August 30, 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].

​The IPA Compliance Boot Camp Will Be Held in Chicago in September
Mark your calendars to join us at the IPA's Compliance Boot Camp on September 12th to ensure you don't miss out. To register please visit the IPA’s website at: 
 
We will have sessions on Regulation E, Earned Wage Access, Artificial Intelligence, Third-Party Risk, Buy Now Pay Later, and Stablecoins. Some attendees may be eligible to receive CLE credits through their attendance. The following day participants will have an opportunity to hear from agents and analysts from the FBI Chicago Field Office on financial and cyber-crime threats. This event is free and open to anyone in the payments community interested in fighting fraud. Registration information for that event can be found here.

​Center for Responsible Lending Releases Survey of DtC EWA Users
The Center for Responsible Learning (CLR) released a survey of direct-to-consumer (DtC) EWA users. The survey asked 300 EWA users about their experiences with DtC EWA and cash advance companies, specifically MoneyLion, Earnin, Brigit, and Dave. 
 
The survey focused on the uses of funds from DtC EWA transactions and the frequency of EWA cash advances by company and found the top uses of funds include food, transportation, and housing costs; and bill or utility payments. In addition, two-thirds of DtC EWA users access their wages 1-2 times per week. 
 
More information can be found in the press release and full survey.
 
CA DFPI EWA Proposal Comments
The California Department of Financial Protection and Innovation (DFPI) has published the full list of comment letters they received this spring in response to their EWA proposal. The list includes letters from various federal and state advocacy organizations, consumer advocacy organizations, EWA providers, academics, and business groups.
 
Maryland Issues EWA Guidance
The Maryland Office of Financial Regulation (OFR) issued regulatory guidance on Earned Wage Access Products to provide clarity on how OFR views EWA products and to describe the requirements EWA providers must adhere to. 
 
Notably, and contrary to the CFPB’s 2020 Advisory Opinion, the guidance seems to assume that all EWA products are extensions of credit and assigns varying levels of regulation based on how that credit is classified. If it is a loan, it would be subject to the Maryland Consumer Loan Law (MCLL). However, Maryland Commercial Law also stipulates that MCLL does not apply to advances between an employer and an employee. 
 
To make the determination between “loan” and “advance”, the OFR will consider factors such as who bears the economic risk, who has contact with the consumer, and who benefits from fees or “tips.” A more detailed analysis of these factors is outlined in the regulatory guidance linked above.
 
CFPB Reaches Settlement with Credit Repair Conglomerate
The CFPB entered into a proposed settlement with a credit repair conglomerate which operates some of the largest credit repair companies in the country, including Lexington Law and CreditRepair.com. If approved, the settlement would impose a $2.7 billion judgement against the companies, and would ban them from telemarketing credit repair services for 10 years. 
 
According to the proposed settlement and a recent court ruling, the credit repair companies collected illegal advance fees for credit repair services through telemarketing in violation of the advance fee provision of the Telemarketing Sales Rule. 
 
More information can be found here or in the CFPB’s press release. 
 
FDIC Publishes 2023 Risk Review
Earlier this month, the FDIC published its 2023 Risks Review, summarizing conditions in the U.S. economy, financial markets, and the banking industry.
 
In Section 4 (page 57) of the report, the FDIC discusses brokered deposits, and community banks’ increasing reliance on brokered deposits. More information can be found in the FDIC press release. 
 
CFPB Announces Rulemaking on Data Privacy, Artificial Intelligence
CFPB Director Rohit Chopra announced at a White House event that the CFPB will begin developing rules addressing data brokers that track, collect, and monetize personal financial information, and in some cases use personal data to train artificial intelligence systems. Notably, in his remarks, Dir. Chopra said it is their intention to define data brokers that sell certain types of consumer data as a “consumer reporting agency” and subject them to the Fair Credit Reporting Act.
 
More information can be found in Director Chopra’s remarks.
 
CFPB Sues Installment Lending Conglomerate Height Finance Holding Company
The CFPB announced that it is suing Heights Finance Holding Company, as well as several of Height’s subsidiaries. The complaint alleges that the company identifies borrowers who are struggling to repay their existing loans, and then aggressively pushes them to refinance. According to the press release below, borrowers become trapped in a “loan churning scheme” and are forced to refinance multiple times. The CFPB is seeking an end to this practice, redress for harmed consumers, and a civil money penalty. 
 
More information can be found in the complaint, or in the press release.

New Federal Bills
H.R. 1163, The Protecting Taxpayers and Victims of Unemployment Fraud Act
This bill, sponsored by Rep. Jason Smith (R-MO-08), would provide financial incentives for states to recover fraudulently paid Federal and State unemployment compensation. The bill was marked up and reported favorably from the House Ways and Means Committee on 2/28/23 by a vote of 20-17. The bill was placed on the floor calendar for consideration on 4/6/23 and passed the House on 5/11/23 by a vote of 230-200.
 
H.R. 1165, Data Privacy Act of 2023
This bill, sponsored by Rep. Patrick McHenry (R-NC-10) would create a federal data privacy standard, and would preempt preexisting state frameworks. This bill was marked up and reported favorably by the House Financial Services Committee on 2/28/23 by a vote of 26-21.