Ballard Spahr
Legal Alert

Mortgage Banking Update - November 12, 2026

November 12, 2026

November 12 – Read the newsletter below for the latest Mortgage Banking and Consumer Finance industry news, written by Ballard Spahr attorneys. In this issue, our lawyers look at the CFPB's latest semiannual report and the Bureau's shift in regulatory priorities, follow the state attorneys general's and the OCC's dispute over rules preempting state interest-on-escrow laws, and review Pennsylvania's new Artificial Intelligence Deceptive Advertising Act, along with other noteworthy updates. 

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

 

Consumer Finance Monitor Podcast: The Future of Consumer Reporting with CDIA President Dan Smith

The consumer reporting system is undergoing rapid change, raising important questions for financial institutions, consumer reporting agencies, data furnishers, and consumers. In this episode of the Consumer Finance Monitor podcast, our host, Alan Kaplinsky (founder, former practice group leader for 25 years and now senior counsel of our Consumer Financial Services Group), is joined by Dan Smith, President and CEO of the Consumer Data Industry Association (CDIA), and Adam Maarec, a member of our Consumer Financial Services Group, for an in-depth discussion of the legal, regulatory, and technological developments reshaping the consumer reporting ecosystem.

Although consumer reporting is often associated primarily with credit scores and traditional credit bureau reports, its reach is considerably broader. Consumer reporting data plays an important role in credit underwriting, tenant and employment screening, fraud prevention, identity verification, and other activities that affect consumers’ everyday lives. Meanwhile, the growing use of artificial intelligence (AI), alternative data, and consumer-permissioned financial information is creating new opportunities while raising important questions about accuracy, privacy, compliance, and consumer protection.

Our discussion begins with the Fair Credit Reporting Act (FCRA) and the obligations of consumer reporting agencies and data furnishers to maintain accurate information and investigate consumer disputes. Dan discusses the scale of the consumer reporting system and explains why he believes the existing statutory dispute-resolution framework remains essential to its effective operation.

We then turn to the Consumer Financial Protection Bureau (CFPB)’s recent changes to its consumer complaint portal following a substantial increase in credit reporting complaints. Dan explains his concerns about AI-assisted disputes and the activities of credit repair organizations that, in his view, use the complaint process to pursue the removal of accurate but negative information from consumers’ credit reports. We discuss the distinction between the FCRA’s formal dispute process and complaints submitted to the CFPB, as well as the implications of the Bureau’s efforts to address potential misuse of its complaint portal.

The conversation also examines the expanding role of alternative data in credit underwriting. Rental payments, utility bills, and other recurring obligations may help lenders evaluate consumers who have limited traditional credit histories. Dan explains why he believes alternative data can complement conventional credit reporting and expand access to credit, while identifying practical and regulatory challenges that may discourage some data providers from participating.

Adam then leads a discussion of Section 1033 of the Dodd-Frank Act and the developing open banking and consumer-permissioned data-sharing ecosystem. We explore how access to consumers’ financial account information could complement traditional credit reporting, particularly through cash-flow underwriting. The discussion also addresses the differences between these systems, the status of the CFPB’s Section 1033 rulemaking, and the privacy, security, and data-accuracy protections consumers should expect.

AI is another major focus. Dan discusses how AI tools can help identify anomalies in data, improve data quality, and accelerate the evaluation of new data sets for underwriting. Adam emphasizes the importance of testing and learning as new technologies develop, while establishing appropriate risk-management safeguards to protect consumers and financial institutions.

Finally, we examine the regulatory outlook for the consumer reporting industry, including the importance of national consistency in credit reporting requirements, the challenges posed by differing state laws, and the strategic investments financial institutions should consider as new data sources and technologies become more prevalent.

This episode offers a timely and practical examination of an industry in transition. For financial institutions, fintech companies, consumer reporting agencies, data furnishers, and their counsel, understanding these developments is increasingly important to navigating compliance obligations, evaluating emerging underwriting tools, and preparing for the next generation of consumer reporting.

Listen to the episode to hear Dan Smith and Adam Maarec discuss these developments and their implications for the future of consumer financial services.

Consumer Financial Services Group

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Consumer Finance Monitor Podcast: Digital Commercial Law in the Age of Digital Assets

Why Traditional Principles of Property, Contracts, Secured Transactions, Custody, and Bankruptcy Are Essential to the Future of Digital Finance

As digital assets, stablecoins, and tokenized financial products continue to reshape financial markets, much of the legal and policy debate has focused on financial regulation. Congress, federal banking agencies, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and state regulators have devoted considerable attention to establishing the regulatory framework governing these emerging technologies. But are lawyers, regulators, and market participants paying enough attention to another critical part of the legal landscape: the principles of private law that determine who owns digital assets, what rights attach to them, and who bears the losses when a transaction or platform fails?

In this episode of the Consumer Finance Monitor podcast, our host, Alan Kaplinsky (founder, practice group leader for 25 years and now senior counsel of the Consumer Financial Services Group), discusses these important questions with two leading commercial law scholars, Christopher Odinet, Professor at Texas A&M University School of Law, and Andrea Tosato, Professor at Southern Methodist University Dedman School of Law. Chris and Andrea are the co-authors of the recently published book Digital Commercial Law: Private Law in the Age of Tokens, Platforms, and Automation, which examines how traditional commercial law principles apply to digital assets and why those principles remain indispensable in an increasingly digital economy.

The book makes a compelling case that the emphasis on public law regulation, while understandable, has obscured fundamental questions of private law. As Andrea explains during our discussion, private law governs the relationships among individuals and businesses, including their contractual obligations, property rights, and rights against third parties. These rules operate alongside financial regulation, not in opposition to it. Without a sound private law foundation, regulatory requirements alone cannot provide the legal certainty that digital financial markets need.

Our discussion explores several important implications of this thesis for financial institutions, fintech companies, digital asset platforms, investors, and their counsel.

Property Rights Versus Contractual Rights

One of the book’s central themes is the distinction between contractual rights and property rights. A contract generally binds the parties to the agreement, while property rights can have consequences against third parties. That distinction becomes critical when a digital token purports to represent ownership of an underlying asset, whether a work of art, real estate, or another financial instrument.

Chris and Andrea explain why creating a token and transferring it on a blockchain does not, by itself, transfer ownership of the underlying asset. The legal effect of tokenization depends on the applicable law and the legal structure connecting the token to the asset. A token issuer cannot necessarily accomplish through terms of service what the law requires to establish or transfer property rights.

Digital Asset Custody and Bankruptcy Risk

We also examine the legal relationship between customers and digital asset platforms that hold assets on their behalf. Is that relationship a bailment, under which customers retain ownership of their assets, or a debtor-creditor relationship, under which customers may be left with claims against an insolvent platform?

Drawing on the crypto-platform bankruptcies of 2022 and 2023, Chris and Andrea explain how contractual language can determine whether customers retain a property interest or instead become unsecured creditors. They also discuss the shortcomings of platform agreements that contain inconsistent or ambiguous provisions and the risks consumers may face when the legal consequences of custody arrangements differ from their expectations.

The discussion highlights an important distinction between digital asset custody and the established legal framework governing securities held through intermediaries, including the protections provided by Article 8 of the Uniform Commercial Code (UCC). The absence of an equivalent default framework for digital assets can have significant consequences when a custodian becomes insolvent.

Stablecoins and the GENIUS Act

Stablecoins present another set of important private law questions. Although the GENIUS Act establishes a federal regulatory framework for payment stablecoins, Chris and Andrea explain why questions about redemption rights and insolvency remain critical.

For example, does the right to redeem a stablecoin for one U.S. dollar travel with the token when it is transferred to a subsequent holder? What happens if a stablecoin issuer becomes insolvent or its reserves prove insufficient? And do the GENIUS Act’s provisions adequately address the priority of stablecoin holders in bankruptcy?

Our guests argue that legislation focused primarily on licensing, reserves, supervision, and other regulatory requirements does not necessarily resolve the underlying private law issues. These questions matter directly to the legal rights and financial interests of stablecoin holders.

Tokenization and Secured Transactions

We also discuss what tokenization actually accomplishes as a legal matter and what it does not. Recording an asset or a claimed interest in an asset on a blockchain does not automatically create enforceable rights in the underlying property. The legal consequences depend on whether applicable law recognizes the arrangement and whether the transaction satisfies the requirements for establishing and transferring the relevant rights.

For banks and other lenders, the 2022 amendments to the Uniform Commercial Code are particularly important. Those amendments establish rules for certain digital assets, including a framework for perfecting security interests in controllable electronic records through control. Chris explains why these rules can affect lien priority and why lenders and their counsel must understand them when structuring secured transactions involving digital assets.

The CLARITY Act and the Future of Digital Commercial Law

Looking ahead, we consider whether Congress is paying sufficient attention to private law principles as it considers comprehensive digital asset legislation, including the proposed CLARITY Act. Our guests discuss the bill’s treatment of custody and customer property rights, identify areas where the proposed framework could be improved, and explain why financial market structure legislation should be developed with a thorough understanding of commercial law.

We also explore whether digital assets should be governed by a new federal commercial law or remain principally subject to state commercial law, including the Uniform Commercial Code and established common law principles. Chris and Andrea explain the advantages of building on the existing state-law framework while ensuring that federal financial regulation rests on sound private law foundations.

Finally, we discuss practical steps that banks, fintech companies, payment companies, digital asset custodians, and their lawyers should take to address these issues. We consider the importance of nationwide adoption of the 2022 UCC amendments and look ahead to developments involving stablecoins, tokenized securities, and tokenized deposits.

The central takeaway from our conversation is straightforward: Digital finance cannot operate on regulation and technology alone. Clear rules governing property, contracts, custody, secured lending, and insolvency are essential to determining who owns digital assets, what rights attach to them, and who bears the risk when things go wrong. The book, Digital Commercial Law: Private Law in the Age of Tokens, Platforms, and Automation, is available on Amazon.

Listen to the podcast here.

Consumer Financial Services Group

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Consumer Finance Monitor Podcast: New Jersey Signals Aggressive Enforcement Against ‘Junk Fees’: What Businesses Need to Know

New Jersey is signaling a more aggressive approach to the regulation of so-called “junk fees.” In a recent enforcement statement issued by the New Jersey Attorney General and the New Jersey Division of Consumer Affairs, state regulators outlined how they intend to use the New Jersey Consumer Fraud Act to address business practices involving fees that they consider deceptive, unconscionable, or abusive.

The enforcement statement was issued in conjunction with Governor Mikie Sherrill’s Executive Order No. 19, which directed state agencies to review and recommend measures to eliminate or reduce junk fees across a broad range of industries. Although the enforcement statement does not create new legal obligations, it provides important insight into how New Jersey regulators intend to interpret and enforce existing law. Businesses operating in New Jersey should pay close attention.

To explore the enforcement statement and its potential implications, Alan S. Kaplinsky (founder, former chair for 25 years and now senior counsel of the Consumer Financial Services Group) was joined on the Consumer Finance Monitor podcast by Beverly Brown Ruggia, Financial Justice Program Director at New Jersey Citizen Action (NJCA). NJCA is a statewide grassroots nonprofit organization focused on social, economic, and racial justice. Beverly has long been involved in consumer financial protection advocacy, including efforts to strengthen the Consumer Financial Protection Bureau, and participated in providing input into the development of New Jersey’s enforcement statement.

Alan and Beverly’s discussion examined the meaning of junk fees, the distinction between permissible fees and potentially unlawful charges, and how the New Jersey initiative could affect businesses in the consumer financial services industry.

What Constitutes a Junk Fee?

One of the central issues in their discussion was how to define a junk fee. Businesses have frequently objected to the term, arguing that it is more of a political slogan than a meaningful legal concept.

Beverly offered a definition that goes beyond whether a fee has been adequately disclosed. In her view, junk fees generally include mandatory charges that consumers cannot avoid, that may not be adequately disclosed, and that are not necessarily reflective of the actual cost of providing a product or service. She emphasized that the amount of a fee and whether it is reasonable in relation to the underlying service are also important considerations.

Alan expressed a different view. He views the term as having a more specific meaning, such as where a business advertises one price but subsequently adds charges that were not adequately disclosed to the consumer.

That distinction is more than semantic. It raises an important question about whether regulators are using the term junk fees to address a particular type of pricing deception or as a broader label for fees they consider excessive or otherwise objectionable.

Earned Wage Access and Overdraft Fees

Alan and Beverly explored several examples of fees that consumer advocates believe warrant regulatory scrutiny.

Beverly expressed particular concern about certain earned wage access (EWA) arrangements in which a third-party provider advances money to a consumer based on wages already earned and then charges the consumer a fee. She distinguished those arrangements from programs in which an employer provides an advance on wages it already owes the employee.

In her view, when a third party provides money that must be repaid with a fee, the transaction should be treated as a loan and subject to applicable state lending laws. She is particularly concerned about efforts by EWA providers to characterize their products as something other than credit to avoid state lending restrictions.

Alan and Beverly also discussed overdraft fees. Beverly argued that a fee charged when a bank covers a relatively small overdraft can be unreasonable if it bears little relationship to the bank’s cost of providing the service. She also maintained that overdraft coverage is effectively a form of credit and should be evaluated accordingly.

Alan questioned whether such fees are necessarily junk fees, as opposed to fees that might be challenged on other grounds, including unconscionability or unfairness. That exchange illustrates an important distinction that businesses should keep in mind: a fee may be subject to legal challenge without necessarily fitting within the conventional understanding of a junk fee.

Credit Card Late Fees and the Limits of Disclosure

Our discussion of credit card late fees produced another interesting difference of opinion.

Alan noted that credit card late fees charged to consumers must be disclosed to them in accordance with the Truth in Lending Act and applicable regulations. In his view, a clearly disclosed late fee does not fit the traditional understanding of a junk fee, even if the amount of the fee might be challenged on other legal grounds.

Beverly disagreed with limiting the analysis to disclosure. She offered an example of a consumer who purchased a $60 pair of shoes but ultimately incurred $80 in late fees because of the timing of payments. In her view, regulators should consider whether the cumulative amount of fees is reasonable and whether consumers understand the consequences of falling behind on payments.

She also suggested that repeated late fees can become unlawful when consumers are caught in a cycle of debt from which they have difficulty escaping.

The exchange highlights a broader question for the industry: To what extent should the legality of a fee turn on whether it was adequately disclosed, and to what extent should regulators be permitted to examine the dollar amount of the fee and its cumulative impact on consumers?

All-In Pricing and Mandatory Versus Optional Charges

Alan and Beverly also discussed all-in pricing, an approach designed to ensure that consumers see the total price of a product or service before beginning the purchasing process.

Beverly explained that all-in pricing is intended not only to protect consumers but also to promote fair competition among businesses. When one business advertises a lower price but adds charges later in the transaction, consumers may be misled into choosing that business over a competitor that has disclosed its full price upfront.

Alan and Beverly agreed that all-in pricing can benefit both consumers and businesses by allowing meaningful price comparisons.

The conversation also addressed the distinction between mandatory and optional charges. Beverly emphasized that optional services should genuinely be optional. She expressed concern about practices in which optional charges are automatically included in the overall price and consumers must affirmatively opt out to avoid paying them. In her view, such practices can be deceptive or abusive because consumers may overlook the additional charges.

She also distinguished fees that are simply part of the cost of doing business, such as shipping costs, taxes, and government-imposed charges (which she considers to be lawful), from additional fees that businesses impose on consumers. Businesses are free to set their prices, she explained, but consumers should understand the total amount they will be required to pay before committing to a purchase.

Payday Lending and Buy Now, Pay Later

The discussion also touched on payday lending and buy now, pay later (BNPL) products.

Beverly explained that New Jersey’s interest rate cap effectively prevents traditional payday lenders from operating in the state. She expressed concern about lending models that depend on borrowers repeatedly refinancing or obtaining additional loans when they cannot repay their original obligations. She also discussed the importance of underwriting and ensuring that consumers can reasonably repay the credit they obtain.

Turning to BNPL, Beverly focused on the potential consequences of late fees. Although a consumer may initially be attracted to the ability to divide a $100 purchase into several interest-free installments, the economics can change substantially if missed payments trigger substantial fees. She questioned whether a $40 late fee on a $100 purchase is reasonable and expressed concern about consumers being drawn into escalating fee obligations.

Her broader point was that businesses should ensure consumers understand the full extent of their potential financial obligations when they enter into a transaction.

What Does the New Jersey Initiative Mean for Businesses?

An important feature of New Jersey’s initiative is that it relies on the existing New Jersey Consumer Fraud Act rather than creating an entirely new regulatory framework. The enforcement statement identifies deceptive, unconscionable, and abusive practices as the basis for enforcement.

Beverly explained that the statement is intended to provide businesses with greater clarity concerning the types of practices that New Jersey regulators will scrutinize. She believes that identifying the existing statutory provisions on which enforcement will be based provides meaningful guidance to businesses.

Alan made the point that the appointment of Chris Peterson as Acting Director of the New Jersey Division of Consumer Affairs adds another important dimension. Peterson is a nationally recognized consumer protection scholar, former CFPB official, and former senior adviser to the CFPB during its formative years. He also served at the Department of Defense, where he worked on strengthening protections for military families under the Military Lending Act.

His consumer protection background suggests that businesses should take the Division’s enforcement priorities seriously. Although the enforcement statement itself does not create new legal obligations, the agency’s interpretation and application of the Consumer Fraud Act could have significant consequences for businesses operating in New Jersey.

Businesses should therefore review their pricing practices, fee disclosures, purchasing processes, and treatment of optional charges. Particular attention should be given to whether consumers receive clear information about all charges before committing to a transaction and whether fees are structured in a manner that could invite scrutiny under the Consumer Fraud Act.

Listen to the Podcast

Alan’s conversation with Beverly was particularly useful because it explored both the consumer advocates’ perspective and some of the difficult legal and practical questions raised by New Jersey’s initiative. Alan and Beverly did not agree on every aspect of what should qualify as a junk fee, and Alan pressed Beverly on several issues where he believes the distinction between an unlawful fee and a junk fee matters.

Those differences make the discussion especially worthwhile for financial institutions, nonbank financial services companies, and their counsel.

Listen to the podcast here.

Consumer Financial Services Group

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Fed, FDIC Extend Deadline for Comments on Extension of Credit to Bank Officials

The Federal Reserve (the Fed) and the Federal Deposit Insurance Corporation (FDIC) have extended until November 4 the deadline for comments on a proposal governing extension of credit by banks to their executive officers, directors, principal shareholders, and their related interests.

“Since the publication of the proposal, commenters have requested that the Board extend the comment period. An extension of the comment period will provide an additional opportunity for interested parties to consider the proposal and prepare comments,” the Fed said, in a Federal Register notice.

The proposals would substantially increase the maximum dollar thresholds.

For extensions of credit to executive officers that are not otherwise specifically authorized by section 22(g) of the Federal Reserve Act, such as most consumer-purpose loans, including automobile loans and unsecured personal loans, the maximum amount would increase from $100,000 to $400,000.

Similarly, the maximum aggregate amount of credit that may be extended to an insider before prior approval of the bank’s board of directors becomes necessary would increase from $500,000 to $2 million.

Rather than allowing the thresholds to become outdated again, the Fed and FDIC propose to adjust them automatically every five years using changes in nominal U.S. gross domestic product.

Consumer Financial Services Group

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CFPB’s Latest Semiannual Report Highlights a Dramatic Shift in the Bureau’s Regulatory Priorities

The Consumer Financial Protection Bureau’s newly released Semi-Annual Report to Congress for January–June 2026 offers a revealing account of the Trump administration’s transformation of the Bureau. The report, released on October 27, 2026, describes an agency that has substantially narrowed its enforcement priorities, abandoned or terminated numerous matters pursued under former Director Rohit Chopra, reduced the scope of its supervisory examinations, and advanced a deregulatory agenda that includes, among other things, significant changes to the Bureau’s fair lending regulations.

The report is particularly notable for what it says about the Bureau’s approach to enforcement. Although the CFPB continues to pursue matters involving identifiable consumer harm, it now emphasizes voluntary remediation, due process, and enforcement grounded in what it regards as clear statutory authority. At the same time, the Bureau has made combating alleged unlawful debanking a central priority and has redirected its fair lending efforts toward intentional discrimination involving identifiable victims.

Several developments merit particular attention.

1. Enforcement Activity Has Been Sharply Redirected

Perhaps the most striking feature of the report is the extent to which the CFPB has changed its enforcement priorities.

The Bureau reports that, during the July 1, 2025–June 30, 2026, reporting period, it initiated just one public enforcement action, resolved nine actions, terminated 16 pending final orders, and dismissed or withdrew as a plaintiff from one action. Five public enforcement matters remained in litigation as of June 30, 2026. The nine resolved actions include the one initiated during the reporting period. These figures illustrate the administration’s emphasis on closing or resolving legacy matters rather than pursuing new public enforcement actions.

The Bureau also reports that it closed approximately 40% of its pending investigations during the reporting period. According to the report, these decisions reflected a reassessment of investigations involving markets the Bureau no longer prioritizes, including student lending, as well as matters premised on consumers having made supposedly “wrong” choices rather than suffering actual fraud with identifiable victims and material, measurable damages.

One example is the closure of the investigation into Credova Financial, LLC, which provides financing for purchases associated with the exercise of Second Amendment rights. The Bureau characterized the investigation as an example of unconstitutional targeting rather than legitimate consumer protection.

The report identifies the CFPB’s current enforcement priorities as including:

  • Providing redress to servicemembers, veterans, and their families.
  • Mortgage-related matters.
  • Fair Credit Reporting Act and Regulation V data-furnishing violations.
  • Fair Debt Collection Practices Act and Regulation F violations involving consumer contracts and debts.
  • Fraudulent overcharges and fees.
  • Inadequate controls protecting consumer information when failures result in actual consumer losses.

The Bureau’s stated emphasis on identifiable harm is not, by itself, surprising. Consumer financial enforcement has long involved remediation for injured consumers. What is noteworthy is how explicitly the report uses that principle to distinguish the current administration’s approach from its predecessor’s, particularly regarding fair lending, student lending, and theories of liability that the Bureau now considers insufficiently grounded in statutory authority.

2. Sixteen Pending Final Orders Were Terminated

The termination of 16 pending final orders deserves separate attention. The report explains that the Bureau reviewed existing orders to determine whether their continuing requirements remained justified under the administration’s enforcement priorities. In most instances, the entities had already paid the required consumer redress and civil penalties, where applicable, and the Bureau concluded that the remaining conduct restrictions were burdensome.

The report specifically emphasizes the administration’s effort to reverse actions based on disparate-impact theories and other fair lending matters. It identifies Navy Federal Credit Union as the exception to the general statement that the entities had paid required redress and civil penalties, where applicable.

This is an important distinction. Terminating an order does not necessarily mean the Bureau has concluded that the original conduct was lawful or that affected consumers were not harmed. In many cases, the underlying financial remedies had already been satisfied. The practical change is that the CFPB no longer considers continued compliance with certain provisions of those orders warranted.

For regulated entities, the report reinforces the importance of distinguishing between completed remedial obligations and continuing restrictions imposed by consent orders or judgments. The precise consequences depend on the terms of each order and the legal basis for its termination.

3. The Bureau’s New Enforcement Philosophy Favors Voluntary Remediation

The report sets out four principles governing the CFPB’s enforcement work: addressing actual consumer harm, respecting due process, collaborating with institutions to resolve problems voluntarily, and avoiding duplicative enforcement.

The Bureau states that it will not use enforcement actions to stretch the boundaries of its statutory authority through novel interpretations or advance a policy agenda. It also indicates that it will generally avoid pursuing matters when state regulators or other federal agencies are better positioned to act.

The clearest illustration is the Bureau’s handling of problems associated with Bilt’s transition to a new bank partner. Rather than initiating a lengthy investigation followed by a public enforcement action, the CFPB engaged directly with Bilt. The Bureau reports that this approach secured more than $250,000 in redress for more than 2,000 affected consumers.

This example illustrates the potential benefits of an approach that prioritizes prompt remediation over litigation. Consumers may receive compensation sooner, and institutions may avoid the costs and uncertainty of a public enforcement proceeding.

There is, however, a countervailing consideration. Voluntary resolutions may provide less public information about the alleged conduct, the Bureau’s legal theories, and the steps other institutions should take to avoid similar problems. Whether the new approach produces better overall consumer protection will depend in part on how consistently the Bureau identifies serious violations and ensures that voluntary remedies are adequate.

4. Fair Lending Enforcement Now Focuses on Intentional Discrimination

The report’s treatment of fair lending is another significant development.

The Bureau states that it is focusing its supervision and enforcement efforts on direct evidence of intentional discrimination involving identified victims. It expressly disavows enforcement based solely on statistical correlations or remarks that the Bureau believes may be susceptible to adverse inference.

The CFPB also reports that it did not cite any fair lending violations during the reporting period. Its fair lending supervisory activities during that period were principally in the scoping stage, with examinations scheduled to begin after June 30, 2026.

The absence of fair lending citations is notable, although it should not be read as evidence that discrimination did not occur. The report itself indicates that the Bureau was changing its examination priorities and that some supervisory work had not yet begun.

The Bureau also finalized two important Regulation B rulemakings.

First, its amendment to the Equal Credit Opportunity Act rule takes the position that Equal Credit Opportunity Act (ECOA) does not authorize disparate-impact liability. It also prohibits the use of race, color, national origin, or sex as eligibility criteria for Special Purpose Credit Programs.

Second, its Section 1071 rulemaking narrows the scope of small-business lending data collection and removes requirements the Bureau considers unsupported by the statute. Among the changes are eliminating collection of LGBTQIA+-owned business status and removing requirements to use disaggregated categories for certain race and ethnicity data.

These changes reflect a fundamental disagreement over the permissible scope of fair lending regulation. The administration regards them as corrections to regulatory overreach; critics of the changes are likely to argue that they reduce the tools available to identify and address discrimination. Their ultimate significance will depend on the applicable statutory requirements, the treatment of the rules in litigation, and how courts interpret ECOA.

5. Debanking Has Become a Central Fair Banking Priority

One development that might surprise readers who associate the CFPB primarily with traditional consumer lending is the prominence the report gives to debanking.

The Bureau describes unlawful debanking as a major priority under President Trump’s August 2025 executive order, Guaranteeing Fair Banking for All Americans. It reports reviewing supervisory and complaint data, publicly available information, and other materials to identify institutions that may have engaged in unlawful debanking.

The CFPB has also reviewed its examination manual and other guidance to eliminate references to reputation risk that it believes could contribute to unlawful debanking. It is coordinating with the Department of Justice and other financial regulators, including the OCC, and is evaluating potential violations of ECOA, the FCRA, and the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices.

The report states that the Bureau is particularly concerned about financial institutions making decisions based on political or religious considerations rather than individualized, objective, and risk-based analyses.

The emphasis on debanking is consistent with the administration’s stated priorities. The more consequential question is how the Bureau will apply existing consumer financial protection statutes to particular account closures, credit decisions, and other banking relationships. The report describes the Bureau’s investigative and supervisory direction, but it does not establish that any particular institution has violated federal law.

Institutions should therefore distinguish between the policy priority and the legal standards that must be satisfied to establish a violation.

6. Supervision Is Becoming Narrower and More Targeted

The Bureau also reports a substantial change in its supervisory approach.

Under its new “Humility in Supervision Pledge,” examiners are expected to focus on clearly identified product lines and specific questions tied directly to applicable statutes and regulations. The Bureau says it will avoid novel legal theories and duplicative oversight by other federal or state regulators.

It also expects shorter examinations, more efficient scheduling, and greater cooperation from supervised entities. The report indicates that the Bureau has centralized its supervision division and eliminated its regional structure to improve efficiency.

The CFPB describes its new approach as emphasizing conciliation, correction, and remediation rather than penalizing institutions that self-report problems and cooperate with examiners. 

For banks and nonbanks subject to CFPB supervision, this is a welcome signal that examinations may become more predictable and focused. But the new approach does not eliminate the need for compliance programs capable of identifying and correcting violations. Nor does it mean that the Bureau will refrain from enforcement when it identifies serious misconduct falling within its jurisdiction.

7. The Consumer Complaint System Is Being Fundamentally Recalibrated

The complaint portal remains one of the CFPB’s most visible consumer-facing functions. The report says the Bureau received approximately 8.27 million complaints from July 1, 2025, through June 30, 2026, and sent approximately 7.50 million to companies for review and response. Companies responded to approximately 99.6% of complaints sent to them during the period.

Those figures are striking, but they require context. The Bureau has acknowledged concerns about the reliability and consistency of complaint data, particularly in credit reporting. It has reported that credit and consumer reporting complaints increased from more than 150,000 in 2019 to more than 5 million in 2025, amid concerns about credit repair businesses, social media influencers, and automated tools encouraging consumers to submit complaints.

In response, the CFPB has taken several steps:

  • Requiring consumers to dispute credit-reporting inaccuracies directly with consumer reporting agencies before submitting a CFPB complaint, consistent with the Bureau’s interpretation of the FCRA process.
  • Introducing two-factor authentication and additional safeguards against unauthorized third-party submissions.
  • Standardizing company response categories.
  • Developing tools to improve the efficiency of complaint processing.
  • Ceasing discretionary publication of unverified complaint narratives and associated visualizations.

The last change is particularly significant. The Bureau argues that publishing unverified narratives can give a misleading impression of the merits of a complaint and needlessly harm a company’s reputation.

The administration’s position has considerable practical force: a complaint is an allegation, not an adjudicated finding, and large complaint volumes can be difficult to interpret without consistent data and appropriate safeguards. At the same time, complaint information can help identify emerging consumer problems that may not otherwise be visible to regulators.

The central question is whether the revised system will improve the reliability of the information available to regulators and consumers without unduly limiting transparency or making it more difficult for consumers to obtain assistance.

8. What Is Most Surprising About the Report?

Three points stand out.

First, the scale of the enforcement retrenchment is noteworthy. The combination of only one newly initiated public enforcement action during the reporting period, the closure of approximately 40% of pending investigations, and the termination of 16 pending final orders reflects more than a change in rhetoric. It represents a substantial reallocation of the Bureau’s enforcement resources.

Second, the report places considerable emphasis on debanking, an issue that extends beyond the CFPB’s traditional focus on consumer credit, debt collection, and other familiar consumer financial products. The Bureau is now devoting resources to examining whether financial institutions’ decisions about access to banking services violate federal consumer financial laws.

Third, the Bureau’s approach to consumer complaints has changed materially. Rather than treating the volume and publication of complaints as an unqualified public benefit, the administration emphasizes data quality, authentication, procedural sequencing, and the reputational consequences of publishing unverified allegations. This could improve the usefulness of the system, but its success should be judged by actual outcomes rather than by the Bureau’s stated objectives alone.

One further point deserves emphasis: the report is not evidence that the CFPB has ceased functioning. The Bureau continues to conduct examinations, investigate matters within its revised priorities, pursue selected enforcement actions, and administer federal consumer financial laws. The more accurate description is that it has narrowed its conception of which problems warrant federal intervention and how that intervention should occur.

Conclusion

The CFPB’s January–June 2026 Semi-Annual Report documents a decisive change in regulatory philosophy. The Bureau is moving away from broad enforcement theories and expansive supervisory initiatives toward a narrower approach centered on identifiable consumer harm, intentional discrimination, statutory limits, and voluntary remediation. It is simultaneously advancing the administration’s deregulatory agenda and elevating debanking as a central fair banking issue.

For financial institutions, the report provides useful insight into the Bureau’s present priorities, but it should not be mistaken for a blanket assurance that enforcement risk has disappeared. Institutions should continue to assess compliance with applicable federal and state law, document the basis for significant credit and account decisions, and maintain effective processes for identifying and remediating consumer harm.

For consumer advocates and policymakers, the central issue is whether the Bureau’s narrower approach will preserve effective protection against unlawful conduct while avoiding investigations and regulatory burdens that the administration considers unjustified. The report articulates the administration’s answer. The actual results, and the response of courts, state regulators, and Congress, will determine how durable that answer proves to be.

Alan S. Kaplinsky and John L. Culhane, Jr.

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The CFPB Has Retreated, but the Consumer Financial Services Protection Enforcement Ecosystem Continues to Expand; The Blue Tsunami Will Accelerate the Expansion

‘Be careful what you wish for, lest it will come true.’ —Aesop

We will be producing a webinar about the impact of the midterm elections and related developments on the consumer financial services industry on December 7 at 1 p.m. ET. To register, click here.

The results of the November 3 midterm elections have dramatically changed the political landscape in Washington. In what is already being characterized as a “Blue Tsunami,” Democrats have seized control of both the House of Representatives and the Senate, delivering a sweeping rebuke to President Trump and his administration. Democrats have also won state elections throughout the country, resulting in more blue trifectas (i.e., one party controlling both chambers of the state legislature and the governor’s office) and more blue state attorneys general than previously.

The election results have enormous implications for the consumer financial services industry. But they also reinforce a thesis that we have been developing during Trump 2.0 in our coverage of the changing consumer financial services regulatory environment: The retreat of the Consumer Financial Protection Bureau (CFPB) has set in motion developments that will have consequences long after the CFPB regains its former stature (which could happen on January 20, 2029). This article builds on our earlier July 22, 2026, article titled “Is a ‘Private CFPB’ Emerging? Or Is a New Consumer Protection Ecosystem Taking Shape?”

Consider one particularly interesting development that preceded the election. The District of Columbia Bar is offering a special continuing legal education (CLE) program addressing how private law firms can pursue consumer financial services cases that the CFPB has abandoned. The program, titled “Mind the Gap: What the CFPB Has Stopped Doing and the Claims Private Litigants Can Bring Now,” is noteworthy not merely because it recognizes that private plaintiffs’ lawyers may find opportunities in the CFPB’s retreat, but because it illustrates how the private bar is beginning to organize, educate, and equip itself to take advantage of those opportunities.

There is something particularly significant about a nonpartisan bar association devoting a CLE program to this subject. This is no longer simply a prediction by consumer advocates or defense lawyers about what is happening since the CFPB substantially curtailed its enforcement activities. It is becoming an established area of professional interest and legal education.

The combination of the election results and this growing private enforcement activity points to a fundamental transformation in consumer financial services enforcement. The CFPB may have temporarily retreated, but other governmental and private-sector actors are moving into the space it has left behind.

For more detailed information about these developments, click here.

Alan S. Kaplinsky

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CFPB Won’t Force Employees to Move to D.C., The American Banker Reports

The CFPB will not force regional workers to move to Washington, D.C., The American Banker reported.

The Bureau had threatened to fire workers who refused to move to D.C.

The CFPB has “no plans in the short term” to reissue notices forcing remote employees to relocate to D.C., the National Treasury Employees Union Chapter 335 said in an email to its members obtained by The American Banker.

The American Banker reported that the notice is a reprieve for about 450 employees who worked remotely or were assigned to former regional offices in Atlanta, Chicago, New York, and San Francisco, which the Bureau shut down last year. About 200 regional staffers have left their jobs since the relocation order was issued this summer.

The National Treasury Employees Union (NTEU) last year sued to keep the CFPB open and operating. This summer, the CFPB and the NTEU jointly sought and obtained a stay of the litigation over a proposed reduction-in-force pending confirmation of Bureau Director nominee Brian Johnson. The Senate Committee on Banking, Housing, and Urban Affairs has voted to advance Johnson’s nomination, but the Senate has not yet voted on it. While confirmation by the full Senate may occur after the midterm elections, if the Senate does not confirm the nomination before year-end, the nomination would be returned to the President and a new nomination would be required next year.

Consumer Financial Services Group

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Another Housing Cost Executive Order

Recently, President Trump issued another Executive Order addressing housing costs, along with a related fact sheet.

The Executive Order, titled Decreasing Housing Costs for the American People, addresses:

  • The cancellation of private mortgage insurance on mortgage loans acquired in the future by Fannie Mae or Freddie Mac (the Enterprises).
  • Facilitating the use of modern manufacturing methods in the production of manufactured and other factory-built housing eligible for federal housing programs.
  • Expanding the acceptance by the Enterprises of an automated title review or other title-risk assessment approved by the Federal Housing Finance Agency (FHFA) in lieu of a lender’s title insurance policy on eligible refinance transactions.
  • The reduction of interest rates on certain single-family home loans made directly by the U.S. Department of Agriculture (USDA) under 42 U.S.C. § 1490a(a)(1)(B) and the U.S. Department of Veterans Affairs (VA) under 38 U.S.C. § 3762(c)(1).

Mortgage Insurance Cancellation. Currently, for covered loans at the federal level, the cancellation of private mortgage insurance is governed by the Homeowners Protection Act. Subject to certain requirements, the Act provides for the borrower requesting cancellation of the insurance when the principal balance of the loan is scheduled to reach, or actually reaches, 80% of the home’s value, and the automatic termination of the insurance when the principal balance of the loan is scheduled to reach 78% of the home’s value.

The Executive Order provides that if the FHFA Director determines that it is in the best interests of the Enterprises or FHFA, and the American public, the Director shall require that the Enterprises establish a pilot program, applicable only to mortgages made after the establishment of the pilot program, that periodically reviews single-family mortgage loans they own, guarantee, or securitize, using automated valuation models and other available data to assess current market value, to identify borrowers who appear to satisfy equity and other requirements for cancellation of private mortgage insurance.

The Executive Order also provides that the FHFA Director shall direct the Enterprises to require servicers, to the extent permitted by law and operationally feasible, to notify borrowers promptly when private mortgage insurance may be canceled under the pilot program, and to reduce or eliminate unnecessary documentation requests, appraisal costs, and other administrative barriers to cancellation.

Housing Production. The Executive Order establishes a Task Force on Manufactured Housing Innovation that is co-chaired by the Secretary of the U.S. Department of Housing and Urban Development and the FHFA Director, or their designees, and includes the USDA Secretary, Secretary of Commerce, and VA Secretary, or their designees. The co-chairs may invite the heads of other executive departments and agencies to participate, as appropriate.

Within 180 days of the date of the Executive Order, the Task Force must submit to the President recommendations to facilitate the use of modern manufacturing methods in the production of manufactured and other factory-built housing eligible for federal housing programs, including actions to:

  • Promote specifications, certifications, inspections, and approvals across federal housing and housing-finance programs.
  • Establish reciprocal recognition among agencies of licenses, certifications, approvals, and inspections, where doing so would avoid unnecessary duplication.
  • Eliminate federal requirements and duplicative reviews that unnecessarily impede automation, modularization, standardized production, or other advanced manufacturing techniques, or that increase the time or cost of bringing homes to market.
  • Use federal financing, insurance, guarantee, purchasing, and other program authorities to encourage innovation and increased production of affordable manufactured and factory-built homes.
  • Promote competition among manufacturers and other market participants while maintaining appropriate standards for safety, quality, durability, and consumer protection.

Title Insurance. Currently, the Enterprises have a pilot program under which an automated title review process may be used in lieu of a lender’s title insurance policy with certain loans. Among other requirements and limitations, the program is available only with refinance loans that have a loan-to-value ratio of less than 80%.

The Executive Order provides that if the FHFA Director determines that it is in the best interests of the Enterprises or the FHFA, and the American public, and consistent with financial safety and soundness, the Director’s authorities as regulator and conservator, and applicable law, the Director shall require the Enterprises to expand the title acceptance pilot into an ongoing program, available nationwide through both Enterprises, under which an Enterprise may accept an automated title review or other title-risk assessment approved by the FHFA in lieu of a lender’s title insurance policy on eligible refinance transactions.

The Executive Order further provides that in expanding the program, the Director shall consider:

  • Extending eligibility to refinance transactions with loan-to-value ratios above the current 80% limit where title risk remains low.
  • Removing geographic limitations and certifying additional title-assessment providers to promote competition.
  • Waiving appraisals, income re-verification, and other documentation requirements for limited cash-out refinances that reduce the borrower’s monthly payment, where the Enterprise’s existing data support doing so.
  • Reducing or eliminating loan-level price adjustments and other Enterprise fees on such refinances.

Addressing the Executive Order, Mortgage Bankers Association President and CEO Bob Broeksmit stated, “[O]ur lender members welcome these latest initiatives to reduce the costs of refinancing and expand innovative manufactured housing options for potential homebuyers. We also appreciate the EO’s acknowledgment of the need to balance consumer, taxpayer, and GSE interests and will work with the Federal Housing Finance Agency and Fannie Mae and Freddie Mac on a timely and thorough implementation.”

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

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FTC and DOJ Report on Older-Adult Consumer Fraud

The cost of consumer fraud targeting older adults could have been as high as $119.5 billion in 2025, the Federal Trade Commission (FTC) said in an annual report to Congress.

The report also outlines the FTC’s outreach efforts to combat fraud against older adults. The Justice Department (DOJ) released a similar annual report.

The FTC report summarizes 2025 findings from the Consumer Sentinel Network, which collects reports of fraud and other consumer problems.

Last year, older adults reported losing more money in the aggregate to fraud that began on social media than to fraud that reached them by any other method of contact.

“Because the vast majority of frauds are not reported to the government, these numbers likely include only a fraction of older adults harmed by fraud,” the FTC said.

The FTC also reported that:

  • Fraud losses by older adults to investment scams climbed 42% in 2025, to more than $1 billion. Consumers reported that scammers often reached them on social media.
  • Older adults reported much higher median losses than younger adults. The disparity was particularly large among people 80 years of age and older, whose median reported loss was $2,000.
  • Older adults reported losing money to fraud at lower rates than younger adults and filed no-loss fraud reports at much higher rates.
  • Older adults continued to be more likely than younger adults to report losing money on technology support scams; sweepstakes, prize, and lottery scams; romance scams; government impersonation; and scams impersonating friends or family members.

In its report, the Justice Department said that between July 1, 2025, and June 30, 2026, it pursued almost 350 criminal and civil enforcement actions that involved fraud or abuse that targeted or disproportionately affected older adults.

About 96% of the cases were criminal in nature; 45% involved international schemes. The cases charged 712 defendants with stealing or allegedly stealing $4,841,305,931 from 711,353 victims.

The DOJ reported that the Federal Bureau of Investigation (FBI) said that scammers, using various means of manipulation, convince victims to deposit more and more money into financial “investments” using cryptocurrency.

The DOJ said that during the reporting period, the FBI notified 10,143 victims, 77% of whom were unaware that the investment opportunity they were being offered was a scam before being contacted by the FBI.

FBI intervention prevented an estimated $646,321,687 in victim losses, and $117,645,453 in cryptocurrency seizures/freezes, according to the DOJ.

“As so many of the fraud schemes targeting older Americans are transnational in origin and operation, the Department is uniquely situated to identify and prosecute such schemes, while collaborating with foreign law enforcement to disrupt them at their source,” Andy Mao, the Justice Department’s National Elder Justice Coordinator, wrote in the report.

In a related development, the FDIC and the CFPB recently held a webinar focused on protecting older adults from scams and financial exploitation. The webinar highlighted resources from Money Smart for Older Adults that organizations can use in financial education efforts. Topics discussed included budgeting and preparing for unexpected life events, investment scams, and scams involving veterans’ benefits. 

Joseph J. Schuster, a partner in the Consumer Financial Services Group at Ballard Spahr LLP, testified before the U.S. House Committee on Financial Services Subcommittee on Financial Institutions on the rising threat of industrialized financial fraud, which disproportionately affects vulnerable populations, including the elderly. The testimony took place on March 5, 2026, during a congressional hearing titled Fighting Fraud on the Front Lines: Challenges and Opportunities for Financial Institutions.

Consumer Financial Services Group

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Trump Committee to Hold Hearing on Possible Removal of Lisa D. Cook From Federal Reserve Board

A Trump administration committee that is investigating the possible removal of Federal Reserve Board Member Lisa D. Cook will hold a closed hearing on December 14.

The hearing originally was scheduled for December 5 but was postponed because of scheduling conflicts, according to press reports. Trump formed the committee last month.

The Trump administration has charged that Cook made false statements on two separate mortgage applications, one for a home in Michigan and the other for a condominium in Georgia (each time claiming that the property being financed was her principal residence). The applications were filed before Cook was nominated to the Board by President Biden. The administration has referred the case to the Justice Department for investigation of whether Cook should be charged with a crime.

However, lawyers for Cook have asserted that reports confirm that Cook properly declared her Michigan home as her principal residence, and that, as part of her mortgage application, she described the property in Georgia as a vacation home.

The Supreme Court has blocked President Trump from firing Cook while litigation challenging her possible firing proceeds. The Court said, in part, that Trump should have given Cook an opportunity to challenge the mortgage allegations.

President Trump announced the formation of the committee on October 7. Members of the panel are Kevin Hassett, the Assistant to the President for Economic Policy; Andrea R. Lucas, the Chair of the Equal Employment Opportunity Commission; and Kevin Sonderling, the Acting Director of the Office of Government Ethics.

“As President, it is my job to ensure the laws are faithfully executed, including by firing who cannot be trusted to tell the truth and follow the law,” President Trump said, in announcing the formation of the committee.

President Trump said that at the hearing, the committee or its representatives may question Cook or her counsel about the allegations against her. The panel is required to submit findings of fact and conclusions of law and recommend whether there is cause to remove Cook.

The New York Times reported that Cook’s attorney, Abbe Lowell, has questioned the impartiality of the panel.

Consumer Financial Services Group

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State AGs Oppose OCC’s Bid to Pause Challenge to Rules Preempting State Mortgage Interest-on-Escrow Laws

The 10 states challenging the Office of the Comptroller of the Currency’s (OCC) new interest-on-escrow rules are urging a federal district court to reject the agency’s attempt to delay judicial review of those rules while the U.S. Supreme Court considers three petitions involving the preemption of state mortgage interest-on-escrow laws. In an October 23, 2026, filing, the states argue that the Supreme Court proceedings discussed below will not resolve the central issues in their Administrative Procedure Act (APA) challenge, that an indefinite stay would harm both the states and consumers, and that the OCC has not demonstrated the hardship necessary to justify delaying the case.

The filing is the latest development in State of Oregon et al. v. Office of the Comptroller of the Currency et al., No. 3:26-cv-01672-SI, pending in the U.S. District Court for the District of Oregon. The case challenges the OCC’s two May 2026 rules that purport to preempt state laws requiring interest to be paid on mortgage escrow accounts maintained by national banks.

Background: The OCC’s Two Interest-on-Escrow Rules

As discussed in our prior coverage, on May 19, 2026, the OCC published two final rules addressing national banks’ authority over mortgage escrow accounts. The Escrow Powers Rule, published at 91 Fed. Reg. 29340, grants national banks authority to determine the interest and fees associated with their escrow accounts. The accompanying Preemption Rule, published at 91 Fed. Reg. 29350, purports to preempt state mortgage interest-on-escrow laws.

The rules implicate a longstanding dispute over the scope of national bank preemption under the National Bank Act and the limits Congress imposed on the OCC’s preemption authority in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Ten states—California, Connecticut, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, and Vermont—have enacted laws requiring interest to be paid on mortgage escrow balances, with some also restricting service charges. The states contend that the OCC’s rules improperly displace these consumer protections by adopting a categorical approach to preemption.

The states’ challenge relies in substantial part on 12 U.S.C. § 25b, which requires the OCC to make preemption determinations under the standard articulated by the Supreme Court in Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25 (1996). Section 25b also imposes procedural requirements, including case-specific findings supported by substantial evidence, and limits judicial deference to the OCC’s preemption determinations.

The states further rely on the Supreme Court’s 2024 decision in Cantero v. Bank of America, N.A., 602 U.S. 205, which rejected the Second Circuit’s categorical approach to National Bank Act preemption and remanded for application of the proper standard.

In August 2026, the states filed suit seeking to have the two OCC rules declared unlawful and set aside under the APA. Their complaint asserts that the rules exceed the OCC’s statutory authority, violate statutory procedural requirements, and are arbitrary and capricious.

The OCC Seeks a Partial Stay Pending Supreme Court Proceedings

On October 5, 2026, the OCC filed a motion to dismiss or transfer the action raising challenges that include standing, venue, and the merits of the states’ APA claims. On October 9, the OCC separately moved for a partial stay of proceedings.

The stay motion seeks to pause the case, except for proceedings necessary to resolve the OCC’s motion to dismiss or transfer, pending resolution of three Supreme Court proceedings concerning state interest-on-escrow laws:

On October 5, the Supreme Court invited the Solicitor General to express the views of the United States on the pending petitions. It did not grant certiorari in any of the three cases, and, as is usual in cases in which the Supreme Court invites the Solicitor General to express its views on whether cert petitions should be granted, the orders inviting the Solicitor General’s views did not establish a deadline for the government’s submissions.

The OCC argues that Supreme Court consideration of the cases could simplify the Oregon litigation or clarify the applicable preemption standard. The states respond that the agency is relying on a series of uncertain future events and that the Supreme Court proceedings will not resolve the distinct questions raised by the OCC’s rulemaking.

The States’ Opposition: The Supreme Court Cases Will Not Resolve the APA Challenge

The states’ October 23 opposition argues that a stay would not promote the orderly course of justice because the Supreme Court cases and the Oregon action present materially different legal questions.

The Supreme Court cases involve private lawsuits in which borrowers assert claims against banks, including breach-of-contract and related claims, and banks invoke federal preemption as a defense. The Oregon action, by contrast, challenges the legality of the OCC’s administrative actions under the APA.

According to the states, even a Supreme Court ruling that one or more state mortgage interest-on-escrow laws are preempted would not answer whether the OCC complied with Dodd-Frank’s requirements when promulgating its rules. Nor would such a ruling necessarily resolve whether the OCC exceeded its statutory authority or acted arbitrarily and capriciously.

The states emphasize that the OCC’s rulemaking methodology is itself at issue. The court must determine whether the agency followed the statutory procedures governing its preemption authority and whether the resulting rules are legally sustainable on the administrative record. A later Supreme Court decision concerning the preemption of a particular state law, they argue, would not cure a defect in the OCC’s rulemaking process.

The states also point out that the three Supreme Court proceedings concern only the laws of Rhode Island, New York, and California. The other seven plaintiff states have materially different statutory provisions. Thus, even if the Supreme Court ultimately ruled that the three laws before it were preempted, the Oregon court would still need to address the validity of the OCC’s rules under Dodd-Frank and the application of the governing preemption standard to the other states’ laws.

The opposition also challenges the OCC’s reliance on the possibility that the Supreme Court will clarify the applicable legal standard. The states note that the Supreme Court has not yet agreed to hear any of the cases and could deny review or take other procedural action without deciding the underlying preemption question.

In the states’ view, the OCC is asking the district court to delay a case that is ready to proceed based on the speculative possibility that future Supreme Court action might prove helpful to the agency.

The States Invoke the Landis Standard for a Stay

The opposition analyzes the OCC’s request under Landis v. North American Co., 299 U.S. 248 (1936), and Ninth Circuit precedent. Under that framework, courts consider three factors: whether a stay would promote the orderly course of justice by simplifying or complicating the issues; the potential damage a stay would cause; and the hardship or inequity the moving party would suffer if required to proceed.

The states contend that all three factors weigh against a stay.

1. A Stay Would Not Materially Simplify the Case

As explained above, the states maintain that the pending Supreme Court cases will not resolve the central APA questions presented by the challenge to the OCC’s rules. Those questions include the agency’s statutory authority, its compliance with Dodd-Frank’s procedural requirements, and whether its rules are arbitrary and capricious.

The states also stress that the Supreme Court has not granted review in any of the three cases. A stay would therefore rest on multiple contingencies: the Court would have to grant one or more petitions, reach the substantive preemption question, and decide it in a way favorable to the OCC.

The opposition invokes Boaz v. First Bank & Trust, No. 6:21-cv-00084-AA, 2022 WL 17360541 (D. Or. Dec. 1, 2022), in which a district court declined to stay a case based on the speculative possibility that the Supreme Court might accept a case and issue a favorable ruling.

2. A Stay Would Harm the States and Consumers

The states argue that the OCC’s rules are already in effect and purport to displace their duly enacted statutes. Delaying judicial review would prolong the alleged injury to their sovereign interests in enforcing those laws.

The opposition separately emphasizes the potential financial consequences for mortgage borrowers. Mortgage escrow accounts can carry substantial positive balances, and interest-on-escrow laws require servicers to compensate consumers for the use of those funds. Without such requirements, banks may retain the economic benefit of using escrow balances without paying interest.

The states point to the OCC’s own explanation of the Preemption Rule, which acknowledges that the rule is likely to reduce expenditures by OCC-supervised institutions because they may elect not to pay interest on mortgage escrow funds in reliance on preemption.

The states argue that leaving the rules in place while the litigation is suspended would permit national banks to stop making payments required under state law, to the financial detriment of consumers. They contend that this harm is relevant to the stay analysis even though consumer injury is not the basis on which they rely to establish their own standing.

The requested stay would be particularly problematic, the states argue, because its duration is uncertain. The Supreme Court’s next steps depend in part on the Solicitor General’s submissions, and the stay motion identifies no definite endpoint. The states contend that their interests and consumers’ interests should not be subordinated for an unknown period while the validity of the OCC’s rules remains untested.

3. The OCC Has Not Demonstrated Sufficient Hardship

The states characterize the OCC’s claimed hardship as the expense of producing and reviewing the administrative record and briefing the merits.

They argue that ordinary litigation costs do not constitute the clear case of hardship or inequity required under Landis, particularly when a stay could cause harm to other parties or nonparties. The states also note that the parties agree the case does not require discovery beyond production of the complete administrative record.

Once the record is produced, the parties can proceed through cross-motions for summary judgment, allowing the court to resolve the APA issues on a relatively direct schedule.

The states further criticize the OCC’s proposal to stay the merits proceedings while allowing its own motion to dismiss or transfer to proceed. In their view, this asymmetric arrangement would permit the OCC to litigate its preferred threshold defenses while preventing the states from obtaining a decision on their affirmative claims. They argue that the OCC’s preference for proceeding with its own motion while delaying the states’ claims is not a cognizable hardship warranting a stay.

What Happens Next?

The October 23 filing is an opposition, not a court ruling. The district court has not yet decided whether to grant the OCC’s partial-stay motion.

The case also remains subject to the OCC’s separate motion to dismiss or transfer, which the states opposed in a filing dated October 19, 2026. The two motions raise distinct issues: the dismissal or transfer motion challenges the court’s ability to hear the action and the legal sufficiency of the states’ claims, while the stay motion asks the court to postpone consideration of the merits pending Supreme Court proceedings.

The court’s October scheduling framework requires the OCC to file reply briefs on November 2 (motion to dismiss or transfer venue) and November 6 (motion for stay), with anticipated resolution of the pending dismissal and stay motions by November 20, 2026. Production of the administrative record will be due December 9 if the motions are denied. Those dates provide the next significant procedural markers, although the actual course of the case will depend on the court’s rulings.

Alan S. Kaplinsky

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OCC Doubles Down on Its Challenge to States’ Lawsuit Over Interest-on-Mortgage Escrow Rules, Urging Dismissal or Transfer to D.C.

The Office of the Comptroller of the Currency (OCC) filed on November 2, 2026, its reply brief in support of its motion to dismiss, or alternatively transfer to the District of Columbia, a lawsuit brought by Oregon and nine other states challenging two OCC rules issued on May 15, 2026, concerning the preemption of state interest-on-mortgage escrow laws. The OCC’s November 2 reply reinforces the arguments made in its opening brief and takes particular aim at what it characterizes as the States’ attempt to manufacture standing and venue by joining forces in Oregon to avoid unfavorable Second Circuit precedent.

The litigation, filed in the District of Oregon (Oregon v. Office of the Comptroller of the Currency, No. 3:26-cv-01672-SI), challenges two related but legally distinct OCC actions: the Real Estate Lending Escrow Accounts rule (the Powers Rule), 91 Fed. Reg. 29340 (May 19, 2026), and the Preemption Determination: State Interest-on-Mortgage Escrow Laws, 91 Fed. Reg. 29350 (May 19, 2026).

As we previously discussed, the Powers Rule codifies the OCC’s position concerning national banks’ authority over mortgage escrow accounts, while the Preemption Determination expressly identifies state interest-on-mortgage escrow laws that the OCC concludes are preempted by federal law. The States contend that the OCC exceeded its authority under the National Bank Act and failed to comply with the restrictions Congress imposed in the Dodd-Frank Act on OCC preemption determinations.

The OCC’s reply addresses three principal issues: the States’ standing to bring the lawsuit, the propriety of litigating the case in Oregon rather than Washington, D.C., and the States’ challenge to the OCC’s statutory authority to promulgate the Powers Rule.

The OCC Says the States Have Failed to Establish Standing or Ripeness

The OCC’s principal jurisdictional argument is that the States have not identified an actual, concrete injury resulting from either OCC action. According to the OCC, the States’ assertion that they have a sovereign interest in enforcing their own interest-on-mortgage escrow laws is insufficient, standing alone, to establish standing.

The OCC emphasizes that the States have not alleged that any national bank is actually refusing to pay interest on escrow accounts in accordance with Oregon law. Moreover, neither the Powers Rule nor the Preemption Determination prohibits a national bank from voluntarily complying with an otherwise applicable state interest-on-mortgage escrow requirement. The OCC argues that the States therefore cannot establish an actual conflict between federal and state law.

The OCC distinguishes the authorities relied upon by the States, arguing that those cases involved federal requirements that actually prevented states from enforcing their own laws. Here, by contrast, any injury depends on the hypothetical possibility that a national bank will elect not to comply with a state interest-on-mortgage escrow law.

The OCC also invokes the Supreme Court’s recent decision in Trump v. California, 609 U.S. 1032 (2026), emphasizing that standing and ripeness are related but distinct requirements. Even if the States could establish some prospective injury to their sovereign interests, the OCC argues, that injury is not ripe because it depends on future actions by national banks that may never occur.

An interesting aspect of the OCC’s argument is its reliance on the distinction between an abstract disagreement over the enforceability of state law and an actual inability to enforce that law because of conflicting federal requirements. The OCC maintains that the latter is necessary to establish the kind of concrete injury required for judicial review.

The OCC separately argues that the States have failed to allege an injury attributable to the Powers Rule itself. In its view, the States cannot simply treat the Powers Rule and the Preemption Determination as interchangeable. The two are separate agency actions, and standing must be established with respect to each challenged action. The OCC also contends that the States cannot cure deficiencies in their complaint by offering additional theories of injury for the first time in their opposition brief.

Cantero II Creates a Separate Standing Problem for Three States

Perhaps the most consequential part of the OCC’s reply concerns the Second Circuit’s recent decision in Cantero v. Bank of America, N.A., 175 F.4th 201 (2d Cir. 2026) (Cantero II).

As we have previously discussed, on remand from the Supreme Court, the Second Circuit held that the National Bank Act preempts New York’s interest-on-mortgage escrow statute. The OCC argues that this decision independently establishes preemption in the Second Circuit, regardless of the OCC’s two May 19 rules.

That argument creates a particular problem for New York, Connecticut, and Vermont, three of the plaintiff States. According to the OCC, those States cannot establish either traceability or redressability because their alleged injuries would exist even if the court were to invalidate the OCC’s rules. Cantero II, rather than the OCC’s regulatory actions, would independently prevent enforcement of their interest-on-mortgage escrow requirements against national banks.

The States attempt to distinguish Cantero II on the ground that the Second Circuit considered only New York’s statute, not the materially different statutes of Connecticut and Vermont. The OCC responds that the States have failed to explain why the differences matter or why Cantero II would not control in the other Second Circuit jurisdictions.

The OCC also points out what it regards as an inconsistency in the States’ position. The States seek to distinguish Cantero II because it addressed only New York’s statute, while simultaneously relying on the First and Ninth Circuit decisions in Conti v. Citizens Bank, N.A. and Kivett v. Flagstar Bank, FSB, which addressed Rhode Island’s and California’s statutes, respectively, as favorable precedent for other States.

The OCC contends that the States cannot have it both ways.

The OCC further questions whether the Second Circuit States can rely on the other States’ asserted standing to maintain the lawsuit, particularly in light of the Supreme Court’s decision in Trump v. CASA, Inc., 606 U.S. 831 (2025), restricting the availability of universal injunctions.

The OCC Continues to Press Its Forum-Shopping Argument

The OCC devotes substantial attention to its alternative request to transfer the litigation to the District of Columbia.

The lawsuit was brought in Oregon, where only one of the 10 plaintiff States is located. The OCC argues that the other nine States cannot simply piggyback on Oregon’s alleged standing and venue to establish their own entitlement to litigate there.

The OCC focuses on 28 U.S.C. § 1391(e)(1), the special venue provision governing actions against federal agencies and officers. It contends that the statute’s language requires additional plaintiffs joining an action to satisfy applicable venue requirements independently. According to the OCC, the States have not demonstrated that the nine non-Oregon plaintiffs satisfy those requirements.

The OCC also challenges the States’ reliance on Ninth Circuit precedent permitting multiple plaintiffs to litigate together in a single forum. It argues that the earlier decisions did not adequately address the statutory language and should not control in light of the Supreme Court’s more recent emphasis on textual statutory interpretation.

Even assuming venue is technically proper in Oregon, the OCC argues that the case should be transferred under 28 U.S.C. § 1404(a).

Its argument is straightforward: the OCC is headquartered in Washington, D.C.; the regulatory decisions were made there; the administrative record was generated there; and the relevant agency officials and records are located there. The OCC also points out that nine of the 10 plaintiff States are not located in Oregon and that the case involves the laws of 10 different States, rather than any uniquely Oregon legal issue.

The OCC further argues that the States’ choice of forum deserves little deference because the litigation reflects an effort to avoid unfavorable precedent in the Second Circuit. In particular, the OCC contends that New York, Connecticut, and Vermont are attempting to circumvent Cantero II by joining a lawsuit in a jurisdiction where they believe they can obtain a more favorable result.

The OCC argues that transferring the case to Washington, D.C., would not interfere with the States’ ability to litigate together or retain the Oregon Attorney General’s Office as lead counsel. It would simply place the litigation in the forum where the challenged agency actions were actually developed and adopted.

The OCC Defends Its Authority to Issue the Powers Rule

Finally, the OCC addresses the States’ argument that the Powers Rule exceeds the OCC’s statutory authority and violates the procedural requirements imposed by Dodd-Frank.

This portion of the reply is particularly important because the OCC seeks to distinguish the legal authority for issuing the Powers Rule from the authority and procedures governing an OCC preemption determination.

The OCC maintains that the National Bank Act, including 12 U.S.C. § 371, provides ample authority for the Powers Rule, which it characterizes as a rule codifying and clarifying longstanding national bank powers concerning real estate lending and mortgage escrow accounts.

The States argue that the Powers Rule must satisfy Dodd-Frank’s procedural requirements because it has a preemptive effect. The OCC rejects that reasoning, arguing that Dodd-Frank’s requirements apply to affirmative OCC preemption determinations, not every agency rule that might have some preemptive effect.

Relying on Smiley v. Citibank (S.D.), N.A., 517 U.S. 735 (1996), the OCC emphasizes the distinction between interpreting the substantive meaning of federal law and determining whether that law preempts a particular state law.

The OCC maintains that the Powers Rule falls into the first category, while the separate Preemption Determination falls into the second. Consequently, the OCC argues, the procedural requirements of 12 U.S.C. § 25b(b)(3) and (b)(5) do not apply to the Powers Rule merely because it may have preemptive consequences.

The OCC also rejects the States’ contention that Dodd-Frank and the Truth in Lending Act (TILA) displace its authority under the National Bank Act. According to the OCC, Dodd-Frank regulates the OCC’s authority to make preemption determinations but does not curtail its separate rulemaking authority under the National Bank Act. Similarly, the OCC argues that TILA’s escrow requirements for certain mortgage transactions do not eliminate the OCC’s authority to issue the Powers Rule, which expressly recognizes that national banks remain subject to applicable federal statutory requirements.

The OCC therefore asks the court to dismiss Count One insofar as it challenges the Powers Rule.

What’s Next?

The OCC’s reply completes the briefing on its motion to dismiss or transfer. The brief does not, however, resolve the separate dispute over the OCC’s request for a partial stay of proceedings pending the Supreme Court’s consideration of related interest-on-mortgage escrow cases. On November 6, 2026, the OCC must file its reply brief in support of its request for a partial stay of proceedings and in response to the States’ brief opposing the OCC’s request for a partial stay of proceedings.

The broader litigation remains important for the future of state interest-on-mortgage escrow laws and the OCC’s authority to determine when those laws are preempted by the National Bank Act.

There are two particularly significant issues to watch. First, will the court accept the OCC’s argument that the States lack standing because they have not alleged that any national bank has actually refused to comply with their interest-on-mortgage escrow laws? Second, will the court agree that the States’ decision to bring a 10-state lawsuit in Oregon warrants transfer to the District of Columbia, particularly given the OCC’s argument that three of the plaintiff States are attempting to avoid the consequences of Cantero II?

The court’s resolution of these threshold issues could materially affect not only where this litigation proceeds, but whether it proceeds at all. The court has stated in its scheduling order that it intends to decide the OCC’s two motions before November 20, 2026.

Alan S. Kaplinsky

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The EEOC Adopts a New Strategic Plan, with Private Litigants Taking Up the Agency’s Priorities

On August 26, 2026, the Equal Employment Opportunity Commission (EEOC) adopted an updated Strategic Plan for Fiscal Years 2026-2030. The EEOC’s new Strategic Plan establishes operational goals for implementation of the priorities in the EEOC’s National Enforcement Plan (NEP), which was issued in June 2026. The Strategic Plan does not create new obligations, but it shows how the agency will prioritize its investigations, structure resolutions, and interact with employers through 2030. Together, the new NEP and Strategic Plan confirm a fundamental shift in how the EEOC will interpret and enforce federal anti-discrimination laws.

In step with the EEOC, private litigants are pushing some of the same themes in court.

What the NEP Prioritizes

The EEOC’s new NEP replaced the agency’s Biden-era Strategic Enforcement Plan and includes a stated focus on:

  • Abandoning disparate impact in favor of intentional discrimination claims, including challenges to broad-based policies that explicitly consider race or sex.
  • Targeting certain diversity, equity, and inclusion (DEI) practices and omitting the prior plan’s diversity and inclusion commitments for the EEOC’s own hiring.
  • Elevating religious accommodation and religious liberty protections, identifying anti-Christian bias specifically as a freestanding priority.
  • “[P]rotecting American workers from alleged ‘anti-American’ national origin discrimination.”
  • Emphasizing “defending women’s rights to single-sex spaces at work and workers’ rights to express [the] binary nature of sex.”
  • Vulnerable workers, systemic harassment, and Pregnant Workers Fairness Act liability.

The agency is already acting on these priorities, as shown by EEOC Chair Andrea Lucas’ direct appeal in a video message posted on the social media platform X in December 2025 to white men, encouraging them to come forward if they believe they have been disadvantaged due to their sex or race; its March 2026 settlement with a Planned Parenthood affiliate to end the EEOC’s investigation of alleged harassment and discrimination against white people tied to the organization’s DEI efforts; the EEOC’s May 2026 suit against The New York Times on behalf of a white male employee; and its September 2026 settlement with a manufacturer employer to resolve an individual charge alleging the company violated Title VII of the Civil Rights Act of 1964 after it did not consider a reasonable accommodation when an employee requested to use “biological pronouns” for a transgender employee.

Notable Strategic Plan Performance Measures

Of the new Strategic Plan’s 17 performance measures, several stand out for employers:

  • Non-monetary relief. Of conciliation agreements and favorable litigation resolutions, 97% should include targeted, equitable relief, up from 90% under the prior plan. That can mean customized training, new policies, and external monitoring.
  • Litigation success. At least 90% of enforcement lawsuits resolved favorably each year.
  • Systemic enforcement. The Systemic Program will focus on matters involving 10 or more aggrieved individuals. Notably, the final Plan dropped a draft target of at least $1 million in monetary relief in 80% of systemic cause findings.
  • Compliance monitoring. Enhanced monitoring of conciliation agreements.
  • Expanded outreach. An additional 20 to 50 events per year for new partners, plus tracking of how charging parties learned of their right to file.

Although the Strategic Plan contemplates generative AI’s impact on hiring, AI appears in no performance measure.

Private Litigants Are Pressing the Same Themes

Taking their cue from the EEOC, private litigants are also pursuing the EEOC’s priorities, including claims of bias against white and Christian Americans and challenges to transgender and nonbinary protections.

For example, in Olympus Spa v. Armstrong, the business, which operates two Korean spas in Washington State where patrons are nude in communal areas, filed a lawsuit against the Washington State Human Rights Commission (WSHRC) alleging violations of its First Amendment rights. The spa maintained a policy that permitted only biological women and post-operative transgender women to access the spa’s services. A pre-operative transgender woman filed a complaint alleging discrimination under the Washington Law Against Discrimination (WLAD), and the WSHRC found that the policy violated the WLAD’s protections for gender identity. The Ninth Circuit upheld the district court’s finding in favor of the WSHRC and held that sex and gender identity are each protected under the WLAD. It also found that sex-based distinctions beyond bathroom separation are not permitted. The spa has appealed the decision to the U.S. Supreme Court, which may grant certiorari to hear the case this winter.

Religious accommodation claims are also gaining traction in court. On October 20, 2026, in Galbo v. Bay Ridge Preparatory School, the U.S. District Court for the Eastern District of New York refused to dismiss a suit alleging that a Catholic school terminated an employee for refusing a Covid-19 vaccine. According to the plaintiff, the school denied her religious accommodation request and her proposed alternatives of telework, masking, and testing. When she was terminated, the plaintiff claimed that her religious views were a motivating factor, and that the school dismissed her beliefs as insincere. The court found her claims of religious discrimination plausible and noted that courts should not judge the “verity of an adherent’s religious beliefs” at the pleading stage.

Both Olympus Spa and Galbo are actively testing the same views that the NEP and the EEOC’s new Strategic Plan attempt to advance. Olympus Spa, although not an employment case, shows how single-sex space disputes are being litigated, and how state laws protecting gender identity may conflict with the EEOC's stated priorities. And Galbo mirrors the EEOC’s goal of elevating religious accommodation and liberty.

What Employers Should Do Now

Through FY 2030, employers should expect NEP-priority charges to draw closer scrutiny and group-wide policies to carry systemic exposure. Employers should:

  1. Review and rework DEI programs for race- or sex-conscious practices such as representation goals and diverse-slate mandates.
  2. Revisit religious accommodation procedures.
  3. Track state law, since policies built around federal priorities may create state-law exposure.
  4. Expect non-monetary terms such as training, policy changes, and monitoring in any resolution with the EEOC based on a charge or lawsuit.
  5. Expect aggressive stances from private plaintiffs’ counsel that mirror and take advantage of the EEOC’s new priorities.

We will continue to monitor these developments. Please contact a member of Ballard Spahr’s Labor and Employment Group with questions.

Justen R. Barbierri and Beth G. Joffe

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Pennsylvania Enacts Artificial Intelligence Deceptive Advertising Act: New Disclosure Requirements for AI-Generated Advertising

Pennsylvania has enacted legislation imposing new disclosure requirements on certain advertisements that use artificial intelligence (AI)-generated or AI-modified content. Senate Bill 806, now Act 99 of 2026, was signed into law by Governor Josh Shapiro on October 22, 2026. The statute, titled the Artificial Intelligence Deceptive Advertising Act, establishes a disclosure requirement for advertisers whose use of synthetic content creates a false consumer perception about the nature, origin, or authenticity of the goods or services being advertised.

The law is particularly relevant to businesses that use AI-generated images, videos, or audio in their marketing and advertising campaigns, including financial services providers that employ synthetic content to promote lending products, deposit accounts, payment services, or other consumer financial products. Although the statute is directed at deceptive advertising rather than AI use generally, its broad definitions and disclosure requirements warrant attention from businesses using generative AI in consumer-facing advertising.

What Does the New Law Require?

Section 4 prohibits an advertiser from creating and disseminating, or causing the creation and dissemination of, an advertisement using synthetic content in a manner that creates a false consumer perception about the nature, origin, or authenticity of the advertised goods or services, unless the advertisement includes a clear and conspicuous disclosure that the content was modified or generated using AI.

The statute defines “synthetic content” as information, including an image, video, audio clip, or text, that has been significantly modified or generated by AI. Its definition of AI expressly includes generative AI.

The law does not impose a blanket disclosure requirement whenever an advertiser uses AI. Rather, the disclosure obligation is tied to the use of synthetic content in a manner that creates a false consumer perception about the advertised goods or services.

For example, an advertiser using an AI-generated video that appears to depict a real customer describing an actual experience with a financial product could face questions under the statute if the presentation creates a false impression about the authenticity of the testimonial. Similarly, synthetic audio or imagery that falsely suggests a product, service, or endorsement is genuine could trigger the disclosure requirement.

Whether a particular advertisement falls within the statute will depend on its content, context, and presentation.

What Constitutes a Clear and Conspicuous Disclosure?

The statute imposes detailed requirements governing the placement and presentation of disclosures. A disclosure must satisfy the following requirements:

  • Noticeability and comprehension. The disclosure must be presented in a size, color, contrast, location, duration, and audibility that make it readily noticeable, readable, understandable, and capable of being heard.
  • Language. The disclosure must be presented in the language or other form of interaction the consumer uses to interact with or comprehend the synthetic content.
  • Consistency. The disclosure cannot contradict or be inconsistent with other information presented alongside it.
  • Proximity. When the disclosure modifies, explains, or clarifies other information, it must appear sufficiently close to that information to be noticed and understood, and it cannot be obscured.
  • Audio and visual presentation. Audio disclosures must be delivered at a volume and cadence sufficient for consumers to hear and comprehend them. Visual disclosures must be sufficiently legible and remain on screen long enough for consumers to read and understand them.
  • Print advertisements. Disclosures in print advertisements and promotional materials, including point-of-sale displays and brochures, must be sufficiently noticeable and use type that contrasts with the background.

The statute also requires the disclosure to appear the first time the synthetic content is presented to the consumer, in the same medium as the synthetic content, and, to the extent technically feasible, in a form that is permanent or extraordinarily difficult to remove.

These requirements make the manner of disclosure as important as its substance. A disclosure that is technically present but difficult to see, hear, or understand may not satisfy the statute.

Exceptions

The statute excludes three categories of content from its disclosure requirement:

  1. Content that is evidently fictional based on the content or context of the depiction.
  2. Parody, satire, commentary, or criticism.
  3. Content limited to text.

The text-only exception is notable. Although the statute’s definition of synthetic content encompasses text significantly modified or generated by AI, the disclosure provision expressly excludes content limited to text. Consequently, AI-generated text alone does not trigger this particular disclosure requirement, even though other laws governing deceptive advertising may remain applicable.

The exception for evidently fictional content also suggests that the law is principally concerned with synthetic depictions that could mislead consumers into believing that an advertisement or its underlying representation is authentic. The statute does not, however, define a specific test for determining when content is evidently fictional.

Enforcement and Potential Penalties

The statute authorizes the Pennsylvania Attorney General or the appropriate district attorney to seek injunctive relief when the official has reason to believe that a prohibited practice is occurring or is about to occur and proceedings would be in the public interest.

The Attorney General or appropriate district attorney may also bring a civil action for violations. A court may award a civil fine of up to $3,000, as well as actual attorney fees and court costs.

The statute does not expressly create a private right of action. Its enforcement provisions identify the Attorney General and appropriate district attorneys as the officials authorized to bring actions under the Act. The provision authorizing a court to award damages does not, standing alone, resolve every question concerning who may pursue a claim, but the text does not expressly authorize consumers to sue directly under the new law.

Importantly, the Act provides that disclosure of AI use does not limit any other recourse available under law. Thus, compliance with the new disclosure requirement does not immunize an advertiser from otherwise applicable claims based on deceptive advertising or other unlawful conduct.

Implications for Consumer Financial Services Providers

Banks, credit unions, finance companies, fintechs, payment providers, and other consumer-facing businesses should evaluate their use of synthetic content in advertising distributed in Pennsylvania.

The most immediate concern is not the use of AI itself, but the potential for synthetic content to create a misleading impression about a product, service, customer experience, endorsement, or other material representation. Advertisers should consider whether their campaigns include AI-generated or materially AI-modified testimonials, spokespersons, product demonstrations, audio, or video.

Businesses should consider taking the following steps:

  • Review consumer-facing advertisements that use AI-generated or significantly AI-modified images, videos, and audio.
  • Determine whether the content could create a false impression about the nature, origin, or authenticity of the advertised goods or services.
  • Establish a process for including disclosures in the same medium as the synthetic content, beginning with its first presentation.
  • Ensure that disclosures meet the statute’s presentation requirements, including its requirements concerning visibility, audibility, language, duration, and resistance to removal.
  • Review the controls used by advertising agencies, third-party marketing vendors, and other parties that create or distribute synthetic advertising on a business’s behalf.

Businesses should also distinguish this law’s specific disclosure obligation from their broader compliance obligations. The Act does not authorize deceptive advertising merely because an advertiser discloses the use of AI, nor does it establish a general safe harbor for AI-generated marketing.

Effective Date

The Act provides that it takes effect 60 days after enactment. Because Governor Shapiro approved it on October 22, 2026, the new requirements are scheduled to take effect on December 21, 2026.

Takeaway

Pennsylvania’s Artificial Intelligence Deceptive Advertising Act adds another state-level requirement to the evolving legal framework governing the use of generative AI in commercial communications. Its scope is narrower than a general AI transparency mandate: the disclosure requirement applies to specified uses of synthetic content that create a false consumer perception about advertised goods or services, subject to the statute’s stated exceptions.

Nevertheless, businesses using AI-generated imagery, audio, or video in consumer advertising should not assume that a disclosure buried in fine print or added after the content has already been presented will suffice. Reviewing advertising practices and implementing appropriate disclosure controls before the December 21 effective date would be a prudent compliance measure.

Alan S. Kaplinsky and John L. Culhane, Jr.

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LOOKING AHEAD

California’s MBA – 2026 Legal Issues and Regulatory Compliance Conference

December 7 – 8, 2026 | Hyatt Regency Huntington Beach, California

Please join Ballard Spahr’s Richard J. Andreano, Jr., co-chair of the conference, at:

Session 12: Compliance Super Session - Ask the Experts

December 8, 2026 – 10:00 AM PT and 2:30 PM PT

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