BPInsights: January 31, 2026

Do Mortgage Escrow Interest Requirements Benefit Consumers?

A new BPI working paper, also published this week on SSRN, examines whether state laws requiring mortgage lenders to pay a minimum interest rate on escrow accounts benefit consumers. These requirements are at the heart of a national legal debate over how state laws should apply to national banks. The paper suggests such requirements, on average, did not help consumers - they likely harmed those borrowers most in need.

Context. Mortgage escrow accounts are a core component of real estate lending because they help break up large lump-sum periodic payments into smaller periodic payments that are easier to budget for, provide predictability to borrowers and ensure that tax and insurance bills are paid when due. Certain states require banks to pay interest on funds held in these escrow accounts. These requirements were at the heart of a pivotal Supreme Court case in 2024, Cantero v. Bank of America, and have sparked legal debate more broadly over how state laws affect nationally chartered banks. National banks are subject to federal and state laws, but federal laws supersede state requirements in most circumstances. The OCC recently issued a proposal stating that "federal law preempts state laws that eliminate OCC-regulated banks' flexibility to decide whether and to what extent to (1) pay interest or other compensation on funds placed in real estate escrow accounts; or (2) assess fees in connection with such accounts."

BPI Research. The working paper analyzes mortgage data from 2018-2024 to show that requiring lenders to pay interest on mortgage escrow funds does not benefit consumers. Such requirements drive lenders to recover costs by increasing up-front mortgage origination fees and decrease the likelihood that a mortgage ends up being originated, with lower-income borrowers most affected by these shifts. 

BPI Comment Letter. BPI filed a comment letter this week on the OCC's preemption proposals, emphasizing that state interest rate requirements are preempted for national banks under the law. The letter cited the new research. Read the letter here.

Five Key Things

1. Warsh Selected as Next Fed Chair Nominee

President Trump on Friday announced that he has selected Kevin Warsh as the next Federal Reserve chair nominee. Warsh, an economist, previously served as a Fed governor between 2006-2011. Warsh will need to be confirmed by the Senate to the position. Current Fed Chair Jerome Powell ends his term leading the central bank in May.

2. Senate Agriculture Panel Advances Market Structure Bill on Partisan Vote

The Senate Agriculture Committee on Thursday advanced legislation on crypto market structure on a party-line 12-11 vote. The panel had delayed its markup two days due to a change in the Senate voting schedule. The measure marked up on Thursday encompassed the Agriculture Committee's portion of the overall legislation - the Ag panel has oversight of the Commodity Futures Trading Commission. The Banking Committee, the other key committee of jurisdiction, will also need to vote on the bill. While Democrats expressed optimism that a bipartisan agreement could eventually be reached, they opposed this version due to unresolved, outstanding issues, such as ethics concerns and a CFTC quorum. Amendments offered ahead of the markup (and ultimately rejected) included Democratic measures to bar public officials from crypto profits; prohibit government bailouts for crypto issuers; and crack down on crypto ATM fraud.

3. Fed Publishes Large Bank Supervision Manuals

The Federal Reserve on Friday published on its website a series of manuals used to supervise global systemically important banks. The publication of the manuals - used by the Large Institution Supervision Coordinating Committee (LISCC) of the Fed - was previewed by Federal Reserve Vice Chair for Supervision Bowman in a speech earlier this month as part of a broader effort to increase transparency in Fed supervision. The manuals released on Friday cover, in detail, roles and responsibilities and protocols of Federal Reserve-LISCC staff in planning exams and executing other supervisory activities, monitoring and analyzing risks at GSIBs, assessing liquidity, capital and resolution planning and conducting supervisory activities relating to the issuance and termination of enforcement actions.

According to the Fed's website, "manuals [are] used internally by the Federal Reserve to supervise the U.S. global systemically important banking organizations (GSIBs). . . Board staff are in the process of updating these manuals. The updates will reflect the change in the name of this supervisory program from LISCC to GSIB. The updates will also conform these manuals to the statement of supervisory operating principles and other regulatory and supervisory changes, as appropriate. The updated versions of these manuals will be released promptly after the updates have been completed."

We expect these changes will include, at a minimum:

• elimination of a presumption of an enforcement action for firms with a single LFI 'Deficient-1' rating;
• new 'composite' approach to 'well managed' status for LFIs - rather than based on a single LFI Deficient-1 rating;
• basing MRAs on material financial risk;
• greater specificity by examiners in documenting MRAs;
• greater reliance on internal audit for validations (sign-offs) of MRAs so long as internal audit is rated "satisfactory"; and

• reintroduction of supervisory observations.

4. Banks, Credit Unions and Consumer Groups Support 'Close the Shadow Banking Loophole Act'

A coalition of leading banks, credit unions and consumer organizations this week endorsed legislation to close the industrial loan company loophole. This loophole undermines the separation of banking and commerce by allowing commercial firms and nonbanks to own FDIC-insured banks without being subject to the full set of safeguards required of other insured banks, such as consolidated Federal Reserve oversight. The "Close the Shadow Banking Loophole Act," introduced by Senators John Kennedy (R-LA) and Andy Kim (D-NJ), would protect consumers and the financial system by requiring all companies engaged in the same banking activities to follow the same rules.

In addition to filing a letter of support, the groups stated:

"We support the Close the Shadow Banking Loophole Act and urge swift passage of the bill into law. Companies that act like banks should be regulated like banks. The ILC loophole blurs the line between banking and commerce and undermines Congressional safeguards to the detriment of consumers and the safety of the financial system."

The groups represented include America's Credit Unions, Americans for Financial Reform, Bank Policy Institute, Center for Responsible Lending, Consumer Federation of America, Independent Community Bankers of America, National Consumer Law Center (on behalf of its low-income clients), National Community Reinvestment Coalition and U.S. PIRG.

To access a copy of the letter of support, please click here.

5. Latest Usage Stats Show Sparse Uptake for FedNow

The latest Federal Reserve release of usage statistics for its real-time payments network, FedNow, suggests that the network has failed to scale in the same way as its private-sector counterpart, the RTP Network.

• Quick Look at the Numbers. FedNow's average daily volume of settled payments in 2025 was 23,050, compared to 1.35 million on RTP. The entirety of FedNow's fourth-quarter 2025 payments volume was less than RTP's in two days. The volume at FedNow declined from Q3 2025 to Q4. The average value for a FedNow payment has risen to over $100,000, which suggests that FedNow is generally not being used for retail payments.
• Questions Remain. BPI has previously called for more transparency into the Fed's real-time payments system, particularly its pricing and its plans to recoup the costs of its operations.

In Case You Missed It

UK Finance Report Calls for Social Media Accountability on Fraud

Trade association UK Finance released a recent report offering insights into fraud in the first half of 2025. Here are a few highlights.

• Top-Line Numbers. UK Finance data for the first half of 2025 showed an increase in both the total number of fraud cases and the amount of money lost to fraud and scams compared with the same period in 2024. A total of £629.3 million was stolen by criminals in the first six months of this year, and there were 2.09 million confirmed cases across both authorized and unauthorized fraud. This represents a 3 percent increase in losses and a 17 percent increase in cases compared to the first half of 2024. Banks prevented £870 million in unauthorized fraud in six months through advanced security systems and real-time monitoring.
• Social Media Accountability. Although the financial industry invests more in fraud protections than any other sector, fraud largely originates outside of the financial sector, primarily on social media, the report noted. "The majority of fraud originates on social media and telecommunications channels, with manipulation beginning long before any payment is made. By the time the bank has any chance in identifying it as fraud, there has often already been extensive contact with the victim on social media or other platforms which is invisible to our sector," the report said. "We need true cross-sector collaboration. Anyone whose platforms are exploited by fraudsters has a moral obligation to protect people from these crimes, and the government must hold the social media and telecommunications industries properly to account."
• Reimbursement Requirement. The report takes stock of the impact of the UK's mandatory reimbursement rule for authorized push payment fraud, which took effect in 2024. "It has led to an increase in the amount of stolen money being reimbursed, but on its own does nothing to prevent the psychological harm to victims. Nor does it do anything to prevent serious organised crime groups from becoming even more dangerous," the report said, suggesting the focus instead should be on preventing fraud.
• 'Where Scams Are Born.' "The pattern is clear: two-thirds of APP fraud cases originated online, demonstrating where scams are born and where defences must be built," the report says. "Yet banks continue to operate as the final - and often only - line of defence against threats that begin far beyond their perimeter. When fraud originates on social media platforms, messaging apps and fake investment sites, asking financial institutions to solve the problem at the point of payment has become unsustainable."

Supervision, Crypto Charters: Highlights from OCC's Gould

OCC Comptroller Jonathan Gould discussed a range of regulatory topics in a recent POLITICO Q&A. Here are some highlights.

• Novel Charters. Gould said the OCC will tailor its supervision of banks, including newly chartered crypto-focused national trust banks, based on their risk profile. "So if you're talking about the very small subset of national trust banks engaged in digital assets, we're going to bring in best-in-class examiners who have a lot of experience looking at digital asset activities to bring the banks up to the level that we expect," he said. He claimed the OCC has the expertise to resolve failed uninsured national trust banks if necessary, noting the agency's experience in resolving failed U.S. branches of foreign banks and acting as national bank receiver before the FDIC was created in 1933.
• Charter Interest. On bank charters more generally, Gould suggested the complexity of post-Global Financial Crisis regulation and supervision may have dulled interest in becoming a bank. "We've seen a big uptick in the past year. I think that's a sign of interest in the federal banking charter," he said. "That [post-2008] dropoff, I think, was not solely caused by supervision and regulatory changes, but clearly that is to a large degree the cause. That is not good, in my opinion."
• 'Heightened Standards.' Gould provided context around the recent OCC proposal to revise the threshold at which "heightened standards" - an intensified level of supervision scrutiny that roughly parallels the Fed's "enhanced prudential standards - apply to banks. The heightened standards guidance "imposed a one-size-fits-all approach to risk management on all banks over a certain size, regardless of their unique business models," Gould said. "And it has also had the unintended effect of, to some extent, transforming our bank examiners into management consultants. It has gotten them a lot more involved in things like governance and committee structure, which are secondary to the primary job: material financial risk." The OCC proposed to raise that threshold to $700 billion in assets. "The agency and I are certainly not wedded to $700 billion. We think it makes sense to distinguish between the global systemically important banks and everybody else, but we welcome comments."

The Crypto Ledger

Here's the latest in crypto.

• Fairshake War Chest Expands. The pro-crypto PAC Fairshake and its affiliate PACs have amassed more than $193 million as the midterms loom, according to Axios. That total is nearly $60 million more than the group spent in 2024. Contributors include Ripple, Coinbase and a16z.
• Chainalysis Estimates At Least $82 Billion in Crypto Money Laundering. Crypto money laundering amounted to at least $82 billion last year, a sharp increase from 2020, driven partly by growth among Chinese-language money laundering networks, according to a Chainalysis report.
• SEC Drops Case Against Winklevoss Twins' Crypto Firm. The SEC recently agreed to dismiss the case against Gemini Trust, a crypto exchange founded and run by Tyler and Cameron Winklevoss.

Traversing the Pond

Here's the latest in international banking policy.

• Holistic View on Capital. Jose Manuel Campa, head of the European Banking Authority, suggested EU plans to simplify financial regulations should include clear expectations about how capital requirements will evolve. Reforms should not fixate solely on subordinated debt known as AT1 bonds, Campa said in a recent Bloomberg interview. "The holistic view of giving clarity to the banks about how the capital requirements will evolve for them over time is more important" than the AT1 issue, he said.
• EU Risks Economic Drag Without Resolving Regulatory Complexity, Fragmentation. The European Banking Federation warned the European Commission in a recent letter that Europe risks economic decline unless policymakers mitigate regulatory complexity and fragmentation. The letter described the current situation as "neither satisfactory, nor sustainable."
• EU Capital Market Strategy Must Support Innovation, Former ECB Official Says. Ignazio Angeloni, a former supervisory board member of the ECB, called in a recent Financial Times op-ed for the EU's capital market strategy to promote innovation. "The focus must be reversed: no longer grand institutional design fostering integration and harmonisation but rather pragmatic steps to unlock capital for growth-enhancing sectors," Angeloni wrote. "The aim should be to obtain concrete results first and prepare for more ambitious reform steps later." The op-ed recommended modeling saving and retirement accounts after Sweden's investment accounts, saying that "Even a small reallocation of household savings would release significant resources for equity investment and venture financing." Another recommendation: Establishing a euro-wide listing platform for firms scaling up.

Things to Watch Next Week

• The House Financial Services Committee will hold a hearing on the Financial Stability Oversight Council's annual report on Wednesday. The Senate Banking Committee will follow with its own hearing on the report on Thursday.
• The House Financial Services Committee Capital Markets Subcommittee will hold a hearing on SEC accountability, due process and public confidence on Wednesday.
• Federal Reserve Vice Chair Philip Jefferson delivers remarks at a Brookings event on inflation on Friday.

BPI Job Bank

• AVP, Graphic Designer
• AVP, Research Analyst
• Junior Event Planner & Administrative Coordinator

Member News

Synchrony CEO: Retailers Also Hurt by 10 Percent Rate Cap

Brian Doubles, CEO of Synchrony Financial, a leading issuer of store-branded credit cards, said a 10 percent credit card rate cap would be "very bad" for Synchrony's partners in the retail sector. "We support 400,000 small-to-medium sized businesses who depend on those credit programs. In some cases, we can be over 40 percent of their sales," Doubles said on an earnings call recently. "So this would be a huge hit for them." The President earlier in January proposed a 10 percent cap on credit card interest rates for one year, which lawmakers, analysts and bank CEOs have warned would result in severe economic consequences.

Upcoming Events

• 2/4/2026: House Financial Services Committee Holds a Hearing on the Annual Report of the Financial Stability Oversight Council
• 2/4/2026: House Financial Services Committee Capital Markets Subcommittee Hearing on SEC
• 2/5/2026: Senate Banking Committee Holds a Hearing on the Annual Report of the Financial Stability Oversight Council
• 2/6/2026: Brookings Institution Event with Philip Jefferson: Supply-side Factors and Inflation: What Have We Learned?
• 2/20/2026: Columbia/BPI Annual Bank Regulation Research Conference: Announcement and Call for Papers