BPInsights: September 20, 2025

Keys to Fighting Fraud: Accountability, Modernized Rules, Info Sharing

To protect U.S. consumers from payments fraud, U.S. policymakers should demand accountability from the sectors where fraud originates and empower banks to safely share information and intervene when fraud occurs, BPI said this week in a response to the banking agencies' request for information on payments fraud and a separate statement for the record for the House Financial Services Subcommittee on Oversight and Investigations' hearing on the same topic.

BPI Recommendations. In these two documents, BPI recommends several policy solutions to combat fraud and scams, including:

1. Social media platforms should verify advertisers to stop scams before they originate and quickly take them down once fraud is reported.
2. The FCC and FTC should require telecom, social media and messaging app companies to monitor their networks and proactively notify victims.
3. Banks should be given a safe harbor to intervene when necessary to protect customers.
4. Congress and regulators should encourage and empower telecom providers, social media, messaging platforms and financial institutions to share data and information related to fraud and scams by creating a safe harbor to mitigate legal uncertainty about liability and antitrust concerns.
5. The U.S. government should establish a National Anti-Scam Strategy to prioritize prevention strategies and align accountability.

On the Hill. Lawmakers discussed policy solutions to fraud at a House Financial Services Committee's Subcommittee on Oversight and Investigations hearing on Thursday.

• Unified Approach: Rep. Dan Meuser (R-PA) asked witnesses about the need for a national U.S. government response to fraud. It is unclear which government agency is in charge of addressing fraud and "having a central place where we could report this information that could be acted upon to actually take action for the consumer" is important, said the American Bankers Association's Paul Benda.
• Crypto Vulnerabilities: Rep. Sam Liccardo (D-CA) expressed concern about the anonymity of crypto, especially decentralized finance or DeFi, and the risk of fraud. Trillions of dollars of transactions are occurring per year in crypto networks, he said. "That number is increasing rapidly, and with that quantity of exchange, obviously to the extent that, particularly, it's happening off of decentralized exchanges, there is increasing opportunity for fraud and for theft, as well as money laundering and other kinds of criminal activity."
• Transmission of Fraud: Committee Chairman French Hill (R-AR) said the FTC and FCC should be involved in addressing fraud "due to the transmission means that you've all addressed like in telecommunication-based scams … we've got to link the financial services industry with, you know, the transmitters, transmission capabilities, which is mail and telephone and text and internet."
• Fed Letter: Chairman Hill and Reps. Andy Barr (R-KY) and Dan Meuser (R-PA) sought details in a letter this week to Fed Chair Jerome Powell on the Fed's efforts to mitigate financial fraud. The lawmakers requested information on the Fed's consumer outreach efforts, organizational structure, plan to address scams and other types of fraud and public comments received in response to its Request for Information on the topic. The letter underscored the urgency of resolving this problem.

Five Key Things

1. Supervision Under the Surface: Capitol Account Q&A with BPI's Greg Baer

BPI President and CEO Greg Baer participated in an interview with Capitol Account late last week. The interview focused on BPI's recently launched Better Bank Supervision campaign, with some discussion of stablecoins, the CFPB's Section 1033 rule and anti-money laundering reform. Here are some highlights.

• Supervision Submerged: Baer described the challenge of assessing bank supervision's effectiveness when much of it is confidential. "It's like a water polo game where everything's going on underneath the waterline and occasionally some blood bubbles up to the surface," he said. "When you see banks that can't do any M&A for five years and [you] wonder why. Well, it's because they got a secret rating that prevented them from doing that. We're trying to give this more visibility."
• Progress: Baer noted recent constructive steps taken by the banking agencies in supervision. "The Fed has taken the first step, which is to reform what they call their LFI ratings system, which looks at capital, liquidity and governance and controls - basically management…," Baer said. "A parallel change needs to be made with regard to the CAMELS rating system, where effectively the [management] component is given undue emphasis."
• 1033: On the CFPB's Section 1033 data sharing rule, Baer provided context on the uneven expectations of fintechs that access bank customer data. "It's never been about [when] a customer says, 'I want to share this information with so-and-so.' It's about data mining by a limited set of fintechs who take the data from the banks on a more frequent than daily basis for their own uses, not for the customer's uses," he said. "They expose that data to cyber attack and theft, without compensating the consumer. And with the knowledge that if there's a problem, the consumer is going to call the bank - which has a call center that they do not have - and perhaps [will] even reimburse the customer for [the tech company's] malfeasance and negligence."
• AML: Baer said he expects the current administration to rewrite AML rules and rationalize the process, a step that is desperately needed. "When you read that law [the Anti-Money Laundering Act], and hear how the system's working, I don't see how you fail to make some pretty significant changes," he said. "All of those changes are going to lead to more bad guys getting caught, not fewer. And more sanctioned transactions being identified and interdicted, not fewer. This is a pure case of where the vast majority of bank resources…are entirely wasted."

2. FDIC Proposal Would Help Restore Due Process to Supervisory Appeals System

The FDIC's proposed changes to its supervisory appeals process would help restore due process and impartiality to a system in need of reform, the Bank Policy Institute and American Association of Bank Directors said in a comment letter submitted on Tuesday.

"The FDIC's proposed changes will help restore due process and confidence to the supervisory appeals framework," the associations stated after filing the letter. "Justice isn't served when the accuser is also the judge and the jury. Supervisory actions often carry significant consequences and affect banks' ability to support their communities, so it is imperative that these decisions are justified and backed by an impartial review.

Current Context: The FDIC in 2022 summarily disbanded the independent Office of Supervisory Appeals and replaced it with the Supervision Appeals Review Committee. This action was taken without proper public notice and comment, violating longstanding principles of transparency. It also introduced potential conflicts of interest in the examination appeals process, exacerbating concerns about retaliation for appealing supervisory directives. For example, officials at the SARC reviewing appeals of supervisory directives may have been involved with or have overseen the office and team that issued the directive.

What Would Change? The new office would serve as the final review authority for banks' appeals of examiner actions, including consequential changes like CAMELS rating downgrades. It would be staffed with outside experts (not FDIC leadership or supervisory staff) who are subject to conflict-of-interest and confidentiality mandates, bolstering the appeals process's independence.

3. Pizza, Truck Stops and the Future of Interchange Fees: Kentucky Federal Judge Backs Fed's Debit Interchange Fee Cap

Kentucky federal judge Gregory F. Van Tatenhove ruled this week in support of the Federal Reserve's debit card interchange fee cap contained in Regulation II, diverging from a recent North Dakota federal court decision rejecting the legality of the cap. Van Tatenhove ruled that the cap is neither "contrary to law" nor "arbitrary and capricious," as alleged by plaintiff Linney's Pizza LLC in a 2022 lawsuit. The decision stands in contrast to a federal court ruling in North Dakota, in the case Corner Post Inc. v. Board of Governors of the Federal Reserve System, brought by a North Dakota truck stop.

• Which Costs? The relevant statute (the Durbin Amendment in the Dodd-Frank Act) allows banks to charge interchange fees to merchants that are "reasonable and proportional" to banks' costs. Linney's Pizza, the plaintiff in this case, argued that the Fed included costs that it should not have considered, making the fee maximum too high. Van Tatenhove ruled that the Fed reasonably interpreted how costs should be considered under the statute. "Put together, § 1693o-2 plainly allows the Board to consider other costs it is not mandated to consider, as long as they are not costs it is prohibited from considering," he wrote.

4. BPI Urges Congress to Advance the Stress Testing Accountability and Transparency Act

BPI expressed support in a letter to Congress this week for the Stress Testing Accountability and Transparency Act, sponsored by Rep. Bill Huizenga (R-MI). The statement calls for the bill's advancement to help support economic growth through a more transparent and accountable Federal Reserve stress testing regime.

"The Bank Policy Institute (BPI) strongly supports H.R. 5270, the Stress Testing Accountability and Transparency Act, sponsored by Rep. Bill Huizenga.

The current Federal Reserve stress testing regime is administered illegally by utilizing models and scenarios to develop a bank's capital requirements that are not disclosed transparently and not subject to a notice-and-comment process as required under the Administrative Procedure Act. As a result, these stress tests have often resulted in inaccurate and volatile results that impose significant economic costs, including reduced credit availability, slower employment growth and decreased market liquidity."

To access the full letter, please click here.

5. Troubling Timeline of NGFS's Most Recent Climate Estimate

In early November 2024, the Network for the Greening of the Financial System (NGFS) announced that a new climate damage function had been incorporated into its climate scenario toolkit. Based on an academic article in Nature, the new climate damage function implies dramatically higher economic losses from worsening climate conditions: a 19% loss of global real income by 2050 and a 60% loss by 2100. These revised estimates of economic collapse are unprecedented in size. The very large economic damage opens the door to more binding bank transition targets, penalties on banks for inadequate compliance with climate change risk expectations, such as fines on banks from the ECB, and potentially additional bank capital requirements for climate risks.

BPI's latest post offers a chronology raising troubling questions about the integrity of the process at NGFS and Nature that produced that estimate.

In Case You Missed It

BPI Brief Reiterates Need for Compliance Extension on 1033 Rule

In a brief this week, BPI, the Kentucky Bankers Association and Forcht Bank reaffirmed the need for an extension of the compliance deadline for the CFPB's Section 1033 rule. "The only question presented by this motion is whether Plaintiffs and their members should be forced to continue to spend unrecoverable money, time, and other resources to build towards compliance with a Rule the adopting agency has admitted is unlawful and is working to replace," the plaintiffs stated in the brief. "The CFPB has not postponed the Rule's rapidly approaching compliance deadlines; it has merely mentioned compliance deadlines as one of many issues it intends to consider in a new rulemaking. But Plaintiffs and their members cannot simply stop all work needed to timely comply with a complex regulation that remains on the books, gambling on the outcome of a process that will last well into 2026 at a minimum." The FTA - but not the CFPB - opposes this action, "but none of its arguments come close to justifying forcing Plaintiffs and their members to waste substantial time and money preparing to comply with a rule set to be overhauled." The brief urged the court to enter an order postponing the rule's compliance deadlines.

Miran Confirmed to Fed Board

Stephen Miran, chair of the President's Council of Economic Advisors, was confirmed by the Senate on Monday to the Federal Reserve Board of Governors. Miran replaced Adriana Kugler, who departed short of her full term. Miran's confirmation came in time for him to join the Federal Open Market Committee meeting on Sept. 16-17, during which the FOMC lowered the target range for the federal funds rate by a quarter percentage point.

Banks Urge SEC to Apply Proven Safeguards to Crypto Custody Rules

The Bank Policy Institute, the Association of Global Custodians and the Financial Services Forum submitted joint recommendations to the Securities and Exchange Commission this week to strengthen crypto custody requirements to protect customers and the financial system. Custodian banks held over $234 trillion in customer assets globally in 2024 and have an 80-year track record of safeguarding client assets by adhering to three core principles designed to protect investors: (1) segregation of client non-cash assets, (2) separation of custody from other financial activities, and (3) proper control over assets. The associations are calling for the SEC to adopt equivalent safeguards and protections for digital asset investors.

"If the SEC permits crypto firms or investment advisers to provide custody services outside of the existing qualified custodian framework, it is imperative that these custody providers be held to equally rigorous standards, including asset segregation requirements, ongoing regulatory oversight and prudential mandates equivalent to those that currently govern qualified custodians," the associations wrote. "A failure by a crypto asset custodian, whether for financial or operational reasons, could cause immense harm not only to those whose assets were custodied, but to investors in wide swaths of the market, thereby necessitating strong investor protection."

The SEC significantly improved the crypto custody framework when, in January 2025, it rescinded Staff Accounting Bulletin 121 and restored banks' ability to serve as a trusted option for their clients. SAB 121 precluded banks from custodying crypto assets because it treated custodied assets as assets owned by the bank, thus subjecting the banks to stricter capital and liquidity requirements and regulatory expectations.

ILC Loophole Undermines Financial Safety and Market Competition

The Bank Policy Institute on Friday recommended the FDIC pause all new deposit-insurance approvals for industrial loan companies (ILCs) until Congress eliminates the ILC loophole and rules for ILCs are strengthened. The letter raised the importance of maintaining strict separation between banking and commerce by preventing nonbank commercial firms and big tech from owning insured banks without full Federal Reserve oversight. This supervision helps protect consumer privacy, bolster financial stability and preserve competition.

"Closing the ILC loophole will encourage competition by guaranteeing that all financial institutions follow the same rules of the road. A company that looks like a bank must be regulated like a bank. A regulatory bypass lane exposes consumers and the FDIC insurance fund to unnecessary risk." - Paige Pidano Paridon, Executive Vice President & Co-Head of Regulatory Affairs

How the ILC Loophole Puts the System at Risk

ILCs are banks. They accept deposits, lend, process payments and enjoy the benefit of a federal safety net in the form of FDIC deposit insurance. However, unlike insured banks, they are not subject to Federal Reserve supervision. This regulatory loophole poses risks.

• Threats to the FDIC Insurance Fund. Many banks in America are owned and operated by regulated bank holding companies subject to strict regulatory scrutiny to ensure that poor financial management at the parent company does not jeopardize the bank subsidiary, thus exposing bank customers and the federal deposit insurance fund to risk. ILC parent companies face no comparable oversight.
• Threats to Competition and Consumer Privacy. The Bank Holding Company Act's requirements are intended to maintain the separation of banking and commerce and, thereby, help prevent concentration of economic power and conflicts of interest, including the potential for one company to misuse consumer financial data for competitive advantage. Allowing big technology or retail firms to own ILCs could let them offer preferential credit to affiliates, disadvantage rivals and exploit consumer information.

BPI Recommendations

• Close the ILC loophole. Banks should be regulated like banks, and that includes parent company oversight. The FDIC should work with Congress to close this loophole.
• Pause new FDIC insurance applications during the request for information review. The FDIC shouldn't take action on ILC applications until it has completed its review and considered all public input.
• Strengthen interim safeguards. Impose bank-like rules for ILC parent companies, including privacy and data requirements, limits on non-financial activities, annual reporting and consolidated capital and liquidity standards.

The Crypto Ledger

Here's the latest in crypto.

• Treasury Seeks Comment on Stablecoin Law Implementation: The U.S. Treasury Department this week issued a proposal seeking public comment on Treasury's implementation of the GENIUS Act, which tasks Treasury with issuing rules to encourage innovation in payment stablecoins while providing a framework to mitigate risks.
• CBDC Bill Folded In: House Republicans plan to combine a bill banning central bank digital currency with an already-passed House bill on crypto market structure, according to POLITICO this week. The procedural move comes after the CBDC bill was already included in a House-passed version of the National Defense Authorization Act, but that provision may be removed from the must-pass bill by the Senate, according to the article.
• NY Monitoring Crypto Risk: The New York Department of Financial Services issued guidance this week directing New York banks to consider using blockchain analytics tools to monitor risks of money laundering, terrorism financing, sanctions violations and other financial crimes. The analytics tools aim to mitigate risks presented by banks' digital asset activities, the state regulator said.

Traversing the Pond

Here's what's new in international banking policy.

• Campa Resigns: José Manuel Campa resigned his position as chair of the European Banking Authority this week, citing "personal, family-related issues." Campa will leave the EBA in January 2026.
• UK Proposes Crypto Rule Exemptions: The UK's Financial Conduct Authority proposed in a consultation this week how its regulatory framework will apply to crypto firms. Crypto companies will be exempted or given less stringent requirements on some rules, such as stipulations on firms' senior managers, systems and controls, on the grounds that they do not pose the same systemic risk as large financial institutions. But in other areas, such as operational risk, crypto firms will be subjected to more stringent regulations.
• Simplifying the Maze: Michael Theurer, an executive board member of the Deutsche Bundesbank, called in a Financial Times op-ed this week for simplifying the "maze" of regulations applied to European banks. He recommended three key reforms, which he said would "reduce complexity while preserving resilience": recognizing only common equity tier 1 requirements for meeting banks' going-concern capital requirements; separating capital and resolution requirements; and merging and simplifying capital buffers.

For better bank supervision, focus on material risks so banks can lend.

Clear rules make the banking system safer, and subjective supervision has costs. A 1-point downgrade in a bank's CAMELS rating due to examiner discretion - not necessarily an increase in risk - results in a 24% increase in bank capitalization, per a NBER study. These costs limit banks' ability to finance the economy.

Learn more at BetterBankSupervision.com.

BofA Raises U.S. Minimum Hourly Wage to $25

Bank of America has raised its U.S. hourly minimum wage to $25, the bank announced this week. The change brings the minimum annualized starting salary for U.S. employees to more than $50,000. Read more here.