The Roundup: Another Fed Rate Cut, Closing an Overdraft Loophole, and AI Risks to Financial Firms
Welcome to the PerformLine Regulatory Compliance Roundup, home of the latest news, articles, and reports from our industry, curated for you. Let’s get into it.
In this edition: The Fed cuts key interest rate but signals elevated inflation is likely to persist, the CFPB takes action on bait-and-switch credit card rewards tactics, banking agencies are warned to pause rulemakings, the CFPB closes an overdraft loophole to save Americans billions in fees, FINRA reminds financial firms how AI use poses significant risks, FDIC-insured institutions reported a net income of $65.4 billion in Q3, and the 2025 state of marketing compliance survey.
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Fed Cuts Key Interest Rate But Signals Elevated Inflation Is Likely to Persist
The Federal Reserve has reduced its key interest rate by 0.25 percentage points, marking the third cut this year and setting the federal funds rate between 4.25% and 4.5%. This decision reflects ongoing concerns about persistent inflation and a cooling labor market. Fed Chair Jerome Powell indicated a cautious approach to future rate cuts, suggesting a slower pace in 2025, with projections now pointing to two additional cuts next year instead of the previously anticipated four. The central bank aims to balance controlling inflation with sustaining economic growth amid uncertainties, including potential policy shifts under President-elect Donald Trump.
CFPB Takes Action on Bait-and-Switch Credit Card Rewards Tactics
The CFPB has issued a warning to credit card companies against the illegal devaluation of rewards points and airline miles, a practice that may violate consumer protection laws. The CFPB’s recent circular emphasizes that such “bait-and-switch” tactics, where consumers are enticed with attractive rewards only to find them devalued later, are unlawful. Additionally, the CFPB’s research indicates that retail credit cards often carry higher interest rates compared to traditional cards.
Banking Agencies Warned to Pause Rulemakings
House Republicans are urging federal banking agencies to halt new rulemaking during the Biden administration’s lame-duck period, warning against finalizing partisan or controversial regulations before the transition of legislative priorities. They highlighted the Congressional Review Act, which allows Congress to overturn recently enacted rules, as a check on rushed policymaking. The request also includes a directive for agencies to preserve all documents and records, signaling potential future oversight and investigations. The targeted agencies include key financial regulators, with lawmakers emphasizing the importance of transparency and caution during this transitional phase to maintain accountability.
Significant Stat: 2.5+ million: The number of consumer complaints submitted to the CFPB in 2024. Read more
CFPB Closes Overdraft Loophole to Save Americans Billions in Fees
The CFPB has finalized a rule to cap bank overdraft fees at $5, aiming to save Americans up to $5 billion annually. This rule, effective October 2025, targets banks and credit unions with over $10 billion in assets, offering them three options: charge a flat $5 fee, limit fees to actual costs incurred, or treat overdrafts as short-term loans with full disclosure of terms. The initiative seeks to eliminate excessive “junk fees” and enhance transparency in banking practices
FINRA Reminds Financial Firms How AI Use Poses Significant Risks
FINRA has issued a regulatory notice reminding financial firms of their obligations when using artificial intelligence (AI) technologies, including generative AI and large language models. FINRA emphasizes that its rules are technology-neutral and apply to AI-generated communications just as they do to traditional methods. Firms must ensure that AI-driven interactions with clients comply with existing regulations, particularly concerning communications with the public and supervision requirements. FINRA advises firms to develop policies addressing technology governance, data privacy, and the accuracy of AI models to maintain compliance and protect investor interests.
FDIC-Insured Institutions Reported Net Income of $65.4 Billion in Q3
FDIC-insured institutions reported $65.4 billion in net income for Q3 2024, an 8.6% decline from the previous quarter due to the absence of $10 billion in one-time gains. Net interest income rose by $4.5 billion, with the net interest margin increasing to 3.23%. Loan balances grew by 0.6%, and domestic deposits increased by 1.1%, driven by uninsured deposits, while asset quality remained stable with a slight rise in past-due loans.
2025 State of Marketing Compliance Survey
We’re conducting our annual State of Marketing Compliance survey, and we’re interested in hearing what’s on your radar for 2025. Share your expertise and insights on marketing compliance trends and expectations. In return, you’ll be the first to receive a copy of our State of Marketing Compliance Report early next year. Take the survey.
