Significant developments in U.S. banking regulation include a high-profile legal battle over Federal Reserve Governor Lisa Cook’s removal, new state laws on commercial financing, and federal initiatives tackling ‘debanking’ practices. The evolving landscape reflects a push for tighter oversight, technological adaptation, and political influence, shaping the future of financial industry governance.
The evolving landscape of U.S. banking regulation is marked by significant developments at the Federal Reserve, shifts in consumer data-sharing rules, new state laws on commercial financing, and federal actions addressing “debanking” practices.
At the heart of recent upheaval is the contentious removal of Federal Reserve Governor Lisa Cook. On August 25, 2025, President Donald Trump abruptly dismissed Cook, citing a criminal referral related to alleged mortgage fraud—a charge she has never officially faced. This move has been met with legal challenges, with Cook filing suit to contest her dismissal, asserting the allegations do not meet the “for cause” standard required under the Federal Reserve Act for removal. The Act restricts presidential authority to remove Fed Governors solely to cause-based reasons. A U.S. District Court granted Cook a temporary injunction on September 9, 2025, finding her likely to succeed on the merits, effectively barring her removal for now. The case is expected to escalate potentially to the Supreme Court, where prior rulings have hinted at possible exceptions for the Fed but left key questions unanswered about what constitutes cause and the handling of allegations predating a Governor’s appointment. Republican senators have expressed reluctance to consider any replacement until the legal questions are settled. Meanwhile, Trump has appealed the injunction, aiming for a rapid resolution before the Federal Open Market Committee’s September 16–17 meeting.
In the interim, President Trump has sought to fill vacancies on the Fed Board by nominating Stephen Miran, currently Chair of the White House Council of Economic Advisers, for a temporary term ending January 31, 2026. Miran, known for his support of Trump’s deregulatory economic policies, is advancing through the Senate Banking Committee, though confirmation before the upcoming Fed meetings would require an unusually fast process.
On the regulatory policy front, the Consumer Financial Protection Bureau (CFPB) is reconsidering its data-sharing rule under the Consumer Financial Protection Act of 2010. Originally issued in a Biden administration final rule last October, this regulation mandated compliance timelines for financial institutions regarding consumer data rights, sparking legal challenges from banking groups. Following a court-ordered stay, the CFPB has initiated an advanced notice of proposed rulemaking aiming to extend compliance deadlines and seek broad public input to redraft the rule in line with new administration priorities. This recalibration coincides with pressure from fintech, crypto, and retail advocacy groups urging the defence of “open banking” frameworks now under threat from larger banks.
President Trump also signed an Executive Order targeting the increasingly politicized practice of “debanking,” where financial institutions deny services based on customers’ political, religious, or social beliefs. Known for its controversial history, including the Obama-era “Operation Chokepoint,” the order mandates federal banking regulators to remove reputational risk as a criterion in supervisory examinations and to scrutinize banks’ policies for unlawful debanking practices. The Federal Reserve, OCC, and FDIC have already moved to excise reputational risk from their oversight frameworks. The FDIC is additionally proposing simplified rules to reduce complicated signage and advertising requirements on ATMs and digital banking platforms, aiming to curb consumer confusion due to over-disclosure.
Significant regulatory reforms are also underway at the state level. Texas enacted House Bill 700, effective from September 1, 2025, imposing registration and detailed disclosure mandates on commercial sales-based financing providers, including merchant cash advances, while prohibiting automatic account debits without perfected security interests. This law exempts banks and credit unions but sets a $10,000 civil penalty for violations. Similarly, Louisiana introduced House Bill 470, effective August 1, 2025, focusing on disclosure requirements for revenue-based financing transactions but without registration or automatic debit restrictions. Importantly, Louisiana’s law does not exempt banks, unlike Texas. These states join a growing list of nine others with commercial financing regulations, reflecting increasing oversight in this sector.
Meanwhile, New York has pioneered regulation of the burgeoning “Buy-Now-Pay-Later” (BNPL) sector by embedding licensing and consumer protection provisions into its fiscal year 2026 budget. The law mandates BNPL lenders to obtain a license from the New York Department of Financial Services, caps interest rates at 16%, and requires robust loan disclosures compliant with federal requirements and forthcoming state regulations. However, this state-level move contrasts with federal regulators; the CFPB recently elected not to enforce earlier BNPL rules following industry litigation. New York’s BNPL regulations will take effect 180 days after implementing regulations are drafted and adopted, with no clear timeline yet from the NYDFS.
Finally, the Federal Reserve Board has dissolved its Novel Activities Supervision Program, which was created to oversee activities related to crypto-assets, blockchain technology, and fintech partnerships. The Fed affirmed that these topics are now sufficiently embedded in standard supervisory processes, signaling a maturation of oversight in these innovative sectors.
Taken together, these regulatory changes and legal developments underscore the dynamic and sometimes contentious environment confronting the U.S. banking and financial services industry as it adapts to technological innovation, political pressures, and evolving consumer protection imperatives. The outcome of Governor Cook’s removal dispute and timely regulatory responses to new financial products and banking practices will significantly shape the tenor of financial regulation in the months and years ahead.
Source: Noah Wire Services
Subscribe to Industry Updates
