August 2025 OBA Legal Briefs

August 2025

In this issue:

• Where can I find…

• Supreme Court Opinions Impacting Banking and Financial Services: October Term 2024-2025 Review

Where can I find…

By Pauli Loeffler

General principles
Before going into the specifics, let’s sketch out some general principles about the laws and regulations that impact your business, one way or another. We will start by talking about the two sources for laws and then explore where the statutes leave off and rules take over. Then we will point the way to specific laws and rules, particularly those that can be difficult to locate.

 Federal vs. state
The first thing to understand is that some matters are addressed exclusively in state law. Other matters are addressed exclusively in federal law. Finally, a few subjects are dealt with by both our state legislature and Congress.

This article will focus primarily on state law.

Statute vs. Rule
Some things are found in the law itself (statutes), while other matters are discussed solely (or with much more detail) in the regulations (rules).

Statutes are the product of Congress or the state legislature. Basically, they can enact anything they dream up, but if a law violates some part of the Constitution (either federal or state), you can be sure someone is going to step forward to file a lawsuit to challenge it. If a provision of a statute is found to be unconstitutional, it will be struck down by a court.

Rules/regulations, on the other hand, are promulgated by administrative agencies. At both the federal and state levels, there are steps an agency must take before it can issue a final rule. Under the state or the federal administrative procedures act, rulemaking is transparent and virtually always must involve notice to the public and an opportunity for comments. In rare occasions, rules are adopted on an “emergency” basis without the typical acceptance and review of comments. The comment process assists the agency proposing the rule to understand the practical consequences of the proposal, and provides the agency with encouragement, criticism, suggested changes, reasons for backing off or doing something differently, feedback about the timeframe needed to modify businesses practices, etc.

Rules are intended to “flesh out” details of bare bones statutes. In order for there to be rules in connection with a particular law, the law has to give an agency the authority to promulgate rules on the subject. There are many laws which stand alone and do not have implementing regulations. An example would be the Servicemembers Civil Relief Act (SCRA). There are no rules under the SCRA. Everything is in the statutes.

By way of contrast, the Biggert-Waters Flood Insurance Reform Act of 2012 had numerous provisions which could not take effect until certain administrative agencies adopt final rules to provide the necessary additional details for compliance.

Think of rules and statutes like pairs. Where there is a rule, there must always be a statute to which the rule is tied. Conversely, however, where you see a statute, there is not always a corresponding rule. Statutes can stand alone. Rules cannot.

For instance, we have the Home Mortgage Disclosure Act (“HMDA”) which is implemented through the CFPB’s Regulation C. We have the Truth in Savings Act, implemented by Regulation DD.

In terms of parameters, when an agency adopts a regulation, it must do so within the scope of its authority. An agency cannot “legislate” or go beyond the rulemaking authority granted by the authorizing legislation. Usually, if a proposed rule is overly broad or exceeds the scope of the agency’s authority, that will be pointed out during the comment process and the final regulation will be modified accordingly. Occasionally, however, an agency will dig in its heels and assert that it has the authority to do whatever it might be trying to do and a challenge to the action must be filed in court.

What won’t you find in rules? Penalties. Only Congress or the state legislature can make something a crime or give a private right of action for a violation. And only Congress or the state legislature can specify which violations will result in a fine.

You may read a regulation and think “Well, it doesn’t say what will happen if we don’t do what it says to do.”  No, it won’t say what the consequences are. That will be spelled out in a statute, not a rule. For instance, you might wonder what would happen if you didn’t register your Mortgage Loan Originators. The SAFE Act spells out the penalties.

What to find in federal law

In terms of knowing whether something is addressed by federal or state law, it’s just something you have to learn and become familiar with. There’s no real trick to it. You need pigeonholes to keep in mind: one for the federal government and one for state, and then you put the laws in the proper pigeonholes.

For instance, the Equal Credit Opportunity Act prohibits discrimination in any aspects of credit on the nine prohibited bases. It affects everything from product offerings and advertisements to deadlines for acting upon an application for credit and for communicating action taken on the application. It is implemented through the CFPB’s Regulation B.

The Home Mortgage Disclosure Act requires government monitoring information to be gathered, recorded, and reported on home purchase, home improvement, and refinancing in order for the government to more easily spot evidence of potential lending discrimination. It is implemented by CFPB’s Regulation C.

The Electronic Fund Transfers Act provides protection in connection with electronic fund transfers made to or from a consumer account. The protections include initial disclosures, receipts at ATMs, periodic statements, restrictions on the issuance of access devices, mandatory error resolution procedures and timeframes, surcharge disclosures, limitations of liability for unauthorized transfers, stop payment capabilities on some EFTs, opt-in requirements for overdraft fees arising from ATM transactions and one-time debit card transactions, gift card disclosures, and special safeguards for individuals who receive payroll cards. Reg E from CFPB implements it.

What to find in state law

State law is where you are going to find many provisions that affect your institution on a daily basis. While federal law has the majority of compliance-related provisions, state law has the bulk of everything else.

The list is extensive, so I will highlight some of the things you will find in state law, and where to find them, but will need to cover more in a subsequent Legal Brief.

Title 15. Contracts
Contract law is always a matter of state law. If you have an issue involving a contract your bank has entered into with a vendor, for example, you will need to read the document to see what state’s law will apply.  If the contracting parties are in different geographic locations, the contract will say that it is to be construed under the laws of “such and such state.” Never assume it is going to be construed under our laws unless it says so. Generally, the Oklahoma statutes on this topic are found in Title 15, however provisions to specific contracts such as safe deposit leases, for example, are found in other areas of the law, e.g., the Banking Code in Title 6.

Within the Title 15 contracts statutes, you will find provisions that relate to the following:

• Capacity of minors to enter into a contract – and what happens if a minor enters into a contract he lacks capacity to enter into
• When the validity of a contract can be challenged based upon fraud, duress, mistake and other factors
• What constitutes valid consideration for a contract

Don’t miss Section 178. That’s the one that essentially nullifies a naming of a spouse as beneficiary for a death benefit if, after naming the spouse as beneficiary, there is a divorce or annulment and the person doesn’t reaffirm that’s still what he or she wants. Our Payable on Death statute in the Banking Code expressly makes POD designations subject to 15 O.S. Section 178.

And that’s just the tip of the Title 15 iceberg. In that same Title of Oklahoma law, you also find the Oklahoma Consumer Protection Act (beginning at Section 751), Oklahoma’s equivalent of the Do Not Call Act, the Telemarketer Restriction Act, beginning at Section 775B.1, a law on Unlawful Electronic Mail, at Section 776.1 – 776.7, the Anti-Phishing Act beginning at § 776.8, and our Gift Certificate and Gift Card Disclosure Act (who knew?!), beginning at Section 801.

Financial Privacy
There are two financial privacy acts. One is the federal Right to Financial Privacy Act. It comes into play only when “customer” records, as that term is narrowly defined, are being sought by a federal governmental authority. Other types of requests for customer records or financial information, are typically going to be governed by Oklahoma’s Financial Privacy Act, which is found in Title 6, beginning at Section 2201. For reimbursement of your expenses for providing records under the federal RFPA, you look to the Federal Reserve Board’s Regulation S for rates. When you provide records under the Oklahoma Financial Privacy Act, your fees for search and processing costs, reproduction costs, and related expenses are subject to Section 2206 of Title 6.

 

Electronic records
Section 3001 of Title 6 allows you to rest easy, because it provides the authority to store and reproduce records electronically and still have them be admissible in evidence. It says “Any financial institution may cause any or all records, including its records as a fiduciary, at any time in its custody to be stored and reproduced electronically or by the microphotographic process, and any reproduction made or an electronically or microphotographically stored record shall have the same force and effect as the original thereof and be admitted in evidence equally with the original.”

Protection against discovery
Section 3002 of Title 6 is innocuously titled “Compliance Review.”  You may have never heard of it, but, you will want to know all about it. It says that if you have a compliance review committee, that is either an audit, loan review or compliance committee appointed by your board, or any other person who acts in an investigatory capacity at the direction of a compliance review committee, and documents are prepared for or created by the compliance review committee which is working on evaluating and seeking to improve loan underwriting standards, asset quality, financial reporting to federal or state regulators, or the committee is evaluating and seeking to improve compliance with regulatory requirements, there is really good news found in this statute. It provides that compliance review documents are confidential and are not discoverable or admissible in evidence in any civil action arising out of matters evaluated by the compliance review committee. Plus, compliance review documents delivered to a federal or state governmental agency remain confidential and are not discoverable or admissible in evidence in any civil action arising out of matters evaluated by the compliance review committee. There is an exception for documents which reflect evidence of fraud committed by an insider of a depository institution, to the extent those documents are otherwise discoverable or admissible.

Uniform Commercial Code (“UCC”) Title 12A
Negotiable instruments (checks, promissory notes, money orders, etc.) are addressed by the Uniform Commercial Code in Article 3, which is found in Title 12A of the Oklahoma Statutes. Any bank employee who deals with checks or promissory notes or any other type of negotiable instruments needs to grab a caffeinated drink and look through the eight Parts of Article 3. This is where you find guidance on everything from negligence contributing to forged signature or alteration of instrument to what you do about a lost, stolen, or destroyed cashier’s check.

After you have completed your review of at least the titles to the various parts and sections of Article 3 of the UCC, keep plowing ahead to Article 4, which deals with Bank Deposits and Collections. This UCC Article contains crucial provisions dealing with everything from stop payments to encoding warranties. An employee who has a true mastery of these provisions can save his or her bank endless headaches – and losses.

Article 4A, is titled “Funds Transfers I will admit frustration with the title to this part of the UCC. When I hear the term “Funds Transfers,” and my brain immediately gores to Reg E., the Electronic Fund Transfer Act and its implementing regulation, Reg E.  Section 4A-108, specifically says “This Article does not apply to a funds transfer any part of which is governed by the Electronic Fund Transfer Act of 1978 (Title XX, Public Law 95-630, 92 Stat. 3728, 15 U.S.C. Section 1693 et seq.) as amended from time to time.”

What does that mean? It means that a consumer account-related EFT is not covered by Article 4A. On the other hand, there are many types of transactions (including all business EFTs) that are not covered by the EFTA and Reg E, and there are even some consumer transactions that are not covered by Article 4A.

On transactions that are covered by Article 4A, you get guidance on how duties are assigned to the various parties to the transaction, where the risks of liability lie, and how losses are allocated when problems, such as improper execution of the payment order or misdescription of the beneficiary, occur.

Article 9 is our bible for perfection for most types of collateral other than real property. This is an area your lending staff must thoroughly understand. It’s lengthy, it’s complex, but it attempts to address virtually any situation you might encounter involving security interest perfection.

Article 15 Title 12A
The Uniform Electronic Transactions Act is like an odd family relative to ESIGN. You can find UETA beginning at Section 15-101 of Title 12A of the Oklahoma Statutes. For information on the complex issue of what is governed by ESIGN, vs. what is governed by UETA, consult the legal articles on uetaonline.com. Keep in mind that ESIGN (which is federal) was designed for consumer matters.

Title 16
Title 16 covers real estate transactions, but the actual name is Conveyances. This where you look to determine whether it is legal for someone who is an attorney-in-fact to make an instrument (such as a deed or mortgage) affecting real estate, or what needs to be included in a Sheriff’s deed, and all kinds of other real property-related matters. Plus, in the Appendix, you will find the Title Examination Standards which is treasure trove of information about everything from mortgages to tax liens.

Supreme Court Opinions Impacting Banking and Financial Services: October Term 2024-2025 Review

By Scott Thompson

1. Key Banking and Financial Services Opinions of the Current Term
2. Thompson v. United States (23-1095)

This case centered on Patrick D. Thompson, a Chicago lawyer convicted under 18 U.S.C. § 1014 for making statements to the Federal Deposit Insurance Corp. (“FDIC”) regarding a loan. Thompson disclosed a $110,000 loan, but omitted additional loans that increased the principal balance to $219,000. The Seventh Circuit affirmed his conviction, interpreting “false statement” in § 1014 to include statements that are misleading but not literally false, a point on which circuit courts were divided.

The central legal question presented to the Supreme Court was “[w]hether 18 U.S.C. § 1014, which prohibits making a ‘false statement’ for the purpose of influencing certain financial institutions and federal agencies, also prohibits making a statement that is misleading but not false.” The case sought to resolve a significant split among federal appellate courts regarding the scope of this criminal statute.

Decided on March 21, 2025, the Supreme Court issued a unanimous 9-0 opinion vacating and remanding the Seventh Circuit’s judgment. Chief Justice John Roberts, writing for the Court, held that 18 U.S.C. § 1014 “does not criminalize statements that are misleading but true.” The Court emphasized a textualist interpretation, stating that while “casual conversation” uses “many overlapping words to describe shady statements: false, misleading, dishonest, deceptive, literally true, and more,” only “false” appears in the statute. Therefore, “it is not enough that a statement is misleading. It must be ‘false'”. Justice Alito and Justice Jackson filed concurring opinions, noting that the jury instructions in the lower court were proper despite the circuit split. The Court’s emphasis that “when Congress intended to cover all misleading statements, ‘it knew how to do so'” suggests a broader interpretive principle that may be applied in future cases involving federal financial regulations.   (Note: Children may want to have this case in their back pocket as persuasive authority.)

This decision provides critical clarity on the scope of 18 U.S.C. § 1014, resolving a significant circuit split. For financial institutions and individuals interacting with them, it means that statements must be literally false to fall under this specific statute, rather than merely misleading. This outcome could impact how federal agencies like the FDIC pursue certain fraud cases, potentially requiring them to demonstrate literal falsity rather than just a misleading omission. The unanimous nature of the decision, particularly on a matter of statutory interpretation that resolves a circuit split, signals a strong judicial preference for textualism in criminal statutes affecting financial interactions. This approach could encourage similar challenges to other statutes where “false” might have been broadly interpreted to include “misleading.”

1. Facebook, Inc. v. Amalgamated Bank (23-980)

This case involved a shareholder class action lawsuit against Facebook (now Meta) and its executives. Shareholders, including Amalgamated Bank, alleged that Facebook made false and misleading statements in its 2016 10-K form by describing the misuse of user data (specifically, the Cambridge Analytica scandal) as a hypothetical risk, even though it had already occurred. The United States Court of Appeals for the Ninth Circuit reversed a lower court dismissal, ruling that stating a known materialized risk as hypothetical could mislead a reasonable investor.

The core legal question was whether a company plausibly misleads investors when it discloses a future risk without mentioning that the potential bad event has happened before. This question delves into the nuances of corporate disclosure requirements, particularly concerning the materiality and presentation of past events as future risks.

After hearing oral argument on November 6, 2024, the Supreme Court issued a one-line order on November 22, 2024, dismissing the writ of certiorari as improvidently granted (“DIG”). This is described as a “rarely used mechanism for dismissing a case.” A DIG order means the Supreme Court declined to clarify how lower courts should evaluate misleading risk disclosures in SEC filings. As a result, the Ninth Circuit’s decision, which allowed Amalgamated Bank’s shareholder class action lawsuit to proceed past a motion to dismiss, remains in effect.

This disposition has significant implications for public companies and financial market participants, particularly those operating within the Ninth Circuit’s jurisdiction. It suggests that companies may face increased scrutiny for risk disclosures, and that describing a risk as hypothetical when it has already materialized could expose them to liability. This could lead to more expansive and detailed risk disclosures in corporate filings to avoid similar challenges. The Court’s decision to “DIG” this case, rather than issue a merits opinion, indicates a reluctance to set a broad, nationwide precedent on corporate disclosure standards, especially given the potential for significant ripple effects across all publicly traded companies. By declining to rule, the Court effectively allows a more expansive interpretation of “misleading” in risk disclosures to persist in a major circuit, forcing companies to err on the side of greater transparency regarding past materialized risks. This creates a de facto stricter disclosure environment for many companies without a direct Supreme Court mandate.

1. BLOM Bank SAL v. Honickman (23-1259)

While specific underlying facts are not extensively detailed in the opinion, this case originated from the Second Circuit. The Supreme Court’s decision focuses on procedural rules governing the reopening of cases.

Based on the holding, the legal question revolved around the interpretation and application of Federal Rule of Civil Procedure 60(b)(6), which allows a court to grant relief from a judgment or order for “any other reason that justifies relief,” and its interaction with Rule 15(a), which governs the liberal amendment of pleadings. The Court was asked to clarify whether the standard for relief under Rule 60(b)(6) becomes less demanding when the movant seeks to reopen a case primarily to amend a complaint.

Decided on June 5, 2025, the Court held that “Relief under Federal Rule of Civil Procedure 60(b)(6) requires extraordinary circumstances, and this standard does not become less demanding when the movant seeks to reopen a case to amend a complaint. A party must first satisfy Rule 60(b) before Rule 15(a)’s liberal amendment standard can apply.” This clarifies that the high bar for Rule 60(b)(6) relief is not lowered simply because the movant intends to amend their complaint.

This procedural ruling, while not directly about banking law, has significant practical implications for any litigation involving financial entities. By reinforcing the “extraordinary circumstances” standard for Rule 60(b)(6), the Court enhances the finality of judgments. For financial institutions involved in complex and often protracted litigation, this means that final judgments are more robust, and it will be more challenging for opposing parties to reopen settled or decided matters based on new information or a desire to amend pleadings. This promotes finality in litigation, which is generally beneficial for entities facing numerous legal challenges, potentially reducing the likelihood of prolonged disputes and associated legal costs. Finality is a critical aspect of risk management for financial institutions, as it provides certainty regarding liabilities and legal exposures.

Conclusion and Future Outlook

The Supreme Court’s October Term 2024-2025 has already delivered significant clarifications in financial law. Most notably, Thompson v. United States has narrowed the interpretation of “false statement” in federal bank fraud statutes, emphasizing a strict textualist approach. The dismissal of Facebook, Inc. v. Amalgamated Bank as improvidently granted further underscores the importance of stringent corporate disclosure practices, particularly within the Ninth Circuit.

The Supreme Court’s current term, and its recent past, illustrate a dynamic interplay between judicial restraint and intervention in financial law. While the Court is willing to clarify statutory text, it also demonstrates a strategic use of certiorari denials and dismissals as improvidently granted to shape the legal environment, often by allowing lower court precedents to mature or by avoiding overly broad pronouncements. This necessitates a proactive, adaptive, and nuanced approach for legal and compliance teams within the financial industry to effectively navigate the evolving regulatory and litigation landscape.