April 21, 2021

The Government Update

​​​​​​​​​​​​​​​​​​​​​​​​is issued by the Innovative Payments Association twenty times a year as a service to members.
Editors: Brian Tate, President and CEO, IPA; Ben Jackson, COO, IPA;  Grant Hannah, Director of Government Relations, IPA; Eli Rosenberg, Partner, Baird Holm LLP; and Gray Derrick, Partner, Baird Holm LLP.
Please address comments and suggestions to: [email protected].

Cash, Crypto and Cocktails – The Innovative Payments Conference Continues to Educate the Industry
 
Even though it is too soon to get the industry together in person, the IPA continues to help payments professionals keep up with trends in the industry at its online Innovative Payments Conference. 
 
The conference kicked off with a discussion of Banking as a Service, which forms the underpinning of many fintechs. IPA member Metabank led a discussion that included Visa, NetSpend, and Modern Treasury. 
 
We discussed data sharing with Consumer Reports and the Financial Data Exchange. The FDIC presented results from its household banking survey. 
 
Wednesday wrapped up with a cocktail class that featured the head mixologist of Old Elk distillery who explained how to make a Manhattan and discussed payments in the service industry during the pandemic. We also presented our Skiba volunteer awards and the Terrence P. Maher Prepaid Influencer Award.
 
Skiba volunteer awards were presented to the following members for their work on the IPA Fintech Glossary.
 

• Lori Breitzke, Vice President – Product Management, Prepaid & EBT, Commercial & Data Products, FIS    
• Don Becker, VP Prepaid Card Partnerships, CommercePayments, Commerce Bank   
• Liz Nutting, Executive Relationship Manager, Prepaid Business Development, Discover Global Network   

 
For her help with member recruitment and her service on the IPA Board and finance committee, a Skiba was awarded to:
 

• Joan Herman, Chief Operating Officer, Paysign

 
The IPA presented the annual Terrence P. Maher Prepaid Influencer Award to IPA Board Member Emeritus Nora Arpin.
 
As we look forward to the coming week, we will delve deeper into some of the topics that could shape the future of payments, including more on fraud, Postal Banking, and cannabis payments. We also will be looking at how the payments industry can help shape the world for the better in sessions on racial equity in financial services and in a session on payments during crisis. 

If you’d like to attend these and get access to the recordings of previous sessions, you can still register. Visit IPC 2021 - Innovative Payments Association (ipa.org)
​

INTERNAL REVENUE SERVICE (IRS)
 
IRS, Treasury disburse 2 million more Economic Impact Payments under the American Rescue Plan; VA beneficiaries bring total to approximately 159 million as payments continue
 
On April 14, the Internal Revenue Service, the U.S. Department of the Treasury and the Bureau of the Fiscal Service announced they are disbursing nearly 2 million payments in the fifth batch of Economic Impact Payments from the American Rescue Plan.
 
This announcement brings the total disbursed so far to approximately 159 million payments, with a total value of more than $376 billion, since these payments began rolling out to Americans in batches as announced on March 12.
 
The fifth batch of payments began processing on Friday, April 9, with an official payment date of April 14, with some people receiving direct payments in their accounts earlier as provisional or pending deposits. Here is additional information on this batch of payments:

• In total, this batch includes nearly 2 million payments with a value of more than $3.4 billion.
• More than 320,000 payments, with a total value of $450 million, went to Veterans Affairs (VA) beneficiaries who receive Compensation and Pension (C&P) benefit payments but who don't normally file a tax return and didn't use the Non-Filers tool last year.
• Nearly 850,000 payments, with a total value of nearly $1.6 billion, went to eligible individuals for whom the IRS previously did not have information to issue an Economic Impact Payment but who recently filed a tax return. 
• This batch also includes additional ongoing supplemental payments for people who earlier this year received payments based on their 2019 tax returns but are eligible for a new or larger payment based on their recently processed 2020 tax returns. This batch included more than 700,000 of these "plus-up" payments, with a total value of more than $1.2 billion.
• Another 72,000 payments went to Social Security beneficiaries who didn't file a 2020 or 2019 tax return and didn't use the Non-Filers tool last year.
• Overall, this fifth batch of payments contains nearly 1.2 million direct deposit payments (with a total value of just under $2 billion) and nearly 800,000 paper check payments (with a total value of over $1.4 billion).
•  Additional information is available on the first four batches of Economic Impact Payments from the American Rescue Plan, which began processing on April 2, March 26, March 19 and March 12.
   
  A larger percentage of payments was made electronically during this round of payments than during previous rounds. This accelerated the delivery of payments to millions of American families whose payments would otherwise have been sent by mail. Over 95% of all Social Security beneficiaries have been paid electronically during this round of payments, compared to 70% in the first round and 72% in the second round.
   
  The IRS will continue to make Economic Impact Payments on a weekly basis. Ongoing payments will be sent to eligible individuals for whom the IRS previously did not have information to issue a payment but who recently filed a tax return, as well to people who qualify for "plus-up" payments.
   
  More information can be found here. 
   
  CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)
   
  Initial Documents Filed in PayPal Case Appeal
   
  As laid out in the scheduling order issued last month by the United States Court of Appeals for the District of Columbia Circuit, initial documents were filed in the appeal in the PayPal case on April 9. These documents are largely procedural and serve as introductory documents in the appeal. 
   
  In addition to the initial documents, the scheduling order requires that dispositive motions be filed by April 26, 2021 for both parties. These filings will likely be the first substantive filings in the appeal.
   
  The scheduling order can be accessed here. The IPA will make all documents filed in the case available to members as soon as they are released to the public. 
   
  FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
  Agencies Seek Wide Range of Views on Financial Institutions’ Use of Artificial Intelligence
  On March 31, five federal financial regulatory agencies announced they are gathering insight on financial institutions’ use of artificial intelligence (AI). The agencies are seeking information on how financial institutions use AI in their activities, including fraud prevention, personalization of customer services, credit underwriting, and other operations. 
  The Federal Reserve System, the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) and the Office of the Comptroller of the Currency (OCC) announced the request for information (RFI) to gain input from financial institutions, trade associations, consumer groups, and other stakeholders on the growing use of AI by financial institutions. More specifically, the RFI seeks comments to better understand the use of AI, including machine learning, by financial institutions; appropriate governance, risk management, and controls over AI; challenges in developing, adopting, and managing AI; and whether any clarification would be helpful. 
  
  Additional information can be found here. 
  
  

Agencies Issue Statement and Request for Information on Bank Secrecy Act/Anti-Money Laundering Compliance
On April 9, the federal banking agencies, in consultation with the Financial Crimes Enforcement Network and the National Credit Union Administration, issued a joint statement addressing how risk management principles described in the “Supervisory Guidance on Model Risk Management” relate to systems or models used by banks to assist in complying with the requirements of Bank Secrecy Act (BSA) laws and regulations. The statement further notes that it does not alter existing BSA/anti-money laundering (AML) legal or regulatory requirements or establish new supervisory expectations, and that no specific model risk management framework is required.

The agencies, along with the National Credit Union Administration and the Financial Crimes Enforcement Network, also announced a request for information (RFI) on the extent to which the principles discussed in the guidance support compliance by banks and credit unions with BSA/AML and Office of Foreign Assets Control requirements. The agencies are seeking comments and information to better understand bank practices and determine whether additional explanation or clarification may be helpful.

Responses are due by June 11th. Additional information can be found here. 

FDIC Seeks Input on How to Modernize Sign and Advertising Requirements for Banks
On April 9, the Federal Deposit Insurance Corporation (FDIC) announced that it is again seeking the public’s input on potential modernization of its sign and advertising requirements to better reflect how banks and savings associations operate and how consumers use banking services.
On February 19, 2020, the FDIC published a notice in the Federal Register soliciting public input regarding potential changes to its official sign and advertising rules. However, given the challenges associated with the COVID-19 pandemic, the agency temporarily postponed this effort on April 16, 2020. As banks continue to innovate, the FDIC is renewing its effort to revise and clarify its official sign and advertising rules related to FDIC deposit insurance. Read the FDIC’s Request for Information.

Additional information can be found here. The IPA previously submitted comment in response before the RFI was postponed in 2020, which can be accessed here. 

Financial Crimes Enforcement Network (FinCEN)
FinCEN Launches Regulatory Process for New Beneficial Ownership Reporting Requirement
On April 1, the Financial Crimes Enforcement Network (FinCEN) issued an Advance Notice of Proposed Rulemaking (ANPRM) to solicit public comment on a wide range of questions related to the implementation of the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA). 
​
This ANPRM is the first in a series of regulatory actions that FinCEN will undertake to implement the CTA, which is included within the Anti-Money Laundering Act of 2020 (AML Act).  The AML Act is part of the FY 2021 National Defense Authorization Act, which became law on January 1, 2021.  

The CTA amended the Bank Secrecy Act to require corporations, limited liability companies, and similar entities to report certain information about their beneficial owners (the individual natural persons who ultimately own or control the companies).  This new reporting requirement will enhance the national security of the United States by making it more difficult for malign actors to exploit opaque legal structures to launder money, finance terrorism, proliferate weapons of mass destruction, traffic humans and drugs, and commit serious tax fraud and other crimes that harm the American people.

The CTA requires FinCEN to maintain the reported beneficial ownership information in a confidential, secure, and non-public database.  Furthermore, the CTA authorizes FinCEN to disclose beneficial ownership information subject to appropriate protocols and for specific purposes to several categories of recipients, such as federal law enforcement.  Finally, the CTA requires FinCEN to revise existing financial institution customer due diligence regulations concerning beneficial ownership to take into account the new direct reporting of beneficial ownership information.
Comments are due by May 5, 2021. Additional details can be found here. 

Tester casts doubts on Brown's plan for Fed-run bank accounts
 
At a virtual conference last week Sen. Jon Tester, a Democrat of Montana and member of the Senate Banking Committee, was asked about FedAccounts and said, “I honestly don't think they're going to have a lot of traction.” He went on to say, "What we've seen is a healthy banking sector. We should talk about how to get more un- and under-banked folks access to financial services.... But quite frankly, I think to pull off the post offices or the Federal Reserve banking policies — I don't think it's going to have much life.”
 
Sen. Tester is a moderate Democrat and while, we haven’t heard directly from other Dems on the panel, it is possible that other moderate Dems on Senate Banking could take the same view as him.
 
Additional information on Sen. Tester’s comments can be found here. 
 
Recap of House Financial Services Committee Hearing on Charters
 
On April 15, the House Financial Services Subcommittee on Consumer Protection and Financial Institutions held a hearing entitled, “Banking Innovation or Regulatory Evasion? Exploring Trends in Financial Institution Charter.”
 
The majority of the discussion was focused on Industrial Loan Companies (ILCs) and the separation of banking and commerce. Specifically, the safety and soundness, data privacy, and competition concerns that could arise if commerce and banking are intermingled were discussed a number of times and attracted interest from members on both sides of the aisle. 
 
There also was some discussion of the OCC’s True Lender Rule and cryptocurrency as well. Former Acting Comptroller of the Currency Brian Brooks was a witness and got the most airtime. He got a number of questions about actions he took while in charge at the OCC, like the payments charter, Valid When Made and True Lender Rules, and action to allow banks to offer crypto custody services. Mr. Brooks defended his record and largely repeated the messaging on these issues from when he was in office.
 
Additional information and a recording of the hearing can be found here. 
 
House Financial Services Committee Approves FinTech & AI Tasks Forces for 117th Congress
 
During a markup on April 20, the House Financial Services Committee approved resolutions to re-establish the FinTech and AI Task Forces in the 117th Congress. 
 
According to the resolution, the FinTech Task Force shall, “…conduct hearings and investigations relating to financial technology within the Committee’s Rule X jurisdiction and may issue reports to the Committee detailing its findings and recommendations.” 
 
In addition, the AI Task Force shall, “…conduct hearings and investigations relating to artificial intelligence within the Committee’s Rule X jurisdiction and may issue reports to the Committee detailing its findings and recommendations.” 

Reps. Stephen Lynch (D-MA) and Tom Emmer (R-MN) will serve as chair and ranking member of the FinTech Task Force respectively. In addition, Reps. Bill Foster (D-IL) and Anthony Gonzalez (R-OH) will serve as chair and ranking member of the AI Task Force respectively. 
 
The resolutions can be accessed here. 
 
Kaptur, Gillibrand, Ocasio-Cortez, Pascrell Call on Congress to implement Postal Banking Pilot Programs
 
On April 15, Congresswoman Marcy Kaptur (D-OH), alongside U.S. Senator Kirsten Gillibrand (D-NY), and U. S. Representatives Alexandria Ocasio-Cortez (D-NY) and Bill Pascrell (D-NJ) called on Congress to implement postal banking pilot programs in rural and urban communities across the country as part of the Fiscal Year 2022 (FY22) Senate and House Financial Services and General Government Appropriations (FSGG) Appropriations Bill and eventual final conference agreement. The lawmakers also pushed for $6 million in funding for USPS in FY22 to carry out the pilot programs to expand non-bank financial services offerings.
 
Additional information can be found here. 
 
House Financial Service Committee Republicans Release Report on FinTech Task Force 
 
On April 20, the Republican staff of the House Financial Services Committee released a report entitled, The Cutting Edge of Finance: An Examination of the Work of Republicans on the House Financial Services Committee’s Task Forces on Financial Technology and on Artificial Intelligence. This report summarizes the work of Republicans on the House Financial Services Committee’s two task forces focused on financial innovation: the Task Force on Financial Technology and the Task Force on Artificial Intelligence. The task forces were intended to help the Committee on Financial Services better understand the latest technology developments in financial services.
 
This report summarizes the key topics on which Committee Republicans focused, the themes that emerged over the course of the Congress, and policy recommendations for regulators and Congress. The key takeaways are that Congress must (1) promote greater financial inclusion and expanded access to financial services, and (2) ensure that the federal government does not hamper the U.S.’ role as a global leader in financial services innovation. 
 
The full report can be found here. 

​None.

​New Federal Laws
 
None.
 
Pending Federal Bills
 
H.R. 1711 – To amend the Consumer Financial Protection Act of 2010 to direct the Office of Community Affairs to identify causes leading to, and solutions for, under-banked, un-banked, and underserved consumers, and for other purpose
 
Summary: This bill would direct the CFPB to conduct research on barriers to financial inclusion and identify hurdles under- and un-banked consumers. It would also require the Bureau to identify best practices to increase participation in the financial system and included a reporting requirement.
Status: Referred to the Committee on Financial Services, and in addition to the Committee on the Budget on 3/9/21
Sponsor: Rep. David Scott (D-GA)
 
H.R. 1996 – SAFE Banking Act
 
Summary: This bill would allow marijuana-related businesses in states with some form of legalized marijuana and established regulatory structures to access the banking and payments system.
Status: Referred to the Committee on Financial Services, and in addition to the Committee on the Judiciary on 3/18/21
Sponsor: Rep. Ed Perlmutter (D-CO)