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; Grant Hannah, Director of Government Relations, IPA; Eli Rosenberg, Partner, Baird Holm LLP; and Gray Derrick, Partner, Baird Holm LLP.
Please address comments and suggestions to: email@example.com.
IPA Webinar: Why Brokered Deposits Matter to Fintechs
Join the IPA on June 25 at 3 PM ET as we explore the topic of brokered deposits and why they matter for the future of payments. In 2015, the Federal Deposit Insurance Corporation (FDIC) issued a Frequently Asked Questions on brokered deposits that designated prepaid deposits held at banks as “brokered”, forcing banks to pay higher rates for deposit insurance and raising costs for Fintechs and prepaid programs. In this webinar, the IPA will dive into the history of the issue, show some of the effects, discuss current and proposed FDIC rules and regulations, highlight congressional action, and outline the IPA’s position and advocacy.
Registration and additional information can be found here.
IPA Blog: IPA Advocates for Members during COVID-19
The COVID-19 pandemic presented the payments industry with challenges that had never been seen before and that required immediate responses and solutions. The IPA is proud to say that the payments industry stepped up to help local, state, and the federal governments distribute emergency funds during our current national emergency. Whether it was ensuring that Economic Impact Payments and state unemployment benefits were safely and quickly delivered to those most in need during this national emergency or continuing to keep prepaid programs operational in the midst of a shift to a work from home culture on the turn of dime, the prepaid industry showed why it continues to be a trusted product for consumers, businesses, and government agencies.
While the industry worked hard to effectively respond to the COVID-19 pandemic, the IPA also worked hard to support the industry’s immediate response as well as ensure that the IPA was continuing to advance the long-term priorities of the industry. The IPA wanted to take a moment to highlight the Association’s efforts to support the industry since early March.
Read the full blog post here.
IPA Podcast: Prepaid Benefits Have International Appeal
As countries struggle to help their citizens deal with the economic fallout of the COVID19 pandemic, many are finding that prepaid cards and accounts offer a fast and convenient way to support people.
The pandemic has shifted the payments behavior of governments – through the way they disburse funds and the way they look at different payment types – as well as the behavior of individuals. Now the question is, what changes will last beyond the pandemic and what will the future look like?
We have pulled together an international panel to try to answer some of these questions. In this episode, we talk with Jennifer Tramontana of the Canadian Prepaid Providers Association, Matthias Spangenberg of Prepaid Verband Deutschland, Diane Brocklebank of the Prepaid International Forum, Kevin McAdam of Global Processing Services, and Brian Tate of the Innovative Payments Association.
We cover how prepaid cards have been used to distribute benefits in various countries. We talk about the regulatory response to the crisis and prepaid’s role in relief. We also cover the future of payments in general and the future of cash in particular. While the world is in constant flux, it is safe to say that more things change, the more some things will stay the same.
To learn more about the Canadian Prepaid Providers Organization, visit: https://cppo.ca/
To learn more about the Prepaid International Forum, visit: https://prepaidforum.org/
To learn more about the Prepaid Verband Deutschland (German Prepaid Association) , visit: https://www.prepaidverband.de/en/
To learn more about Global Processing Services, visit: https://globalprocessing.net/
Listen to the podcast here!
IPA Virtual Awards Happy Hour
Join the IPA and the IPC Awards Selection Committee on July 7th at 3:30pm Eastern for a virtual networking happy hour presentation of the IPC Awards!
The first 20 members who register for the event by June 26 will receive a special package in the mail to aid in our celebration of our award winners.
OFFICE OF THE COMPTROLLER OF THE CURRENCY (OCC)
OCC Plans Rule to Define Valid Bank-Fintech Partnerships
In remarks made during a recent online event, Acting Comptroller of the Currency Brian Brooks indicated that the OCC will soon be issuing a “true lender” proposed rule.
He indicated that the proposal will contain bright line rules for determining “what is a true lender” and “what is a rent-a-charter scheme.” The proposal also will make clear that a loan is not necessarily “legal” because a bank is the “true lender” but that, instead of a state regulator, the OCC will be the enforcement channel to address the loan’s legality when the bank is the “true lender.”
In his remarks, Acting Comptroller Brooks also indicated that addressing fintech and its effect on the banking system is a top priority for him. He stated that the OCC is engaged in a supervisory initiative to design examination procedures and clear guidance for its examiners to use in connection with examinations involving bank-fintech partnerships and fintech charter applications.
CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)
Consumer Financial Protection Bureau Launches Pilot Advisory Opinion Program
On June 18, the Consumer Financial Protection Bureau (Bureau) announced the launch of a pilot advisory opinion (AO) program to address regulatory uncertainty in the Bureau’s existing regulations. According to the Bureau, the pilot AO program will allow entities seeking to comply with regulatory requirements to submit a request where uncertainty exists. If deemed appropriate, the Bureau will issue an advisory opinion based on its summary of the facts presented that would be applicable to other entities in situations with similar facts and circumstances. The Bureau says it recognizes that the public would benefit from a process that provides clarifications broadly and not just to requesting individuals or entities.
In addition to the pilot, the Bureau also announced that the public can comment on a proposed permanent AO program. Following the conclusion of the pilot, the proposed AO program will be fully implemented after the Bureau’s review of comments received.
Additional information can be found here.
CFPB Blog Post: You have options for how to receive your unemployment benefits
Millions of workers have filed for unemployment insurance benefits as a result of the coronavirus pandemic. If you’ve lost your job or a portion of your income, you can apply for benefits through your state unemployment program, and if you qualify, you have options for how you can receive this money.
In most states, you can receive your money either on a state-issued prepaid debit card or by having it directly deposited into your own bank or credit union account or onto an existing prepaid card. In some states, receiving paper checks is also an option. While the majority of workers who are eligible for unemployment benefits have already filed as a result of COVID-19, many states will allow you to make changes to the way you receive your benefits.
Read the full post here.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
FDIC Consumer News: No Cash Payments? Now what?
In a digital economy, what are my options?
Whether it’s ordering take out from an app-based food delivery service or using a ride share app to get home, cash may not be an option for payment. More retailers are now accepting cashless payments to reduce exposure to high touch surfaces. When you are used to paying with cash, this can be challenging.
Here are some of the options available to you other than cash or traditional credit and debit cards.
A prepaid card allows you to use a card to make purchases at stores or to pay bills online without accessing a bank account or using a credit card. These cards usually are not linked to a checking or savings account, and require you to load money onto the card up front. Find more information about FDIC deposit insurance and prepaid cards at: Is the Money on My Prepaid Card FDIC-Insured?
Here are some prepaid card types:
Sen. Jerry Moran Introduces Brokered Deposits Legislation
On June 15, Senator Jerry Moran (R-KS), a member of the Senate Banking Committee, introduced S. 3962, the Asset Growth Restriction Act of 2020. In brief, the bill proposes to strike the current legal framework for brokered deposits and replace it with an authorization for the FDIC to limit the asset growth of financially troubled banks by regulation, rule, or order. The legislation would do this by repealing Section 29 of the Federal Deposit Insurance Act, which provides the legal authority for the FDIC to regulate brokered deposits and sets restrictions on the acceptance of brokered deposits by financially troubled banks.
In December 2019, FDIC Chairman McWilliams suggested Congress consider “replacing Section 29 of the FDI Act with a simple restriction on asset growth for banks that are in trouble.” McWilliams argued that this regime would be far easier for the FDIC to administer, would limit the FDIC's potential exposure, and would more directly address the goal of preventing troubled banks from using insured deposits to try to grow out of their problems. She said that a simple limitation on asset growth would be more effective over time, as the industry continues to evolve. She additionally reiterated her support for these changes during questioning after her testimony before the Senate Banking Committee and the House Financial Services Committee in May 2020.
As a reminder, also in December 2019, the FDIC released a notice of proposed rulemaking on Brokered Deposits. In April, the IPA filed our comment letter responding to the FDIC’s proposed rulemaking. In brief, the IPA’s comment thanks the FDIC for releasing their proposal and creating new exceptions to their current brokered deposit regulations.
Recap of House Financial Services Committee’s FinTech Task Force Hearing on Digital Wallets and FedAccounts
The House Financial Services Committee’s FinTech Task Force held a virtual hearing entitled, “Inclusive Banking During a Pandemic: Using FedAccounts and Digital Tools to Improve Delivery of Stimulus Payments." on Thursday, June 11. Below is a brief rundown of some themes that emerged from the hearing.
As a reminder, the IPA submitted a statement for the hearing record. The Task Force didn’t recommend any particular course of action, but discussions on this topic will likely continue. A recording of the hearing can be found here.
Recap of Senate Banking and House Financial Services Committees Hearings with Fed Chair Powell
Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee on June 16 and the House Financial Services Committee on June 17. The Senate Banking hearing focused on the Fed lending facilities, interest rates, the Fed’s balance sheet, and the economic outlook.
The House Financial Services Committee hearing focused on similar themes, but there were two specific questions asked by members at the hearing on the topics of FedAccounts and central bank digital currencies that are worth highlighting.
The question on FedAccounts came from Rep. Stephen Lynch (D-MA) and the question on central bank digital currencies came from Rep. Tom Emmer (R-MN). Reps. Lynch and Emmer are chair and ranking member of the Financial Services Committee’s FinTech Task Force respectively. Please find a summary of the exchanges below.
Rep. Stephen Lynch (D-MA)
Rep. Lynch asked Chair Powell what his thoughts are on the FedAccounts proposal and other ways to address gaps that the unbanked and underbanked face. Chair Powell responded that the introduction of FedAccounts would be a very dramatic change in the landscape of banking. He said he would worry what would happen to our private banking system because a lot of people would opt to keep their personal money at the Fed and then who would do the lending. In terms of the underbanked, he highlighted the Fed’s work in local communities under CRA to encourage financial inclusion and their close work with community development financial institutions and minority depository institutions. He said they play a big role in financial inclusion and the Fed has a great deal of outreach and interaction with those institutions that are active in the communities that really need the help.
Rep. Lynch closed by saying that, with the drift in banking away from brick and mortar towards mobile banking, he thinks it does present some opportunities that we have not had in the past and asked that Chair Powell treat it with the same level of attention as he would if the banks were in trouble. He further said that he appreciates that FedAccounts would ask the Fed to do something that it was not designed to do, but the circumstances and technology now gives them the opportunity to do something. Finally, he said it may be changing the role of the Fed, but he thinks they can try to make life easier for the underbanked.
Rep. Tom Emmer (R-MN)
Rep. Emmer asked what action the Fed had recently taken to explore the idea of central bank digital currencies (CBDC). Powell said that central banks everywhere are looking at it and the Fed owes it to the public they serve to take a look at it, if it is going to be something good for the US economy and the world’s reserve currency, the dollar. He said the Fed needs to understand it first and best. He also said a group of central banks have gotten together to share understanding of the technology, the cyber implications, the economic, and the financial inclusion implications. He further said that it is a big complex problem that they take seriously and that we do not wake up one day and realize the dollar is no longer the world reserve currency because we missed a technological change. He said though, at the same time, there are some very serious questions that have to be answered before they would want to implement a CBDC.
Rep. Emmer then asked what role Powell thinks the private sector would play with a CBDC. Powell said he thinks this is something that central banks have to design principally. He said the private sector is not involved in creating the money supply and there are ideas that this should be the work of a private board, but he doesn’t think the public would welcome private employees who are not solely accountable to the public good being responsible for something so important. He reiterated that he thinks in the first instance, it will have to be the work of central banks.
A recording of the Senate Banking hearing can be accessed here and House Financial Services hearing can be accessed here.
Chair of Federal Reserve and Treasury Secretary to Testify Before House Financial Services Committee
On June 22, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, announced an additional hearing was being added to the June Committee calendar. This hearing will be held on June 30 at 12:30 PM ET and is entitled, “Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response.” This hearing will convene in a “hybrid” format, which provides for remote Member participation or Member participation from the hearing room.
The IPA will follow this hearing and flag any relevant topics of discussion. Additional information and a link to livestream the hearing can be found here.
New Federal Laws
PENDING FEDERAL BILLS
H.R. 189—Financial Institution Customer Protection Act of 2019
Summary: This bill specifies that a federal banking agency cannot request or order a financial institution to close a customer account unless the agency has a valid reason for doing so, and that reason cannot be only reputational risk.
Introduced: Jan. 3, 2019
Status: The bill was referred to the House Committee on Financial Services on Jan. 3, 2019.
Sponsor: Rep. Blaine Luetkemeyer (R-MO); 0 co-sponsors. 2% chance of enactment (according to govtrack).
H.R. 758—Cooperate with Law Enforcement Agencies and Watch Act of 2019
Summary: The bill would protect institutions from regulatory action for keeping accounts open at the request of law enforcement.
Introduced: Jan. 24, 2019
Status: The bill was received in the Senate, read twice, and referred to the Committee on Banking, Housing, and Urban Affairs on March 12, 2019.
Sponsor: Rep. J. French Hill (R-AR); 2 co-sponsors. 2% chance of enactment (according to govtrack).
H.R. 907—To Clarify Exclusions from the Definition of a Deposit Broker
Summary: The bill would amend the Federal Deposit Insurance Act (“FDIA”) to clarify the exemptions from the definition of a “deposit broker.” Specifically, the bill would amend FDIA Section 29(g)(2)(I) to provide that a deposit broker does not include an agent or nominee (i) whose primary business purpose is not the placement of deposits with an insured financial institution; or (ii) who is an exclusive agent of an insurance company or insured depository institution affiliated with an insurance company, provided that the agent or nominee is, among other things, contractually prohibited from placing funds with any other unaffiliated depository institution.
Introduced: Jan. 30, 2019
Status: The bill was referred to the House Committee on Financial Services on Jan. 30, 2019.
Sponsor: Rep. Darin LaHood (R-IL); 2 co-sponsors. 2% chance of enactment (according to govtrack).
H.R. 1423—Forced Arbitration Injustice Repeal (FAIR) Act
Summary: The bill would prohibit forced arbitration agreements and any agreements that would preclude class action lawsuits.
Introduced: Feb. 28, 2019
Status: Received in the Senate and Read twice and referred to the Committee on the Judiciary on September 24, 2019. Sponsor: Rep. Johnson, Henry C. “Hank,” Jr. (D-GA); 222 cosponsors. 2% chance of enactment (according to govtrack). Details Link
H.R. 2514—COUNTER ACT OF 2019
Summary: This bill would make changes to the Bank Secrecy Act and anti-money laundering laws. It would require the financial regulators and Financial Crimes Enforcement Network to each appoint a civil liberties and privacy officer who would need to consult on any new regulations. It would create a public-private information sharing program between FinCEN and the financial services industry, and it would require AML training for examiners.
Introduced: May 3, 2019
Status: The bill passed the House of Representatives on October 28, 2019 and was received in the Senate and referred to the Senate Banking Committee on October 29, 2019.
Sponsor: Rep. Emanuel Cleaver (D-MO); 2 co-sponsors, 2% chance of enactment (according to govtrack).
H.R. 2630—CASH ALWAYS SHOULD BE HONORED (CASH) ACT
Summary: This bill would make it unlawful for any physical retail establishment to refuse to accept cash as payment. Introduced: May 9, 2019
Status: The bill was referred to the House Committee on Energy and Commerce on May 9, 2019.
Sponsor: Rep. David Cicilline (D-RI); 10 co-sponsors. 2% chance of enactment (according to govtrack).
H.R. 4501— CONSUMER TRANSACTION ACCOUNT PROTECTION ACT OF 2019
Summary: This bill would specify that consumer transaction account deposits of an insured depository institution shall not be considered to be funds obtained through a deposit broker.
Introduced: September 26, 2019
Status: The bill was referred to the House Committee on Financial Services on September 26, 2019. Sponsor: Rep. Roger Williams (R-TX); 1 co-sponsor. 2% chance of enactment (according to govtrack).
H.R. 4767—FINANCIAL SERVICES INNOVATION ACT OF 2019
Summary: The bill requires federal regulators to create Financial Services Innovation Offices (FSIOs) within their agencies to foster innovation in financial services. Companies would also be able to apply for an “enforceable compliance agreement” with the FSIOs that, if accepted, will allow them to provide an innovative product or service under an alternative compliance plan.
Introduced: Oct. 21, 2019
Status: The bill was referred to the House Financial Services Committee and in addition to the Committee on Agriculture, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned. On Nov. 11, 2019 it was referred to the Subcommittee on Commodity Exchanges, Energy, and Credit of the Committee on Agriculture.
Sponsor: Rep. Patrick McHenry (R-NC); 1 co-sponsor; 2% chance of enactment (according to govtrack).
H.R. 6116— CONSUMER FINANCIAL PROTECTION COMMISSION ACT
Summary: The bill would convert the leadership structure of the CFPB from a sole director to a commission. The commission would be made up of 5 members who are appointed by the president and approved by the Senate to serve 5- year terms. No more than 3 members of the commission would be allowed to be from the same political party. The name of the Bureau would also be changed to the Consumer Financial Protection Commission.
Introduced: March 5, 2020
Status: The bill was referred to the House Financial Services Committee.
Sponsor: Rep. Blaine Luetkemeyer (R-MO); 25 co-sponsors; 2% chance of enactment (according to govtrack).
S. 142—The American Data Dissemination Act
Introduced: Jan. 16. 2019
Status: The bill was referred to the Senate Commerce, Science, and Transportation Committee on Jan. 16, 2019. Sponsor: Sen. Marco Rubio (R-FL), 0 co-sponsors, 2% chance of enactment (according to govtrack).
S. 149—Stop Senior Scams Act
Summary: The bill would establish an advisory council made up of federal regulators and industry representatives from,
among others, gift card and prepaid card companies, to collect and review information in the development of model
materials to provide to retailers, financial services companies, and wire-transfer companies to be used to educate employees on how to identify and prevent scams affecting seniors.
Introduced: Jan. 16, 2019
Status: The Senate Commerce, Science, and Transportation Committee ordered the bill to be reported with an amendment in the nature of a substitute favorably on July 10, 2019. It was reported out of the Commerce Committee on December 19,2019.
Sponsor: Sen. Robert Casey (D-PA); 2 co-sponsors, 83% chance of enactment (according to govtrack).
S. 189—The Social Media Privacy Protection and Consumer Rights Act of 2019
Summary: This bill requires online platform operators to inform a user, prior to a user creating an account or otherwise using the platform, that the user’s personal data produced during online behavior will be collected and used by the operator and third parties.
Introduced: Jan. 17, 2019
Status: Read twice and referred to the Committee on Commerce, Science, and Transportation on Jan. 17, 2019 Sponsor: Sen. Amy Klobuchar (D-MN); 3 co-sponsors, 2% chance of enactment (according to govtrack).
S. 453—A Bill to Amend the Consumer Financial Protection Act of 2010 to Subject the Bureau of Consumer Financial Protection to the Regular Appropriations Process
Summary: The bill would amend the Consumer Financial Protection Act of 2010 to subject the Consumer Financial Protection Bureau to the regular appropriations process.
Introduced: Feb. 12, 2019
Status: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs on Feb. 12, 2019. Sponsor: Sen. David Perdue (R-GA); 18 cosponsors. 2% chance of enactment (according to govtrack).
S. 3108— CONSUMER TRANSACTION ACCOUNT PROTECTION ACT OF 2019
Summary: This bill would specify that consumer transaction account deposits of an insured depository institution shall not be considered to be funds obtained through a deposit broker.
Introduced: December 19, 2020
Status: The bill was referred to the Committee on Banking, Housing, and Urban Affairs on December 19, 2019. Sponsor: Sen. Doug Jones (D-AL); 2 co-sponsors. 2% chance of enactment (according to govtrack).
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