CPI at 3.5%; CFPB Layoffs on Pause; GrailPay Series A

CPI comes in at 3.5% for June. Warsh testifies to Congress. Regulators issue guidance on credit risk of workers without authorization. CFPB layoffs on pause. Credit unions want Fed to pull debit interchange rule. Circle gets full charter approval. GrailPay raises Series A. Stripe and Advent make offer for PayPal.

Retailers are losing payment fees to financial intermediaries, but banking infrastructure has evolved. Retailers can now embed financial services without becoming banks, turning payment costs into new revenue streams by offering their own cards and financing. Our Head of Fintech Solutions, Lynn Chen, explains in her new Insights piece how embedded finance is becoming a competitive advantage and why retailers should act now.

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Inflation Cooled in June

Last week’s inflation print offered a welcome respite, relatively speaking anyway. CPI was up in June 3.5% year over year, vs. expectations of a 3.8% jump in prices. Core inflation, which excludes food and energy prices, was up 2.6% year over year, still well above the Federal Reserve’s long-term 2% target. Easing energy and housing costs were the primary drivers of the slower rate of inflation. Still, while the overall energy index dropped 5.7% in June vs. the month prior, it was still up 15.7% year over year, with gasoline up 26.7% vs. 2025. The shaky ceasefire in Iran and partial opening of the Strait of Hormuz helped calm energy markets in recent weeks, but, with renewed military action in the Middle East, that relief seems likely to be short lived. Fed Chair Kevin Warsh testified before Congress last week, his first time doing so since being sworn in as Chair. The session was ostensibly focused on the Fed’s Semiannual Monetary Policy Report, and legislators largely stuck to that topic, as they work to suss out Warsh’s position on a range of topics. Warsh has worked to reinforce the Fed’s focus on vanquishing inflation, a task made more complicated by other government priorities that include the war in Iran and encouraging development in AI, which has pushed up costs ranging from memory chips to electricity. Warsh, in his prepared testimony, said, “The Fed’s number one objective is to get monetary policy right — or as near to it as we possibly can. That is our clear and constant aim, the star we steer by. And if we get policy right — and we will — the inflation surge of the last five years will be a thing of the past.”

Joint Regulatory Guidance on Credit Risk of Undocumented Workers

Federal banking regulators issued new guidance on the risk of lending to borrowers who do not have authorization to work in the United States. The OCC, FDIC, and NCUA jointly issued the guidance, reminding the institutions they respectively oversee that “lending to individuals who are not legally authorized to work in the United States may present elevated credit risk because a borrower’s ability to generate income, maintain employment, and remain financially stable may be subject to greater uncertainty.” The joint guidance reiterates that lenders should mitigate such risks through safe and sound underwriting practices, including assessing borrowers’ ability and willingness to repay. The guidance follows an earlier “Statement on Ability To Repay and Immigration Status” from the CFPB and a broader Presidential executive order. It is worth noting that the new joint guidance focuses on safety and soundness principles, but does not change lenders obligations under the Equal Credit Opportunity Act or its implementing rules, Reg B.

CFPB Layoffs on Pause

CFPB employees are getting a reprieve from a planned reduction in force. The administration’s efforts, led by acting CFPB Director Russ Vought, to dramatically scale back the size and scope of the Bureau’s activities have been something of a start-and-stop affair. Plans to layoff the large share of CFPB employees have faced protracted legal wrangling from the union representing the employees. In the latest development, the judge in that case granted a partial stay to the CFPB’s workforce reduction plans, to allow the agency’s potential future director, Brian Johnson, to weigh in. Johnson, a former CFPB deputy director who has also done stints at a financial services compliance consulting firm and at Capital One, was nominated to lead the agency last month. But no hearing has yet been scheduled for Johnson in the Senate Banking Committee, which typically must approve such a nomination before it's considered by the full Senate. The court’s stay will continue until 60 days after Johnson is confirmed or until January 3, 2027, whichever happens first.

Credit Unions Want Fed to Pull Debit Interchange Rule

America’s Credit Unions, a trade association, is asking the Federal Reserve to withdraw its proposed changes to debit interchange caps until outstanding legal challenges have been resolved. The group sent the letter to Fed Chair Kevin Warsh and published it via press release prior to Warsh’s testimony to Congress last week. While the Fed has said it doesn’t plan to advance the measure until litigation is resolved, the central bank hasn’t actually withdrawn the proposal, which is what America’s Credit Unions is requesting that it do. The group also asked the Fed to carefully consider proposed changes to master account access, which has become something of a flashpoint in recent years, and to reconsider check hold and exceptions under the Expedited Funds Availability Act. Requirements under the law can require institutions to make funds available, even when they believe the transaction may be suspicious, contributing to fraud losses, the trade group said.

Circle Gets Final Charter Approval

USDC stablecoin issuer Circle has received full OCC approval of its application to charter a national trust bank, the company said last week. The entity, Circle National Trust, will initially offer fiduciary digital asset custody, with a plan to add reserve management at a later date. Circle was one of numerous digital asset-focused businesses that applied to form a national trust bank, many of which plan to use such charters as part of stablecoin issuing lines of business. Circle joins BitGo in receiving final approval, while Ripple, Paxos, and Fidelity have received conditional but not yet final approval. Circle CEO Jeremy Allaire commented on the development, saying, “Federal oversight of our trust bank sets a new standard for transparency, governance and scale for Circle’s infrastructure and unlocks a new phase of adoption, where leading financial institutions can build on public blockchains with clarity and confidence.”

GrailPay Raises $10.5Mn Series A

GrailPay, a business-to-business payments startup, announced it has raised a $10.5Mn Series A. The new funding brings GrailPay’s total raised to date to $17.2Mn. The round was led by MissionOG, with participation from Counterpart Ventures, EJF Ventures, Construct Capital, SSC Venture Partners, and Commerce Ventures. GrailPay declined to disclose its valuation, other than saying that it was a “significant” increase from its prior funding round. GrailPay originally began as a consumer app, facilitating pay-by-bank, before pivoting to focus on B2B transactions. GrailPay aims to address fraud and other risks posed by faster payments, which often cannot be disputed or reversed, and the growing use of AI, which could pose risks of payment errors, like sending a payment to the wrong account or in an incorrect amount. GrailPay investor Kevin Leonard, a partner at MissionOG, commented, saying, “The best options available today are static account verification tools that tell you an account is open, but nothing about what it's done or what it's likely to do next. That was manageable when the rails were slow, and you had days to catch a bad payment before it settled. But real-time payments, agentic commerce, and competitive pressure to fund instantly are all accelerating, and that gap is becoming untenable.”

Stripe and P.E. Firm Make Offer for PayPal

Stripe and private equity firm Advent have made a joint offer to acquire the original online payments company, PayPal. Stripe and Advent are offering $60.50 per share, which would value PayPal at over $53Bn, according to reporting from Reuters, citing two people familiar with the deal. The offer values PayPal at about a 28% premium to where the company was trading prior to news of the potential takeover breaking. Under the proposed deal terms, Stripe and Advent would jointly own PayPal on a 50-50 basis. The current deal follows an initial discussion in early April, per Reuters reporting. PayPal stock was up about 16% on news of the acquisition interest.