September 21, 2022

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].

​Compliance Boot Camp
The IPA will gather in Chicago on September 29th for our Compliance Boot Camp. Topics to be discussed include Regulation E, EWA, BNPL, Paypal v. CFPB, Fraud Prevention, and Cryptocurrency. Registration information can be found here. 

Money 20/20 Reception
Please join Stinson LLP, Baird Holm LLP, The American Transaction Processors Coalition and the IPA on Monday, October 24th, for a reception during the Money 20/20 Conference. Drinks and hors d'oeuvres will be served beginning at 5 p.m. Registration information can be found here. 

Senate Democrats Send Letter to CFPB on P2P Fraud
Senators Casey (D-PA), Blumenthal (D-CT), Warren (D-MA), Gillibrand (D-NY), all members of the Senate Special Committee on Aging, along with Sen. Cortez Masto (D-NV), sent a letter to CFPB Director Rohit Chopra expressing concern with the increased prevalence of fraud on P2P payment platforms such as Venmo, Cash App, PayPal, and Zelle, particularly targeted toward older adults. According to the letter, the CFPB is currently considering guidance to broaden the definition of unauthorized transactions, which would shift some of the burden of these losses from consumers to banks and P2P apps. The Senators encouraged the CFPB to move forward in issuing guidance to provide seniors with better tools to protect themselves and their families.
 
Acting Comptroller Hsu Remarks on Safeguarding Trust in Banking
Acting Comptroller Michael Hsu delivered remarks at The Clearing House and Bank Policy Institute’s Annual Conference. His remarks were intended to provide an update on his priorities as Acting Comptroller- guarding against complacency, addressing inequality, adapting to digitalization, and managing climate-related risk. 
 
Notably, in his remarks, Acting Comptroller Hsu compared the increase in bank-fintech partnerships to the run up to the 2008 financial crisis and said:
 
“The “de-integration” of banking services that is taking place now has its roots in technology, data, and operations and is affecting all banks, not just the large, money center banks. My strong sense is that this process, if left to its own devices, is likely to accelerate and expand until there is a severe problem or even a crisis. Like the globalization of manufacturing and the disintermediation of credit, the efficiency gains of these changes can be enjoyed immediately, while the most material risks do not manifest for some time.”
 
FDIC-FinCEN Digital Identity Tech Sprint
FinCEN has published key takeaways on their digital identity-focused Tech Sprint, available here. Through the Tech Sprint, the FDIC and FinCEN challenged teams to develop solutions to measure the effectiveness of digital identity credentials. Specifically, the Tech Sprint asked teams to answer the following question: “What is a scalable, cost-efficient, risk-based solution to measure the effectiveness of digital identity proofing to ensure that individuals who remotely (i.e., not in person) present themselves for financial activities are who they claim to be?” More information on the FDIC-FinCEN Tech Sprint Program can be found here.
 
Senate Banking Committee Hearing on New Consumer Financial Products
The Senate Banking Committee held a hearing entitled “New Consumer Financial Products and the Impacts to Workers.” A recording of the hearing and witness statements can be found here. 
 
Witness statements and member questions focused on BNPL, Training Repayment Programs, student loans, and EWA. When EWA was discussed, members and witnesses focused mostly on direct-to-consumer and tip-based models. In his opening statement, Chairman Sherrod Brown was critical of tip-based models, but acknowledged that “employer-based earned wage advances with strong consumer protections can, in fact, help workers cover unexpected expenses or emergencies.” 
 
In his opening statement, Ranking Member Toomey described EWA as “an appealing alternative to payday loans for workers who want an advance on their wages. Many people don’t have savings available to pay for unexpected expenses that can arise in between pay periods….EWA can help consumers to meet such expenses and others…” He also noted that market competition is the best way to achieve consumer protection and warned against burdensome regulation that could stifle innovation.  
 
The IPA met with senior Committee staff in advance of the hearing to educate them on EWA. We were pleased to see that during the hearing members differentiated between direct-to-consumer and employer-sponsored programs and there were no overt criticisms of employer-sponsored programs.
 
CFPB Releases Market Report on BNPL
The CFPB released a market report as a follow up to its December 2021 market monitoring orders to five Buy Now Pay Later lenders. The market report summarizes the data, individual and organizational submissions to the CFPB, and publicly available sources to provide a review of the BNPL marketplace and consumer impacts. The report identifies both financial and operational benefits of BNPL loans over legacy credit products and outlines three categories of potential consumer risks: discrete consumer harms, data harvesting, and borrower overextension. CFPB Director Chopra’s remarks on the release of the BNPL market report can be found here.
 
Treasury Releases Reports on Digital Assets
As assigned in President Biden’s Executive Order on “Ensuring Responsible Development of Digital Assets, the Treasury released three reports on digital assets, individually focused on the future of money and payment systems, consumer and investor protection, and illicit finance risks. The White House also released a Fact Sheet this morning outlining the reports and announcing further steps to protecting consumers and ensuring fair play in digital assets.
 
The reports and their recommendations can be accessed below:

• The Future of Money and Payments
• Implications for Consumers, Investors, and Businesses
• Action Plan to Address Illicit Financing Risks of Digital Assets

​New Federal Bills
None
 
New Federal Bills
None
 
Pending Federal Bills
S. 4760 - Digital Commodities Consumer Protection Act of 2022
 
Summary: The bill would give the CFTC the authority to regulate digital commodities.
 
Status: Introduced on August 8, 2022 and referred to the Senate Committee on Agriculture, Nutrition and Forestry.
 
Sponsor: Rep. Debbie Stabenow (D-MI)
 
Financial Data Privacy Bill Discussion Draft
 
Summary: The bill would modernize financial data privacy laws and give consumers more control over how their personal information is collected and used.
 
Status: Discussion Draft released. Not officially introduced.
 
Sponsor: Rep. Patrick McHenry (R-NC)
 
S. 4356 Responsible Financial Innovation Act
 
Summary: The bill would create a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust consumer protections while integrating digital assets into existing law.
 
Status: Introduced in Senate on June 7, 2022, Referred to the Committee on Finance.
 
Sponsors: Senators Kristen Gillibrand (D-NY) and Cynthia Lummis (R-WY)
 
The Stablecoin Transparency of Reserves and Uniform Safe Transactions (Stablecoin TRUST) Act 
 
Summary: The bill would require that payment stablecoin issuers choose from one of three regulatory regimes: a traditional bank charter; a new federal license designed specifically for stablecoin issuers; or a state-based money transmitter or similar license under state law. The bill would also subject all payment stablecoin issuers to standardized disclosure, redemption, and audit requirements; and would clarify that stablecoins that do not offer interest are not securities.
 
Status: Proposed, but not yet introduced.
 
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)
 
H.R. 6415 To amend the Federal Reserve Act to prohibit the Federal reserve banks from offering certain products or services directly to an individual, and for other purposes.
 
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 and referred to the Financial Services Committee 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 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 on 3/17/2022 by a vote of 222-209 and was received in the Senate on 3/21/22.
 
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)
 
IV. U.S. Congress Members Not Seeking Re-Election in 2022
The current structure of the U.S. Senate is 48 Democrats, 50 Republicans, and 2 Independents. Currently 1 Democratic and 5 Republican Senators have announced they will not be running for reelection in 2022. The current structure of the U.S. House is 222 Democrats and 211 Republicans. Currently 31 Democratic and 18 Republican House members have announced they will not be running for reelection in 2022. More information about Congressional retirements can be found here. 
 

S. 4760 - Digital Commodities Consumer Protection Act of 2022
 
Summary: The bill would give the CFTC the authority to regulate digital commodities.
 
Status: Introduced on August 8, 2022 and referred to the Senate Committee on Agriculture, Nutrition and Forestry.
 
Sponsor: Rep. Debbie Stabenow (D-MI)
 
Financial Data Privacy Bill Discussion Draft
 
Summary: The bill would modernize financial data privacy laws and give consumers more control over how their personal information is collected and used.
 
Status: Discussion Draft released. Not officially introduced.
 
Sponsor: Rep. Patrick McHenry (R-NC)
 
S. 4356 Responsible Financial Innovation Act
 
Summary: The bill would create a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust consumer protections while integrating digital assets into existing law.
 
Status: Introduced in Senate on June 7, 2022, Referred to the Committee on Finance.
 
Sponsors: Senators Kristen Gillibrand (D-NY) and Cynthia Lummis (R-WY)
 
The Stablecoin Transparency of Reserves and Uniform Safe Transactions (Stablecoin TRUST) Act 
 
Summary: The bill would require that payment stablecoin issuers choose from one of three regulatory regimes: a traditional bank charter; a new federal license designed specifically for stablecoin issuers; or a state-based money transmitter or similar license under state law. The bill would also subject all payment stablecoin issuers to standardized disclosure, redemption, and audit requirements; and would clarify that stablecoins that do not offer interest are not securities.
 
Status: Proposed, but not yet introduced.
 
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)
 
H.R. 6415 To amend the Federal Reserve Act to prohibit the Federal reserve banks from offering certain products or services directly to an individual, and for other purposes.
 
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 and referred to the Financial Services Committee 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 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 on 3/17/2022 by a vote of 222-209 and was received in the Senate on 3/21/22.
 
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)
 
IV. U.S. Congress Members Not Seeking Re-Election in 2022
The current structure of the U.S. Senate is 48 Democrats, 50 Republicans, and 2 Independents. Currently 1 Democratic and 5 Republican Senators have announced they will not be running for reelection in 2022. The current structure of the U.S. House is 222 Democrats and 211 Republicans. Currently 31 Democratic and 18 Republican House members have announced they will not be running for reelection in 2022. More information about Congressional retirements can be found here.