Banking and Finance Law Daily Wrap Up, WORTH NOTING—Other regulatory, legislative, litigation, and industry developments, (Mar 28, 2025)

By WK Editorial Staff

A weekly roundup of other items of interest to the banking and finance law community.

BANKING OPERATIONS—The Federal Deposit Insurance Corporation has published its Annual Report for 2024 on March 20. In an opening message, acting FDIC Chair Travis Hill highlighted the banking industry’s “strong earnings and generally favorable asset quality metrics” to end 2024, as well as overall strong capital and liquidity levels. Hill further noted the positive situation comes despite “weaknesses in certain portfolios.” The latest report saw the deposit insurance fund grow $4 billion, putting the reserve ratio at 1.28 percent to end the year.

BANKING OPERATIONS—U.S. commercial banks and savings associations reported $14.8 billion in trading revenue for the fourth quarter of 2024, a 10.6 percent decline from the previous quarter but a 26.7 percent increase year over year, according to the Office of the Comptroller of the Currency’s latest Bank Trading and Derivatives Activities report. The report noted the four largest banks held 86.5 percent of total derivative notional amounts, the values of which fell by over $32 trillion, to $186.5 trillion, in the fourth quarter. Net current credit exposures rose 14.1 percent to $270 billion during the same period, according to report highlights.

CHECKS AND ELECTRONIC TRANSFERS—4th Cir.: To help resolve a legal dispute that arose between Studco Building Systems US, LLC, and 1st Advantage Federal Credit Union, stemming from scammers who had hacked into Studco’s email system, the U.S. Court of Appeals for the Fourth Circuit examined funds transfers to a “misdescribed account” and analyzed and applied provisions of Article 4A of the Virginia Uniform Commercial Code (UCC) governing such funds transfers. Under the facts of the case, Studco typically received invoices from Olympic Steel, Inc. and paid them “using ACH payments, which were made by electronic transfers of money from Studco’s account with JPMorgan Chase to Olympic’s account with its own bank.” However, given the hackers’ underlying scheme, Studco received an email purportedly from Olympic, advising Studco that Olympic was changing banks and that Studco should thereafter make its ACH payments to Olympic’s new account at 1st Advantage Federal Credit Union—“even though that account was not in fact held by Olympic.” Studco then “redirected its next four ACH payments, totaling over $550,000, to what it believed was Olympic’s new account at 1st Advantage,” and the scammers “made off with the money and were never identified.” Studco, which bore the loss, filed a lawsuit against 1st Advantage, seeking reimbursement from 1st Advantage “based on its allegedly negligent failure to discover that the scammers had misdescribed the account into which the ACH funds were to be deposited.” Studco claimed that “if 1st Advantage had handled the transfers in a commercially reasonable manner, the loss would have been avoided.” Against this backdrop, the Fourth Circuit determined that “1st Advantage deposited the ACH payments into the account with the number specified in Studco’s ACH payment order, even though that account was not in fact held by Olympic.” Under those circumstances, “a bank such as 1st Advantage has no liability under § 8.4A-207 [of the Virginia UCC] unless it had actual knowledge of the misdescription.” The Fourth Circuit emphasized that because “there was no evidence of actual knowledge presented in this case,” the lower court erred “to have held 1st Advantage liable on a finding of negligence or commercial unreasonableness.” Moreover, it was error for the lower court “to have concluded that Studco’s ACH deposit of funds into the 1st Advantage account was a bailment, subjecting 1st Advantage to bailment liability” (Studco Building Systems US, LLC v. 1st Advantage Federal Credit Union, Nos. 23-1148 and 23-1766 (4th Cir. March 26, 2025)).

CONSUMER FINANCIAL PROTECTION BUREAU—The Consumer Financial Protection Bureau has released its current list of CFPB-supervised depository institutions and depository affiliates. The list is based on Dec. 31, 2024, Call Report data.

CRIMES AND OFFENSES—The Treasury Department’s Office of Foreign Assets Control has removed digital currency “mixer” Tornado Cash from the sanctions list. Tornado Cash was placed on the list in August 2022 (see Banking and Finance Law Daily, Aug. 24, 2022). In a statement, the Treasury department referenced its filings before the Fifth Circuit Court in Van Loon v. Department of the Treasury in choosing to de-list Tornado Cash. “We remain deeply concerned about the significant state-sponsored hacking and money laundering campaign aimed at stealing, acquiring, and deploying digital assets for the Democratic People’s Republic of Korea (DPRK) and the Kim regime,” the Treasury said in its announcement.

DEBT COLLECTION—8th Cir.: In connection with a lawsuit brought by two individuals, “the Woodwards,” against Credit Service International Corp. (CSIC) and CSIC’s attorney for alleged violations of the Fair Debt Collection Practices Act (FDCPA) and Minnesota garnishment law, the U.S. Court of Appeals for the Eighth Circuit upheld the Minnesota federal district court’s awarding of attorney fees and costs for an amount less than they sought. As observed by the court, after CSIC obtained a default judgment against the Woodwards, CSIC’s attorney sent a letter to the Woodwards informing them that CSIC intended to garnish their wages to collect approximately $2,900 on the applicable default judgment. Although the Woodwards did not respond to the letter, and a garnishment summons was sent to their employer, the Woodwards hired an attorney who alleged that CSIC and its attorney “violated Minnesota garnishment laws and the Fair Debt Collection Practices Act.” Ultimately, the Woodwards accepted an offer of judgment for “$2,002 plus reasonable attorney’s fees and costs” to resolve their FDCPA and Minnesota garnishment lawsuit. The Woodwards’ attorney then sought attorney fees and costs for approximately $29,000. After CSIC and its attorney opposed that requested amount and sought a lesser amount, the federal district court ultimately granted the Woodwards $12,075 for attorney fees and costs. The Eighth Circuit affirmed the lower court’s ruling (Woodward v. Credit Service Intl. Corp., No. 24-1373 (8th Cir. Mar. 24, 2025)).

FEDERAL RESERVE SYSTEM—An audit report released by the Federal Housing Finance Agency’s Office of Inspector General (OIG) found that the FHFA’s Division of Federal Home Loan Bank Regulation (DBR) provided adequate oversight of the Federal Home Loan Banks’ (FHLBanks) market risk modeling. The audit determined that DBR’s supervisory guidance outlined necessary processes and controls, ensuring risk-based oversight of FHLBanks’ market risk exposure. Examiners followed established guidelines, and supervisory conclusions were well-documented. The review also confirmed that DBR effectively assessed the remediation of Matters Requiring Attention and found no supervisory concerns. The OIG made no recommendations from the audit.

FINANCIAL STABILITY—A bill introduced in the House of Representatives on March 24 seeks insight into the direct impact tariffs have had on costs for consumers and small businesses. The Protecting Families from Inflation Act—co-sponsored by reps. Janelle Bynum (D-Ore.), Cleo Fields (D-La.) and Sam Liccardo (D-Calif.)—would require the Federal Reserve to conduct a study of the impact of tariffs implemented since 2017. Bill authors said in their announcement that the legislation seeks to highlight the impact such “reckless taxes” implemented by the Trump administration have had on costs. The bill would require a report from the Fed within 9 months of its enactment.

FINANCIAL STABILITY—The Federal Reserve Board has released its latest periodic report regarding the Bank Term Funding Program (BTFP). The BTFP was established by the Fed in response to the failure of Silicon Valley Bank and Signature Bank to help assure banks have the ability to meet the needs of all their depositors. As of Feb. 28, 2025, the total outstanding amount of all advances under the BTFP was $100,335,000; the total value of the collateral pledged to secure outstanding advances was $151,779,000; and the amount of interest, fees, and other revenue or items of value received under the facility, reported on an accrual basis, was $9,043,320,000. On Jan. 24, 2024, the Fed announced that the BTFP would cease making new loans as scheduled on March 11.

FINANCIAL TECHNOLOGY—Custodia Bank announced that it—working with Vantage Bank—has completed America’s first-ever tokenization of a bank’s U.S. dollar demand deposits on a permissionless blockchain by issuing, transferring and redeeming Avit™ stablecoins for a bank customer. The banks collaborated on the mint, transfer and redemption of Avit tokens for a bank customer on the Ethereum mainnet using the ERC-20 standard, according to Custodia’s announcement. Custodia Bank managed blockchain issuance/redemption services, custody services, blockchain transaction monitoring and reconciliation using its Avit Management System. Custodia’s release stated that the banks “complied with all applicable U.S. bank regulatory requirements, including BSA/AML/OFAC, which necessitated designing documentation, policies and procedures that differ from those of current stablecoin issuers.” Caitlin Long, CEO of Custodia Bank said “Custodia looks forward to the reversal of U.S. regulatory obstacles that have stymied stablecoin innovation in recent years, so that American consumers can benefit from the substantial network effects and global reach of permissionless blockchain technologies.”

GOVERNMENT SPONSORED ENTERPRISES—The Federal Housing Finance Agency’s Office of Inspector General (OIG) recently issued a partially redacted report, titled “Inspection: FHFA Oversight of Freddie Mac’s Issuance of Suspicious Activity Reports.” In its March 2025 report (COM-2025-005), the OIG recommended that the FHFA’s Division of Enterprise Regulation: (i) “create examination procedures to assess the effectiveness of the Enterprises’ internal controls and processes in ensuring compliance with FinCEN requirements for SAR filings, to include SAR narratives, and communicate the new procedures to the examiners responsible for this work;” and (ii) “consider whether to direct Freddie Mac to file an amended SAR containing a complete narrative for the case identified above, and whether to amend FHFA’s examination procedures to require this step if future examinations uncover a similar issue.” According to the OIG, the FHFA has agreed with both recommendations and will undertake “specific corrective actions.” The OIG communicated that it will independently determine whether the FHFA has implemented the corrective actions before closing its recommendations.

LOANS—The Federal Reserve Board has filed its periodic report providing updates pursuant to Section 13(3) of the Federal Reserve Act concerning a lending facility established by the Fed in response to economic effects of the COVID-19 pandemic. The Fed is required to submit an initial report regarding each facility established under Section 13(3) and periodic updates at least every 30 days thereafter. This report provides the next periodic update on the Paycheck Protection Program Liquidity Facility (PPPLF), Main Street New Loan Facility (MSNLF), Main Street Expanded Loan Facility (MSELF), the Main Street Priority Loan Facility (MSPLF), Nonprofit Organization New Loan Facility (NONLF), and Nonprofit Organization Expanded Loan Facility (NOELF). In addition, the Fed has released transaction-specific disclosures for the PPPLF.

MORTGAGES—Performance among first-lien, residential mortgages improved year-over-year in the last quarter of 2024, according to the Office of the Comptroller of the Currency’s latest Mortgage Metrics Report for the fourth quarter of 2024. Findings from the reports noted a.1 percentage point increase in current and performing mortgages at the end of the latest quarter, to 97.3 percent, compared to the fourth quarter of 2023. Year-over-year comparisons similarly saw fewer new foreclosure initiations and a decrease in mortgage payments 60 or more days overdue. The latest quarterly report from the OCC included data from $2.7 trillion worth of outstanding mortgage debt among seven national banks comprising 20.2 percent of all outstanding residential mortgage debt.

Attorneys: Kevin Edward Giebel (Giebel & Associates) for Lisa Woodward. Patrick Daniel Newman (Bassford & Remele) for Credit Service International Corp. Myriah V. Jaworski (Clark Hill PLC) for Studco Building Systems US, LLC. John Michael Bredehoft (Kaufman & Canoles, P.C.) for 1st Advantage Federal Credit Union.

Companies: Credit Service International Corp.; Custodia Bank; 1st Advantage Federal Credit Union; Freddie Mac; JPMorgan Chase; Olympic Steel, Inc.; Studco Building Systems US, LLC; Vantage Bank

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