August 9, 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: gr@ipa.org.

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. Registration information for that event can be found here.

Credit Card Competition Act of 2023
Sens. Richard Durbin (D-IL) and Roger Marshall (R-KS) introduced their bipartisan Credit Card Competition Act of 2023, which would allow merchants to route credit transactions through unaffiliated networks rather than the network of the card used. Specifically, the bill would call on the Federal Reserve to issue regulations within one year that ensures banks that have assets of over $100 billion cannot restrict the number of networks on which an electronic card transaction can be processed to less than two unaffiliated networks, at least one of which must be outside the top two largest networks. While the bill has little chance of advancing as a standalone bill, Durbin and Marshall are working to find a legislative vehicle to attach it to. Most recently, their attempts to attach it to the FY2024 NDAA were unsuccessful.

Brokered Deposits
Assistant Secretary for Financial Institutions Graham Steele gave a speech in late July to the Americans for Financial Reform Education Fund.  He focused his remarks on recent turbulence in the banking sector that began in early March which led to some of the bank failures.  In his speech, Asst. Sec. Steele provided some observations and offered some considerations that may be relevant for any future steps that may be taken to help prevent future banking system issues. 
 
In the section of his speech entitled, “Observations and Preliminary Lessons Learned,” the Assistant Secretary made the following statements regarding brokered deposits and the changes to the FDIC regulations related to brokered deposits that were approved by the FDIC in December 2020. 
 
“Recent changes to FDIC rules and the agencies’ LCR rule have also made it easier for banks to accept reciprocal deposits and effectively excluded some bank-fintech partnerships from the brokered deposits rule.[25]  Reciprocal and brokered deposits may warrant greater attention now that they are playing an increasingly important role in bank funding structures in light of the recent events.[26]  This recent episode can help to inform a broader consideration of how well the standardized liquidity frameworks are performing and if further refinements would be appropriate.”
 
To review the full speech please visit: 
Remarks By Assistant Secretary for Financial Institutions Graham Steele at the Americans for Financial Reform Education Fund | U.S. Department of the Treasury
 
The IPA supported the changes to the FDIC’s brokered deposit regulations in 2020 and will continue to be engaged in this issue moving forward. 
 
CA DFPI EWA Proposal
In March, the CA Dept. of Financial Protection and Innovation filed a Notice of Proposed Rulemaking on their EWA registration proposal. With input from our members, the IPA filed a comment letter with the CA DFPI in response to this proposal which outlined our support for the employer-based EWA model and the CFPB’s 2020 Advisory Opinion on EWA.
 
Rep. Bryan Steil (R-WI) Prepares Federal EWA Legislation
Rep. Bryan Steil (R-WI) is currently drafting legislation which would create a federal regulatory framework for EWA providers. We received a copy of the discussion draft and were able to meet with his office to relay our comments and a few concerns, mostly technical changes, with the bill. Staff specifically noted that the IPA was unique compared to others they’ve heard from in that we provided actual suggestions and changes.
 
As far as timing for the bill’s introduction, they are still working on generating bipartisan support and are hoping to have something ready for a fall markup on fintech-related legislation. We’ll continue to be a resource to Steil’s office in the coming weeks and months as they prepare to introduce their bill. 
 
California Legislature Considers Plastic Gift Card Ban
This spring, CA State Senator Monique Limon introduced a bill, SB728, which would ban plastic gift cards in the state. We’ve been active in engaging both in the Senate, with members of the Senator’s staff, and in the Assembly, with staff from the Natural Resources Committee, where the bill was first considered before passing in June and being referred to the Assembly Appropriations Committee. The bill has since passed the Appropriations Committee and will be awaiting consideration on the Assembly floor when they reconvene on August 14th.
 
Several of the changes we advocated for have been included in subsequent versions of the bill. Specifically, the implementation date was pushed back one year, from January 2026 to January 2027, and a sell-through period of an additional one year, to January 2028 was included, during which retailers may continue to sell or distribute plastic gift cards that they have already acquired. Again, these were changes that we specifically lobbied for, so we’re pleased to see them included in what will likely be the final version of the bill.
 
Nevada and Missouri Pass EWA bills
State legislatures have been busy considering EWA regulatory frameworks this year. Two states, Nevada and Missouri, have enacted state-level EWA registration requirements so far this year. 
 
Nevada SB290 provides new licensing and regulatory requirements for both employer-integrated and direct-to-consumer EWA providers. According to the bill, all EWA providers in Nevada will be required to be licensed to operate and will be subject to oversight by the Commissioner of Financial Institutions and the Attorney General. The bill will also require EWA transactions to be non-recourse and fee-free, and have no impact on a user’s credit score. 
 
Missouri SB103 requires EWA providers to register with the Division of Finance and pay a $1,000 registration fee. The bill outlines obligations and restrictions on how an EWA provider may operate in the state, including requiring the development of customer complaint procedures, specifying how services may be provided and which notices are required to be given consumers, and regulating the types of fees and the manner in which repayment may be pursued.  

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.