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: firstname.lastname@example.org.
IPA Podcast: New Agency Heads Will Change the Regulatory Environment
The Consumer Financial Protection Bureau has a new director, and the Biden Administration has nominated a new Comptroller of the Currency. These two agencies regulate large swaths of financial services. With the appointments, the industry likely will see a change in both the kinds of regulations that will be promulgated and the tone of interactions with the regulators.
In this episode, we talk with Brian Tate, the CEO of the Innovative Payments Association, about what these changes might mean and how the industry can prepare.
You can listen to the podcast on your favorite podcast app or at our site: Podcast - Innovative Payments Association (ipa.org)
Make sure to subscribe and leave us a review.
IPA Joins a Coalition to Oppose Tax Reporting Proposal
The IPA has joined a coalition of financial services trades (including ABA, ICBA, CUNA, etc.) and companies opposing the proposed new tax information reporting regime from the Biden Administration as part of the proposed Reconciliation package pending in Congress. In brief, the proposal would require providers of financial services to track and submit to the IRS information regarding every account above a de minimis threshold of $600 during the year. In total over 100 trade associations have signed the letter. The letter will be sent to Members of the House and Senate.
CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)
Rohit Chopra confirmed as CFPB Director, Will Testify Before Congress
On September 30, the U.S. Senate confirmed Rohit Chopra’s to be the next Director of the Consumer Financial Protection Bureau. He was sworn in on October 12. He previously served at the CFPB from 2010 to 2015 and led the Bureau’s efforts on student lending issues. He will testify in front of the House Financial Services Committee on Oct. 27 and is expected to reveal some of his priorities as director. The hearing will be livestreamed at: https://financialservices.house.gov/live/.
OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC)
Saule Omarova Nominated to be next Comptroller, Draws Scrutiny
On September 23, President Biden announced that he was nominating Saule T. Omarova, the Beth and Marc Goldberg Professor of Law at Cornell University, to be the next comptroller of the currency.
Saule’s nomination has drawn scrutiny because of her writings on the banking system. In an article for the Vanderbilt Law Review, she calls for “the complete migration of demand deposit accounts to the Fed’s balance sheet…”
Support for her nomination seems to be split along party lines, with Sen. Sherrod Brown (D-OH) releasing a statement in support, and Senator Pat Toomey (R-PA) saying he has “serious reservations” about her nomination.
The Postal Service Begins Testing Financial Services
The Washington Post reported that the United States Postal Service has begun a test where it is offering check cashing services at several east coast locations. It plans to expand the pilot to include other financial services such as bill payments, the Post said. You can read the article here: USPS moves toward banking services with paycheck-cashing test - The Washington Post
Postal Banking has existed in the past. Post Offices offered deposit accounts from 1910 through 1966. The accounts were aimed moistly at immigrants and people in rural areas who did not have access to banks. You can read more about the history of postal banking here: Banking on the Postal Service? | USPS Office of Inspector General (uspsoig.gov)
The idea of postal banking has come up many times since 1966. In 2020, Senator Kirsten Gillibrand (D-NY) and Bernie Sanders (I-VT) introduced the Postal Banking Act to allow the Postal to offer low-cost checking and savings accounts, ATMs, mobile banking, and low-interest loans. You can read more here: Senators Gillibrand And Sanders Reintroduce Postal Banking Act To Fund United States Postal Service And Provide Basic Financial Services To Underbanked Americans | Kirsten Gillibrand | U.S. Senator for New York (senate.gov)
Department of Commerce Requests Input on Impending Chip Shortage
The U.S. Department of Congress published a request for public comment on the semiconductor chip shortage affecting a number of industries across the United States on Sept. 24. The shortage has been caused by the COVID 19 pandemic. The request seeks input on:
It is seeking input from a variety of companies. The deadline to respond is November 8. You can find the notice here: Federal Register :: Notice of Request for Public Comments on Risks in the Semiconductor Supply Chain
The chip shortage could affect the payments industry by making it difficult to find chips for new EMV and contactless cards and by causing manufacturing problems for chip reading terminals. The IPA is working with its members and other organizations to look for possible solutions to the shortage.
California Governor Signs Bill for Requirements on Accepting Deposits
California Governor Gavin Newsome signed a bill into law on Oct. 5 that puts requirements on accounts that want to accept direct deposit of state funds for unemployment, welfare, and child support payments. Any account that wants to be able to accept these funds must be held at an insured depository institution and offer deposit insurance, provide consumer protections under the Electronic Funds Transfer Act, and not offer overdraft or credit features that charge a fee. You can find the full text of the law here: Bill Text - SB-497 Qualifying accounts for direct deposit of publicly administered funds. (ca.gov)
NCLC Writes to the CFPB to Ask it to Treat EWA as Credit
The National Consumer Law Center submitted a letter to the Consumer Financial Protection Bureau dated October 12, that requested that it treat all earned wage access products as extensions of credit and that it rescind an earlier compliance sandbox order that found earned wage access products are not credit. You can find NCLC’s letter here: CFPB-EWA-letter-coalition-FINAL2.pdf (nclc.org)
Research shows that earned wage access products are cheaper alternatives for liquidity than alternatives such as payday loans and pawn loans. (See Final Copy EWA & D2C Advance Usage Trends)
Research by the Aite Group found that 81% of EWA users stopped using payday loans after EWA became available. (Aite Report - DailyPay)
New Federal Laws
Pending Federal Bills
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: Referred to the Subcommittee on Antitrust, Commercial, and Administrative Law on 04/23/2021.
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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