The Government Updateis 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: gr@ipa.org.  San Francisco Looking for Fintech or Banking Partner for College Savings Program The IPA has learned that the San Francisco Office of the Treasurer & Tax Collector and the Kindergarten to College (K2C) program is planning to hold a Webinar on Wednesday, Feb. 23, to discuss its forthcoming request for proposal for a financial services provider to offer college savings programs for every student in the San Francisco Unified School District. The accounts have seed funding and are eligible for incentive deposits from the city. It currently has $10.9 million in savings and continues to grow. This virtual pre-bid conference will introduce San Francisco’s K2C program, highlight the program goals, and share next steps in the process. They will answer questions about the program and what they are seeking. You can learn more and register at the link below. Virtual K2C Financial Institution Pre-Bid Conference Wednesday, February 23, 2022 9:00 – 10:00 AM PT Register at: Webinar Registration - Zoom  CFPB Publishes Blog Regarding Excessive Fees As a follow up to their recently-announced request for information (RFI) “Regarding Fees Imposed by Providers of Consumer Financial Products or Services,” the CFPB has published a blog post, entitled “The Hidden Cost of Junk Fees.” In addition to background information on how they define junk fees, the CFPB outlines common junk fees described in their request for information, including overdraft or non-sufficient fund fees, late fees, fees to pay your bill, closing costs and homebuying fees, and most important to the IPA, prepaid card fees. The IPA is reviewing the blog post and RFI on junk fees as it relates to prepaid (cards) accounts and is in the early stages of drafting a response to the CFPB. CFPB Begins Accepting Public Petitions for Rulemaking The CFPB has launched a new online system for members of the public to engage with the agency and request regulatory changes. Using the new system, the public will be able to request the agency pursue a new rule, amend an existing one, or repeal a rule. Petitions will be posted on public dockets for review and comment, and everyone, including former government employees and lobbyists, will be required to submit their petitions for public review through the online system going forward. Crypto/Stablecoin Bills Introduced in Financial Services Committee Rep. Tom Emmer (R-MN) introduced a H.R. 6415 to amend the Federal Reserve Act and prohibit the Federal Reserve from offering products and services directly to an individual, maintain an account on behalf of an individual, or issue a central bank digital currency to an individual. The bill has been referred to the Financial Services Committee but currently has no cosponsors and has not received a markup. In the coming weeks, Rep. Josh Gottheimer (D-NJ), also a member of the House Financial Services Committee, will be releasing a bill which would require stablecoin issuers to either become a bank, similar to recommendations from the President’s Working Group on Financial Markets’ Recommendations on Stablecoins, or to partner with a bank. Either option would subject the issuer to bank-like regulation. The bill also requires nonbank stablecoin issuers to maintain collateral in an amount equal to 100 percent of the value of outstanding stablecoin. Rep. Gottheimer and Emmer’s bills are one of a number of recent legislative proposals on cryptocurrency, in addition to the Federal Reserve’s report on CBDCs and an upcoming White House Executive Order on cryptocurrency regulation, indicating 2022 will be Congress’ most active year for the regulation of digital assets. CFPB Release Results of Semiconductor Study The Department of Commerce released results from the Risks in the Semiconductor Supply Chain Request for Information (RFI) issued in September 2021. The study showed that median inventory held by chips consumer fell from 40 days in 2019 to 5 days in 2021, while semiconductor demand is 17 percent higher in 2021 than in 2019, indicating the potential for a major disruption if COVID, a natural disaster, or political instability affects a foreign semiconductor facility. PayPal v. CFPB Oral Arguments Oral arguments for PayPal v. CFPB took place last week. These arguments focused on Paypal’s attempting to strike down a proposal by the CFPB to hold digital wallets to certain disclosure and waiting-period rules that currently apply to physical prepaid payment cards. Lawyers for PayPal seemed to have a better grasp on the issues than lawyers for the CFPB, who appeared to be playing defense most of the time. While it’s impossible to predict how the court will decide the case, the judges seemed to understand the issue, and appeared more sympathetic to PayPal’s arguments. We expect a decision later this year or early next year. Senate Banking, House Financial Services Holds Hearing on PWG Stablecoin Report Undersecretary of the Treasury for Domestic Finance Nellie Liang appeared before the Senate Banking and House Financial Services Committees in separate hearings to discuss the recently-released Presidential Working Group Report on Stablecoins. Both hearing focused on stablecoin risks and benefits, existing state regulation, and the financial inclusion potential of stablecoins. Liang mostly repeated the findings and recommendations of the report, and did not reveal any new policy recommendations. When asked by Republicans about existing state regulation, Liang said that while there are existing state laws that apply to stablecoins, a less fragmented federal regulatory framework is preferred. Liang declined to advocate for specific legislative proposals, other than the recommendation from the report to require stablecoins be issued from insured depository institutions. This proposal tracks closely with Rep. Gottheimer’s (D-NJ) recent legislative proposal which has yet to be released. You can watch the senate hear at this link (the hearing starts at about 18:00: hearing | Hearings | United States Committee on Banking, Housing, and Urban Affairs (senate.gov) You can watch the house hearing here: Virtual Hearing - Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins | U.S. House Committee on Financial Services Feinstein Asks Treasury, IRS to Investigate Traffickers' Use of Cryptocurrency In a recent letter to the Treasury Department and IRS, Sen. Dianne Feinstein (D-CA) asked for information on how digital currencies are being used in human and drug trafficking. Feinstein specifically asked what steps Treasury and the IRS are taking in response to a recent GAO report which stated the agencies may not have all the data they need to determine the extent to which cryptocurrencies are being used to aid human and drug trafficking. She asked the agencies what steps they are taking to better capture the needed data, what other actions they are taking to improve the tracking, sharing, and use of information regarding the illicit use of cryptocurrencies, and whether they require additional legislative authorities to implement GAO’s recommendations.  New Federal Bills The Stablecoin Innovation and Protection Act Summary: This bill would require stablecoin issuers to either become a bank or to partner with a bank, and be subject to bank-like regulation. The bill also requires nonbank stablecoin issuers to maintain collateral in an amount equal to 100 percent of the value of outstanding stablecoin. Status: Proposed, but not yet introduced. Sponsor: Rep. Josh Gottheimer (D-NJ) Pending Federal Bills H.R. 6415 Summary: This bill amends the Federal Reserve Act to prohibit the Federal Reserve banks from offering banking products and services, including CBDC, directly to consumers. Status: Introduced in the House on January 18, 2022 Sponsor: Rep. Tom Emmer (R-MN) H.R. 4773 – Consumer Financial Protection Commission Act Summary: This bill removes the CFPB from the Federal Reserve System, converts the Bureau into an independent commission, and modifies its leadership structure. Specifically, the bill eliminates the position of director and deputy director and establishes a five-person commission appointed by the President and confirmed by the Senate. Status: Introduced in the House and referred to the House Financial Services Committee on July 28, 2021 Sponsor: Rep. Blaine Luetkemeyer (R-MO) H.R.963 – Forced Arbitration Injustice Repeal (FAIR) Act Summary: This bill prohibits a pre-dispute arbitration agreement from being valid or enforceable if it requires arbitration of an employment, consumer, antitrust, or civil rights dispute. Status: The bill passed the House Judiciary Committee on November 3. Sponsor: Rep. Hank Johnson (D-GA) 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 purposes. 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: Passed/agreed to in House on 5/18/21. Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs on 5/19/21. 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: Passed/agreed to in House on 4/19/21. Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs on 4/20/21. Sponsor: Rep. Ed Perlmutter (D-CO) H.R. 3968 - Municipal IDs Acceptance Act Summary: This bill would require that the banking regulators update their guidance on Customer Identification Programs to state that an identification card issued by a municipality may be used by a bank to verify the identity of a customer, if such identification card enables the bank to form a reasonable belief that the bank knows the true identity of the customer. Status: 06/23/2021 Ordered to be Reported from the Financial Services Committee in the Nature of a Substitute (Amended) by the Yeas and Nays: 27 - 23. Sponsor: Rep. Richie Torres (D-NY) H.R. 4277 – Overdraft Protection Act of 2021 Summary: This bill would limit overdraft fees, both in frequency and amount, and would establish a set of practices for overdraft coverage programs. Status: Introduced and referred to the House Financial Services Committee on 6/30/21. Sponsor: Rep. Carolyn Maloney (D-NY)     
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The Government Updateis 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: gr@ipa.org.  IPA Media Engagements The IPA is frequently cited in the media on issues important to our members. Below are the most recent examples:
 CFPB Issues Letter on EWA; Promises Greater Clarity CFPB Acting General Counsel Seth Frotman said in a letter to New Jersey consumer advocates that the CFPB’s November 2020 advisory opinion regarding EWA products has caused confusion among those trying to apply the opinion to a wider range of products than initially intended, and is being misinterpreted. The 2020 advisory opinion said that EWA products offered for free through an employer should not be regulated as consumer credit under the Truth in Lending Act. Consumer advocates, including the recipients of Frotman’s letter, have called for the opinion to be rescinded. Frotman noted that the 2020 advisory opinion was limited to a narrow set of facts and was not intended to apply to all EWA products. Frotman indicated that he is recommending to CFPB Director Rohit Chopra that the CFPB provide greater clarity on EWA products. Federal Reserve Releases CBDC Report The Federal Reserve released its long-awaited report on central bank digital currency (CBDC), entitled “Money and Payments: The U.S. Dollar in the Age of Digital Transformation.” As expected, the Fed avoided taking a position on the creation and implementation of a CBDC, and instead laid out pros and cons, and posed questions that will shape the debate going forward. Notably, the Fed emphasized they would not move forward without congressional approval, stating “The Federal Reserve does not intend to proceed with issuance of a C.B.D.C. without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.” The Fed also dismissed the possibility that a CBDC could be implemented alongside consumer bank accounts at the Fed, stating “The Federal Reserve Act does not authorize direct Federal Reserve accounts for individuals, and such accounts would represent a significant expansion of the Federal Reserve’s role in the financial system and the economy,” The Federal Reserve’s initial analysis suggests that a potential U.S. CBDC, if one were created, would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable, and identity-verified. FinCEN Issues Proposed Rule for SAR Sharing Pilot Program The Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM) that proposed and solicited public comment on the establishment of a pilot program for sharing suspicious activity reports (SARs). The pilot program would permit a financial institution with a SAR reporting obligation to share SARs and information related to SARs with the institution’s foreign branches, subsidiaries, and affiliates for the purpose of combating illicit finance risks. Currently institutions may only share SARs with foreign head offices (not branches) controlling companies (whether foreign or domestic), and domestic affiliates. Department of Commerce Releases Results from Semiconductor Supply Chain RFI The Department of Commerce has released the results from the Risks in the Semiconductor Supply Chain Request for Information (RFI) issued in September 2021. The RFI showed that median inventory held by chips consumer fell from 40 days in 2019 to 5 days in 2021, while semiconductor demand is 17 percent higher in 2021 than in 2019, indicating the potential for a major disruption if COVID, a natural disaster, or political instability affects a foreign semiconductor facility. As a reminder, the IPA joined a joint trade association letter in response to Department of Commerce RFI, and has joined a Semiconductor Shortage coalition with other financial trades to conduct proactive outreach on Capitol Hill. CFPB issues RFI Regarding Excessive Fees The CFPB issued a press release announcing a Request for Information (RFI) aimed at reducing fees charged by banks and other financial companies. Specifically, they are asking for consumers’ experiences with unexpected, unclear, duplicative, and excessive fees related to their bank, credit union, prepaid or credit card account, mortgage, loan, or payment transfer. Fienstein Asks Treasury, IRS to Investigate Traffickers' Use of Cryptocurrency Last week, in a letter to the Treasury Department and IRS, Sen. Dianne Feinstein (D-CA) asked for information on how digital currencies are being used in human and drug trafficking. Feinstein specifically asked what steps Treasury and the IRS are taking in response to a recent GAO report which stated the agencies may not have all the data they need to determine the extent to which cryptocurrencies are being used to aid human and drug trafficking. She asked the agencies what steps they are taking to better capture the needed data, what other actions they are taking to improve the tracking, sharing, and use of information regarding the illicit use of cryptocurrencies, and whether they require additional legislative authorities to implement GAO’s recommendations.  Notable State Issues NY Gift Card bill Passes Assembly NY State Bill A266 passed the Assembly and was referred to the Senate last week. The bill would require any businesses who display gift cards for sale to post notices alerting customers of gift card scams. One of our members who has a presence in New York has been communicating with the sponsor of the bill, and she is open to working with the industry, to make improvements and/or amendments. WA Payroll Card Bill in Senate Committee Last week, Washington Senate bill 5531 was introduced. It would amend the Uniform Unclaimed Property Act to consider payroll cards abandoned property one year after it was issued and made payable. IPA continues to follow the bill, but there has been no action on the bill since it was introduced.  New Federal Bills
None. Pending Federal Bills H.R. 6415 Summary: This bill amends the Federal Reserve Act to prohibit the Federal Reserve banks from offering banking products and services, including CBDC, directly to consumers. Status: Introduced in the House on January 18, 2022 Sponsor: Rep. Tom Emmer (R-MN) H.R. 4773 – Consumer Financial Protection Commission Act Summary: This bill removes the CFPB from the Federal Reserve System, converts the Bureau into an independent commission, and modifies its leadership structure. Specifically, the bill eliminates the position of director and deputy director and establishes a five-person commission appointed by the President and confirmed by the Senate. Status: Introduced in the House and referred to the House Financial Services Committee on July 28, 2021 Sponsor: Rep. Blaine Luetkemeyer (R-MO) H.R.963 – Forced Arbitration Injustice Repeal (FAIR) Act Summary: This bill prohibits a pre-dispute arbitration agreement from being valid or enforceable if it requires arbitration of an employment, consumer, antitrust, or civil rights dispute. Status: The bill passed the House Judiciary Committee on November 3. Sponsor: Rep. Hank Johnson (D-GA) 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 purposes. 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: Passed/agreed to in House on 5/18/21. Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs on 5/19/21. 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: Passed/agreed to in House on 4/19/21. Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs on 4/20/21. Sponsor: Rep. Ed Perlmutter (D-CO) H.R. 3968 - Municipal IDs Acceptance Act Summary: This bill would require that the banking regulators update their guidance on Customer Identification Programs to state that an identification card issued by a municipality may be used by a bank to verify the identity of a customer, if such identification card enables the bank to form a reasonable belief that the bank knows the true identity of the customer. Status: 06/23/2021 Ordered to be Reported from the Financial Services Committee in the Nature of a Substitute (Amended) by the Yeas and Nays: 27 - 23. Sponsor: Rep. Richie Torres (D-NY) H.R. 4277 – Overdraft Protection Act of 2021 Summary: This bill would limit overdraft fees, both in frequency and amount, and would establish a set of practices for overdraft coverage programs. Status: Introduced and referred to the House Financial Services Committee on 6/30/21. Sponsor: Rep. Carolyn Maloney (D-NY) |
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