January 25, 2023

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;  Eli Rosenberg, Partner, Baird Holm LLP; and Gray Derrick, Partner, Baird Holm LLP. Please address comments and suggestions to: [email protected].

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The 2023 Innovative Payments Conference will be held on May 7-9th. The IPA’s IPC is the must-attend annual event for the payments community attracting the attention and support of the industry’s most influential players. Benefit from two days of cutting-edge content, discussions and enhanced networking as you engage directly with those leading the way in payments compliance, legislation, regulation and innovation.

CFPB Files Amicus Brief in Prepaid Card Case
The CFPB filed an amicus brief in the U.S. Court of Appeals for the Fourth Circuit as part of Mohamed v. Bank of America, N.A., No. 22-1954 (4th Cir.). In the case, the plaintiff sued Bank of America for violations of the Electronic Fund Transfer Act (EFTA) when he received a prepaid government benefits card that had been fraudulently depleted of its entire $15,000 balance before he received it. Bank of America argued that EFTA does not apply to accounts loaded with unemployment assistance related to the pandemic.
 
The CFPB’s amicus brief explains that EFTA’s protections clearly apply to prepaid card accounts used to distribute certain types of government benefits, including unemployment assistance related to the pandemic, and that to hold otherwise would be to create a new exception to the law’s regulations.
 
More information can be found in this CFPB blog post, authored by general counsel Seth Frotman.
 
CFPB Proposes Rule to Establish Public Registry of Contract Terms
The CFPB proposed a rule which would establish a public registry of supervised nonbanks’ terms and conditions that are included in form contracts with their customers and users. According to the press release, the rule would require nonbanks to submit information on terms and conditions in form contracts that they use to waive or limit individuals rights and legal protections. The information would then be posted in an online registry that will be open to the public. The IPA is currently involved in a Chamber of Commerce coalition that is examining the effects the potential rule may have on pre-dispute arbitration clauses. The main concern seems to be the compliance burden on institutions that have many different contracts, sometimes more than one per state, the effect the registry would have on their ability to include pre-dispute arbitration clauses, and what next steps the CFPB may take after they have compiled this information.
 
CFSA Files Brief in CFPB Funding Case
The Community Financial Services Association of America (CFSA) filed its brief to the Supreme Court in their case against the CFPB. In the brief, the CFSA argued that the Supreme Court has the ability to address the validity of the CFPB’s payday lending rule without addressing the issue of the CFPB’s controversial funding mechanism. The Supreme Court is scheduled to consider the request for certiorari in a February 17th conference, after which we will know whether or not the Court will hear the case this term or next term, or will deny the request entirely.
 
CFPB Issues Report on TransUnion, Experian, and Equifax
The CFPB released its annual report on the three major credit reporting bureaus – Equifax, TransUnion, and Experian. In brief, the report analyzes how the credit bureaus respond to consumer complaints and implement aspects of the Fair Credit Reporting Act.  Accordingly, the report acknowledges that the credit bureaus have taken affirmative steps to address consumer concerns and provide more substantive responses to consumer inquiries.  However, the CFPB expects continued improvement in the next year and has recommended the credit bureaus implement the following changes: consider consumer burden when implementing automated processes; recognize that technology is also improving for consumers; and consider how to transition the market from control and surveillance to consumer participation
 
Agencies Issue Joint Statement on Crypto-Asset Risks to Banking Organizations
The Federal Reserve, FDIC, and OCC issued a joint statement on digital assets, expressing their concerns for banks and the use of digital assets including cryptocurrency and stablecoins.

The statement describes several key risks they see associated with crypto-assets and the crypto-asset sector, including: uncertainties related to custody practices, redemptions, and ownership rights; misleading or false representations of disclosures; volatility, run risks on stablecoins; a lack of maturity and robustness in the risk management and governance practices; heightened risks associated with open or DeFi networks; and the risk of fraud.

The statement also notes that the banking regulators are carefully reviewing any proposals from banking organizations to engage in activities that involve crypto-assets.
 
OCC Releases 2022 Annual Report
The OCC released its 2022 Annual Report in which they provide an overview of the condition of the federal banking system and discusses the OCC’s strategic priorities and initiatives. Specifically, the report found that the banking system remains resilient despite a recent dip in profitability with the phasing out of pandemic-related economic aid, and said that banks are still able to support their customers and the national economy. 
 
The report also highlighted the efforts of the OCC related to third-party risk management, financial inclusion, and the risks and benefits of cryptocurrency and digital assets.
 
CFPB Blog Post on Supervision Process
The CFPB published a blog post entitled “What new supervised institutions need to know about working with the CFPB”. In the blog, the CFPB outlines the supervisory activities that they conduct, the process they follow when conducting examinations, and what supervised institutions can expect following an exam or other supervisory activity. The blog post also included a link to the CFPB’s Supervision Program, and encourages supervised institutions to become more familiar with the program.
 
House Financial Services Committee Subcommittee Chairs

• Capital Markets — Rep. Ann Wagner
• Financial Institutions and Monetary Policy — Rep. Andy Barr 
• National Security, Illicit Finance and International Financial Institutions — Rep. Blaine Luetkemeyer 
• Oversight and Investigations — Rep. Bill Huizenga 
• Housing and Insurance —Rep. Warren Davidson
• Digital Assets – Rep. French Hill

House Balance of Power in the 118th Congress​

​Senate Balance of Power in the 118th Congress

New Federal Bills
None
 
Pending Federal Bills
None