Last Week, This Morning

January 20, 2026

Below you will find several key developments in the financial services industry, including related developments in information privacy and data security, from the past week. We add an "Amicus Brief(ly)¹" comment to each item, where we briefly (see what we did there?) note for friends (and again?) of CounselorLibrary the important takeaways from the developments outlined in the email. Our legal reporters - CARLAW, HouseLaw, InstallmentLaw, PrivacyLaw, and BizFinLaw - provide more comprehensive, real-time updates of federal and state laws, regulations, litigation, and other industry items of interest. For a personal guided tour and free trial of any of these legal reporters, please contact Michael Willer at 614-855-0505 or mwiller@counselorlibrary.com.

On January 12, the Consumer Financial Protection Bureau and the Department of Justice withdrew their joint statement issued on October 12, 2023, regarding the implications of a creditor's consideration of an individual's immigration status under the Equal Credit Opportunity Act. The 2023 joint statement advised creditors that "unnecessary or overbroad reliance on immigration status in the credit decisioning process, including when that reliance is based on bias, may run afoul of ECOA's antidiscrimination provisions and could also violate other laws."

The agencies withdrew the 2023 joint statement primarily to avoid any conflict with the express language of the ECOA and its implementing regulation, Regulation B. The ECOA and Reg. B generally permit creditors to consider an applicant's immigration or citizenship status where "necessary to ascertain the creditor's rights and remedies regarding repayment." The agencies' notice of withdrawal states that "[t]he joint statement's exclusive emphasis on the risks of [considering an applicant's immigration or citizenship status], however, may have created the misimpression that ECOA or Regulation B prohibit or otherwise limit the consideration of immigration or citizenship status by a creditor evaluating an application for credit. Not only would such a limitation be inconsistent with Regulation B, but the illustrative scenarios described in the joint statement may also create confusion as to how creditors may consider immigration status while managing credit and compliance risks." For example, one of those illustrative scenarios described in the joint statement "suggests that applying a blanket underwriting policy for certain groups of non-citizens may constitute discrimination in violation of ECOA if not strictly necessary for assessing the creditor's ability to obtain repayment or meet legal obligations." According to the agencies, "[t]his example could be read as positing a bright-line, one-size-fits-all approach to underwriting noncitizens as necessary for ECOA compliance. There is no such requirement in ECOA or Regulation B, and focusing exclusively on compliance risks ignores that creditors may legitimately use additional information in particular circumstances to fully assess underwriting risks related to providing credit to those without lawful status or who are otherwise unauthorized to work in the United States. A credit applicant's immigration or citizenship status may present underwriting risks that typical assessments of financial capacity alone will not fully resolve. As Regulation B acknowledges, this is something creditors may legitimately consider. To the extent the joint statement suggested, or could be read to suggest, that the practices it describes are presumptively discriminatory in violation of ECOA, such a presumption would not be supported by ECOA or Regulation B."

Amicus Brief(ly): The interpretations of the prior administration remain squarely in the crosshairs of the current administration, and the withdrawal of this joint statement is just the next apparent step. Back in 2023 when the CFPB and the DOJ issued the joint statement, creditors were not sure whether the statement was an unnecessary restatement of existing law or long-standing interpretation or if it was a more meaningful development for creditors because it cast doubt on whether a creditor could permissibly treat immigrant applicants differently based solely on whether they had permanent-residency status. In the latter case, the joint statement was likely signaling to creditors that they should be looking at individual creditworthiness factors that could mitigate the risk of extending credit to immigrants who were not permanent residents (as opposed to just denying them credit), as a means of ensuring fair access to credit. With the statement withdrawn, creditors are at least not compelled to engage in a complex creditworthiness analysis without the tools - like credit scores or credit history showing good payment performance on similar credit - they often use for citizen applicants.

Public Law No. 119-21, otherwise known as the "One Big Beautiful Bill Act," became effective July 4, 2025. The law includes a new income tax interest deduction for tax years 2025 through 2028 that permits taxpayers to deduct up to $10,000 of "qualified passenger vehicle loan interest" from taxable income. The allowable interest deduction is reduced by $200 for each $1,000 by which the taxpayer's adjusted gross income exceeds $100,000 ($200,000 if filing jointly).

"Qualified passenger vehicle loan interest" is interest that is paid or accrued during the taxable year on indebtedness incurred by the taxpayer after December 31, 2024 (the exemption does not apply to transactions consummated prior to 2025) for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use. The deduction also applies to interest from refinancing any transaction that qualifies for the deduction that is secured by a first lien on the vehicle, but only to the extent that the refinancing does not exceed the amount of the refinanced indebtedness. (It would not apply to interest attributable to financed ancillary products purchased in connection with the refinance transaction or to any cash paid to the consumer in excess of the amount owed on the refinanced obligation.)

The law excludes interest paid on loans to finance fleet sales, loans for commercial purchases, lease financing, or loans to purchase salvage vehicles. The law also excludes any vehicle for which the final assembly did not occur within the United States.

Any person that receives individual interest aggregating $600 or more during a calendar year must file a return with respect to each individual from whom such interest was received. These recipients must also give each individual from whom reportable qualified passenger vehicle loan interest is received a statement showing:

• the amount of such interest received for the calendar year;
• the amount of outstanding principal on the specified passenger vehicle loan as of the beginning of such calendar year;
• the date of the origination of such loan;
• the year, make, model, and vehicle identification number of the applicable passenger vehicle that secures such loan; and
• other information as the Secretary of the Treasury may prescribe.

The interest statement must be provided before January 31 of the year following the calendar year for which the return is made (i.e., the year after the calendar year in which the interest was paid).

The Internal Revenue Service recently published transitional guidance aimed to accommodate the time interest recipients need to make necessary changes to their systems to comply with their new reporting requirements. The guidance also notes that the IRS needs additional time to make necessary programming and form updates to implement the new law.

The guidance provides that "the recipient may satisfy the reporting obligations ... for interest received in calendar year 2025 on a specified passenger vehicle loan by making a statement available to the individual on or before January 31, 2026, indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan. The interest recipient can make this statement available to the individual via, for example, an online account portal that the individual can easily access, a regular monthly statement, an annual statement that is provided to the individual, or by other means designed to provide accurate information to the individual regarding the total amount of interest received in calendar year 2025."

The IRS will not impose penalties on recipients of qualified passenger vehicle loan interest that satisfy the reporting obligations in accordance with the transitional guidance.

Amicus Brief(ly): Question one for any finance company not making or buying direct loans is whether the IRS really meant to limit this guidance to "interest" on "loans." We can give the IRS a pass for not using language specific to retail installment sale contracts, but it is safe to read the statement requirement (and, of course, the income tax deduction rule) expansively to include all vehicle finance credit. But that means that vehicle finance creditors and servicers have a reporting requirement this month for last year's accounts. The reporting deadline came up fast and even caught the IRS unprepared for the change, but the transitional guidance is there to ease the new reporting burden by making clear that a year-end statement (that many vehicle finance servicers provide) that breaks down the amount received last year in interest or finance charges, principal, and fees will suffice to notify consumers about how much in interest or finance charges they paid last year.

On January 14, the Department of Housing and Urban Development published a proposed rule concerning the agency's implementation of the Fair Housing Act's disparate impact standard. Since 2013, HUD has issued three final rules for determining whether a given practice has an unjustified discriminatory effect under the FHA, even where such practice is not motivated by discriminatory intent. Based on several factors, including President Trump's Executive Order titled "Restoring Equality of Opportunity and Meritocracy" that established that it is U.S. policy to eliminate the use of disparate impact liability, HUD is proposing to remove its discriminatory effects regulations. HUD states that it "is appropriate for courts, not a Federal agency, to make determinations related to the interpretation of disparate impact liability under the [FHA]." Comments on the proposed rule are due by February 13, 2026.

The FHA prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities. In 2013, HUD issued a final rule to, among other things, establish that discriminatory effects liability is cognizable under the FHA, meaning that a policy that has a discriminatory effect on a protected class is unlawful if it does not serve a substantial, legitimate, nondiscriminatory interest or if a less discriminatory alternative could also serve that interest.

In 2020, HUD issued a final rule on the disparate impact standard under the FHA. The final rule amended HUD's 2013 rule to better reflect the U.S. Supreme Court's 2015 ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., which held that disparate impact claims are cognizable under the FHA. The final rule revised the burden-shifting test for determining whether a given housing policy or practice has an unjustified discriminatory effect and added to illustrations of discriminatory housing practices found in HUD's FHA regulations. The final rule also established a uniform standard for determining when a housing policy or practice with a discriminatory effect violates the FHA. Prior to the effective date of the 2020 rule, a federal district court issued a preliminary injunction staying HUD's implementation and enforcement of the rule, and, therefore, the 2020 rule never took effect.

In 2023, HUD issued a final rule rescinding its 2020 rule and reinstated its 2013 discriminatory effects rule, finding that the 2013 rule was more consistent with how the FHA has been applied in the courts and by the agency with respect to discriminatory practices.

Amicus Brief(ly): The federal agencies under the current administration's leadership have been intently focused on eliminating references to the "disparate impact" theory of fair lending from exam guidelines, guidance, and rules. Under the Equal Credit Opportunity Act, the position had a basis because the ECOA's language does not specifically recognize an "effects test" for discrimination. But HUD may be going a little far with this proposed rule because the FHA uses broader anti-discrimination language than the ECOA. In fact, the Supreme Court's Inclusive Communities case recognized that allowing rebuttable claims of disparate impact was necessary to give effect to the language of the FHA and that "[r]ecognition of disparate impact liability under the Fair Housing Act also plays a role in uncovering discriminatory intent: It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment." HUD will get comments on both sides of the argument, and the courts (unrestrained by the formerly impactful Chevron deference to agency interpretations) will likely end up deciding a case or two on any final rule.

On January 14, the Michigan Department of Insurance and Financial Services issued a bulletin to outline the department's expectations as to how financial service providers will govern and manage the development, acquisition, and use of certain advanced computational technologies, including artificial intelligence systems, that impact consumers. The bulletin also advises financial service providers of the types of information and documentation that the DIFS may request during an investigation or examination regarding the provider's use of AI systems. The DIFS notes that the bulletin "does not prescribe specific practices or documentation requirements" and that the DIFS "recognizes that Financial Service Providers may demonstrate compliance with laws that regulate their conduct in the state in their use of AI Systems through alternative means, including through practices that differ from those described in th[e] bulletin."

The DIFS states that the use of AI systems can present unique risks, such as the potential for inaccuracy, unfair discrimination, data vulnerability, lack of transparency, and inability to map decision processes, and that financial service providers are expected to develop, implement, and maintain a written AI systems program designed to mitigate these and other risks that may result in an "adverse consumer outcome." The DIFS also states that the U.S. Treasury Department's December 2024 report titled "Artificial Intelligence in Financial Services" is an appropriate source of guidance for financial service providers as they develop and use AI systems.

Amicus Brief(ly): These days, terms like "artificial intelligence" and "AI" are almost certain to appear in a regulatory update report. The Michigan bulletin outlines a number of common concerns with the use of AI in financial services, like the potential for discrimination in underwriting and pricing and the potential for unreliable or arbitrary outcomes. The bulletin also acknowledges the compelling reasons why a financial services business would use AI, including efficiency and cost-effectiveness. To balance the concerns with the benefits, the bulletin describes in detail how it expects regulated providers to manage the risks involved with reliance on AI by, among other things, adopting written AI systems programs that operate like mini-compliance management systems for AI use. There are some good ideas in this bulletin for providers that have not yet adopted controls or policies around the use of AI.

On January 12, the California Department of Financial Protection and Innovation issued a Second Invitation for Comments on Proposed Rulemaking regarding registration and reporting of persons that engage in "collecting, analyzing, maintaining, or providing consumer report information or other account information, including information relating to the credit history of consumers, used or expected to be used in connection with any decision regarding the offering or provision of a consumer financial product or service." This broad definition appears to include not only consumer reporting agencies but also other companies that work with consumer report or other account information.

The DFPI states that the invitation is "intended to gather information and promote transparency and engagement among stakeholders." The invitation specifically seeks comments regarding 28 issues involving five general topics: (1) consumer and market concerns; (2) definitions; (3) registration, reporting, and oversight requirements; (4) economic impact; and (5) reasonable alternatives. Further, like the Consumer Financial Protection Bureau's now-abandoned data broker proposed rulemaking regarding Regulation V, the invitation seeks comments regarding whether to apply the rule to data brokers, data aggregators, resellers, and others rather than just consumer reporting agencies.

Comments on the proposed rule are due by February 26, 2026.

Amicus Brief(ly): The California DFPI remains an active regulator to start 2026 with a proposal that builds on its efforts to adopt regulations that establish registration requirements for unregulated businesses in California, including debt settlement, education financing, and earned wage access providers. This effort in California reflects the ongoing trend of federal and state regulatory attention to providers with access to sensitive consumer data, especially those that handle and sell that data. Consumer reporting agencies and data brokers will want to submit comments in response to this proposal to make sure their interests are on the record as the DFPI considers whether and how to require companies to register and ultimately how to regulate them.

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¹ For the unfamiliar, an “Amicus Brief” is a legal brief submitted by an amicus curiae (friend of the court) in a case where the person or organization (the “friend”) submitting the brief is not a party to the case, but is allowed by the court to file the brief to share information or expertise that bears on the issues in the case.