Mortgage Banking Update - July 10, 2025

July 10 – Read the newsletter below for the latest Mortgage Banking and Consumer Finance industry news, written by Ballard Spahr attorneys. In this issue, we delve into our amicus involvement in an important Supreme Court case, HUD's Buy Now, Pay Later Request for Information, the new federal Office of Immigration Policy, and much more.

• Ballard Spahr Submits Amicus Brief on Behalf of Banking Trade Groups in Important SCOTUS Arbitration Case
• Today's Podcast Episode: What is Happening at the Federal Agencies That Is Relevant to the Residential Mortgage and Settlement Service Industries
• Budget Bill Includes Huge Cuts to CFPB Budget
• Supreme Court Rejects Granting of Universal or Nationwide Injunctions in Landmark Opinion
• Financial Institutions May Rely on Third Parties for Social Security, Taxpayer Identification Numbers
• HUD Seeking Information About Impact That Buy Now, Pay Later Has on Housing Expenses
• NYC Comptroller Calls for Strengthening City, State Consumer Protection Laws, Regulations
• Independent Fed Inspector General Assigned to CFPB Investigating Administration's Actions at the CFPB
• FinCEN Designates Three Mexican Financial Institutions as Primary Money Laundering Concerns Linked to Opioid Trafficking
• Department of Labor Creates Temporary Office of Immigration Policy
• NLRB Acting General Counsel Says Secretly Recording Union Negotiations Is Unlawful
• Looking Ahead

Ballard Spahr Submits Amicus Brief on Behalf of Banking Trade Groups in Important SCOTUS Arbitration Case

On behalf of the American Bankers Association (ABA) and the Consumer Bankers Association (CBA), Ballard Spahr has submitted an amicus brief to the United States Supreme Court in Coinbase, Inc., et al. v. Kramer, et al., No. 24-1230. The amicus brief was filed in support of a petition for a writ of certiorari filed by Coinbase which asks the Court to clarify the scope of Federal Arbitration Act (FAA) preemption when California plaintiffs seek public injunctive relief under the "McGill rule" but only a fraction of the general public (typically customers of the defendant) would benefit from the issuance of any such relief.

In a 2017 decision, McGill v. Citibank, N.A., the California Supreme Court held on public policy grounds that claims for "public injunctive relief"—relief that has "the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public"—cannot be waived by parties to private arbitration agreements and that the FAA does not preempt that rule.

In practice, however, California state courts have greatly expanded the rule to defeat the enforcement of arbitration clauses governed by the FAA even when an injunction is intended to benefit not the general public as a whole, but rather only a discrete segment of the general public, usually other customers of the defendant company. These courts have refused to find that the FAA preempts the McGill rule in any respect. This has resulted in hundreds of lawsuits against businesses that avoid arbitration by seeking "public injunctive relief" in their complaints.

By contrast, California federal courts hold that the state courts' expansive application of the McGill rule is preempted by the FAA because it forbids waiving claims for prospective injunctive relief against unlawful conduct even if the implementation of such an injunction would require evaluation of the individual claims of numerous non-parties and/or involve the sort of procedural complexity or formality that would be inconsistent with the FAA's objective of facilitating streamlined proceedings in arbitration. This sharp division between the California federal and state courts has led to confusion as well as flagrant gamesmanship and forum shopping.

In their amicus brief, the trade groups urge the Supreme Court to grant review to resolve this conflict and restore the overriding national policy favoring individual arbitration restore the overriding national policy favoring arbitration embodied in the FAA. In its landmark 2011 decision in AT&T Mobility LLC v. Concepcion, the Court approved the use of class action waivers in consumer arbitration agreements which require disputes to be resolved on an individual (non-class) basis. The Court reasoned that individual arbitration provides a fast, inexpensive, consumer-friendly and efficient means of resolving customer disputes precisely because it is not intended to adjudge claims of non-parties. It held that the FAA preempted California law which disapproved the use of class action waivers.

The trade groups argue that the California state courts' overly broad application of the McGill rule deprives consumers, businesses and the public of the many benefits of individual arbitration, emphasizing that the Consumer Financial Protection Bureau (CFPB) itself found that individual arbitration is a faster, more efficient and more cost-effective method of resolving consumer disputes than court litigation, particularly class action litigation. They further contend that the already overburdened and underfunded California state court system will become even more overburdened and underfunded if disputes that should be resolved in arbitration are instead shuttled to court due to an over-expansive interpretation of the McGill rule. Businesses will also be saddled with enormous additional litigation costs, and consumers will pay higher prices and/or suffer reduced services because the added litigation costs will be passed through to them in whole or in part. As taxpayers, they will also pay for the increased costs to the court systems required to handle the burgeoning increase in additional litigation. Moreover, the trade groups assert, holding that the FAA preempts the California state courts' uniform application of the McGill rule to deny arbitration will not impair consumer plaintiffs' individual claims. Their substantive rights will merely be resolved in arbitration instead of in court, and their claims will be resolved in a faster, cheaper and more convenient manner.

The Coinbase petition will be considered by the Court at its September 29, 2025 conference.

Ballard Spahr pioneered the use of class action waivers in consumer arbitration agreements and filed an amicus brief on behalf of the ABA, the CBA and other trade groups in Concepcion. It has written extensively on the issue of FAA preemption of the McGill rule.

In addition, it was in the forefront of successfully opposing the CFPB's efforts to override Concepcion and prohibit the use of class action waivers in consumer arbitration agreements.

Mark J. Levin & Alan S. Kaplinsky

Today's Podcast Episode: What is Happening at the Federal Agencies That Is Relevant to the Residential Mortgage and Settlement Service Industries

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

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

• Changes in leadership and priorities at the CFPB, as well as efforts to significantly reduce the funding and staffing at the CFPB and related lawsuits.
• House Republican criticism of various CFPB actions under former Director Chopra.
• The rescission and revisiting of CFPB final rules, proposed rules and informal guidance, including the Nonbank Enforcement Order Registry final rule, Residential Property Assessed Clean Energy (PACE) Financing final rule, Residential Mortgage Servicing proposed rule, and FCRA "Data Broker" proposed rule.
• The termination of CFPB enforcement efforts and revisiting of CFPB redlining consent orders.
• The rescission of Community Reinvestment Act rule amendments.
• The White House directive for the federal government to eliminate the use of disparate-impact liability.
• The status of the HUD disparate impact rule under the Fair Housing Act.
• HUD's reversal of various FHA policies adopted during the Biden Administration, including guidance regarding appraisal bias and reconsideration of value.
• Trigger leads bills.
• White House firings of independent agency board/commission members and efforts to exert control over independent agencies.
• State efforts to fill the void left by the actions at the CFPB.

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

To listen to this episode, click here.

Consumer Financial Services Group

Budget Bill Includes Huge Cuts to CFPB Budget

The budget bill signed by President Trump on July 4 will make massive cuts to the CFPB's budget.

The huge bill changes the amount that the CFPB may receive from the Federal Reserve from a maximum of 12% of the Fed's inflation-adjusted total operating expenses in 2009 to a maximum of 6.5%. Senate Republicans, who proposed that provision, said it does not affect the bureau's ability to request funds from Congress or the ability of the bureau to function. They added that it will save $2 billion.

The provision decreases the CFPB's funding cap by 46%, according to the Republicans.

Banking Committee Republicans originally proposed eliminating all CFPB funding by decreasing its funding cap to 0%. However, the Senate Parliamentarian ruled that provision could not be offered in the budget bill.

The House-passed version of the reconciliation measure would have set funding for 2025 at no more than $249 million, with an annual adjustment for inflation. That provision was not included in the bill.

Republicans on Capitol Hill have long argued that the CFPB was unaccountable. They have advocated for the bureau being funded through the annual appropriations process. However, the Supreme Court has ruled that the funding method is constitutional.

The Banking Committee did not address the fact that the CFPB is only allowed under Dodd-Frank to be funded out of "combined earnings of the Federal Reserve System." Parties have argued that because the Fed has been losing money since September 2022, there currently are no combined earnings of the Federal Reserve System. No court has yet ruled that there are no combined earnings.

Senate Banking, Housing and Urban Affairs Committee Chairman Sen. Tim Scott, R-S.C. was pleased that his committee's CFPB provision was included in the bill.

"For the first time since the passage of Dodd-Frank, Congress is reining in the unaccountable Consumer Financial Protection Bureau and decreasing its mandatory funding cap by 46%, which will save over $2 billion and require the Bureau to be fiscally responsible," he said.

However, committee Ranking Democrat Sen. Elizabeth Warren, D-Mass., sharply criticized the provision.

"The Consumer Financial Protection Bureau is the financial watchdog to keep people from getting cheated on credit cards, mortgages, Venmo, payday loans, and a zillion other transactions," Warren said. "When this financial cop can't do its job, there is no one else in the federal government to pick up the slack."

There has been some speculation that the CFPB funding cut could help the Trump Administration in its court battle to resume shrinking the agency, Law360 reported. For several months, an injunction obtained by the National Treasury Employees Union, has stopped the administration from firing the majority of the CFPB staff and canceling its contracts.

Law360 speculated that the new law could assist the administration in its argument that the CFPB should shrink.

Consumer Financial Services Group

Supreme Court Rejects Granting of Universal or Nationwide Injunctions in Landmark Opinion

Last Friday, the Supreme Court, in a 6-3 opinion in Trump v. CASA, Inc., covering three separate lawsuits that were consolidated for purposes of argument and decision, held that federal courts may not grant a universal injunction against the President implementing his Executive Order limiting birthright citizenship. (A "universal injunction" is an injunction which purports to confer benefits on third parties who are not named plaintiffs in the lawsuit.). The lawsuits were brought by individual pregnant women, two organizations, and a number of states. The three federal district courts issued universal injunctions after holding that the Executive Order was unconstitutional. The three Courts of Appeals affirmed. The Government then sought partial stays in the Supreme Court of the lower courts' orders pertaining to the universal injunctive relief but not the orders holding that the Executive Order is unconstitutional. The Government did not seek stays of the orders granting injunctive relief to the plaintiffs, including the members of the organizational plaintiffs. As a result, the Supreme Court did not have in front of it and did not consider at all the constitutionality of the Executive Order or the legality of the organizations to assert claims on behalf of their members.

The Supreme Court noted in a footnote to the majority opinion that it did not consider the possible application of Section 706 of the Administrative Procedure Act, presumably because the lawsuits did not challenge the validity of any federal agency regulation. Section 7(b) states, in relevant part:

The question arises whether a court might in effect "set aside" or nullify an agency regulation and thereby implicitly benefit all persons harmed by the regulation without granting an injunction, which under CASA may only benefit the named plaintiffs. That might be a way for a plaintiff challenging a regulation to avoid the holding of CASA.

The majority opinion held that the injunctive relief must be limited so that it applies only to the individual plaintiffs and the members of the two organizational plaintiffs. The Court did not act on the stay sought by the Government against the application of the universal injunction granted by the district courts to the States and remanded that issue to the district courts for further consideration.

This article will not discuss the originalist reasoning employed by the majority of the Court in striking down universal injunctions nor the reasoning of the concurring or dissenting opinions. We will also not consider the impact that this opinion may have on the "checks-and-balances" framework of our Constitution and the fact that this opinion seems to confer extraordinary power on the Executive branch to the detriment of lower federal courts, which will apply to many other Executive Orders that have been or will be issued. We are sure that such an analysis will be undertaken by many academics. Instead, we will focus exclusively on the practical application of the holding to the consumer financial services industry, which increasingly initiates lawsuits seeking to enjoin statutes and regulations that will harm their businesses. The best examples of that are the numerous lawsuits that were initiated by the industry through their trade groups challenging regulations promulgated by the CFPB under former Director Rohit Chopra.

In initiating those lawsuits, the trade groups, relying upon Supreme Court precedent that enables a trade group to stand in the shoes of its members, sought to enjoin the CFPB from enforcing a regulation based on a wide range of legal theories. Associational standing allows an association representing members with standing to bring the case to court. Under Hunt v. Washington State Apple Advertising Commission, 433 U.S. 333 (1977), to satisfy the requirements for associational standing, a trade group must show that "(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit."

Sometimes, the trade groups have sought universal injunctions that would apply to non-members of the trade groups. At other times, in order to simplify the number of issues before the court, the trade groups have sought injunctions that would only benefit their members. As a result of the new Supreme Court opinion in CASA, the trade groups will no longer be able to obtain universal injunctions. The trade groups will only be able to seek injunctive relief that will benefit their members unless they decide to file their lawsuits as Rule 23(b)(2) class actions (class actions which seek only equitable, non-monetary relief).

The majority opinion basically provided a blueprint or roadmap for plaintiffs who are seeking universal injunctions by instructing them to file class actions in the future in which the class will be defined to include all persons harmed by the regulation. Recognizing that this will substantially complicate and prolong these types of lawsuits, the majority opinion advised that a plaintiff could seek a temporary restraining order or preliminary injunction on behalf of the putative class and that the plaintiff might be eligible to obtain that relief before a class actually gets certified. One of the organizational plaintiffs in the birthright citizenship cases file an amended complaint last Friday afternoon seeking a class action accompanied by a motion seeking to certify a class and a separate motion seeking a TRO and preliminary injunction. It will be important to follow further proceedings in that case to see whether the plaintiff actually obtains a preliminary injunction that is upheld on appeal. The Government is expected to oppose both motions.

It should be noted that Rule 23(b)(2) class certification is not just a "walk in the park." It requires the plaintiff to establish the following elements.

Rule 23(a):

1. the class is so numerous that joinder of all members is impracticable;
2. there are questions of law or fact common to the class;
3. the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
4. the representative parties will fairly and adequately protect the interests of the class.

Rule 23(b)(2):

1. the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.

An order granting or denying certification of a class is appealable at the discretion of the court of appeals.

It is possible that some trade groups will decide not to seek class certification because of the added cost and the view that there is no need to benefit non-members. If that occurs, then non-members will either need to initiate their own lawsuits or possibly seek to intervene in the existing lawsuit in which a court has already granted injunctive relief and then file a separate motion for a preliminary injunction.

Another possible alternative that may work is to become a member of the trade group that has already obtained an injunction benefiting its members (This, of course, could be a nice way for a trade group to recruit new members.) This latter strategy may not work in all instances either because the non-member is not eligible to join the trade group or because a court concludes that the injunction only applies to those entities that are members of the trade group at the time the injunction is granted.

It makes no sense for a federal agency to be able to enforce a regulation only against third-parties that are not beneficiaries of an injunction. The agency should agree not to enforce the regulation against non-members. However, our experience with the CFPB's reaction to injunctions granted only to members of a plaintiff trade group demonstrates otherwise.

We are also concerned that the Supreme Court may revisit its precedent favoring associational standing as the CFPB has previously urged courts to do. Justice Thomas in a concurring opinion in a recent case has urged the Court to reject associational standing and to instead require that all plaintiffs must have standing on their own in FCA v. Alliance for Hippocratic Medicine, 602 U.S. 367, 397–405 (2024) (Thomas, J., concurring).

It seems that the safest approach would be for the plaintiffs to file class actions if they want to enjoin a federal statute, regulation, or Executive Order. While that seems like a rigmarole which shouldn't be necessary, it may be the only way of ensuring success in obtaining injunctive relief for a wide range of affected entities, rather than just the named plaintiff.

Alan S. Kaplinsky

Financial Institutions May Rely on Third Parties for Social Security, Taxpayer Identification Numbers

Banks and credit unions may now rely on third parties to provide a consumer's Social Security or Taxpayer Identification Number, according to an order issued by the FDIC, OCC, and NCUA, with the consent of the Financial Crimes Enforcement Network (FinCEN).

The Customer Identification Program Rule (CIP rule) implements part of the USA PATRIOT Act. The "CIP rule requires a bank or credit union to obtain taxpayer identification number (TIN) information from its customer before opening an account, and the exemption permits a bank or credit union to use an alternative collection method to obtain TIN information from a third-party rather than from the customer," the order states.

FinCEN concurred with the order.

"We recognize that the way customers interact with banks and receive financial services has changed significantly since 2001, when the initial requirement was enacted into law under the USA PATRIOT Act," said FinCEN Director Andrea Gacki. "This order reduces burden by providing banks with greater flexibility in determining how to fulfill their existing regulatory obligations without presenting a heightened risk of money laundering, terrorist financing, or other illicit finance activity."

The exemption does not affect the requirement for financial institutions to have risk-based CIP procedures that allow them to have a reasonable belief that they know the true identity of each customer.

This exemption is optional, and entities are not required to use an alternative collection method to obtain a customer's TIN information.

The order takes into account the comments received on a March 2024 interagency request for information.

Consumer Financial Services Group

HUD Seeking Information About Impact That Buy Now, Pay Later Has on Housing Expenses

The U.S. Department of Housing and Development (HUD) is seeking information about the impact that the frequent use of Buy Now, Pay Later (BNPL) products may have on borrowers' ability to meet housing-related expenses, including rent or mortgage payments. Comments are due on or before August 25, 2025.

"The rise of BNPL lending raises important questions about how it may impact housing affordability and stability," the Department said, in issuing a Request for Information. "As consumers take on additional short-term debt obligations through BNPL services, their capacity to manage housing-related expenses, such as rent or mortgage payments, may be affected."

HUD noted that use of BNPL services is growing rapidly and is changing how individuals manage short-term expenses.

"BNPL loans essentially create 'phantom debt' that mortgage lenders may not be readily able to detect as needed to fully assess a borrower's outstanding obligations or debt management behavior," according to HUD. Interestingly, HUD did not expressly address the ramifications of BNPL arrangements with regard to the "ability to repay" requirements applicable to residential mortgage loans.

HUD said that FHA's policies would largely exclude BNPL loans from consideration in underwriting because closed-end debts are not required to be included if they will be paid off within 10 months from the date of closing and the cumulative payments of all such debts are less than or equal to 5% of the borrower's gross monthly income.

The Department continued, "Understanding the intersection between BNPL lending and housing-related expenses is crucial for determining whether FHA's current policies are adequate or if development of BNPL-specific policies are warranted for FHA to continue to support financial self-sufficiency and housing stability."

HUD listed a lengthy series of questions to gather information about BNPL usage, including:

• How does frequent BNPL usage affect borrowers' ability to meet housing-related expenses, including rent or mortgage payments?
• What are the credit and spending profiles of people who frequently rely on BNPL services?
• Why do borrowers choose BNPL services over other payment methods?
• Are borrowers taking out multiple concurrent BNPL loans—known as loan stacking—and what are the implications for overall debt burden?
• What is the relationship between BNPL use and indicators of financial vulnerability?
• What housing-related expenses are sacrificed to repay BNPL loans?
• How might BNPL usage affect a household's risk profile or eligibility for FHA-insured mortgage programs?

At the same time as HUD is seeking comments on BNPL services, the CFPB has abandoned its BNPL rule and said it does not intend to issue a new one.

"The Bureau has determined that it does not intend to reissue the BNPL Interpretive Rule because it was procedurally defective and the interpretation included therein applied ill-fitting open-end credit regulations to BNPL products, which are generally structured as closed-end loans," the CFPB said in a status report it submitted in a lawsuit filed by the Financial Technology Association.

Meanwhile, CNN reports that FICO plans a suite of credit scores that include BNPL data. It will provide lenders with a window into a borrower's repayment behavior, CNN reported. FICO would be the first major scoring company to account for BNPL borrowing, according to CNN.

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

NYC Comptroller Calls for Strengthening City, State Consumer Protection Laws, Regulations

Accusing the Trump administration of "dismantling" the CFPB, New York City Comptroller Brad Lander is calling on city and state officials to fill the void by strengthening consumer protection laws and rules in the city and state.

"The Trump Administration's dismantling of the Consumer Financial Protection Bureau (CFPB)—including the elimination of 90 percent of its staff—will leave millions of Americans more vulnerable to unfair, deceptive, and abusive business practices from lenders and financial institutions of all types," the comptroller's office said in releasing a new report. The report "demands that State and City leaders close regulatory and enforcement gaps, increase banking access and affordability, and expand consumer rights, engagement, and outreach."

The report said that during the past decade, the CFPB has been instrumental in expanding access to safe, affordable credit and banking services. That has ended, according to Lander.

"These rollbacks mean state and city governments around the country must take a larger role in defending American consumers," the comptroller's office said.

New York, Lander asserted, has one of the weakest consumer protection statutes in the nation.

The comptroller's office said that existing gaps in city and state consumer protection policy, coupled with severely weakened federal oversight, leave New Yorkers especially vulnerable to harm. "While the State and City cannot replace the CFPB, there are, as this report demonstrates, a variety of opportunities for New York to better protect its residents from financial exploitation," Lander's office said, in summarizing the report.

While the City and State have strong foundations of consumer protection through the State's Department of Financial Services and the City's Department of Consumer and Worker Protection, "the law governing it is among the weakest consumer protection statutes in the country, and legal loopholes enable ultra-high-cost lenders to evade state usury law, trapping consumers in cycles of debt," according to the comptroller's office.

Lander said that most states ban unfair deceptive acts or practices, while New York only bans deceptive acts or practices. In addition, according to Lander, New York is one of seven states where consumers must prove impact on the public—not just harm to the individual consumer– in order to pursue legal action.

At the state level, New York can significantly strengthen consumer protection by enacting legislation to modernize its consumer protection law, regulate Earned Wage Access and other high-cost lending products, address barriers to bank accessibility among marginalized groups, and improve financial data privacy protections, among other proposals, according to Lander.

Specifically, Lander released a long list of recommendations, including:

• Governor Kathy Hochul signing the FAIR Business Practices Act legislation, which would revise the state's consumer protection law to include both unfair and deceptive business acts or practices. The legislation also would make it clear that the consumer protection law applies to small businesses and non-profits and to residential property transactions. The FAIR Act would also give power to the State Attorney General's Office to bring action against any person or business operating in New York, regardless of whether they are located in New York. Currently, the consumer protection law sets fines at $50 per violation; the FAIR Act would increase that fine to $1000 for each violation, in addition to actual damages, with additional damages awarded if the defendant is found to have "willingly or knowingly" violated the Act. The state legislature recently passed the bill; it is awaiting the governor's signature.
• Provide full funding for the Office of the Attorney General, N.Y. State Department of Financial Services and NYC Department of Consumer and Worker Protection to probe and take action against harmful practices and protect local consumers.
• Create a statewide Consumer Protection Restitution Fund to collect a portion of civil consumer penalties to compensate consumers who otherwise cannot receive restitution.
• Enact the Department of Financial Services regulation limiting overdraft fees at state-chartered banks.
• Improve statewide legislation to expand access to banks among underserved populations.
• Provide targeted support for minority depository institutions and credit unions operating in underserved communities.
• Pass legislation to regulate ultra-high-cost lenders, while rejecting legislative efforts to merely licensing them without protecting consumers against business practices.

Ballard Spahr has a dedicated State Attorneys General Consumer Response Team that helps banks and other financial institutions understand and adapt to the evolving regulatory environment and mitigate risks in an era of heightened municipal and state-level enforcement. Ballard Spahr brings an unmatched combination of experience to state attorney general (AG) enforcement matters.

The lawyers on our State Attorneys General Consumer Finance Response Team advise businesses and organizations to keep them well-prepared to meet current conditions and be ready for what lies ahead. If you have received a civil investigative demand (CID), subpoena, or inquiry from a state attorney general, or if you need guidance on state regulatory compliance, our team is available to assist. Please contact us to discuss your specific situation.

Joseph J. Schuster, Jenny N. Perkins & Adrian King

Independent Fed Inspector General Assigned to CFPB Investigating Administration's Actions at the CFPB

The independent Office of Inspector General (OIG) for the Federal Reserve System (FRS) and Consumer Financial Protection Bureau (CFPB) is investigating the bureau's workforce reductions and its canceled contracts, according to a letter to Senator Andy Kim, D-NJ, from Acting FRS/CFPB IG Fred Gibson.

Gibson said he already was investigating the workforce reductions at the bureau in response to a letter from Senator Gary Peters, D-Mich. and 15 other Senators. Responding to a call from Sen. Kim and Senator Elizabeth Warren, D-Mass., Gibson now has expanded his work to include contracts that have been canceled by the Trump administration.

The FRS/CFPB IG is somewhat insulated from political pressure. The IG serves the Federal Reserve Board and the CFPB and unlike other IGs, the FRS/CFPB IG is not nominated by the President and confirmed by the Senate. The FRS/CFPB IG is appointed by the Fed Chairman—in this case, Jerome Powell.

In April, Peters and the Senators wrote to the FRS/CFPB IG demanding an investigation to ensure the agency is still able to fulfill its functions. Gibson's letter confirms that the IG is investigating the administration's actions at the CFPB. The Government Accountability Office already is investigating attempted firings, stop-work orders, and announcements of dropped lawsuits at the CFPB.

"As Trump dismantles vital public services, an independent OIG investigation is essential to understand the damage done by this administration at the CFPB and ensure it can still fulfill its mandate to work on the people's behalf and hold companies who try to cheat and scam them accountable," said Senator Kim.

Kim and Warren cited Gibson's independence in making their request to expand the investigation.

Shortly after Gibson responded to Kim's letter, Michael Horowitz was selected as permanent FRS/CFPB IG. Horowitz is the former IG at the Department of Justice.

Aside from the attempted administration cuts, lawmakers on Capitol Hill have included cuts in the CFPB's budget in the large reconciliation bills passed by the House and Senate. Under the just-passed Senate bill, CFPB spending would drop from a maximum of 12% of the Federal Reserve's inflation adjusted profits in 2009 to 6.5% of those profits.

The House-passed version of the reconciliation measure would set funding for 2025 at no more than $249 million, with an annual adjustment for inflation.

The House and Senate now will have to reconcile differences between the two bills.

The administration's actions at the CFPB also are tied up in court. The U.S. District Court for the District of Columbia has issued a temporary injunction, essentially stopping all administration actions aimed at dismantling the bureau. The Federal Appeals Court for the District of Columbia has temporarily supported that injunction.

Consumer Financial Services Group

FinCEN Designates Three Mexican Financial Institutions as Primary Money Laundering Concerns Linked to Opioid Trafficking

On June 25, 2025, the U.S. Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN") issued three orders designating CIBanco S.A., Intercam Banco S.A., and Vector Casa de Bolsa, S.A. de C.V. (collectively, the "Designated Institutions") as "financial institutions of primary money laundering concern." These measures, taken under the FEND Off Fentanyl Act of 2024, target the entities' role in laundering proceeds linked to opioid trafficking and restrict U.S. financial institutions from transacting with them. The prohibitions will take effect 21 days after their publication in the Federal Register.

Legislative Authority and Background

The legislative foundation for these actions stems from the FEND Off Fentanyl Act, enacted to address the growing crisis of synthetic opioid trafficking, particularly fentanyl, which has significantly impacted the U.S. (See our previous blog post, located here.) The Act empowers the Secretary of the Treasury to designate foreign financial institutions as primary money laundering concerns when these entities are linked to opioid trafficking activities. Under this framework, FinCEN is authorized to impose "special measures" as described in 31 U.S.C. 5318A(b) and 21 U.S.C. 2313a. These measures can include prohibitions or conditions on transactions involving the designated institutions, creating a mechanism to disrupt illicit financial flows and safeguard the integrity of the U.S. financial system.

Building on this legislative foundation, FinCEN has targeted specific institutions due to their involvement in illicit activities.

Designation of Mexican Financial Institutions

FinCEN's investigation determined that each of the designated institutions facilitated illicit financial flows for Mexican drug trafficking organizations (DTOs), including the Jalisco New Generation Cartel, the Sinaloa Cartel, and the Gulf Cartel. The findings include:

1. CIBanco S.A., Institución de Banca Múltiple: Identified as having substantial ties to DTOs, which utilize its financial services to facilitate money laundering operations. Despite assertions from CIBanco regarding its anti-money laundering (AML) compliance measures, FinCEN's investigation revealed significant gaps and inadequacies in its AML framework. Evidence points to CIBanco's involvement in processing considerable funds that are subsequently channeled into DTO operations, supporting illicit opioid trafficking activities.
2. Intercam Banco S.A., Institución de Banca Múltiple: Offering a range of financial services and maintains USD correspondent banking relationships with multiple U.S. financial institutions. According to FinCEN's findings, Intercam has played a role in processing funds related to the importation of precursor chemicals necessary for the synthesis of synthetic opioids. The investigation indicated that Intercam had been persistently involved in money laundering activities tied to DTOs, underscoring its critical role in facilitating complex financial flows that support the drug trade.
3. Vector Casa de Bolsa, S.A. de C.V.: Implicated in processing transactions for DTOs, including high-profile groups such as the Sinaloa and Gulf Cartels. Despite having an AML/CFT compliance program, FinCEN's analysis revealed that Vector has facilitated ongoing transactions that benefit DTO operations. Its services reportedly involved processing funds associated with the importation of precursor chemicals and laundering profits back into Mexico, further entrenching its role in the illicit financial network.

Although the orders focus on operations located in Mexico, the practical effects will be felt by financial institutions globally, particularly U.S. firms with correspondent banking or payment relationships involving these entities.

Details of Prohibitions and Effective Dates

FinCEN's orders prohibit all covered U.S. financial institutions from engaging in any transmittal of funds to or from the Designated Institutions. This includes:

• Wire transfers
• ACH transactions
• Convertible virtual currency transfers
• Any payment involving accounts or intermediaries administered by these institutions

Notably, these measures are civil in nature, but violations could trigger significant civil or criminal penalties under the Bank Secrecy Act and related statutes.

The orders are scheduled to become effective 21 days after publication in the Federal Register. While publication is still pending, U.S. financial institutions are expected to begin preparing immediately to comply with the prohibitions. The orders specify no expiration date but may be modified or rescinded in the future under certain conditions, such as litigation outcomes or resolution of underlying concerns.

Scope and Application of Restrictions

The prohibitions apply to:

• The specified entities' operations within Mexico, and
• Any account or address (including crypto wallets) administered on behalf of those entities

They do not apply to the Designated Institutions' branches or subsidiaries located outside Mexico, such as in the U.S.—but financial institutions should remain cautious of indirect exposures.

Rationale Behind FinCEN's Action

The FEND Off Fentanyl Act authorizes Treasury to target foreign institutions facilitating illicit opioid trafficking. According to Treasury, these designations are part of a broader national security and public health strategy to combat the synthetic opioid crisis by cutting off DTOs from the global financial system.

DTOs often rely on sophisticated cross-border financial channels—including legitimate institutions—to launder proceeds from trafficking. The designations serve to disrupt those networks and signal the U.S. government's zero-tolerance stance on enabling illicit drug finance.

Immediate Actions for Financial Institutions

U.S. financial institutions must take immediate compliance actions:

• Screen for exposure: Review existing clients, counterparties, and transactions to identify any links to the Designated Institutions.
• Update internal controls: Modify AML/CFT protocols, enhance transaction screening tools, and adjust payment routing mechanisms.
• Reassess relationships: Evaluate correspondent banking ties and terminate or revise any arrangements involving the Designated Institutions.
• Conduct training: Educate compliance teams and staff on the scope of the orders and risk of inadvertent violations.
• Monitor updates: Stay alert for FAQs, clarifications, and guidance from FinCEN and other U.S. regulatory authorities.

Final Thoughts

FinCEN's unprecedented use of Section 2313a authority under the FEND Off Fentanyl Act underscores a new era in countering global drug finance. The designations of CIBanco, Intercam, and Vector aim to cut off the financial lifelines of DTOs and disrupt illicit opioid flows into the U.S. U.S. financial institutions must act swiftly to ensure compliance—not only to avoid regulatory penalties, but also to safeguard the integrity of the global financial system.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. Please click here to find out about Ballard Spahr's Anti-Money Laundering Team.

Kelly A. Lenahan-Pfahlert

Department of Labor Creates Temporary Office of Immigration Policy

The U.S. Department of Labor (DOL) recently confirmed the establishment of a temporary Office of Immigration Policy, aimed at enhancing how DOL administers employment‑based immigration programs.

The new office comes amid growing employer reliance on legal immigration pathways to ensure a "timely, qualified, and stable workforce" through improved visa access as border and interior enforcement has intensified. For businesses reliant on foreign workers on temporary work visas and green card sponsorship, this development signals a step toward expedited and more transparent processing.

Historically, the Office of Foreign Labor Certification (OFLC) has long administered foreign worker sponsorship programs such as labor certification applications (PERM) and temporary-worker visas such as H-1B, H-2B and H-2A.Support for the new office has grown due to the increased demand for employment-based visas post-pandemic, as well as DHS's renewed scrutiny of nonimmigrant programs.

The core functions of the new Office of Immigration Policy include:

• Developing customer‑centered policies to streamline visa issuance;
• Coordinating immigration-related work internally across ETA, WHD, ILAB, and externally with USCIS, DHS, and Congress; and,
• Enhancing public and congressional communications on DOL's immigration role.

The DOL's newly‑formed Office of Immigration Policy marks a tactical shift toward a more strategic and user-focused posture on employment-based visas. This change will hopefully provide a more unified DOL voice on processing timelines, demand-side challenges, labor attestations, and wage determinations. The office may also boost responsiveness to congressional queries and reduce backlogs in visa-related adjudications. While operational details remain pending, its formation suggests the DOL will play a more active role in shaping employment-based immigration law.

Dustin J. O'Quinn, Brian D. Pedrow & Betty N. Wong

NLRB Acting General Counsel Says Secretly Recording Union Negotiations Is Unlawful

The National Labor Relations Board (NLRB) Acting General Counsel recently concluded that surreptitious recordings of collective bargaining sessions is a per se violation of the National Labor Relations Act (the Act). In the memo issued to NLRB regional offices on June 25, 2025, Acting General Counsel William B. Cowen instructed regions to issue a complaint, alleging bad faith bargaining, if an investigation reveals surreptitious recording occurred.

Cowen, a Trump appointee, said this policy is necessary to promote free and open dialogue at the bargaining table. He wrote, "[s]ecretly recording individuals at bargaining sessions without knowledge or consent is a breach of trust, undermining the integrity of relationships and eroding the basic principles of mutual respect and dignity that form the foundation of healthy interactions."

In GC Memorandum 25-07, the Acting General Counsel relied on the fact that parties may not bring a court reporter to negotiations without the other party's consent, and that insisting on the presence of a court reporter in negotiations is a permissive subject of bargaining upon which no party may lawfully insist to impasse. The Acting General Counsel maintained that it logically follows that secret recording of negotiations is not permitted.

Employer Takeaways

The Acting General Counsel's memorandum may make it unlawful for a party to secretly record union negotiations, even in a state where the law requires only one party's consent for the recording. Employers that suspect they are being recorded during collective bargaining now have recourse at the NLRB.

* * *

Ballard Spahr's Labor & Employment Group routinely assists employers in ensuring compliance with the National Labor Relations Act, and other state, federal, and local statutes and regulations.

Rebecca A. Leaf & Brian D. Pedrow

Looking Ahead

Student Lending Legislation and Litigation: 2025 Mid-Year Review

A Ballard Spahr Webinar | July 23, 2025, 12 PM ET

Speakers: Alan S. Kaplinsky, John L. Culhane, Jr., and Thomas Burke

MBA – Compliance and Rick Management Conference

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

COMPLIANCE CONVERSATIONS TRACK: Loan Originator Compensation

September 28, 2025 – 2:14 PM ET

Speaker: Richard J. Andreano, Jr.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.