed to require that the consumer provide their contact information where the creditor can send the Loan Estimate. (Yes, the creditor can ask consumers to voluntarily provide contact information and typically consumers will do so, but the fact the TRID rule allows for such a bizarre result should be addressed.)

If creditors could require more information before issuing a Loan Estimate, including basic items such as the type of loan the consumer wants, the term to maturity, whether the home would be a primary or secondary residence and other important factors, they could provide more accurate Loan Estimates, reduce the need to provide revised Loan Estimates and reduce the risk of disclosing charges that are not accurate.

Tolerances. Under the TRID rule, certain charges disclosed in the initial Loan Estimate may not increase without a changed circumstance that permits the creditor to increase the charge. This is referred to as the “zero percent tolerance” and includes government transfer taxes and charges paid to the creditor, a mortgage broker, an affiliate of the creditor or mortgage broker, and an unaffiliated third party if the creditor did not permit the consumer to shop for the provider of the third-party service consistent with the TRID rule.

The aggregate amount of recording fees and the following third-party charges may increase by no more than 10% absent a changed circumstance that permits a greater aggregate increase: the charge for the third-party service is not paid to the creditor or an affiliate of the creditor, the creditor permits the consumer to shop for the third-party service consistent with the TRID rule and the consumer either does not select a provider for the service or selects a provider identified by the creditor on a list that the creditor must provide to the consumer.

The estimates of the following charges may increase without a percentage limit, although the creditor must estimate the charges based on the best information reasonably available: prepaid interest, property insurance premiums, amounts placed into an escrow, impound, reserve, or a similar account, charges paid to third-party service providers that the consumer selected and were not disclosed on the required list that the creditor provided to the consumer, property taxes, and fees paid for third-party services not required by the creditor.

Addressing the TRID rule tolerances, the RFI includes the following questions:

  • Question 10. Are there adjustments to the tolerance thresholds that could improve loan execution and result in improved credit access and lower consumer costs? For example, are there instances where the CFPB should consider adjusting tolerances for transfer taxes because transfer taxes cannot be determined within three business days of application?
  • Question 11. Is there additional guidance that CFPB should provide around changed circumstances, which result in the issuance of revised estimates? For example, should the CFPB consider providing additional guidance around changed circumstances in cases where a purchaser continues to negotiate with the seller for payment of charges customarily paid by the borrower?

The assessment of the tolerances must account for the fact that the tolerances are beyond the authority of the CFPB to impose under TILA and RESPA. Full stop. Both statutes simply provide for estimates of fees in good faith. Good faith does not mean exact or being subject to a 10% limit. It means good faith. The CFPB should be cognizant of this important fact when assessing the current tolerances.

Transfer taxes should not be in the zero percent tolerance category. The CFPB simply followed the approach taken by the U.S. Department of Housing and Urban Development when it revised Regulation X under the RESPA in November 2008 to add the concept of tolerances. We understand that HUD placed transfer taxes in the zero percent tolerance category based on the belief of a HUD official that creditors always know the amount of the transfer taxes upfront. However, our understanding is that such belief was based on creditor practices at the time with loans on multi-family properties, where the transfer taxes can be quite substantial and creditors would determine the amount early in the loan process. That was not the practice in the single-family mortgage loan industry, and the inclusion of transfer taxes in the zero percent tolerance category continues to present operational burdens for creditors.

Miscellaneous. The RFI also includes the following questions regarding the TRID rule:

  • Question 12. Should the TRID disclosure forms be modified in a way that would improve clarity for consumers and loan execution for mortgage brokers or creditors?
  • Question 13. Is there additional guidance that CFPB should provide regarding the acceptability of electronic or digital forms and signatures that would promote their use and lower costs for consumers?
  • Question 14. Are there changes or clarifications to requirements specific to construction loans that would provide consumer clarity, reduce costs, or otherwise promote access to credit for the construction of residential housing? For example, should the CFPB waive certain requirements as the CFPB did when it issued a “Trial Disclosure Program Waiver Template” to the Independent Community Bankers of America (ICBA) covering the ICBA’s alterative versions of the Loan Estimate and Closing Disclosure tailored to construction loans?
  • Question 15. Are there other changes to the TRID Rule that CFPB should consider to facilitate compliance with the disclosure requirements of TILA and RESPA and to aid the consumer in understanding the transaction?
  • Question 16. For any potential changes recommended regarding TRID requirements, are there any considerations for pricing or secondary market participants that CFPB should consider, such as concerns around acceptance of materiality-based standards in lieu of timing standards? For example, how would potential changes impact the pricing, liquidity, or demand for mortgages, mortgage backed securities, mortgage servicing rights, or other mortgage backed capital markets instruments?

Observation. The TRID rule is far from perfect and can be improved. However, creditors and other industry members spent enormous sums of money to implement the TRID rule and subsequent revisions to the rule. Many industry members will likely oppose changes to the rule that would require significant additional implementation expenditures unless the changes provide regulatory relief that will materially reduce operational burdens and costs.

Right of Rescission

Under TILA, for certain mortgage loans, such as refinance loans on a consumer’s principal dwelling, the consumer has the right to rescind the transaction within three business days after consummation for any reason or no reason. The three-business day right to rescind was intended to provide the consumer with a cooling off period to assess if they are satisfied with the mortgage loan transaction in view of the fact that the final disclosures under the original TILA mortgage disclosure regime were provided at consummation. As noted, under the TRID rule the consumer must receive the Closing Disclosure at least three business days before consummation.

The combination of the TRID rule requirement that the consumer receive a Closing Disclosure at least three business days before consummation and the consumer’s right under TILA to rescind certain transactions within three business days after consummation presents the issue of whether any transactions currently subject to both requirements should be exempt from any of the requirements, such as refinance loans that simply provide for a reduction in the interest rate on the consumer’s current loan. The need for the rescission right cooling off period is much less important when a consumer receives the Closing Disclosure at least three business days before consummation, and the combination of both the TRID rule and TILA requirements effectively delays the implementation of the lower interest rate.

The RFI addresses this issue in the following question:

  • Question 9. Does the three-business-day post-consummation rescission waiting period, coupled with the three-business-day pre-consummation TRID waiting period, unduly delay loan funding for refinance transactions? If so, how could the CFPB adjust the right of rescission or TRID waiting periods?

Reverse Mortgages

The CFPB observes that reverse mortgage loans are not subject to the TRID rule, but are subject to the Good Faith Estimate and HUD-1 Settlement Statement requirements under RESPA and the disclosure statement and specific reverse mortgage disclosure requirements under TILA. The required disclosures vary based on whether the reverse mortgage is structured as closed-end or open-end credit. The disclosure requirements are far from integrated and streamlined.

The RFI includes the following questions regarding reverse mortgages:

  • Question 19. The CFPB is aware that the reverse mortgage industry faces significant difficulties applying the disclosure requirements of TILA and RESPA to reverse mortgages, in light of those transactions’ unusual terms and features. Would integrated and tailored reverse mortgage disclosures enable consumers to make more informed decisions?
  • Question 20. Would a different set of scenario assumptions in the calculation of total annual loan cost rates in the [Total Annual Loan Cost (TALC)] table give consumers more reasonable and accurate likely cost estimates of reverse mortgages?
  • Question 21. Would a table that demonstrates how the reverse mortgage balance grows over time, using dollar amounts rather than annualized loan cost rates in the current TALC table, help consumers to better understand and evaluate the costs and the benefits of the reverse mortgage? If so, what are the important features of such a chart?
  • Question 22. Would consumers benefit from a tailored disclosure informing consumers about how reverse mortgages work and about terms and risks that are important to consumers when selecting a reverse mortgage, instead of the generic brochures and booklets? If so, please provide any research or analysis of material that would be beneficial.

The reverse mortgage loan disclosure requirements were shoehorned into the TILA and RESPA disclosure regimes and need to be integrated and streamlined to provide for simplified and concise disclosures, particularly given that the applicants for such loans are elderly. However, based on the enormous amount of money spent by the industry to implement the TRID rule, implementation costs and other burdens need to be considered in connection with any revisions of the reverse mortgage disclosure requirements.

Small Banks and Credit Unions

Addressing the focus of the EO on community banks and banks with less than $100 million in assets, the RFI includes the following questions:

  • Question 17. Are there unique aspects of the loan origination process performed by small banks and credit unions for which the CFPB should consider changes to the TRID Rule specifically tailored for small banks and credit unions? If so, how should CFPB consider structuring these tailored changes (e.g., exemptions or alternative requirements)?
  • Question 18. Would changes exclusive to small banks and credit unions lower costs for originators, creditors, or consumers?

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

 

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CFPB and NTEU Jointly Seek, and Obtain, Stay of Litigation Over Bureau’s Proposed Reduction-in-Force Pending Confirmation of Brian Johnson

In a noteworthy development in the ongoing litigation challenging the Trump administration’s efforts to dramatically reduce the Consumer Financial Protection Bureau’s workforce, the CFPB and the National Treasury Employees Union (NTEU) have jointly asked the U.S. District Court for the District of Columbia to temporarily stay proceedings concerning the Bureau’s proposed 2026 reduction-in-force (RIF) plan. On July 10, 2026, the day after the joint motion was filed, Judge Amy Berman Jackson granted the requested stay, while modifying the parties’ proposed schedule for future status reports.

The filing, submitted on July 9, 2026, represents a significant shift in the litigation. Rather than pressing the court to decide whether the Bureau may proceed with its proposed RIF, both sides agreed that the issue should await the Senate’s action on President Trump’s nomination of Brian Johnson to serve as CFPB Director.

Background

As our readers know, Judge Amy Berman Jackson previously entered a preliminary injunction preventing the CFPB from carrying out mass layoffs and other actions that would substantially impair the Bureau’s ability to perform its statutory duties. Following the CFPB’s adoption of a new RIF plan on March 31, 2026, the D.C. Circuit remanded the matter to the district court to determine whether the preliminary injunction should be modified, suspended, or dissolved in light of the revised plan.

Rather than litigating that issue immediately, however, the parties jointly requested that the court postpone consideration.

Why the Parties Wanted a Stay

The principal reason is straightforward. President Trump has nominated Brian Johnson to serve as CFPB Director, and the nomination remains pending before the Senate. According to the parties:

“Mr. Johnson, if confirmed, should be given the opportunity to review the 2026 RIF Plan and decide whether he would like to pursue it.”

Accordingly, the parties asked the court to stay proceedings regarding the RIF until 60 days after Johnson is confirmed. If he is not confirmed by January 3, 2027, the parties proposed that the stay would automatically expire on that date.

The parties also agreed that the existing preliminary injunction will remain fully in effect during the stay, and the CFPB expressly agreed to continue complying with it. Importantly, the requested stay applies only to litigation over the RIF plan and does not affect other issues, including the Bureau’s planned return-to-office directive. Whether the NTEU will challenge the return-to-office directive, which seems like a backhand reduction in force, given the closure of regional offices and the requirement for employees to relocate to Washington, D.C., remains to be seen.

Judge Jackson Grants the Stay

On July 10, Judge Jackson granted the parties’ joint motion. While the court agreed to stay proceedings regarding the Bureau’s proposed RIF, it modified the reporting schedule proposed by the parties.

Specifically, the court ordered that:

  • If Brian Johnson is confirmed by the Senate, the parties must file a joint status report within two days of his confirmation; and
  • If no CFPB Director is confirmed by January 3, 2027, the parties must file a joint status report on January 4, 2027, advising the court of their respective positions on whether the stay should expire or instead be extended.

The order therefore leaves open the possibility that, if no Director has been confirmed by early January, the stay could be extended rather than automatically expiring as contemplated by the parties’ proposal.

CFPB Says It Can Operate Indefinitely at Current Staffing Levels

Perhaps the most interesting aspect of the filing is an accompanying declaration from CFPB Chief Financial Officer Ngagne Jafnar Gueye.

The declaration states that, under the new statutory funding cap enacted earlier this year, the Bureau now has sufficient financial resources to continue operating indefinitely at its current staffing levels, provided future spending does not increase faster than the Employment Cost Index.

According to the CFO, this improved financial position is attributable to two factors:

  • significant cost savings and operational efficiencies implemented by Bureau leadership; and
  • natural employee attrition that has reduced personnel costs below what the declaration describes as a previously unsustainable level under the new 6.5% funding cap.

This declaration appears intended to reassure both the district court and the D.C. Circuit that maintaining the existing preliminary injunction will not jeopardize the Bureau’s ability to fund its operations while the nomination process plays out. Previously, Acting CFPB Director Russell Vought had advised the D.C. Circuit that based on the reduction in funding at current staffing levels the CFPB expected to run out of money to operate in the fourth quarter of 2026.

What This Means

Judge Jackson’s order significantly reduces the likelihood of any immediate judicial ruling on the legality of the CFPB’s proposed workforce reduction. Instead, the Bureau’s future staffing levels may ultimately depend more on the policy decisions of a Senate-confirmed Director than on further litigation.

If Brian Johnson is confirmed, he will have the opportunity to evaluate whether to proceed with the March 2026 RIF plan, revise it, or abandon it altogether before the litigation resumes. If his nomination remains pending into early January 2027, the court will determine at that time, after receiving the parties’ positions, whether the stay should continue.

The filing also underscores an important practical reality: notwithstanding earlier concerns that the Bureau’s reduced funding cap could threaten its ability to function, the CFPB now represents to the court that it can continue operating at current staffing levels indefinitely. That assertion could prove significant not only in this litigation but also in the broader debate over the Bureau’s long-term funding and operational capacity.

We will continue to monitor both the confirmation process for Brian Johnson and further developments in this closely watched litigation.

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

 

 

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Vought Tells Congress CFPB Needs Major Changes, Even Abolishment

During recent Congressional Hearings Acting CFPB Director Russell Vought, testifying for the first time in that capacity, stated that the Trump administration has succeeded in improving the structure and operation of the CFPB, but more work needs to be done.

In fact, in testimony before the Senate Committee on Banking, Housing, and Urban Affairs he said he would prefer that the agency be abolished.

“Though we have improved a great deal about how it operates, the Bureau remains structurally defective, and I do not believe it should exist in its current form,” Vought told the House Financial Services Committee. “I have been committed to running it in a responsible manner and addressing real harms instead of remaking financial markets in service of a radical political agenda.”

Among other things, Vought endorsed efforts to bring the CFPB under the appropriations process. The agency currently is funded out of the combined earnings of the Federal Reserve.

“I do not understand why Congress would ever provide funding for an agency outside [the appropriations] process,” Vought told the House Committee.

House Financial Services Committee Chairman Rep. French Hill, (R-Ark.), said his committee will consider a large package of changes to the agency.

Among other things, Hill’s bill will increase the threshold for depository institutions to fall under CFPB supervision.

Vought endorsed comprehensive changes to the agency. “We don’t want to go beyond the authority you have given us,” he told the House Committee. He endorsed proposals for Congress to codify the Bureau’s enforcement standards. For example, he said that Congress should codify the definition of Unfair, Deceptive, or Abusive Acts or Practices. We recently reported that in the Trump v. Slaughter decision by the Supreme Court both Chief Justice Robert and Justice Gorsuch made comments suggesting that the broad grant of authority by Congress to the FTC to define what is unfair or deceptive may not be constitutionally permissible, implying that the similar grant of authority to the CFPB may likewise be defective.

Vought said that the agency cannot pull back on its duties by itself. “We need Congress to restrict our authorities,” he said.

Vought can serve as Acting Director through August 1, 2026. President Trump has nominated Brian Johnson to be the permanent Director of the Bureau, but he has not yet been confirmed.

“If confirmed, I know President Trump’s nominee, Brian Johnson, will do a great job in continuing to steer the CFPB in an appropriate manner,” Vought told the House Committee.

Vought said that after he became Acting Director, his team took a comprehensive examination of the agency and found that the agency was “weaponized, out-of-control, and had gone far beyond its statutory mandate.”

“Instead of going down this destructive path, we have steered the Bureau towards operating with humility, accountability, and fiscal responsibility,” he said. “Regulations should be justified by statute, not the whims of ideologues at the Bureau. Supervision should be precisely targeted to avoid stifling economic growth and innovation and disproportionately increasing compliance costs. And enforcement should be based on clear violations of law—not on advancing a political agenda outside of accountability and oversight from elected officials and the American people.”

Rep. Ayanna Pressley, (D-Mass.), accused Vought of “gutting the Agency.”

However, Hill told the House Committee that the agency has taken proper steps to reverse the trend of over-regulation of the Biden administration. The agency “has begun to pull back from being a super regulator,” he said.

Ranking Democrat Rep. Maxine Waters, (D-Calif.), criticized Vought for refusing to respond to requests for briefings, testimony and answers to letters sent by Committee Democrats. She called Vought’s testimony inadequate, adding that he failed to answer many questions. She asked that the committee hold a “Minority Day” hearing to hear from witnesses that oppose how the Trump administration is operating the CFPB.

On the other side of the Capitol, Senate Banking Committee Chairman Sen. Tim Scott, (R- S.C.), endorsed Vought’s efforts at the CFPB. “Finally, we have a Bureau that respects its authority,” Scott said.

However, Ranking Democrat Sen. Elizabeth Warren, (D-Mass.), said that the CFPB cut enforcement actions against companies that had contacts with the Trump administration.

“This is corruption and Mr. Vought is at the center,” Warren said. She later added, “Corruption at the CFPB has hurt American families.”

Consumer Financial Services Group

 

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CFPB Releases Semiannual Regulatory Agenda: A Surprisingly Active Rulemaking Program

The Consumer Financial Protection Bureau has released its Semiannual Regulatory Agenda covering the period from January 2026 through November 2026. Published through the Office of Information and Regulatory Affairs (OIRA) as part of the Unified Agenda of Federal Regulatory and Deregulatory Actions, the agenda provides an important roadmap of the Bureau’s anticipated regulatory activity during the remainder of the year. It should be noted, however, that this is actually the Fall 2025 agenda (its publication was apparently delayed) and the preamble to the agenda states that it reflects developments only through January 13, 2026. As a result, three of the nine final rule actions listed on the agenda address rulemaking actions that were issued after January 13, 2026. Those are: 1. Financial Data Transparency Act; 2. Reconsideration of Section 1071 Small Business Lending Data Collection Rule; and 3. Amendments to Regulation B Under the Equal Credit Opportunity Act.

What is perhaps most striking is not the substance of any single rulemaking, but the sheer number of actions on the agenda. Despite the CFPB’s substantially reduced workforce and budget under the Trump administration, the Bureau has identified 20 rulemaking actions that it expects to pursue in addition to five lone term actions. (Short descriptions by the CFPB, which are referred to as “abstracts,” of each rulemaking item on the agenda appear with the agenda.) While many of these initiatives are deregulatory in nature, the agenda demonstrates that rulemaking remains a central policy tool for the Bureau. We note, in the lawsuit before the D.C. federal district court challenging the proposed CFPB workforce reductions, at the request of the National Treasury Employees Union and CFPB the court granted a temporary stay to provide time for Brian Johnson, if confirmed as CFPB Director, to review the planned reductions. While the CFPB proposes significant reductions in staff overall, it plans to retain 125 staff members in the Research, Monitoring and Regulations Division, second only to the planned 133 staff members in the Operations Division. This reflects that the CFPB intends to be active with rulemaking.

Three Pre-Rule Actions

The agenda identifies three matters in the pre-rule stage:

  • Amendments to Dodd-Frank Act Sections 1031 and 1036 (RIN 3170-AA88);
  • Ability-to-Repay/Qualified Mortgages (RIN 3170-AB35); and
  • Prepaid Accounts Under Regulations E and Z (RIN 3170-AB55).

The inclusion of these items indicates that the Bureau is in the earliest stages of considering potential amendments to several significant regulations that have long affected the consumer financial services industry.

Eight Proposed Rulemakings

The proposed rule stage reflects the Bureau’s continued emphasis on reconsidering existing regulations and establishing procedural safeguards governing its own regulatory process.

The agenda includes proposed rules involving:

  • Reconsideration of the Payday Lending Rule;
  • Reconsideration of the Personal Financial Data Rights or open banking (Section 1033) Rule;
  • Procedures for Guidance Documents;
  • Procedures for Periodic Review of Bureau Regulations;
  • Larger Participant Rules covering the automobile finance, debt collection, consumer reporting, and international money transfer markets; and
  • Contingency Calculations for Determining the Average Prime Offer Rate.

One notable development is the Bureau’s continued effort to revisit the larger participant rules that define the scope of CFPB supervisory authority over nonbank financial companies in several important markets.

Nine Final Rule Actions

The final rule stage contains nine actions, including several significant reconsideration and rescission efforts:

  • Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties (Regulation X);
  • Financial Data Transparency Act;
  • Remittance Transfers Under Regulation E;
  • Reconsideration of the Section 1071 Small Business Lending Data Collection Rule;
  • Rescission of the COVID-19 mortgage servicing protections adopted during the pandemic;
  • Rescission of the State Official Notification Rules;
  • Legal Standard Applicable to Supervisory Designation Proceedings;
  • Amendments to Regulation B under the Equal Credit Opportunity Act; and
  • Amendments to the Consumer Financial Civil Penalty Fund Rule.

Several of these items reflect the Bureau’s continuing effort to unwind regulations adopted during the Chopra administration or to revise procedural rules governing the CFPB’s supervisory and enforcement authorities. Nevertheless, the inclusion of the mortgage servicing rule under Regulation X is interesting, as it would apparently finalize a rule proposed in July 2024 during Chopra’s tenure as CFPB Director. The proposal was criticized by the industry as it would impose burdensome requirements and many provisions were likely beyond the CFPB’s statutory authority. Additionally, as noted below, the CFPB’s long-term actions include the discretionary mortgage servicing rules under RESPA/Regulation X and TILA/Regulation Z.

Five Long-Term Actions

  • Identity Theft and Coerced Debt
  • Rescission of Loan Originator Compensation Requirements under the Truth in Lending Act
  • Discretionary Servicing Rules under the Real Estate Settlement Procedures Act
  • Discretionary Mortgage Servicing Rules under the Truth in Lending Act
  • Loan Originator Compensation Requirements under the Truth in Lending Act

As is typically the case with long-term actions, no deadlines were announced for these rulemaking proceedings. (Our understanding is that while the CFPB initially considered rescinding various discretionary provisions in the loan originator compensation rule, it now understands that various discretionary provisions are important to retain and that revisiting the rule in general is a preferable path.)

Key Themes

Several themes emerge from the agenda.

First, the Bureau continues its systematic review of major regulations issued during the previous Administration.

Second, the CFPB is devoting considerable attention to procedural rules that govern how the agency itself operates. New rules concerning guidance documents, periodic review of regulations, supervisory designation proceedings, and state official notification procedures reflect an emphasis on internal governance and administrative process.

Third, the Bureau continues to evaluate the scope of its supervisory authority over nonbank financial companies through revisions to the larger participant rules affecting several markets.

What Is Missing

Equally noteworthy are the items that do not appear on the agenda. The Bureau has not proposed major new substantive consumer protection regulations comparable to those advanced during the Chopra administration. Instead, the agenda is overwhelmingly focused on reconsidering, rescinding, refining, or streamlining existing regulations.

That shift is entirely consistent with the Bureau’s policy direction over the past year.

It should be noted, however, that the CFPB has very recently notified OIRA that it intends to publish a Request for Information about credit card late fees. See the blog that we recently published about that. Additionally, the CFPB recently issued a request for information on the TILA/RESPA integrated disclosure (TRID) rule, the right to rescind under TILA, and reverse mortgages.

Although Acting Director Vought has indicated that the CFPB will be examining supervised entities to look for evidence of debanking, there is no item on the agenda related to debanking.

Looking Ahead

The Unified Agenda is not binding, and rulemaking schedules frequently change. Nevertheless, the agenda offers the best available indication of the CFPB’s regulatory priorities for the coming months.

As we have previously reported, President Trump has nominated Brian Johnson to be the next Director of the CFPB. Assuming that he is confirmed by the Senate (which we anticipate happening sometime before the end of this month), Mr. Johnson is certain to have a great deal of influence in shaping the regulatory agenda.

For banks, credit unions, Fintech companies, mortgage lenders and servicers, consumer reporting agencies, debt collectors, money transmitters, and other participants in the consumer financial services industry, the agenda confirms that the Bureau’s principal focus will remain the reassessment of existing regulations rather than the adoption of significant new regulatory requirements.

Even with the planned number of staff members in the Research, Monitoring, and Regulations Division, it remains to be seen whether all 20 rulemaking initiatives can be completed on the timetable reflected in the agenda. Nevertheless, the agenda demonstrates that the CFPB intends to remain an active regulator and will continue using the rulemaking process to implement the current Administration’s policy objectives.

We will continue to monitor each of these rulemakings and report on significant developments as proposed and final rules are issued.

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

 

 

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Senate Banking Committee Schedules Confirmation Hearing for CFPB Director Nominee Brian Johnson

The Senate Committee on Banking, Housing, and Urban Affairs has scheduled a confirmation hearing for Brian Johnson, President Trump’s nominee to serve as Director of the Consumer Financial Protection Bureau (CFPB).

The hearing will take place on Thursday, July 23, 2026, at 10:00 a.m. EDT in Room 538 of the Dirksen Senate Office Building. Following an executive session to vote on several unrelated nominations, the Committee will convene in open session to consider the nominations of Brian Johnson to serve as CFPB Director, Abby Warren to serve as Assistant Secretary of the Department of Commerce, and Irving Dennis to serve as Chief Financial Officer of the Department of Housing and Urban Development.

The hearing marks the next significant step in the confirmation process for Johnson, who previously held senior leadership positions at the CFPB from December 2017 until March 2020, including as Acting Deputy and then Deputy Director for a majority of that period. If confirmed by the Senate, Johnson would become the first Senate-confirmed CFPB Director of President Trump’s second Administration.

Johnson’s confirmation has taken on added significance because of the CFPB’s ongoing restructuring efforts and several high-profile court proceedings. As we recently discussed, the CFPB and the National Treasury Employees Union jointly requested, and Judge Amy Berman Jackson granted, a stay of litigation concerning the Bureau’s proposed 2026 reduction-in-force (RIF) pending Johnson’s confirmation. The parties advised the court that, if confirmed, Johnson should be given the opportunity to determine whether to proceed with, modify, or abandon the Bureau’s proposed RIF plan. Judge Jackson’s order requires the parties to file a joint status report within two days after Johnson is confirmed by the Senate.

The confirmation hearing is also likely to provide the first detailed public indication of Johnson’s priorities for the CFPB. Members of the Banking Committee can be expected to question him on a wide range of issues, including:

  • the Bureau’s ongoing workforce restructuring and proposed reduction-in-force;
  • the CFPB’s supervisory, enforcement, and rulemaking priorities;
  • implementation of the Bureau’s substantially reduced statutory funding cap;
  • the future of significant pending regulations and litigation; and
  • Johnson’s broader vision for the Bureau under the Trump administration.

Given the sweeping changes already underway at the CFPB, Johnson’s testimony will be closely watched by banks, nonbank financial services companies, trade associations, consumer advocates, and others with a stake in the Bureau’s future direction.

Russell Vought’s term as Acting Deputy Director will expire on August 1. Mark Paoletta, the current Acting Deputy Director of the CFPB and Chief Legal Officer, will become the new Acting Director of the CFPB unless and until Brian Johnson is confirmed by the Senate and sworn into office. 

We will monitor the confirmation hearing and provide a detailed summary of Johnson’s testimony, the questions posed by Committee members, and the implications for the CFPB and the consumer financial services industry.

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

 

 

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Federal Banking Agencies Issue Joint Guidance on Lending to Individuals Not Legally Authorized to Work in the United States

On July 13, 2026, the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and National Credit Union Administration (NCUA) issued interagency guidance reminding the financial institutions they supervise of their existing safety and soundness obligations when extending credit to individuals who are not legally authorized to work in the United States. So far, no such guidance has been issued from the Federal Reserve Board.

The guidance implements President Trump’s Executive Order 14406, Restoring Integrity to America’s Financial System, issued on May 19. That Executive Order directed the federal banking agencies to address risks to the financial system associated with extending credit and financial services to individuals who are “inadmissible” or “removable” under the immigration laws. (“Inadmissible” refers to individuals ineligible to enter the United States or ineligible to receive or renew visas and “removable” refers to individuals who may be legally deported.)

Although the guidance does not establish new legal requirements, it signals how certain federal bank regulators expect supervised institutions to evaluate and manage the credit risks associated with lending to borrowers whose ability to remain lawfully employed in the United States may be uncertain. The guidance follows closely on the Consumer Financial Protection Bureau’s June 8, 2026 Statement on Ability to Repay and Immigration Status which addressed the relevance of immigration status under the Truth in Lending Act ability to repay requirements for credit cards and mortgage loans and the Equal Credit Opportunity Act.

Existing Safety and Soundness Standards Apply

The agencies emphasize that the guidance is intended as a reminder of existing supervisory expectations rather than the creation of new underwriting standards. Financial institutions are expected to continue employing safe and sound underwriting practices that evaluate a borrower’s willingness and capacity to repay a loan according to its terms.

The agencies note that borrowers who are not legally authorized to work in the United States may present elevated credit risk because their ability to generate income, maintain employment, and remain financially stable may be subject to greater uncertainty. Accordingly, institutions should consider whether those uncertainties affect repayment capacity and other traditional underwriting factors.

Key Underwriting Considerations

The guidance identifies several areas that institutions should evaluate when underwriting loans to borrowers who are not authorized to work in the United States (so called “non-work authorized borrowers”).

Source of repayment. Because employment income is often the primary source of repayment, institutions should assess whether that income is stable and likely to continue. The agencies specifically identify several risks that may impair repayment, including:

  • termination of employment because the borrower lacks legal work authorization;
  • expiration of employment authorization;
  • inability to obtain lawful reemployment; and
  • removal from the United States.

The agencies encourage lenders to consider whether repayment capacity would remain adequate under scenarios involving interruptions in employment or income.

Collateral considerations. The guidance notes that lenders may encounter additional challenges enforcing security interests if non-work authorized borrowers become difficult to contact or locate or leave the United States. These concerns may be particularly relevant for movable collateral such as automobiles, recreational vehicles, and boats.

Documentation and verification. Institutions are encouraged to verify that employment income is current, stable, and likely to continue by reviewing documentation such as pay stubs, W-2s, tax returns, employer verifications, bank statements, and, where appropriate, evidence of continuing work authorization. The agencies also remind institutions to consider whether loans to non-work authorized borrowers warrant particular attention for credit classification and allowance for credit loss purposes.

Portfolio concentration risk. The agencies also focus on portfolio-level risk. Institutions with significant concentrations of borrowers employed in industries, geographic areas, or by employers that may be disproportionately affected by immigration enforcement or workforce disruptions should evaluate whether correlated deterioration could occur across multiple borrowers simultaneously.

Consumer Compliance Considerations

The guidance also highlights the CFPB’s June 8, 2026, Statement on Ability to Repay and Immigration Status.

The CFPB explained that under the Truth in Lending Act and Regulation Z, mortgage lenders and credit card issuers must make a reasonable and good-faith determination that consumers have the ability to repay their loans. Where repayment depends upon U.S.-based employment, creditors are allowed to, and in some circumstances may be required to, consider information bearing on the consumer’s continuing ability to earn that income.

The guidance also notes that ECOA and Regulation B expressly permit creditors to consider an applicant’s immigration status, as well as additional information necessary to determine the creditor’s rights and remedies regarding repayment. Thus, the agencies make clear that consideration of immigration status, when relevant to credit risk and repayment, is consistent with existing federal law.

As is the case with CFPB statement, the federal banking agencies’ guidance does not provide detail on how financial institutions can thread the needle of complying with safety and soundness, ability to repay and fair lending requirements. The guidance also appears to be at odds with the Trump administration’s opposition to the debanking of individuals or businesses.

Takeaways

The guidance and FIL reflect the Trump administration’s broader policy emphasis on incorporating immigration-related considerations into federal financial regulation. While they impose no new regulatory requirements, they clearly signal that the FDIC, OCC, and NCUA expect supervised institutions to consider whether a borrower’s lack of work authorization affects traditional credit risk factors, including income stability, repayment capacity, collateral recovery, and portfolio concentrations.

Banks, credit unions, and other supervised institutions should review their underwriting policies, documentation practices, concentration risk monitoring, and loss allowance methodologies to ensure they appropriately account for these risks where relevant, particularly for residential mortgage lending.

Although much of the guidance restates existing safety and soundness principles, the issuance of the guidance demonstrates that immigration-related credit risk has become an area of heightened supervisory focus. Financial institutions should therefore expect FDIC, OCC, and NCUA examiners to evaluate how these risks are incorporated into underwriting and risk management practices during future examinations.

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

 

 

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Colorado Files Supplemental En Banc Brief Defending Its Interpretation of DIDMCA’s Opt-Out Provision

Colorado has filed its supplemental en banc brief in National Association of Industrial Bankers, et al. v. Weiser, urging the U.S. Court of Appeals for the 10th Circuit to affirm the now-vacated panel majority’s interpretation of Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). The supplemental brief responds to questions posed by the en banc court and to the Supplemental En Banc Brief filed by the plaintiffs and the amicus briefs supporting them (which includes the amicus brief filed by our firm on behalf of several national and state bank trade associations) and reiterates Colorado’s position that a state’s DIDMCA opt-out applies whenever either the borrower or the lender is located in the opt-out state.

The central issue before the en banc court is the meaning of the phrase “loans made in such State” in DIDMCA Section 525. Colorado argues that the statutory text unambiguously encompasses loans involving either a borrower or a lender located in an opt-out state, while the plaintiffs contend that a loan is “made” only where the bank is located and performs its lending functions.

Colorado’s Principal Arguments

The Statutory Text Is Unambiguous

Colorado begins with what it characterizes as a straightforward textual analysis. According to the State, a loan cannot exist without both a borrower and a lender. Because a loan is completed only when the lender delivers funds and the borrower receives them and agrees to repay them, both parties necessarily determine where a loan is “made.” Colorado therefore argues that the Banks’ assertion that “the borrower is irrelevant” is inconsistent with the ordinary meaning of the statutory language.

The brief relies heavily on contemporaneous dictionary definitions and traditional contract principles, emphasizing that a loan is a bilateral transaction requiring actions by both parties. According to Colorado, because both the borrower and lender are necessary for a loan to come into existence, both parties’ locations are relevant in determining whether a loan was “made” in an opt-out state.

Congress Used Different Language in Sections 521 and 525

Colorado next argues that Congress deliberately used different language in DIDMCA’s two key provisions.

Section 521 authorizes state-chartered banks to charge interest permitted by the laws of the state “where the bank is located.” By contrast, Section 525 allows a state to opt out with respect to “loans made in such State.”

According to Colorado, courts must give meaning to Congress’s choice of different language. Had Congress intended Section 525 to focus solely on the bank’s location, it could easily have repeated the language used in Section 521. Instead, Congress chose a different phrase, which Colorado argues necessarily has a broader meaning.

The Banks’ Interpretation Produces an Illusory Opt-Out

Colorado argues that the plaintiffs’ interpretation would effectively deprive Section 525 of meaningful effect.

Under the Banks’ interpretation, Colorado argues, the state’s opt-out would prevent only Colorado-chartered banks from exporting interest rates while allowing out-of-state state-chartered banks to continue making loans to Colorado residents at rates permitted by their home states. Colorado contends that Congress could not have intended such a limited opt-out because it would leave states powerless to reestablish meaningful usury protections for their own residents.

The brief includes several hypothetical examples illustrating how Colorado’s interpretation gives full effect to both Sections 521 and 525, while the Banks’ interpretation largely nullifies the opt-out provision.

Practical Compliance Concerns Do Not Justify Rewriting the Statute

Responding to arguments that its interpretation would complicate nationwide lending, Colorado argues that any additional complexity is simply the consequence of Congress allowing individual states to opt out of DIDMCA.

The State contends that lenders routinely comply with differing state laws in other contexts and identifies a straightforward analytical framework for determining whether a state’s opt-out applies: first, determine whether either the borrower or lender is located in an opt-out state; second, determine whether the loan falls within the scope of that state’s opt-out; and third, determine which state’s substantive law governs the transaction. According to Colorado, these issues are manageable and do not justify departing from the statute’s plain language.

Alternative Arguments if the Court Finds Ambiguity

Although Colorado maintains that the statute is unambiguous, it also argues that every traditional interpretive aid favors its position if the court concludes otherwise.

First, Colorado contends that DIDMCA’s legislative history demonstrates Congress intended states to retain the ability to reimpose their usury laws through the Section 525 opt-out. The brief relies heavily on statements by Senator William Proxmire, who described the opt-out provision as preserving state authority to restore interest-rate limitations if a state chose to do so.

Second, Colorado argues that the regulatory history provides little support for the Banks’ interpretation because federal agencies have repeatedly changed their views over the past four decades. The State notes that the FDIC’s 1988 interpretive letter expressly rejected the proposition that a loan necessarily is made only where the bank is located and instead emphasized that Sections 521 and 525 use materially different language serving different purposes.

Finally, Colorado argues that if ambiguity remains after applying traditional interpretive tools, the court should apply the presumption against federal preemption and construe the statute in favor of preserving state regulatory authority.

Observations

Colorado’s supplemental brief demonstrates that the en banc proceeding has evolved into a pure exercise in statutory interpretation. Unlike earlier briefing, which devoted significant attention to policy considerations, Colorado now grounds virtually its entire argument in textual analysis. The State repeatedly emphasizes that Congress used different language in Sections 521 and 525 and argues that those differences must be given independent meaning.

The brief also seeks to reframe the case as one involving federalism rather than bank parity. While the plaintiffs argue that Congress enacted DIDMCA principally to place state-chartered banks on equal footing with national banks, Colorado contends that Section 525 reflects Congress’s equally important decision to preserve state sovereignty by permitting states to reject DIDMCA’s interest-rate exportation regime.

The en banc court’s ultimate interpretation of the phrase “loans made in such State” will have significant implications for interstate lending by state-chartered banks and for the continuing viability of state efforts to regulate interest rates applicable to loans made to their residents.

Any amicus briefs supporting the State of Colorado are due on July 15, 2026. Plaintiffs Supplemental En Banc Reply Brief is due July 22. The En Banc oral argument will take place on August 18, 2026.

Three leading financial services trade associations (the National Association of Industrial Bankers (NAIB), the Online Lenders Alliance (OLA), and the American Financial Services Association (AFSA)) filed a lawsuit on June 15, 2026, in Federal District Court in the District of Oregon challenging a recently enacted Oregon law effective June 5, 2026, that seeks to impose Oregon’s 36% interest-rate cap on consumer finance loans made by out-of-state state-chartered banks in their home states to Oregon residents.

The lawsuit contends that Oregon House Bill is preempted by Section 521 of DIDMCA and, in part, violates the dormant Commerce Clause of the U.S. Constitution.

The plaintiffs are represented by our law firm (Pilar French in our Portland, Oregon office and Burt Rublin, Alan Kaplinsky and Facundo Bouzat, who are in the Philadelphia office).

Alan S. Kaplinsky and Burt M. Rublin

 

 

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Former Iowa Attorney General Thomas J. Miller Files Amicus Brief Supporting Colorado’s Interpretation of DIDMCA’s Opt-Out Provision

On July 15, 2026, former Iowa Attorney General Thomas J. Miller filed an amicus brief supporting Colorado in the en banc proceedings before the U.S. Court of Appeals for the 10th Circuit in National Association of Industrial Bankers, et al. v. Weiser. Unlike the other amicus briefs filed in support of Colorado, Miller’s submission is unique because it is based not on academic research, economic analysis, or general principles of statutory interpretation, but on his personal experience administering Iowa’s consumer credit laws from the time the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) was enacted in 1980 through more than four decades thereafter.

Miller served as Iowa Attorney General from 1979 until 2022 (except for a four-year interruption from 1991 to 1995). He notes that he was Iowa’s Attorney General when Congress enacted DIDMCA and when Iowa immediately exercised its statutory right to opt out of DIDMCA’s interest-rate exportation provision. Because Iowa is the only state that opted out immediately after DIDMCA’s enactment and has remained opted out continuously ever since, Miller contends that he possesses unique firsthand knowledge regarding how Section 525 of DIDMCA has been understood and enforced since its adoption. He argues that the plaintiffs’ interpretation of the statute conflicts with Iowa’s longstanding understanding and application of DIDMCA’s opt-out provision.

Iowa’s Experience Allegedly Provides Contemporaneous Evidence of Congress’s Intent

Miller begins by arguing that the 10th Circuit need not resort to extrinsic evidence because he asserts that Section 525’s text is unambiguous. In his view, the panel majority correctly concluded that when Congress authorized states to opt out of DIDMCA “with respect to loans made in such State,” it meant loans made to consumers in the opt-out state. He nevertheless argues that, if the en banc court concludes the statute is ambiguous, Iowa’s contemporaneous interpretation deserves substantial weight under the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, which recognized that longstanding governmental interpretations may inform a court’s understanding of ambiguous statutes.

According to Miller, Iowa’s experience is especially significant because it is the only jurisdiction that has continuously exercised its opt-out authority from the moment DIDMCA became law.

Miller Asserts That Iowa Believed Its Opt-Out Applied to Out-of-State State Banks

The brief traces Iowa’s historical regulation of usury.

Before Marquette National Bank v. First of Omaha Service Corp., Iowa regulated interest charged to Iowa borrowers regardless of where the lender was located. Although Marquette held that the National Bank Act preempted Iowa’s usury laws as applied to national banks, Miller notes that Iowa officials immediately recognized that the decision did not affect lending by state-chartered banks. Shortly after Marquette, the Iowa Attorney General issued an opinion concluding that while national banks could export their home-state interest rates, “if the lender institution is other than a national bank, Iowa law would control.”

When Congress enacted DIDMCA in 1980, Miller explains, it extended interest-rate exportation rights to state-chartered banks but simultaneously created an important safeguard absent from the National Bank Act by allowing states to opt out of the new preemption. Iowa exercised that right immediately, declaring that DIDMCA would not apply “with respect to loans … made in this state.”

Iowa Consistently Enforced Its Usury Laws Against Out-of-State State Banks

According to Miller, there was never any doubt within Iowa government that the state’s DIDMCA opt-out restored Iowa’s authority to enforce its consumer credit laws against loans made by out-of-state state-chartered banks to Iowa residents.

The brief points to a 1986 opinion issued by the Iowa Consumer Credit Code Administrator rejecting a New York state-chartered bank’s contention that Iowa’s opt-out did not apply to loans made by out-of-state banks. The Administrator concluded that Iowa retained authority to apply its consumer credit laws to loans made to Iowa borrowers despite the lender’s out-of-state location.

Miller further notes that Iowa has consistently enforced that interpretation in practice. While many out-of-state state banks voluntarily complied with Iowa law, the State also brought enforcement actions when lenders exceeded Iowa’s usury limits. According to Miller, these actions reflect Iowa’s uninterrupted position that its opt-out restored full authority to regulate loans made to Iowa residents by out-of-state state-chartered banks.

Miller Contends That Iowa’s Longstanding Position Supports Colorado’s Interpretation

Miller concludes that Iowa’s uninterrupted 46-year history of interpreting and enforcing DIDMCA strongly supports Colorado’s position.

While contending that the statutory text alone warrants reversal of the district court’s preliminary injunction, he argues that Iowa’s continuous interpretation since 1980 provides confirmation that Congress intended Section 525 to permit states to apply their usury laws to loans made to consumers within opt-out states, including loans originated by out-of-state state-chartered banks.

Observations

Former Attorney General Miller’s amicus brief is unlike the other filings in this case because it rests primarily on Iowa’s historical interpretation and enforcement of Section 525 of DIDMCA over the past 46 years. According to the brief, because Iowa opted out immediately after DIDMCA’s enactment and has remained an opt-out state ever since, Iowa’s longstanding interpretation of the statute should inform the 10th Circuit’s construction of Section 525.

That argument is open to serious question. The issue before the court is the interpretation of a federal statute enacted by Congress. Iowa cannot determine the meaning of federal law. As the Supreme Court made clear more than two centuries ago, “it is emphatically the province and duty of the judicial department to say what the law is.” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803).

Nor does the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), upon which Mr. Miller relies, support the proposition that a federal court should give special weight to a former state attorney general’s interpretation of a federal statute. To the contrary, Loper Bright reaffirmed that courts must exercise their own independent judgment in determining the meaning of federal statutes. If federal courts no longer give Chevron deference to the statutory interpretations of federal agencies merely because they administer a statute, it is even more difficult to see why they should defer to the views of a former state official who possesses no congressionally delegated authority to interpret federal law.

Indeed, the premise of the brief raises an obvious question. If Iowa’s historical interpretation is entitled to persuasive weight because it has remained an opt-out state since 1980, why should that experience be accorded greater significance than that of the overwhelming majority of states that either never exercised DIDMCA’s opt-out authority or subsequently repealed their opt-out statutes? The brief offers no principled basis for concluding that the experience of one state more accurately reflects congressional intent than the collective experience of the many other states.

Most significantly, Congress has assigned responsibility for administering and interpreting Sections 521 and 525 of DIDMCA to the Federal Deposit Insurance Corporation. Unlike a former state attorney general, the FDIC is the federal banking agency charged with implementing and interpreting the statute. In this litigation, the FDIC has filed an amicus brief with the en banc 10th Circuit supporting the plaintiffs’ interpretation of Section 525. Whether or not the court ultimately agrees with the FDIC’s position, its views at least emanate from the federal regulator entrusted by Congress with administering DIDMCA rather than from a state official interpreting a federal statute outside the scope of any delegated federal authority.

Ultimately, Mr. Miller’s brief is best understood as an account of Iowa’s own regulatory history rather than an authoritative or persuasive exposition of federal law. Iowa’s enforcement practices may illustrate how one state has viewed its opt-out legislation over the past four decades, but it cannot answer the question before the 10th Circuit: what Congress intended when it enacted Section 525 of DIDMCA in 1980. That question, as Marbury and Loper Bright make clear, is one for the federal courts to decide through their independent interpretation of the statutory text.

Alan S. Kaplinsky and Burt M. Rublin

 

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11 States and the District of Columbia File Amicus Brief Supporting Colorado in DIDMCA 10th Circuit En Banc Appeal

On July 13, 2026, the attorneys general of California, Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New York, Washington, and the District of Columbia filed an amicus brief in support of Colorado in the en banc proceedings before the U.S. Court of Appeals for the 10th Circuit in National Association of Industrial Bankers, et al. v. Weiser. These “Blue State” amici urge the court to reverse the district court’s preliminary injunction and uphold Colorado’s interpretation of Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). Previously, 21 “Red States” filed an amicus brief supporting the plaintiff trade associations that are challenging the Colorado opt-out statute.

The states explain that they have a substantial interest in the appeal because, in their view, the plaintiffs’ interpretation of DIDMCA would effectively eliminate the authority Congress reserved to states to opt out of DIDMCA’s interest-rate exportation provisions and restore their own usury laws. They contend that the plaintiffs’ reading “would nullify” states’ ability to protect their residents from predatory lending.

The Blue States Frame the Case as One About State Sovereignty

Unlike several of the amicus briefs filed on behalf of the banking industry, which emphasize competitive parity between state and national banks and the importance of interstate lending, the Blue State amici present the case primarily as one involving state sovereignty.

The brief begins by arguing that states have historically possessed the sovereign authority to protect their residents through usury laws, regardless of where a lender is located. According to the amici, courts have long recognized that states may apply their consumer protection laws to transactions involving their residents, even when the seller or lender operates from another jurisdiction. The brief points to numerous decisions, including Quik Payday v. Stork, 439 F.3d 1302 (10th Cir. 2008); Otoe Missouria Tribe v. New York State Department of Financial Services, 769 F.3d 105 (2d Cir. 2014); Consumer Financial Protection Bureau v. CashCall, Inc., 35 F.4th 734 (9th Cir. 2022) ; and TitleMax of Delaware, Inc. v. Weissmann, 24 F.4th 230 (3d Cir. 2022), that applied a state’s lending laws based on the borrower’s location.

The amici argue that this historical backdrop is critical because Congress enacted DIDMCA against a legal landscape in which states generally regulated loans made to their own residents.

The Blue States Assert That DIDMCA Created a Different Balance Than the National Bank Act

The brief next contrasts the National Bank Act (NBA) with DIDMCA.

According to the amici, Marquette National Bank v. First of Omaha Service Corp., 439 U.S. 299 (1978) recognized that the NBA permits national banks to export the interest rates authorized by their home states. Congress subsequently extended comparable authority to state-chartered banks through Section 521 of DIDMCA. Unlike the NBA, however, DIDMCA also includes Section 525, which permits states to opt out of that preemption.

The states argue that this distinction reflects a deliberate congressional compromise. They contend that Congress sought to place state-chartered banks on more equal footing with national banks while simultaneously preserving state authority by allowing states to restore their own usury laws through the opt-out mechanism. The amici rely extensively on legislative history, including testimony before Congress and statements from banking regulators and legislators, all of which they contend demonstrate that Congress intended states to retain meaningful authority to reestablish their usury limits if they chose to do so.

The brief also notes that Iowa and Puerto Rico have long exercised their statutory opt-out rights and observes that Colorado is the most recent state to do so in response to concerns over bank-Fintech partnerships that facilitate high-interest lending. The amici further note that several other states have considered similar legislation in recent years.

The Blue States Argue That Plaintiffs’ Interpretation Would Defeat Congress’s Compromise

The heart of the brief argues that the plaintiffs’ interpretation of Section 525 would effectively eliminate the value of the opt-out provision.

According to the amici, Congress did not intend states to be able only to prevent their own state-chartered banks from exporting interest rates while leaving out-of-state state banks free to charge higher rates to the state’s residents. Such an interpretation, they argue, would invert the very purpose of usury laws, which exist to protect resident borrowers rather than regulate lending by home-state institutions to borrowers elsewhere.

The states also emphasize that Congress deliberately used different language in Sections 521 and 525. Whereas Section 521 focuses on the state “where the bank is located,” Section 525 refers instead to “loans made in” the opt-out state. The amici argue that courts must give independent meaning to those different statutory phrases. In their view, a loan is “made” at least in part where the borrower enters into the loan agreement, receives the funds, and incurs the debt.

The brief further rejects arguments that Colorado’s interpretation would create unmanageable compliance burdens. According to the amici, businesses routinely comply with differing state consumer protection laws, and lenders have historically complied with varying state usury laws long before DIDMCA was enacted.

The Blue States also Invoke the Presumption Against Preemption

Finally, the amici argue that, even if the en banc court concludes Section 525 is ambiguous, longstanding principles governing federal preemption require that ambiguity be resolved in favor of preserving state authority.

The brief emphasizes that regulation of usury has historically been one of the core police powers reserved to the states. Relying on Supreme Court decisions such as Altria Group, Inc. v. Good, 555 U.S. 70 (2008); CTS Corp. v. Waldburger, 573 U.S. 1 (2014); and Virginia Uranium, Inc. v. Warren, 587 U.S. 761 (2019) the amici contend that where Congress legislates in an area of traditional state authority, courts should not lightly infer federal preemption absent a clear statement from Congress. Because, in the amici’s view, Colorado’s interpretation is at least a plausible reading of the statute, the court should reject the broader preemption urged by the plaintiffs.

Observations

This amicus brief differs from most of the other filings supporting Colorado because it frames the dispute principally as one about federalism rather than banking law. Whereas Colorado’s own supplemental brief focuses heavily on statutory text, and other amici have emphasized the policy benefits of state interest-rate caps, the Blue States’ amicus brief repeatedly returns to a single overarching theme: Congress deliberately preserved state sovereignty by including DIDMCA’s opt-out provision, and that reservation of authority should be interpreted broadly enough to have practical effect.

Eleven states and the District of Columbia have joined the brief, underscoring that the outcome of the 10th Circuit’s en banc decision will have implications extending well beyond Colorado. If the plaintiffs prevail, the amici argue, states that have exercised, or may someday exercise, their DIDMCA opt-out authority could find that authority substantially diminished. Conversely, if Colorado prevails, other states may be encouraged to revisit whether to opt out of DIDMCA as a means of regulating high-rate lending facilitated through interstate bank-Fintech partnerships.

Alan S. Kaplinsky and Burt M. Rublin

 

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Former FDIC Board Members Gruenberg and Cordray File Amicus Brief Supporting Colorado in 10th Circuit DIDMCA Opt-Out Litigation

On July 15, 2026, former Federal Deposit Insurance Corporation (FDIC) Chairman Martin J. Gruenberg and former Consumer Financial Protection Bureau Director and FDIC Board Member Richard Cordray filed an amicus brief supporting Colorado in the en banc proceedings before the U.S. Court of Appeals for the 10th Circuit in National Association of Industrial Bankers v. Weiser. Their brief principally addresses four of the six questions posed by the en banc court and urges adoption of the vacated panel majority’s interpretation of Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA), which is that a loan is made both in the bank’s state and the borrower’s state.

Unlike several of the other amicus briefs filed in support of Colorado, Gruenberg and Cordray devote substantial attention to what they characterize as an unexplained reversal in the FDIC’s litigation position. According to the brief, the FDIC’s current interpretation of Section 525, advanced in its recently filed amicus brief supporting the plaintiffs, represents a departure from the agency’s prior interpretations and is inconsistent with the statute’s text, structure, purpose, and legislative history.

The Brief Focuses on Four Questions Posed by the En Banc Court

The amici organize their analysis around four principal themes.

First, they contend that the phrase “loans made in such State” cannot reasonably be interpreted to mean only loans made by a bank located in that state. They argue that a loan is, by definition, a contract between a lender and a borrower and that both parties are indispensable participants in creating the loan. Because both lender and borrower are necessary to the transaction, they argue that the borrower cannot simply be ignored when determining where a loan is “made.”

Second, the brief argues that the structure of DIDMCA demonstrates that Congress intentionally used different terminology in Sections 521 and 525. Section 521 refers to the state where “the bank is located,” while Section 525 refers to “loans made in such State.” According to the amici, ordinary principles of statutory construction require courts to give effect to those different terms rather than treating them as synonymous.

Third, the amici contend that even if one assumes that a bank “makes” the loan, it does not follow that the loan is made only where the bank is located. Relying on decisions involving interstate commerce and online lending, including the 10th Circuit’s decision in Quik Payday, Inc. v. Stork, they argue that interstate lending transactions occur both where the lender operates and where the borrower enters into the transaction.

Finally, the brief argues that the purpose and legislative history of Section 525 confirm that Congress intended to preserve a meaningful role for states choosing to opt out of DIDMCA’s interest-rate exportation regime. According to the amici, interpreting Section 525 as applying only to banks physically located in an opt-out state would substantially diminish the practical significance of the opt-out provision.

Former FDIC Officials Criticize the Agency’s Current Litigation Position

Perhaps the most noteworthy aspect of the brief is its criticism of the FDIC’s current litigation position.

Gruenberg and Cordray argue that the FDIC’s present interpretation of Section 525 is inconsistent with the agency’s earlier interpretations, including a 1988 advisory opinion and statements contained in the preamble to the FDIC’s 2020 valid-when-made rule. They assert that those earlier interpretations recognized a distinction between the state where a bank is located under Section 521 and the state where a loan is made under Section 525.

The brief further contends that the FDIC has offered no persuasive explanation for changing its position and characterizes the agency’s current arguments as an attempt to read language into Section 525 that Congress did not enact.

Reliance on the Presumption Against Preemption

The amici also argue that, even if Section 525 were considered ambiguous, the court should resolve that ambiguity in favor of preserving state authority.

Relying on Supreme Court decisions recognizing the traditional state role in regulating banking and consumer protection, including Altria Group, Inc. v. Good and Wyeth v. Levine, they contend that the presumption against federal preemption reinforces the panel majority’s interpretation because Congress expressly preserved the ability of states to opt out of DIDMCA’s preemptive effect.

Observations

This amicus brief is noteworthy because it is filed by two former members of the FDIC Board who criticize the FDIC’s current litigation position as an unexplained departure from the agency’s historical interpretation of Section 525. According to the amici, the FDIC previously interpreted the statute to permit an opt-out state to apply its usury laws to loans made by out-of-state state-chartered banks and only recently changed course after a change in agency leadership.

That characterization, however, overlooks an important part of the FDIC’s own interpretive history.

As our firm explained in the amicus brief we filed on behalf of a coalition of national and state financial services trade associations supporting the plaintiffs, the FDIC’s earliest interpretation of Section 525 reached precisely the opposite conclusion. In Interpretive Letter No. 83-16, issued in October 1983—only three years after DIDMCA’s enactment—the FDIC advised that a state-chartered bank could rely on the interest-rate authority of its home state when extending credit to residents of other states, including “when making loans to citizens of states that have rejected the federal preemption.” That interpretation squarely supports the plaintiffs’ position that a state’s decision to opt out of Section 521 does not prevent an out-of-state state-chartered bank from exporting the interest rate authorized by the law of its home state.

The FDIC reiterated that understanding in its 1992 amicus brief in Greenwood Trust Co. v. Massachusetts. There, the agency argued that a state’s decision to opt out of Section 521 “should not affect the usury preemption of section 521 for a bank not located in that State” and that Section 525 “clearly does not confer on states that elect to opt out of Section 521 extraterritorial authority to apply their own lending laws to loans made in other states by banks chartered in other states, merely because the borrower happens to be a resident.” Those statements are difficult to reconcile with the suggestion that the FDIC historically viewed Section 525 as authorizing opt-out states to regulate loans originated by out-of-state state-chartered banks.

Why the 1988 FDIC Interpretive Letter and the 2020 Final Rule May Not Carry the Weight the Amici Attribute to Them

Former Chairman Gruenberg and former Director Cordray rely heavily on two FDIC authorities, the agency’s 1988 Interpretive Letter and statements contained in the preamble to the FDIC’s 2020 final rule concerning the valid-when-made doctrine, to argue that the FDIC historically interpreted Section 525 to permit an opt-out state to apply its usury laws to loans made by out-of-state state-chartered banks. Whether those authorities support that broad proposition, however, is open to debate.

First, neither authority squarely addresses the question presently before the 10th Circuit. The 1988 Interpretive Letter recognized that Congress used different language in Sections 521 and 525 of DIDMCA and therefore concluded that the state where a bank is “located” under Section 521 should not automatically be equated with the state where a loan is “made” under Section 525. But the opinion did not undertake a comprehensive analysis of the critical issue now before the court, namely, whether an interstate loan made by an out-of-state state-chartered bank to a resident of an opt-out state is “made” in the borrower’s state, the lender’s state, or both. Instead, the opinion appears to assume the answer to that question rather than analyze it.

The same is true of the FDIC’s 2020 final rule implementing the valid-when-made doctrine. That rulemaking was promulgated to address a different issue altogether, whether the interest rate on a loan remains valid after the loan is sold, assigned, or otherwise transferred. The brief discussion of Section 525 in the preamble was incidental to that rulemaking and was not the subject of notice-and-comment rulemaking or independent statutory analysis. Although the preamble observes that state banks making loans in an opt-out state must comply with that state’s interest-rate limits, it does not explain what constitutes a loan “made” in an opt-out state or analyze the statutory text that is now before the en banc court.

Perhaps most significantly, the amici do not address the FDIC’s earlier interpretations of Section 525. As our firm’s amicus brief filed on behalf of a coalition of national and state financial services trade associations explains, the FDIC advised in 1983 that an out-of-state state-chartered bank could continue to export the interest rate authorized by its home state even when lending to residents of a state that had exercised its opt-out rights under Section 525. Likewise, in its 1992 amicus brief in Greenwood Trust Co. v. Massachusetts, the FDIC argued that a state’s decision to opt out “should not affect the usury preemption of Section 521 for a bank not located in that State” and that Section 525 does not authorize an opt-out state to regulate loans made in other states merely because the borrower resides in the opt-out state.

Accordingly, the historical record is considerably more nuanced than the amici suggest. Rather than reflecting a single, uninterrupted agency interpretation dating back to 1983, the FDIC’s statements over the past four decades have not always been consistent. Ultimately, however, that history may prove of only limited significance. The question before the 10th Circuit is one of statutory interpretation, and under the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, it is the responsibility of the federal courts, not current or former agency officials, to determine the meaning of Section 525 by applying the traditional tools of statutory construction.

Alan S. Kaplinsky and Burt M. Rublin

 

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Bank Trade Associations Seek Preliminary Injunction Against Oregon’s DIDMCA Opt-Out Law

The National Association of Industrial Bankers (NAIB), the Online Lenders Alliance (OLA), and the American Financial Services Association (AFSA) have moved for a preliminary injunction to block enforcement of a recently enacted Oregon law that seeks to impose Oregon’s 36% interest-rate cap on consumer finance loans made by out-of-state state-chartered banks in their home states to Oregon residents.

The motion, filed on July 9, 2026, in the U.S. District Court for the District of Oregon, accompanies an earlier-filed complaint alleging that Oregon House Bill 4116 is preempted by federal banking law and, in part, violates the dormant Commerce Clause of the U.S. Constitution.

The Challenged Oregon Law

As we previously reported, Oregon recently exercised its right under Section 525 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) to opt out of DIDMCA’s interest-rate exportation provisions applicable to state-chartered banks.

The plaintiffs do not challenge Oregon’s decision to opt out with respect to Oregon-chartered banks. Rather, they challenge a separate provision of House Bill 4116 that purports to apply Oregon’s Consumer Finance Act (and its 36% interest-rate ceiling) to consumer finance loans of $50,000 or less made by state-chartered banks in their home states to Oregon residents.

According to the plaintiffs, Oregon’s law unlawfully attempts to regulate loans made outside Oregon by banks chartered and regulated in other states in violation of the express preemption provision in Section 521 of DIDMCA.

Why the Plaintiffs Say They Are Likely to Succeed

The motion argues that the plaintiffs are likely to prevail on the merits because Oregon’s law conflicts with Section 521 of DIDMCA, which authorizes state-chartered banks to charge interest at rates permitted by the laws of the state where the bank is located and to export the home state rates in their interstate loans.

The plaintiffs contend that Section 521 of DIDMCA expressly preempts conflicting state interest-rate limitations in the borrowers’ state and that in Section 525 of DIDMCA Congress gave states only a limited authority to opt out of DIDMCA’s preemption provisions “with respect to loans made in such State.”

Central to the dispute is the meaning of the phrase “loans made in such State.”

The plaintiffs rely heavily on the Federal District Court of Colorado’s decision in National Association of Industrial Bankers v. Weiser, which held that a loan is “made” in the state where the bank is located and performs its lending functions, not where the borrower resides. Under that interpretation, Oregon may regulate loans made by Oregon-chartered banks in Oregon, but it may not regulate loans made by out-of-state state banks in their home states to Oregon residents.

The motion also points to positions previously advanced by both the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency in the ongoing Weiser litigation. According to the plaintiffs, federal banking regulators have taken the view that a DIDMCA opt-out does not authorize a state to apply its interest-rate limits to loans made in other states by state banks chartered elsewhere.

Dormant Commerce Clause Challenge

The motion separately argues that one portion of House Bill 4116 violates the dormant Commerce Clause.

Under the challenged provision, Oregon law would apply when an Oregon resident makes payments on a consumer finance loan from an Oregon bank account or through an Oregon financial institution, even if the loan itself was made while both the bank and borrower were located outside Oregon.

The plaintiffs contend that this provision regulates conduct occurring wholly outside Oregon’s borders and therefore constitutes an impermissible extraterritorial regulation of interstate commerce that is precluded by Supreme Court and Ninth Circuit precedent.

The Claimed Irreparable Harm

The motion places particular emphasis on irreparable harm, a critical requirement for obtaining preliminary injunctive relief.

According to the plaintiffs, their member state banks already have incurred substantial compliance costs as a result of House Bill 4116 which became effective on June 5, 2026. They further assert that enforcement of the statute would force many institutions to reduce lending activity, alter product offerings, terminate relationships with customers and business partners, and forego future business opportunities.

The motion argues that these injuries are irreparable because sovereign immunity generally prevents recovery of monetary damages against the State of Oregon. The plaintiffs also contend that the loss of customers, goodwill, and competitive position cannot be adequately remedied after the fact. In addition, the plaintiffs rely on case law holding that irreparable harm is presumed where a plaintiff has shown that it is likely to prevail on its challenge to the constitutionality of a statute.

In support, the motion cites the district court’s decision in NAIB v. Weiser, where the court granted a preliminary injunction against Colorado’s DIDMCA opt-out law after finding that state-chartered banks would suffer irreparable harm from lost customers, lost goodwill, lost revenue, and compliance burdens.

The Competitive Impact on State Banks

A recurring theme in both the complaint and the preliminary injunction motion is the competitive imbalance created by Oregon’s law.

The plaintiffs emphasize that national banks derive their interest-rate exportation authority from Section 85 of the National Bank Act rather than DIDMCA. As a result, Oregon’s statute does not affect national banks’ ability to export rates authorized by their home states.

According to the plaintiffs, Oregon’s law therefore disadvantages state-chartered banks while leaving national banks free to continue offering the same products and pricing structures in Oregon, with less competition from state banks.

The motion argues that this outcome directly conflicts with Congress’s purpose in enacting Section 521 of DIDMCA, which was designed to eliminate competitive disparities between national banks and state-chartered banks. That objective is expressly set forth in the preamble of Section 521.

Why the Motion Matters

The preliminary injunction motion represents the latest development in a growing national dispute over the scope of DIDMCA’s opt-out provision. Oregon is only the fourth jurisdiction currently maintaining a DIDMCA opt-out, joining Colorado, Iowa, and Puerto Rico.

The case also arrives while the 10th Circuit, sitting en banc, is considering the same core statutory question in NAIB v. Weiser: whether a loan is “made” only where the bank is located, or also where the borrower resides.

An order by the court granting or denying the injunction will be immediately appealable to the Ninth Circuit.

Either way, the Oregon litigation and 10th Circuit’s forthcoming en banc decision in NAIB v. Weiser will have a significant impact on interstate lending, bank-Fintech partnerships, and the continuing debate over the scope of state authority to regulate loans made by out-of-state state-chartered banks.

Alan S. Kaplinsky and Burt M. Rublin

 

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Court Establishes Briefing Schedule on Preliminary Injunction Motion Challenging Oregon’s DIDMCA Opt-Out Law

On July 13, 2026, we reported that the National Association of Industrial Bankers (NAIB), the Online Lenders Alliance (OLA), and the American Financial Services Association (AFSA), represented by Ballard Spahr, had filed a motion for a preliminary injunction on July 9, 2026, seeking to prevent Oregon officials from enforcing Oregon’s recently enacted DIDMCA opt-out law while the litigation proceeds.

On July 14, 2026, Judge Ann L. Aiken of the U.S. District Court for the District of Oregon entered an order adopting the briefing schedule proposed by the parties and establishing the schedule for briefing the plaintiffs’ motion for a preliminary injunction.

Under the court’s scheduling order:

  • Amicus briefs supporting the plaintiffs’ motion are due July 28, 2026.
  • Oregon’s response to the preliminary injunction motion is due August 11, 2026.
  • Amicus briefs supporting Oregon’s position are due August 25, 2026.
  • The plaintiffs’ reply brief is due September 8, 2026.

The parties’ stipulation which the court adopted, also makes clear that although the parties agreed upon a schedule for any amicus filings, neither side consented in advance to the filing of any particular amicus brief. Instead, each party reserved whatever rights it may have to object to proposed amicus participation.

The briefing schedule reflects the parties’ expectation that the case may attract significant interest from organizations and other entities that have a stake in the outcome of the litigation. The challenge to Oregon’s DIDMCA opt-out law presents issues of national importance concerning the ability of states to opt out of Section 521 of the Depository Institutions Deregulation and Monetary Control Act and the effect of such opt-out statutes on loans made by FDIC-insured, state-chartered banks which are located outside Oregon. In addition, the litigation raises issues that overlap with those currently pending before the en banc U.S. Court of Appeals for the 10th Circuit concerning the scope of DIDMCA preemption and the authority of states to regulate interest rates on loans originated by out-of-state, state-chartered banks.

We will continue to monitor the case and report on the parties’ briefs, any amicus filings, the oral argument if one is scheduled, and the district court’s ruling on the preliminary injunction motion.

Alan S. Kaplinsky and Burt M. Rublin

 

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FTC Takes Aim at AI Accuracy

The Federal Trade Commission recently issued a proposed policy statement that could reshape how financial services firms use AI-powered tools. The proposed statement, titled “Proposed Policy Statement Concerning the Suppression of Accuracy in Artificial Intelligence Systems,” puts AI developers on notice that altering AI outputs away from accuracy, even if done to comply with a state law, may constitute consumer deception under Section 5 of the FTC Act.

The Core Theory: Accuracy Suppression as Deception

In December 2025, the Administration issued an executive order calling for the FTC to issue a policy statement on the application of the FTC Act’s prohibition on unfair and deceptive acts or practices to AI models. Stemming from that request, the Commission has asserted that AI companies that “steer the outputs of their AI systems toward unexpected objectives, and away from the objectives set by or reasonably expected by users, are likely to deceive consumers in violation of Section 5 of the FTC Act.” While the employment of AI tools in financial services may be novel, the FTC is applying its well-established three-part deception test from its 1983 Policy Statement to modern technology: first, there must be a representation, omission or practice that is likely to mislead the consumer; second, the consumer must be acting reasonably under the circumstances; and third, the representation, omission or practice must be material, such that it is “likely to affect the consumer’s conduct or decision with regard to a product or service.”

AI companies market that their systems aim to produce outputs that achieve users’ objectives as faithfully and accurately as they can. The FTC remarks that these representations, “absent adequate disclaimers or qualifications,” are material because consumers rely on them to assess whether a particular system is best suited to accomplish their objectives. The Commission expressed concern that consumers may be induced to pay for a service that does not behave as advertised or be deceived into relying on a technology that produces worse outputs if the “AI developer’s hidden agenda subverted consumers’ objectives.”

The State Law Dimension: Colorado and Implied Preemption

The proposed statement specifically discusses the interplay between AI system development and state law compliance. Colorado’s original Artificial Intelligence Act, for example, imposed a broad duty on AI companies to avoid outputs that might lead to disparate impacts. The revised version of that law, which was recently adopted in May 2026, previously discussed here, explicitly provides that AI companies can be held liable for discriminatory outcomes caused by their customers’ use of their products. The FTC acknowledges that, in order to avoid liability under this law, AI companies may be motivated to suppress accuracy to provide more equitable outputs. However, based on the proposed statement, companies deploying AI tools could be liable for deceptive practices under Section 5 if they fail to disclose how embedding state law compliance into their models may diminish accuracy.

The FTC takes the position that compliance with a state law is not a defense to a Section 5 violation. As the statement explains, “a company’s motives for deceiving consumers are irrelevant to the application of Section 5,” and state law is “impliedly preempted to the extent it conflicts with a federal regulatory scheme”. This implied preemption argument could have broad implications for the growing patchwork of state laws governing AI.

Why This Matters for Consumer Finance

Consumer finance practitioners should pay close attention for several reasons.

AI adoption in financial services is accelerating.

Consumers are increasingly turning to AI for financial advice, and AI tools are being integrated into lending, underwriting, and customer-facing applications across the industry. The proposed statement’s framing of consumer expectations, particularly the finding that consumers accept AI outputs without further fact-checking over 90% of the time, underscores how heavily consumers rely on AI outputs and the importance of disclosures regarding the basis of recommendations and other advice.

Fair lending and anti-discrimination compliance may be affected.

Many financial institutions have been building AI governance frameworks designed to detect and mitigate disparate impact in lending and credit decisions. The proposed statement’s skepticism of laws that require AI companies to avoid disparate-impact outcomes raises questions about how the FTC will view bias-mitigation measures in AI-driven financial products. Financial institutions and their AI vendors will need to carefully evaluate whether their bias-testing and output-adjustment practices could be characterized as “suppressing accuracy” under this framework.

Disclosure obligations are heightened.

The FTC acknowledges that AI companies can shape consumer expectations through clear and conspicuous disclosures about their systems’ objectives. However, disclaimers cannot be buried in terms of service and must plainly dispel the notion that the system is designed to produce the most accurate answer. For consumer-facing AI products in financial services, this means disclosures about model limitations, output adjustments, or design choices will need to be front-and-center. Moreover, the more the disclosure conflicts with consumers’ reasonable expectations, the more persistent and prominent it must be.

Hallucinations are treated differently.

The FTC draws a distinction between accuracy suppression driven by design decisions and incorrect outputs resulting from technological limitations (i.e., hallucinations). The FTC does not believe hallucinations “in and of themselves” raise Section 5 issues, though misrepresenting the likelihood of hallucinations could still constitute deception. This view departs from past CFPB guidance on the use of chatbots in consumer finance. In 2023, the CFPB warned about the grave consequences that can result when a person relies on a chatbot backed by unreliable technology or inaccurate data. “In instances where financial institutions are relying on chatbots to provide people with certain information that is legally required to be accurate, being wrong may violate those legal obligations.” However, while not completely doing away with this concern, we think this departure is consistent with the current Administration’s cautious optimism toward advancing AI integration in financial services.

Looking Forward

The public comment period closes July 31, 2026. Given the FTC’s direction, financial institutions and their AI vendors should begin evaluating their AI governance frameworks to ensure that any output adjustments are accompanied by adequate, prominent disclosures and are defensible under the accuracy-focused lens articulated by the FTC.

Adam Maarec and Aja D. Finger

 

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Travel App Company Reaches $35 Million Agreement With the FTC

The FTC recently announced the settlement (subject to court approval) of an action premised in part on its Unfair and Deceptive Fees Rule (the so-called “Junk Fee Rule”).

The FTC and the companies that operate the Hopper travel apps reached an agreement that would require the companies to pay $35 million. The companies would also be prohibited from unfairly charging consumers hidden fees and misrepresenting the total prices consumers would pay and the benefits of the companies’ VIP Support and Price Freeze Services. According to the FTC, Hopper allows consumers to search and book airfares, lodging, and rental cars primarily through its apps.

The complaint filed in the U.S. District Court for the District of Massachusetts, contended that the Canadian company Hopper and its Massachusetts subsidiary “unfairly charged users without their consent for fees that the company claimed were optional yet were hidden and pre-selected for consumers,” the FTC said.

The complaint alleged that in doing so Hopper violated the FTC Act and, since May 12, 2025, the FTC’s Junk Fee Rule.

“Hopper deceived consumers by showing them a total price that did not include hidden, pre-selected fees,” Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, said.

 The FTC stated that “[u]ntil mid-2023, when consumers were ready to purchase their booking, they saw a screen with the ‘total price’ and a Swipe to Book button that failed to adequately disclose that the company would add charges for Tip and VIP Support fees. These ‘optional’ fees were pre-selected and hidden on an app screen that only appeared if the consumer scrolled down. Since 2023, Hopper has continued to fail to disclose that Tip fees were optional.”

According to the FTC, Hopper specifically violated the Junk Fee Rule by failing to disclose “the nature, purpose, and amount” of the Tip fee and that consumers could decline to pay the Tip fee or instead pay a $0 Tip.

The FTC said that consumers routinely complained that they did not consent to these extra fees, that “VIP Support fees were deceptively hidden, and that if Hopper [had] adequately disclosed these fees and made them unselected by default, most consumers would [have declined] them.”

The FTC also contended that Hopper misrepresented the benefits consumers would receive from the VIP Support service and that consumers were also misled about the benefits they would receive from purchasing the “Price Freeze” service, also known as “Hold the Room.”

The FTC asserted “[t]he company has said the service would allow consumers to hold or freeze an advertised price for a travel booking for a period of time so a consumer [could] book the travel later for the same price and that the fee paid for Price Freeze [would] be applied to the total price of the booking.”

However, the FTC contended that Hopper failed to disclose restrictions on these services, including that “Price Freeze” only protected the price up to a certain amount and only if a booking were still available. The FTC also said that the company failed to apply the “Price Freeze” fee toward the cost of booking, as the company had promised.

In response to the settlement, Hopper said, “[t]he FTC’s allegations were narrow: [they] primarily [involved] outdated display practices implemented during the pandemic, [that were] limited to the Hopper app, and [that were] discontinued by Hopper in mid-2023, prior to the start of the FTC’s inquiry. Importantly, the FTC raised no issues with the current Hopper app or website, other business divisions, current product offerings, or any other practices.” 

The company added, “[w]e decided to settle because the claims at issue are outdated and have no bearing on our business. Pursuing years of litigation over outdated, ticky-tacky issues would distract us from our current customers and partners — and that is not a distraction we are willing to accept. There are no other ongoing investigations with the FTC or any other agency. The settlement amount does not reflect the merit of the claims. It reflects our decision to move forward.” 

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

 

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Massachusetts Governor Proposes Medical Debt Rules

Massachusetts Governor Maura Healey has proposed regulations that would stop certain companies in the state from reporting medical debt to consumer credit agencies. 

The proposal would prohibit licensed medical care providers and debt collectors working for them from reporting medical debt to credit bureaus, intending to help patients avoid long-term financial harm after an unexpected illness or medical emergency. 

Providers that don’t comply could lose their license to practice, according to state officials.

“Getting sick is hard enough. It shouldn’t ruin your credit,” Governor Maura Healeysaid. “No one should have to worry that seeing a doctor, filling a prescription or taking their child to the emergency room will damage their financial future. Medical debt shouldn’t make it harder to buy a home, rent an apartment or get a loan years after you’ve recovered and when you’re working hard to make your payments. This action will help protect patients while we continue our work to lower health care costs and ensure all Massachusetts residents can afford to get the care they need when they need it.” 

“Medical debt can have long-lasting consequences that extend well beyond a hospital bill,” according to state officials. “A serious illness, cancer diagnosis, complicated pregnancy or trip to the emergency room can leave people with bills they never anticipated and often cannot afford.”

“Unlike most forms of consumer debt, medical debt is often unavoidable,” they added. “These proposed regulations recognize that patients shouldn’t face years of financial consequences simply because they needed medical care.”

The Department of Public Health developed the proposed regulations and all 23 of the Department’s licensing boards voted to advance them for public comment. The Department is accepting written public comments and will hold public hearings on July 27 and 28. After that, the Department will evaluate all comments received and finalize the proposed regulations. 

During the Biden administration, the CFPB supported banning medical debt from credit reports. The CFPB adopted a rule to impose such a ban, but the rule was vacated by a federal district court.

Reportedly, at least 17 other states have banned medical debt from appearing on credit reports. Those states are: California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, North Carolina, Ohio, Oregon, Rhode Island, Vermont, Virginia, and Washington. (See our blog about the bans on medical debt reporting in Colorado and New York here.)

At least some of the state laws, such as the Colorado law, are being challenged in court. Those challenges have been bolstered by a CFPB interpretive rule advising that such laws are preempted by the FCRA.

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

 

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Statutory Discrimination Claims and Constitutional Claims Opposing DEI Initiatives Receive Different Treatment in the Seventh Circuit – Practical Takeaways for Employers

A recent decision from the U.S. Court of Appeals for the Seventh Circuit highlights an important distinction for public employers defending challenges to DEI-related initiatives. That is, opposition to DEI does not automatically establish a viable Title VII claim, but constitutional claims may present different considerations.

Title VII Claims

In Spengler v. Cooperative Educational Service Agency 7, decided on July 8, 2026, the Seventh Circuit affirmed summary judgment against a Wisconsin public school employee who alleged she was demoted and reassigned to a lower-paying position after refusing to adopt her employer’s “equity mindset.” The employee—a white teacher—asserted claims for race discrimination and retaliation under Title VII, arguing that she opposed what she viewed as discriminatory DEI practices.

The court concluded that the record did not support her Title VII claims. According to the Seventh Circuit, the evidence showed that the employer’s expectations regarding the “equity mindset” applied to employees of all races and the plaintiff acknowledged that an employee of any race who refused to follow the framework likely would have faced the same consequences. As a result, the court found insufficient evidence that race motivated the employment decision or that the plaintiff engaged in objectively reasonable opposition to an unlawful employment practice under Title VII. Rather, according to the court, the school’s actions were based on the employee’s refusal to follow the school’s instructional framework. 

Constitutional Claims

The court reached a different conclusion, however, on one constitutional issue. It held that the district court should have allowed the plaintiff’s First Amendment claim to proceed. The complaint alleged that, because the employee declined to adopt or express agreement with certain beliefs reflected in the employer’s equity framework, she was removed from her position in violation of the First Amendment’s protection against government-compelled beliefs. The Seventh Circuit did not decide the merits of that claim but remanded it for further proceedings.

Practical Takeaways for Employers

For employers, the decision reinforces several practical points:

  • A Title VII claim based on opposition to DEI initiatives still requires evidence that an adverse employment action was taken because of a protected characteristic or because the employee opposed conduct that Title VII prohibits.
  • Employers should continue to document legitimate, nondiscriminatory reasons for personnel decisions, particularly where disagreements over workplace initiatives overlap with performance expectations or compliance with established instructional or operational frameworks.
  • Public employers should recognize that constitutional considerations, such as the First Amendment, may present issues distinct from Title VII. Those considerations generally do not apply to private employers.

Shanae T. Jones, Shirley S. Lou-Magnuson, and Brian D. Pedrow

 

 

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Two Recent Court Decisions Shape the Trump Administration’s DEI Executive Orders

Two recent court developments underscore that challenges to the Trump administration’s Executive Orders addressing diversity, equity, and inclusion (DEI) are far from over. In one case, a federal court in Washington blocked enforcement of certain grant conditions against a group of local government plaintiffs in relation to Executive Orders 14173 (the DEI Order) and 14168 (the Gender Order). Just days earlier, however, plaintiffs challenging the DEI Order in Maryland voluntarily dismissed their lawsuit after the Fourth Circuit Court of Appeals upheld the relevant provisions against a constitutional challenge.

Although the cases reached different procedural outcomes, they involved different legal theories and leave important questions unresolved for federal contractors and grant recipients.

Seattle Court Blocks Enforcement of Grant Conditions Against Local Government Plaintiffs

On June 29, 2026, the U.S. District Court for the Western District of Washington granted a preliminary injunction preventing federal agencies from enforcing portions of the Administration’s DEI and Gender Executive Orders against the City of Seattle and several other local government plaintiffs. Those plaintiffs include the cities of Cleveland and Columbus, Ohio; Portland, Oregon; Durham, North Carolina; and Shoreline, Washington, as well as Allegheny County, Pennsylvania; Hennepin and Ramsey counties in Minnesota; and Prince George’s County, Maryland.

The plaintiffs challenged new grant conditions requiring recipients to certify that they do not operate DEI programs that violate federal anti-discrimination laws and, in some cases, comply with restrictions concerning “gender ideology.” They argued that federal agencies lacked authority to impose those conditions across a wide range of grant programs.

The court agreed that the plaintiffs were likely to succeed on their Administrative Procedure Act claims. The court held that the federal agencies had not identified statutory authority allowing them to impose the challenged conditions across the grant programs at issue, nor had they provided “a reasoned explanation tying those conditions to the statutory purposes of the affected grants.” The court also found that the challenged conditions bore “no apparent relationship to the grant programs at issue,” making them likely unlawful under the admittedly high arbitrary and capricious standard.

The ruling is an important one, but its reach is limited. The injunction applies only to the plaintiffs in the case. Critically, however, it does not invalidate the Executive Orders or prevent the Administration from enforcing them more broadly.

Maryland Plaintiffs End Their Constitutional Challenge

A few days earlier, on June 26, 2026, the National Association of Diversity Officers in Higher Education, the American Association of University Professors, and the City of Baltimore voluntarily dismissed their constitutional challenge to the DEI Order.

The dismissal followed the Fourth Circuit’s decision allowing the challenged provisions to remain in effect. In announcing the dismissal, the plaintiffs pointed to the government’s representations during the appeal, which the Fourth Circuit accepted, that the Executive Orders are narrower than some public statements about them suggested. Among other things, the government represented that the certification provisions do not expand existing federal anti-discrimination laws and are directed only at DEI programs that violate those laws.

What This Means for Employers

These developments do not resolve the broader legal questions surrounding the Administration’s DEI initiatives. Rather, they reflect that different courts are addressing different legal challenges involving the Executive Orders and their implementation. Given apparent splits of opinion in courts of different circuits, this may increase the likelihood that an appeal based on those differences will ultimately be taken up for review by the U.S. Supreme Court.

Federal contractors and grant recipients should continue monitoring developments closely. While the Seattle injunction temporarily limits enforcement of certain grant conditions against the plaintiffs in that case, it does not provide nationwide relief. At the same time, the dismissal of the Maryland litigation leaves the Fourth Circuit’s decision intact, showing that the scope and application of the Executive Orders will likely continue to be addressed through ongoing litigation.

*          *          *

Ballard Spahr’s Labor and Employment Group regularly advises employers on developments involving federal contractors, workplace discrimination, DEI initiatives, and evolving federal employment policies. We assist clients in evaluating compliance obligations and navigating rapidly changing legal developments.

Shirley S. Lou-Magnuson and Ryan B. Ricketts

 

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LOOKING AHEAD

RESPRO 2026 Fall Seminar

September 16 – 17, 2026 | Mayer Brown's Washington, D.C. offices

Washington Update: What to Expect for Midterm Elections and Update on Housing Policy
September 16, 2026 – 4:30 PM ET
Speaker: Timothy Jenkins

CFPB Update
September 17, 2026 – 1:00 PM ET
Speaker: Richard J. Andreano, Jr.

 

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