January 25, 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].

Register Now for the IPA’s 2024 Innovative Payments Conference – Unlocking the Future of Payments

Our annual Innovative Payments Conference is around the corner, and we invite you to attend. The IPC, scheduled May 5-7, 2024, in Washington, DC, is the place to immerse yourself in three days of groundbreaking insights, cutting-edge technology, and networking opportunities for payments leaders. To learn more about the conference, please visit: www.ipa.org.

Speaker Line Up Features Amy Walter
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We are filling the agenda with leaders in the payments arena as well as those who will keep us inspired, informed, and engaged – including our keynoter– Amy Walter. 

As a popular TV panelist who has graced the screens of Meet the Press, Face the Nation, and PBS NewsHour, Amy has a unique knack for explaining the intricacies of politics and the 'why' behind political decisions. Her expertise in the electoral process, congressional culture, and the D.C. political scene is unmatched. Named one of Washingtonian magazine's "Most Powerful Women" and "Top 50 Journalists," Amy Walter is truly a leader in political analysis and forecasting.

Federal Reserve Extends Interchange Comment Period
On January 22nd the Federal Reserve Board of Governors issued a press release announcing they have extended the comment period for their Regulation II proposal issued last year. The initial comment period was scheduled to close on February 12th. The new deadline to submit comments to the Federal Reserve is now May 12, 2024. 
 
Next, the Federal Reserve has released additional data related to the interchange fee cap. According to the Federal Reserve, the agency published the data to give the public additional information as they consider the proposal. The additional data are available here. The IPA will review the new information released today and will amend our draft comment accordingly. 
In the interim, please contact Brian Tate ([email protected]) if you have any questions. 
 
CFPB Releases Proposed Rule on Overdraft 
On January 17th the Consumer Financial Protection Bureau released its proposed rule on Overdraft Protection services. In brief, the proposed rule would apply credit protections via TILA to overdraft loans offered by covered financial institutions. A covered financial institution is a bank with assets of $10 billion or more. Consumers receiving covered overdraft credit from a covered financial institution would receive the loan disclosures required under TILA. Moreover, the protections that apply to traditional credit cards would apply to a covered overdraft credit issued by a covered financial institution that is accessed by debit cards or routing/checking account numbers. 
 
The proposed rule would provide for an exception that would permit covered institutions to be able to offer overdraft as a courtesy service where fees do not exceed the institution’s costs, or as a line of credit. The proposal would provide two options for covered financial institutions to operate within this exception—calculating their own costs using a “breakeven standard” or relying on a “benchmark fee” set by the CFPB. Financial institutions may determine the amount of the fee they need to charge to break even using the breakeven standard. Alternatively, financial institutions may charge a benchmark fee, which could be set as low as $3. The CFPB has proposed several options for the benchmark fee, including $3, $6, $7, or $14. 
 
CFPB Proposes Regulation for NFS Fees
On January 24th the CFPB released a proposal on Non-Sufficient Fund Fees (NSF). In brief, today’s proposal would cover NSF fees when a consumer tries to make a payment but does not have enough money in their account at the point of sale. Further, the proposal would apply to debit card and prepaid card purchases, ATM withdrawals, as well as some declined peer-to-peer payments. Comments are due to the CFPB on or before March 25, 2024. 
 
The IPA is currently analyzing the proposal and plans to discuss the proposal in more detail during our next GRWG weekly call on Monday, January 29th. Please contact Brian Tate ([email protected]) if you have any questions. 
 
IPA Meets with CFPB Regarding EWA  
In November 2023, in an extraordinarily rare move, the CFPB submitted a comment to the California Department of Financial Protection and Innovation in response to the agency’s modified Earned Wage Access registration proposal. In brief, the CFPB’s letter attempts to compare EWA to payday loans, and also alludes to the fact that the Truth in Lending Act (TILA) may apply to some EWA products. In addition, the letter said the CFPB may seek to issue additional guidance to clarify their 2020 EWA Advisory Opinion (AO). 
 
In response to the CFPB’s letter, the IPA requested and received the opportunity to meet with the CFPB staff to discuss issues related to the AO. The IPA met with the CFPB on January 11th and shared our continuing concern regarding the CFPB’s public comments which appear to be inconsistent with the language of the AO. Additionally, the IPA stressed that the AO itself outlines how TILA does not apply to EWA products and how employees have a right to their earned, but not yet received wages, which should not be converted into credit simply because they were accessed before the payday set by their employer. 
 
CA DFPI - Notice of Second Modification to Proposed Regulations (EWA)
The California Department of Financial Protection and Innovation has released a Second Modificationto their proposed rule to require earned wage access providers to register with the state. The initial proposal was released in March 2023, and their second proposal was released in November 2023. As with the first two proposals, today’s amended proposal addresses a wide variety of issues, including EWA. In brief, DFPI’s release amends and seeks to clarify some of the language that was in the previous two versions. The deadline to submit comments in response to the Second Modification is February 6, 2024.  
 
Unfortunately, it does not appear that the DFPI has amended their proposed regulation to reflect IPA’s concerns with the proposal’s classification of EWA products as loans. The IPA will continue to review the DFPI’s proposal to learn if the modifications made to some of the definitions differ in substance from the March 2023 or November 2023 proposals. Due to the extremely tight timeline the IPA requests that the working group review this new version of the proposed rule and send any feedback to Brian Tate ([email protected]) or Eli Rosenberg ([email protected]) as soon as possible. 
 
Montana Opinion on EWA
Just before Christmas, the Montana Attorney General,  Austin Knudsen issued an Opinion on EWA in response to a question posed by Matt Reiger, the Montana Speaker of the House. The questions present to the AG is as follows:  

• Question Presented: Whether an Earned Wage Access ("EWA") product meets the definition of: (1) "consumer loan" in MCA § 32-5-102(2)(a) requiring licensure by the Montana Division of Banking and Financial Institutions under MCA § 32-5-103; or (2) "deferred deposit loan" under MCA § 31-1-703 requiring licensure under MCA § 31-1-795.

 
In brief, the AG’s Opinion is as follows:  
 

• Short Answer: No. So long as the EWA product is fully non-recourse; does not condition an income-based advance on any interest, fees, or other consideration or expenses; and limits income-based advances to income already earned by the consumer.

 
The Montana AG’s opinion is consistent with the views other states have expressed regarding EWA, including Neveda, Missouri, and Arizona. 
 
EWA in Maryland 
Maryland House Bill 246 has been recently introduced in the Maryland General Assembly. In short, HB 246 is generally consistent with the EWA Guidance released by the Maryland Office of Financial Regulation last fall and is now in effect. In enacted, HB 246 would also require Direct to Consumer providers to be licensed as lenders, employer-based providers to register with the state. Additionally, HB 246 seeks to limit fees, tips, and other similar costs associated with some EWA models. Please note that HB 246 has the support of the MD Department of Labor. 
 
The MD House Economic Matters Committee held a hearing on Tuesday, January 23, 2024 at 1 pm ESTto review a number of bills, including HB 246. The Committee also released their Fiscal and Policy Note on HB 246 which you can find here. The IPA members and the association testified at the hearing. During the hearing the Committee recognized the need for EWA for Marylanders and appeared to be receptive to continued engagement with all stakeholders, including industry representatives, moving forward. 
 
Washington State Introduces EWA Bills

• HB 2083: Washington State House Bill 2083 was introduced at the start of 2024 legislative session and immediately the Washington State House Committee on Consumer Protection & Business has scheduled a hearing and received public comment. The IPA submitted written testimony to the Committee opposing the bill. If enacted into law, HB 2083 would severely restrict the availability of EWA in the state of Washington. Executive Session hearing was held on January 19th but the Committee did not take any action to move the bill out of Committee. 

 

• SB 6025: On January 16th the Washington State Senate Business, Financial Services, Gaming & Trade Committee held a hearing on to consider a number of bills, including SB 6025. SB 6025 is a companion bill to HB 1874, which was included in the same hearing as HB 2083 in the Washington State House. In brief, a number of IPA members who testified earlier this week in the House expressed concerns that if HB 1874 is enacted, there is the possibility that some regulators may interpret the bills language as extending to EWA products. The IPA testified at the Senate hearing expressing our concern with the potential broad interpretation of the bill’s language. An Executive Session hearing to discuss SB 6025 has been set for January 23rd. 

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• Next IPA Weekly GRWG Call – January 29, 2024
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