Compliance Solutions quarterly newsletter — March 2025

General

The Beneficial Ownership Information reporting rule rollercoaster

It has been quite a rollercoaster of events lately for the enforcement of the Corporate Transparency Act and its Beneficial Ownership Information (BOI) reporting rule.

History

On January 1, 2021, the Corporate Transparency Act (CTA) was enacted as part of the National Defense Authorization Act of 2021. The CTA requires that the Financial Crimes Enforcement Network (“FinCEN”) creates and maintains a national registry of BOI from reporting companies. Their goal is to crack down on illicit finance and enhance the transparency of the U.S. financial system by preventing criminal actors from using anonymous shell companies to hide their illicit proceeds.

On September 29, 2022, FinCEN issued its final rule establishing beneficial ownership information reporting requirements which became effective January 1, 2024. Reporting companies created or registered before January 1, 2024, would have until January 1, 2025, to file their initial BOI report.

In March 2024, the Northern District of Alabama’s decision in National Small Business United v. Yellen ruled the Corporate Transparency Act is unconstitutional. The court ruling stated the CTA is not a justifiable exercise of Congress’s enumerated powers. The opinion further concludes that the CTA “exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’s policy goals…”

The U.S. District Court for the Eastern District of Texas was busy in December 2024 with Tex. Top Cop Shop v. Garland. The District Court initially issued a nationwide injunction halting the enforcement of the CTA. The same District Court denied a motion by the government to pause the injunction. However, on December 23, 2024, the Fifth Circuit Court of Appeals granted the emergency motion by the government to stay the injunction pending appeal. Three days later, on December 26, 2024, the Fifth Circuit vacated the motion in part effectively blocking the enforcement of the CTA once again. In the new year, the United States Supreme Court issued an emergency stay to reverse the injunction that had been granted. This would normally indicate to all that the CTA can be enforced while the appeal is pending, however, there was another case in Texas still blocking any enforcement.

The second case, Smith v. U.S. Dep’t of the Treasury, with the Eastern District of Texas, had their nationwide injunction halted on February 17, 2025, while the appeal is being considered, taking into account the Supreme Court’s decision in Tex. Top Cop Shop.

On February 18, 2025, FinCEN extended the BOI filing deadline for initial, updated, and/or corrected reports to March 21, 2025, for all reporting companies, unless exempt or a later deadline applies. Reporting companies that were previously given a reporting deadline later than March 21, 2025, must file their initial BOI report by that designated later deadline. Plaintiffs in the Yellen case are not currently obligated to report their BOI at this time. Additionally, FinCEN announced their intention to revise the reporting rule to reduce the burden for lower-risk entities, which may include many U.S. small businesses.

The United States House of Representatives unanimously passed House Bill 736, “Protect Small Businesses from Excessive Paperwork Act of 2025”. The bill would extend the BOI reporting deadline to January 1, 2026, for reporting companies formed or registered before January 1, 2024.

Recent Outcomes

FinCEN announced on February 27, 2025, it will not issue any fines or penalties or take enforcement actions against companies for their failure to file or update BOI reports pursuant to the CTA. FinCEN intends to issue an interim final rule no later than March 21, 2025, extending the current BOI reporting deadlines. Public comments will be sought on potential revisions to the existing BOI reporting requirements.

On March 2, 2025, the U.S. Department of the Treasury announced it will not enforce the BOI reporting rule under its existing deadlines, nor will it enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the interim final rule takes effect. The Treasury Department plans to issue proposed rulemaking that will limit the scope of the BOI reporting rule to foreign reporting companies only.

This information is current as of March 3, 2025. For more information and recent news releases, visit fincen.gov/boi.

Consumer Financial Protection Bureau: To be, or not to be, that is the question

The Consumer Financial Protection Bureau (CFPB) has served as a key resource for financial industry professionals providing guidance on rule interpretations, industry trends, consumer protection accountability, and fair practices for thirteen years. Since its inception, the agency has faced scrutiny over its rulemaking, enforcement actions, funding, and even its legality. While opinions vary on its authority and effectiveness, most industry professionals acknowledge the critical role the CFPB has played as an independent federal agency. As the regulatory landscape shifts under the current administration, the future of the CFPB — and its role in ensuring fairness, ethical practices, and public guidance — remains uncertain.

Industry experts worry that without CFPB oversight, traditional financial institutions will face new competition from unsupervised non-depository institutions. They also fear that losing 13 years of consumer protections against predatory practices could have negative consequences.

On February 8, 2025, CFPB Acting Director Russell Vought issued a stop work order via email directing staff to halt any supervision the agency does, cease pending investigations, not to perform any work tasks and not to report. On Monday, February 10, 2025, the agency doors were closed and locked, and the website became inaccessible, however the website has since been restored and the doors reopened. Shortly thereafter the CFPB union sued the federal government over the stop work order which forced a government response motion to be filed where Vought stated, “The predicate to running a ‘more streamlined and efficient bureau’ is that there will continue to be a CFPB.” Court rulings have paused certain actions, allowing for re-evaluation and further consideration of the agency's role and functions.

In response to uncertainty, some state lawmakers are acting by following Rohit Chopra’s state-level enforcement blueprint. They are working to incorporate terms like “abusive” into consumer protection laws, strengthen or create enforceable consumer data and privacy rights, and establish prohibitions on junk fees. As of March 2025, the future of the CFPB remains uncertain pending court rulings. However, despite differing perspectives, industry professionals and leaders agree on the need for accountability, consistency, consumer protection laws, and the enforcement of fair practices. Ultimately, time will determine which entities will oversee the complex landscape of financial industry regulation.

A brief timeline of relevant events:

• February 3, 2025: Scott Bessent appointed acting director of the US Department of Treasury. Rohit Chopra is terminated and Bessent subsequently orders the agency to stop working same day.
• February 4, 2025: A blueprint for state-level enforcement is found, left by Chopra.
• February 7-8, 2025: 1.) Newly created Department of Government Efficiency (DOGE) team gains access to CFPB and its systems. 2.) Russel Vought takes over the CFPB as acting director and subsequently shuts down operational functions, closes headquarters and eliminates funding. 3.) The CFPB home page now displays “404 Error Not Found” message on its home page and official account deleted from the X (formerly twitter) platform.
• February 10, 2025: 1.) Vought emails all CFPB employees and instructs them not to perform work tasks and stand down which includes orders to; stop all supervision activities that has not been approved by acting director, stop issuing or approving final rules as well as formal or informal guidance, suspend all effective dates of final rules yet to be issued, stop investigative activities, cease opening new investigation, stop issuing public communications of any type to name a few. 2.) In response, many regulatory and legal experts begin weighing in on important regulatory rules, RESPA, UDAAP, Reg B and the future of regulation. 3.) Protests outside of the CFPB headquarters.
• February 11, 2025: Jonathan McKernan is named the new director of CFPB, however as of March 11, 2025 has not yet been confirmed by the Senate.
• February 14, 2025: Lawsuit filed which effectively pauses the efforts to shutter the CFPB, and in another court action the same day a different federal judge blocks the CFPB firings that took place the week before.
• February 24, 2025: In a court filing; an oppositional response to the CFPB union stop-work order and firings, Russel Vought is quoted as saying in part… “The predicate to running a more streamlined and efficient bureau is that there will continue to be a CFPB.” Federal Judge blocks the request to continue any additional shuttering of the agency until a March 3, 2025 hearing.
• March 2, 2025: Vought’s office rescinds prior statements and directs CFPB employees to perform statutorily required duties ahead of court hearing on March 3, 2025.
• March 3, 2025: Some employees return to work to carry out the March 2, 2025 order, however many find they have no workspace to return to and/or have lost critical access to government systems.
• March 10, 2025: CFPB Chief Operating Officer gives a six hour sworn testimony of chaos and confusion surrounding the previous events named above.

Considering a new core/data processor, deposit or loan origination system platform?

If you are a credit union currently using TruStage™ documents and are considering switching or adding a new deposit or lending platform, please reach out to us through the Compliance Solutions document support request form. Our team is ready to discuss how our documents integrate with different platforms, and we can help determine the best approach for your needs. Depending on the platform you choose, your existing documents (including any custom versions) may not be fully compatible or set up for optimal use. Engaging with our team early in the discovery process ensures we can find the most effective document solution tailored to your specific requirements.

Lending

New state notices

TruStage Compliance Solutions actively tracks state legislature that may lead to new compliance requirements and notices. Most recently, California and New York added statute sections that will require new notices.

California added new section § 2932.2 to the CA Civil Code. This new section requires a mortgagee, beneficiary, or authorized agent to provide to the mortgagor or trustor, before the mortgagor or trustor signs the mortgage or deed of trust, a written disclosure that a third party, such as a family member, HUD-certified housing counselor, or attorney, may record a request to receive copies of any notice of default and notice of sale.

New York amended its Real Property Code adding §283 that, among other things, requires mortgagees to provide mortgagors notice related to flood insurance in certain real estate-secured transactions in which the mortgagor is required to purchase or pay for flood insurance.

Both new notices only apply to transactions secured by residential real property containing no more than four dwelling units. TruStage Compliance Solutions has developed both documents and they are active in your document library or available to order.

Deposit

International Organization for Standardization® 20022 implementation for Fedwire® Funds Service slated for July 14, 2025

International Organization for Standardization (ISO) 20022 is a standards framework that enables a common global language across business areas including (but not limited to) payments. The Federal Reserve (“Fed”) has advised users of its Fedwire Funds Service that all transfers through the service will be required to comply with ISO 20022 data transmission standards for both domestic and cross-border transactions. Some benefits of adopting these global messaging standards include a more efficient and secure payments process and stronger fraud protection. You may visit the Federal Reserve's implementation webpage for more information.

In early February, the Fed announced its decision to “reschedule the Fedwire Funds Service ISO 20022 implementation from March 10 to July 14, 2025. This will provide customers and vendors who are not ready additional time to better prepare for the transition to the new ISO 20022 format.” Additional details regarding the implementation delay are available here.

We have made modifications to TruStage Compliance Solutions documents to align with ISO 20022 requirements for the type and format of data that is transmitted through services such as the Fedwire Funds Service. Financial institutions that do not presently use this service will find the updated documents still support documentation of transfers sent through other service providers, including those not requiring adoption of the ISO 20022 data transmission standards. The updates we have made serve to expand the functionality of the documents, and no content has been removed.

Question of the quarter

Question: We allow new accounts to be funded with deposits via ACH debit transfers from other financial institutions. Are these deposits subject to Regulation CC’s funds availability requirements?

Answer: No. ACH debit transfers are NOT governed by Regulation CC (“Reg CC”) or a financial institution’s funds availability disclosure. Why? ACH debit transfers are specifically excluded from Reg CC’s definition of “electronic payment.” While an ACH credit transfer (e.g., direct deposit) is considered an “electronic payment,” an ACH debit transfer is not. The Commentary to Reg CC § 229.2(p) explains that “ACH debit transfers, even though they may be transmitted electronically, are not defined as electronic payments because the receiver of an ACH debit transfer has the right to return the transfer, which would reverse the credit given to the originator.”