December 19, 2024

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].

Dear IPA Member:
 
As we start wrapping up an eventful year, we are proud to share the Innovative Payments Association’s 2024 Annual Report. This year, we’ve made significant strides in advocacy, regulatory engagement, and industry leadership to support the growth and innovation of the payments industry.
 
From driving meaningful discussions on regulatory changes to expanding educational initiatives like the Summer of Learning and Compliance Boot Camp, 2024 has been a year of impactful achievements made possible by your continued support.
 
We'd like to invite you to explore our Annual Report, highlighting key milestones and sharing insights into 2025. Read the report here.
 
Thank you for being an essential part of our community. We look forward to working together in the year ahead to continue driving innovation and success in the payments industry.
 
Sincerely,

Brian C. Tate
President & CEO
Innovative Payments Association

President Trump Reelected
On November 5, 2024, former President Trump was reelected President of the United States. Trump will be inaugurated on January 20, 2025.  

One week after the election the IPA held a post-election review with IPA members.  The review was accompanied by a post-election analysis conducted by OGR.  

President-elect Trump has started the process of nominating people for Cabinet positions and other key national level posts, such as: Scott Bessent for Treasury Secretary, David Sacks for AI & Crypto Czar , and Paul Atkins for SEC Director. As of this writing, the incoming President has not nominated any one to fill positions at the Consumer Financial Protection Bureau, Federal Deposit Insurance Corporations, of the Office of the Comptroller of the Currency.  Nominees for the prudential regulators and the CFPB will likely be made prior to Inauguration Day in January.  


French Hill Named Chair of the House Financial Services Committee
Last week U.S. Representative French Hill (R-Arkansas) was named the next Chairman of the House Financial Services Committee.  You can learn more about the new Chairman by visiting his website at: https://hill.house.gov/

Chairman Hill has an extensive financial services background. In the 118th Congress he serves as the Vice Chairman of the House Financial Services Committee and as Chairman of the new subcommittee tasked with overseeing all areas related to digital assets and financial technology. 

Prior to his congressional service, Congressman Hill was founder, Chairman, and Chief Executive Officer of Delta Trust & Banking Corporation. From 1989 to 1991, he also served as Deputy Assistant Secretary of the Treasury for Corporate Finance. After the fall of the Berlin Wall, Rep. Hill led the design of U.S. technical assistance to the emerging economies of eastern and central Europe in the areas of banking and securities. In 1991, President Bush appointed Rep. Hill to be Executive Secretary to the President’s Economic Policy Council (EPC), where he coordinated all White House economic policy.  
The IPA has a long-standing relationship with Chairman Hill and his staff.  Please note that Chairman Hill spoke at the IPA’s 2019 Innovative Payments Conference.   We wish Chairman Hill good luck in his new role. 
 
IPA Responds to FDIC Proposed Rule on Brokered Deposits
At the end of July the FDIC released a Proposed Rule on Brokered Deposits.  The FDIC also released a statement regarding the proposal you can read here. 
 The FDIC’s proposal makes significant changes to current regulation, including the “Enabling Transactions” exception to the brokered deposit regulations for third party relationships that was included in the 2020 Brokered Deposits Final Rule. (This exemption came about through efforts led by the IPA and its members.)   As expected, Chairman Martin Gruenberg’s remarks at the FDIC’s Board Meeting referenced the failed business arrangements connected to Synapse, SVB, Voyager, and others as reasons for the changes. 
Below are some key changes the proposal makes to the current brokered deposit regulations:

• It revises the definition of “deposit broker” to combine the “placing” and “facilitation” prongs into a single definition with single set of factors for determining when a third party acts as a deposit broker.
• It eliminates the exclusive deposit placement arrangement exception.
• It eliminates the “enabling transactions” test for application of the primary purpose exception.
• It removes the ability for third parties to apply for application of the primary purpose exception. Under the proposal, only the IDI would be able to apply. 
  
  

The IPA has filed our response to the FDIC in November 2024.  The IPA’s letter focused on several key points, including, but not limited to, treating fintech-bank accounts as de facto “brokered” is not consistent with Federal Deposit Insurance Act or the history and intent of the brokered deposits regulatory framework based on FIRREA. In addition, the FDIC’s proposed classification of fintech-bank accounts as de facto “brokered” is not supported by the FDIC’s own rationale which is grounded in unrelated bank failures.  You can read the IPA’s letter here.
 
IPA Files Comment Response to Bank-Fintech Ledger
The IPA has finalized and filed our comments responding to the FDIC’s proposed rule entitled, “Recordkeeping for Custodial Accounts.” In brief, the proposal would require all banks partnered with a third party to either maintain a ledger of FBO accounts via third-party fintechs or have direct access to a ledger maintained by a fintech so they can reconcile the accounts each day.  The deadline for the public to submit comments to the FDIC is January 16, 2025. 
 
The IPA’s comments outline our concerns with the proposal, including concerns regarding the scope of the proposal which we believe would extend to products the FDIC did not intend to cover, including gift cards, corporate cards, savings accounts, and wealth management accounts. Lastly, the IPA believes the FDIC needs to sync up their proposed changes to FDIC section 370 and the current 370 requirements, so banks aren’t subject to two sets of requirements that are similar in certain respects but different in other respects.   
 

FDIC Releases 2023 Unbanked and Underbanked Study
On November 12, 2024, the FDIC released its biannual national survey on the unbanked and underbanked. The 2023 FDIC National Survey of Unbanked and Underbanked Households found that nearly 96 percent of all U.S. households were banked in 2023,

In addition, the FDIC survey found two-thirds (66.2 percent) of unbanked households relied entirely on cash while a third (33.8 percent) of unbanked households relied upon a combination of prepaid cards or nonbank online payment services such as PayPal, Venmo or Cash App to conduct transactions.
Other key findings include:

• The Underbanked Rate – 14.2 percent of U.S. households (representing 19.0 million households) were underbanked in 2023, meaning these households had a bank or credit union account yet primarily used nonbank products and services to meet their financial needs.
• Mobile Banking – Nearly half of banked households (48.3 percent) used mobile banking as their primary method to access their accounts. 
• Nonbank Online Payment Services and Prepaid Cards – Between 2021 and 2023, use of nonbank online payment services such as PayPal, Venmo, or Cash App increased, while the use of general purpose reloadable prepaid cards decreased. 
• Credit Cards – 76.4 percent of all households had a credit card in 2023. However, about one-in-six households (15.7 percent) had no access to mainstream credit, down from 20.0 percent in 2017. 
• Buy Now, Pay Later –In 2023, 3.9 percent of all households used BNPL in the past 12 months.
• Crypto –In 2023, 4.8 percent of U.S. households owned or used crypto or digital assets in the previous 12 months. 

 
CFPB Issues Overdraft Final Rule 
On December 12th  the CFPB issued a final rule amending their current rules, Regulations E and Z, in part, to treat overdraft products as credit, unless the overdraft fee is capped at $5 or an amount that covers a financial institution’s costs and losses. Banks and credit unions over $10 billion will need to comply with Regulation Z’s requirements for loans, including providing consumers with a choice on whether to open a line credit. In addition, financial institutions will have to give consumers disclosures, periodic statements, and allowing consumers to decide whether to pay automatically or manually. The final rule will go into effect on October 1, 2025.

 
FEC Seeks Feedback on Payment Forms
The Federal Election Commission recently published a notice in the Federal Register entitled, “Contributions Through Untraceable Electronic Payment Methods.” The FEC is seeking public comment on whether it should proceed with such a full rulemaking. 
 
In brief, Texas Attorney General Ken Paxton wrote the FEC petitioning it “to amend its regulations concerning the use of credit cards to make contributions, to address the potential use of prepaid cards to circumvent contribution amount limitations and source prohibitions.”  The Petition asks the Commission to adopt two amendments to its regulations which would require that when contributions are made by credit, debit, prepaid or gift card, the campaign committee must “cross-check” the donor’s name and address with that information held by the issuer and contributions cannot be accepted from prepaid or gift cards unless the information from those prepaid or gift cards has been cross-checked. Comments are due to the FEC by January 27, 2025.  
 
The IPA will continue to review the FEC’s request and is planning to draft a response.  In the interim, please send any questions to Brian Tate ([email protected]). 
​

Shield Act Passes House 
U.S. Representative Bryan Steil (R-WI), Chairman of the House Committee on House Administration, 
and sponsor of the Secure Handling of Internet Electronic Donations (SHIELD) Act released a press 
release announcing the bills passage in the House of Representative by Voice Vote.  In brief, 
The SHIELD Act prohibits political committees from accepting online contributions from debit or credit 
cards without the disclosure of the card verification value, or CVV, and the billing address associated 
with the card.  The IPA has had several conversations with Chairman Steil’s office and remains 
concerned about additional regulation being layered on already heavily regulated prepaid account 
products.  

Key 2025 Election Dates

• January 3, 2025: 119th Congress Swearing In
• January 20, 205: Inauguration Day

 
2025 Congressional Calendars

• 2025 House Calendar
• 2025 Senate Calendar

 
Podcasts, Press, and Education
 
IPA Mentions/Reports:

• IPA Blog: The FDIC Should Look Inward Before Pointing Fingers Out

• IPA Pod: Is Pay By Bank the Future of Payments
• IPA Pod: Think Like and Innovator 
• IPA Pod: Nov. 2024 Government Update 
• IPA Blog: Challenge Your Assumptions About the Election 

Articles and Reports:

• Digital Transactions: 
• Payments 3.0: Humanity And the War on Gift Card Fraud – Digital Transactions

 
Upcoming Events and Calls

• Next IPA Weekly GRWG Call: January 6, 2025 (tentative)