On March 29, a Texas federal court granted a preliminary injunction enjoining the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (collectively, the agencies) from implementing their Final Rule modernizing how they assess lenders’ compliance under the Community Reinvestment Act (CRA). Notably, the court found the plaintiffs demonstrated a substantial likelihood of success on the claim that the Final Rule violates the CRA, indicating how the district court will likely find on the merits.

Yesterday, the Texas Bankers Association, the Amarillo Chamber of Commerce, the American Bankers Association, the Chamber of Commerce of the United States of America, the Longview Chamber of Commerce, the Independent Community Bankers of America, and the Independent Bankers Association of Texas Revenue Based Finance Coalition (collectively, the plaintiffs) filed a complaint in the U.S. District Court for the Northern District of Texas challenging the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency’s (collectively, the agencies) Final Rule modernizing how they assess lenders’ compliance under the Community Reinvestment Act (CRA). In their complaint, the plaintiffs asked the court to vacate the Final Rule and provide a preliminary injunction that would pause implementation of the Final Rule while the court decides the case.

We are pleased to share our annual review of regulatory and legal developments in the consumer financial services industry. With active federal and state legislatures, consumer financial services providers faced a challenging 2023. Courts across the country issued rulings that will have immediate and lasting impacts on the industry. Our team of more than 140 professionals has prepared this concise, yet thorough analysis of the most important issues and trends throughout our industry. We not only examined what happened in 2023, but also what to expect — and how to prepare — for the months ahead.

Troutman Pepper has been recognized for its exceptional work in the field of Banking & Finance and Financial Services Law in the 14th edition of Best Law Firms®. Our firm’s National Tier 1 rankings include Banking and Finance Law, Financial Services Regulation Law and Banking & Finance Litigation.

On October 19, the Securities and Exchange Commission (SEC) dismissed its claims against Ripple Labs, Inc. (Ripple) executives Bradley Garlinghouse and Christian Larsen for allegedly aiding and abetting Ripple’s violations of the Securities Act with respect to its “institutional sales” of XRP. The Southern District of New York had deemed “institutional sales” to be unregistered securities in its July summary judgment decision, however, at that time the court reserved judgment as to the aiding and abetting claims against the executives. The matter was set for trial in 2024.

In its highly anticipated decision, the Second Circuit has answered the question of whether a syndicated term loan qualifies as a “security” with a definitive “no”. On August 24, the Court of Appeals for the Second Circuit issued its ruling, affirming the lower court’s holding in Kirschner[1] that leveraged loans are not securities. After the Securities and Exchange Commission (SEC) declined to submit a brief, the court determined, in its application of the Reves test, that three of the four Reves factors weighed against concluding that the complaint plausibly alleged that the loans in question are securities.

On August 9, the Securities and Exchange Commission (SEC) sent a letter to U.S. District Judge Analisa Torres requesting leave to file an interlocutory appeal in SEC v. Ripple Labs, Inc. as to the two adverse liability determinations in her July 13, 2023 order. That order granted partial summary judgment in Ripple Labs’ favor regarding the sale of its XRP token. As we previously discussed here, the court held in deciding cross motions for summary judgment that defendants’ “programmatic” offers and sales to XRP buyers over crypto asset trading platforms and Ripple’s “other distributions” in exchange for labor and services did not involve the offer or sale of securities under the U.S. Supreme Court’s decision in SEC v. W.J. Howey Co.

Taxpayers have long attempted to limit the application of the Self-Employment Contributions Act (SECA ) taxes to income that is akin to employment income and not investment, or passive income, by relying on Code §1402(a)(13).[1] That section provides that the SECA base excludes the distributive share of income or loss of a limited partner other than guaranteed payments to that partner for services actually rendered to or on behalf of the partnership.

In a long-awaited decision in SEC v. Ripple Labs, Inc., U.S. District Judge Analisa Torres of the Southern District of New York held that Ripple Labs, Inc.’s (Ripple) XRP token is not, in and of itself, a security requiring registration. Although the decision is being regarded by many as a victory for both Ripple and the crypto industry, the nuances in the decision may result in an appeal from both sides.