The Government Updateis 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].  The IPA's Compliance Boot Camp is coming to Chicago, Illinois, and act fast—37% of the seats have already sold! Register now to secure your spot at this one-day, in-person event packed with valuable sessions tailored to the payments community. This is the lowest rate you will find for earning up to 6 CLEs. Here's a glimpse of what awaits you:
Podcasts, Press, and Education IPA Mentions:
 On May 16, 2024, the U.S. Supreme Court released its opinion in CFSA v. CFPB. The case focused on whether the CFPB’s current funding structure is constitutional. You can read a copy of the Court’s Opinion here. Below is the Court’s holding in the case:
(1) The Bureau’s funding is “drawn from the Treasury” and is therefore subject to the requirements of the Appropriations Clause. The issue is whether the Bureau’s funding mechanism constitutes an “Appropriatio[n] made by Law.” The Court concludes that the answer is yes based on the Constitution’s text, the history against which that text was enacted, and congressional practice immediately following ratification. Pp. 5–15 To learn more about the decision and its impact on the payment’s community please listen to the IPA’s Podcast episode entitled, “The CFPB is Here to Stay.”  Text of California EWA Regulation Released
In May, the California DFPI released the text of its EWA Final Rule. A copy of the final rule can be found here (see section on Income Based Advances). At first glance, similar to the proposed rule, the final rule continues to categorize EWA services as loans. In addition, the final rule still requires EWA providers to register with the state. However, if an EWA provider registers with the state, the EWA provider is exempt from the fee restrictions and rate caps normally imposed on lenders in the state of California. DFPI also posted a Final Statement of Reasons in which the agency outlines their reasoning for removing the fee restrictions and fee cap restrictions. However, it is important to keep in mind the DFPI does not foreclose the possibility of the imposition of fee caps and/or fee restrictions in the future. You may recall that the State of California Office of Administrative Law rejected the California Department of Financial Protection and Innovation’s submission of the agency’s EWA final rule. Please note that DFPI will have to address the issues raised by the OAL when it rejected the DFPI’s submission. Thus, it is still possible parts of the final rule could change after DFPI makes amendments. Lastly, as a reminder, the IPA filed three comments in response to the proposed rule (and amendments). You can find a copy of the letters the IPA filed with DFPI in response to their EWA proposals here: https://www.ipa.org/ewa.html CFPB Finalizes Rules for BNPL Just before Memorial Day 2024 the CFPB issued an interpretive rule that confirms that Buy Now, Pay Later providers are credit card providers. Thus, BNPL providers must follow the regulations that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with BNPL. Today’s release outlines how BNPL products meet the criteria for credit card providers, under TILA. As a result, BNPL providers must:
The CFPB is collecting comments on this interpretive rule. Comments are due 60 days after the rule is published in the Federal Register. CFPB Issues Final Rule on Industry Standard-Setting for Open Banking This morning the CFPB released a rule finalizing in part its proposed rule on consumer data rights under section 1033 of the Consumer Financial Protection Act. This final rule establishes minimum attributes a standard-setting body must possess to receive CFPB recognition and to issue consensus standards when the full rule is finalized. In its October 2023 proposed rule the CFPB proposed that standards adopted by CFPB-recognized standard setters might be used to facilitate implementation of a final Personal Financial Data Rights rule. The rule will go into effect 30-days after publication in the Federal Register. According to today’s final rule, standard setters must apply to the CFPB and display the following attributes:
The IPA will continue to review and analyze the final rule. If you have any questions, please contact Brian Tate ([email protected]). FDIC Consumer New - Banking with Third-Party Apps On the last day of May the FDIC posted a newsletter focused on consumer’s who use banking apps to conduct their retail banking. In brief, the newsletter outlines the differences between banking directly with a financial institution and utilizing banking services through a third party fintech program manager, including when FDIC insurance applies, how to navigate nonbank companies, and how to avoid scams or fake apps. FDIC Chair to Step Down When Replacement Confirmed Statement by FDIC Chairman Martin J. Gruenberg It has been my honor to serve at the FDIC as Chairman, Vice Chairman, and Director since August of 2005. Throughout that time I have faithfully carried out the critically important mission of the FDIC to maintain public confidence and stability in the banking system. In light of recent events, I am prepared to step down from my responsibilities once a successor is confirmed. Until that time, I will continue to fulfill my responsibilities as Chairman of the FDIC, including the transformation of the FDIC’s workplace culture. Prudential Regulators Issue Third Party Risk Guide for Community Banks In May, the FDIC, OCC, and the Federal Reserve Board issued the following press release announcing their new compliance guide entitled, “Third-Party Risk Management A Guide for Community Banks.” The guide outlines each stage of the third-party relationship and is targeted at community financial institutions. In addition, the guide reinforces the third-party risk management guidance issued by the agencies in June 2023, and please note that the guidance is not a substitute for the agencies’ prior guidance. If you have any questions, please contact Brian Tate ([email protected]). IPA Responds to FinCEN RFI In late May the IPA filed a comment responding to FinCEN’s CIP RFI. The deadline to file comments responding to the RFI is TODAY. As a reminder, FinCEN is seeking comments on the Bank Secrecy Act’s (“BSA”) customer identification program (“CIP”) rule. The CIP rule requires U.S. banks to collect a taxpayer identification number (“TIN”) from a U.S. person before opening a new account for that person. The RFI requests comments about the potential risks, benefits, and safeguards related to partial collection of SSNs directly from customers and the use of third-party sources to collect customers’ full SSNs. The IPA thanks the working group for their feedback during the comment drafting process. A copy of the IPA’s comment can be found here: https://www.ipa.org/fraud.html IPA Comments on IRS Green Book Proposal on EWA Shortly after the release of the President’s proposed Budget for FY 2025 , the U.S. Department of Treasury released the "General Explanations of the Administration’s Revenue Proposals" (also known as the “Green Book). The Green Book provides an explanation of the Administration's revenue proposals for that specific fiscal year. Similar to the last two years, this year’s Greenbook again contains a proposal from the Internal Revenue Service (IRS) on the tax treatment of EWA related products (See. p. 232). Further, the language of this year’s proposal appears to be very similar to the proposals released in prior years. The IPA responded to the Treasury’s IRS proposal by submitting an unsolicited comment letter to the U.S. Treasury outlining our concerns, including the agency’s mischaracterization of the structure and form of EWA products, and how earned wages are accessed by employees who utilize EWA services. The IPA is currently engaged in a dialogue with the U.S. Treasury and looks forward to sharing information with the agency regarding the benefits of EWA to millions of American. A copy of the IPA’s letter can be found here. Interchange State Law Update Yesterday Gov. Pritzker signed the 2025 IL state budget into law. The new state budget included interchange related provisions to prohibiting interchange on sales or excise taxes and voluntary gratuities in Section 150. The provision, if enacted, would be the first of its kind in the country. The provision was included in the state budget as part of a deal made between leaders in the state legislature and the retailers. It is not clear at all that this potential change in law will result in any discernable benefit to consumers in the state of IL. EWA State Law Update On May 21, 2024, South Carolina Governor McMaster signed into law the Earned Wage Access Services Act which will require EWA providers operating in the state to register with the state’s Department of Consumer Affairs. The new law also provides exemptions from state lending and other requirements for providers. South Carolina now joins Kansas, Wisconsin, Nevada, and Missouri in establishing a distinct statutory framework for EWAs. Comments are closed.
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