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Nutter Bank Report: March 2025
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- Federal Banking Agencies Announce Rollback of CRA Rules and Other Pending Rules
- FDIC and OCC Clarify Process for Banks to Engage in Crypto-Related Activities
- OCC and FDIC Plan to Stop Examining Banks for Reputation Risk
- Massachusetts Attorney General Issues Ban on “Junk Fees” Charged to Consumers
- Other Developments: Bank Mergers and Payday Lending
1. Federal Banking Agencies Announce Rollback of CRA Rules and Other Pending Rules
The federal banking agencies have announced their intent to issue a proposal to rescind the Community Reinvestment Act (CRA) final rule originally issued in October 2023. In their announcement on March 28, the agencies also stated their intention to reinstate the CRA framework that existed prior to the October 2023 final rule. The October 2023 final rule tailored CRA performance standards to bank size, business model, and local conditions. It also updated CRA asset size thresholds for small, intermediate, and large banks. The announcement follows the March 3 decision by the FDIC to withdraw four outstanding proposed rules relating to brokered deposits, corporate governance, the Change in Bank Control Act (CBCA), and incentive-based compensation arrangements. Click for a copy of the announcement about the CRA October 2023 CRA rule. Click for a copy of the FDIC’s announcement about withdrawn proposed rules.
Nutter Notes: In its announcement of the withdrawal of several proposed rules, the FDIC said that it decided to withdraw the 2024 brokered deposits proposal because it “would have significantly disrupted many aspects of the deposit landscape.” It said the 2023 corporate governance proposal “would have created a number of overly prescriptive and process-oriented expectations for management and boards of directors of FDIC-supervised institutions with $10 billion or more in total consolidated assets.” The 2024 proposal related to the CBCA would have removed an exemption from the requirement to notify the FDIC for an acquisition of voting securities of a bank holding company for which the Federal Reserve already reviews a CBCA notice. The 2024 proposal related to incentive-based compensation arrangements was approved by the FDIC Board, but was never published for comment in the Federal Register. In January, FDIC Acting Chairman Travis Hill flagged a number of these proposed rules as “problematic” and suggested that the FDIC would consider withdrawing them.
2. FDIC and OCC Clarify Process for Banks to Engage in Crypto-Related Activities
The FDIC and OCC have announced that they will no longer require banks they supervise to receive supervisory nonobjection before engaging in certain cryptocurrency activities. The FDIC issued new guidance on March 28 for state non-member banks engaging or seeking to engage in crypto-related activities, which rescinded guidance published in April 2022 requesting that banks notify the FDIC of their intent to engage in crypto-related activities and provide information necessary to allow the FDIC to “assess the safety and soundness, consumer protection, and financial stability implications of such activities.” The FDIC’s move followed the OCC’s March 7 announcement that rescinded earlier guidance to national banks and federal savings associations that also required those institutions to seek prior approval to engage in certain permissible crypto-related activities. Click for a copy of the FDIC’s announcement. Click for a copy of the OCC’s announcement.
Nutter Notes: The OCC’s prior written guidance confirmed that it is permissible for national banks and federal savings associations to provide crypto-asset custody services, hold dollar deposits serving as reserves backing stablecoins under certain circumstances, and perform certain activities to support customer payments transactions on a distributed ledger. Both the FDIC and OCC reiterated that the banks they supervise must adequately manage the risks associated with crypto-related activities, and conduct such activities in a fair manner and in compliance with applicable law. The Federal Reserve has not yet announced any similar policy changes for its supervision of crypto-related activities by state member banks which could be due to the vacancy in its Vice Chair for Supervision role following Governor Michael Barr’s resignation from the role on February 28. On March 17, President Trump nominated Governor Michelle Bowman to be the next Vice Chair for Supervision, which is pending a Senate confirmation hearing and vote.
3. OCC and FDIC Plan to Stop Examining Banks for Reputation Risk
The OCC has announced that it has begun to remove references to national banks’ and federal savings associations’ reputation risk from the Comptroller’s Handbook and related published guidance. In its March 20 announcement, the OCC stated that it “believes removing references to reputation risk will improve transparency and confidence in the supervisory process.” The OCC explained that it “has never used reputation risk as a catch-all justification for supervisory action . . . , [but] focused primarily on the risks to a bank’s current or projected financial condition and resilience arising from negative public opinion.” In a March 24 letter to Congressman Dan Meuser, Chairman of House Subcommittee on Oversight and Investigations, Acting Chairman Hill said that the FDIC plans to issue a proposed rule that would ensure that examiners do not use reputational risk as a basis to criticize the activities or actions of banks. Click for a copy of the OCC’s announcement about reputation risk. Click for a copy of Acting Chairman Hill’s letter.
Nutter Notes: The bank reputation risk supervisory policy changes at the OCC and FDIC follow a February 20, 2025, letter by several Congressional leaders, including Congressman Meuser, to Acting Chairman Hill expressing concern about debanking digital asset firms. In their letter, the representatives recommended that the FDIC consider a number of recommendations aimed at preventing bank regulators from “using the supervisory process to debank disfavored industries.” Those recommendations included prohibiting the “use of reputational risk as a supervisory factor and clarify and reform the use (including consideration of removing as a factor) of ‘management’ from CAMELS assessment to prevent abuse or discrimination.” While the OCC’s announcement did not refer to debanking, Acting Chairman Hill’s March 24 letter directly responded to the February 20, 2025, letter from Congressional leaders. The Federal Reserve has not yet announced any similar policy changes for its consideration of reputation risk in examinations of state member banks which could be due to the current vacancy in the role of Vice Chair for Supervision.
4. Massachusetts Attorney General Issues Ban on “Junk Fees” Charged to Consumers
The Massachusetts Attorney General’s Office (“AGO”) has issued new rules under the state’s consumer protection law banning so-called “junk fees” as unfair and deceptive practices in connection with certain billing practices, including trial offers and automatic renewals, recurring charges, and subscriptions. The rules issued on March 3, 2025—which are more fully explained in a recent Nutter legal advisory—do not exempt the banking industry despite efforts by Massachusetts banks advocating for the AGO to exempt the industry after the rules were originally proposed in the fall of 2023. In December 2023, state banks argued that such a ban was not necessary given the existing federal consumer protection laws (such as the Truth in Lending Act and Truth in Savings Act that include similar advertising and disclosure requirements) and existing federal and state bank supervision ensuring compliance with those consumer laws. In terms of direct applicability to banks of the new state rules, banks should ensure that all consumer fees (such as overdraft fees, insufficient funds fees, late fees, and other fees) are fully disclosed to a consumer clearly and conspicuously when agreeing to provide a product or service, including the nature, purpose, and amount of all fees, charges, or other expenses that could be imposed on a given transaction. Click for a copy of the final rule.
Nutter Notes: The AGO’s junk fee regulations are a stark reminder that the CFPB’s recent reductions in its funding and changes in its enforcement priorities and its staffing do not represent a permission slip to ignore consumer protection laws. In addition to the AGO’s efforts to potentially fill an enforcement vacuum, including through its authority to enforce federal consumer protection law (as it is authorized to under a 2022 CFPB interpretive rule), banks under $10 billion in assets continue to be supervised for federal consumer compliance by their prudential regulator. In addition, banks should be mindful that a new CFPB director in 2029 could always look back at past practices that fall within the applicable statute of limitations. Accordingly, banks should continue to maintain robust consumer compliance programs and be prepared for more state-level investigative and enforcement activity moving forward.
5. Other Developments: Bank Mergers and Payday Lending
- FDIC to Rescind 2024 Bank Merger Policy Statement
The FDIC on March 3 approved a proposal to rescind its Statement of Policy on Bank Merger Transactions adopted in September 2024. The FDIC instead plans to reinstate, on an interim basis, its policy on evaluating bank mergers that was in effect prior to 2024 while “the agency conducts a broader reevaluation of its bank merger review process.” Click for a copy of the FDIC’s announcement.
Nutter Notes: Late last year, the FDIC, OCC, and U.S. Department of Justice (DOJ) coordinated the release of new policies to govern each agency’s consideration of bank merger transactions. The FDIC and OCC each published final statements of policy that, among other things, clarified which conditions are likely to raise supervisory concerns that would need to be resolved before the agency would approve a merger transaction. The OCC and DOJ have not yet publicly responded to the FDIC’s proposal to rescind its 2024 policy statement.
- The CFPB Announces That It Will Not “Prioritize” Enforcement of Payday Lending Rule
The CFPB announced on March 28 that it “will not prioritize enforcement or supervision actions with regard to any penalties or fines associated with” a rule meant to protect consumers from unfair and abusive practices in payday, vehicle title, and certain high-cost installment loans. The payday lending rule was finalized in 2017 and became effective on March 30, 2025. Click for a copy of the CFPB’s announcement.
Nutter Notes: Among other things, the payday lender rule requires that, for short-term and longer-term loans with balloon payments, a lender must reasonably determine that consumers have the ability to repay the loans according to their terms. While the rule is now effective, the CFPB is not expected to enforce it. However, states may bring enforcement actions related to violations of the rule.
Nutter Bank Report
Nutter Bank Report is a monthly electronic publication of the Banking and Financial Services Group of the law firm of Nutter McClennen & Fish LLP. Chambers and Partners, the international law firm rating service, after interviewing our clients and our peers in the profession, has ranked Nutter’s Banking and Financial Services practice among the top banking practices in the nation. Visit the U.S. rankings at Chambers.com. The Nutter Bank Report is edited by Matthew D. Hanaghan. Assistance in the preparation of this issue was provided by Heather F. Merton. The information in this publication is not legal advice. For further information, contact:
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Michael K. Krebs Tel: (617) 439-2288 |
Matthew D. Hanaghan Tel: (617) 439-2583 |
Daniel W. Hartman |
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Kate Henry Tel: (617) 439-2304 |
Timothy J. Rennie Tel: (617) 439-2141 |
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This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.
