August 31, 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].

IPA Op-Ed in Newsweek on CFPB Advisory Opinion Process
Ben Jackson, Chief Operating Officer of the IPA, published an op-ed in Newsweek on the CFPB’s advisory opinion process. In it, Ben reviews the history of the CFPB’s 2020 AO on Earned Wage Access and explains the positive effect of the framework on the industry. Ben also discusses Director Chopra’s recent blog post and the potential review and/or recission of established advisory opinion. Finally, Ben encourages the CFPB and Director Chopra to meet with EWA industry representatives before taking any regulatory action to rescind, amend, or enhance the 2020 EWA Advisory Opinion. 
 
Summer of Learning Schedule Continues to Grow
The IPA continues to add interesting and informative webinars to our Summer of Learning Series. We currently have the following scheduled:

• September 7th -- Summer of Learning Webinar with Tracy Chin, OCC.
• September 13th – Summer of Learning Webinar with Deep Laps, Using Context to Manage Fraud Risk.

 
Compliance Boot Camp
The IPA will gather in Chicago, IL 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. 
 

DOJ Releases Opinion on Authority of FDIC Chairperson
Yesterday the Department of Justice Office of Legal Counsel released an opinion, requested by the FDIC Board, on the authority of the majority of the FDIC Board to present items for vote and decision. In the opinion, the Office of Legal Counsel states that the Chairperson of the FDIC does not have the authority to prevent a majority of the FDIC Board from presenting items to the Board for a vote and decision. The opinion cites the Federal Deposit Insurance Act of 1950 as the vesting substantive and procedural powers of the FDIC in the Board, not the Chairperson. 
 
Former FDIC Chairperson Jelena McWilliams resigned from her position in December 2021 after disagreements with the majority of the FDIC over the Chairperson’s authority to control the agenda of the Board. Martin Gruenberg currently serves as acting Chairman of the FDIC.
 
CFPB Takes Action to Protect the Public from Shoddy Data Security Practices
In a circular published August 11th, the CFPB stated that financial companies may violate the Consumer Financial Protection Act if they fail to implement adequate measures to safeguard consumer data against data security incidents. 
 
The circular did not suggest any particular security practice is required under the Consumer Financial Protection Act but did note some examples where failure to implement certain practices, such as multi-factor authentication, adequate password management, and timely software updates, may increase the risk that a firm’s conduct may trigger liability.
 
Federal Reserve Announces Final Guidelines for Master Account Access
The Federal Reserve has announced final guidelines that establish a transparent, risk-based, and consistent set of factors to be used in reviewing requests to access Federal Reserve accounts and payment services. The new guidelines include a tiered review framework to provide additional clarity on the level of due diligence and scrutiny that will be applied to different types of institutions with varying degrees of risk. 
 
Ranking Member Toomey Sends Letter to FDIC on Crypto-Related Businesses
Sen. Pat Toomey (R-PA), Ranking Member of the Senate Banking Committee, sent a letter to the FDIC alleging the FDIC is deterring banks from doing business with lawful crypto-related companies, even without any FDIC determination that that the companies are providing unlawful or impermissible services. The letter draws a comparison to the Obama-era Operation Choke Point, in which the FDIC encouraged banks to deny services to legal yet politically disfavored businesses. Specifically, the letter refers to whistleblower communications that allege the FDIC’s Washington, D.C. headquarters is urging FDIC field offices to send letters to multiple banks requesting they refrain from expanding relationships with crypto-related companies, and that the FDIC may be abusing its supervisory powers to the same effect. The letter includes several questions on FDIC policies related to crypto-related businesses and specific communications and memoranda.
 
FDIC Issues Supervisory Guidance on Multiple Re-Presentment NSF Fees
The FDIC issued guidance to supervised institutions addressing compliance risks associated with assessing multiple non-sufficient funds (NSF) fees as a result of the re-representment of the same unpaid transaction. 
 
According to the guidance, many financial institutions charge NSF fees when checks or ACH transactions cannot be covered by the customer’s balance. After being declined, merchants may subsequently resubmit transactions for payment, increasing the risk of additional NSF fees for the same transactions. The guidance further states that the charging of multiple NSF feeds arising from the same unpaid transaction can increase risks of violations of laws prohibiting unfair or deceptive acts or practices (UDAP), and that the FDIC will take appropriate action to address both consumer harm and violations of law regarding re-presentment NSF fee practices.
 
CFPB Issues Public Request for Comment on Credit Card Data Survey
The CFPB published a blog post and public request for comment related to their Terms of Credit Card Plans (TCCP) Survey, through which they collect data twice per year from credit card issuers. The CFPB announced in the blog post that they are considering modernizing the TCCP survey by collecting median rates by credit score tiers to give consumers more predictability before they apply for credit; gathering information on credit cards available to specific communities or groups; requiring the biggest issuers to submit information about each general purpose credit cards instead of only products with the largest number of accounts; and allowing a broader range of institutions to participate in the TCCP Survey. The CFPB encourages the public to submit comments through the Federal Register until October 17th.
 
CFPB Alleges Block Is ‘Slow-Walking’ Cash App Investigation
The CFPB has asked a federal judge to force Block to comply with demands related to investigations looking into Cash App’s handling of complaints and disputes. In mid-2020 the CFPB opened an investigation into Block’s Cash App payment tool relating to the handling of customer complaints and disputes. The investigation appears to be similar to the CFPB’s investigation into Zelle, with a focus on chargebacks and violations of Reg E. The CFPB made document requests in August 2020 and August 2021, with deadlines no later than December 2021. The CFPB has now filed a petition in mid-August asking the US District Court for the Northern District of California to enforce a civil investigative demand. In the petition, the CFPB alleges Block has failed to turn over documents requested related to six specific questions. According to Block, however, they have been in regular communication with the CFPB relating to the document requests and were waiting for a response to their most recent communication when the CFPB’s petitions was filed.
 
Tentative Senate Banking Committee September Hearing Schedule 
Below is a tentative September hearing schedule for the Senate Banking Committee. EWA and/or BNPL may discussed during the listening session on the 7th and the hearing on the 13th. We will monitor hearing memoranda for topics of interest to our members. 
 
September 7, 10:30 AM- Virtual Listening Session: consumer products impact on the dignity of work (payday lending and other work related products) 
September 8, 10:00 AM- Full Committee State of Insurance 
September 13, 10:00 AM- Full Committee New Risks to Consumers 
September 15, 10:00 AM- Full Committee SEC Oversight w/ Chair Gensler

​New Federal Bills
None
 
Pending Federal Bills
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.