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@example.com.
The IPA is planning to hold two events later in March for our members.
On March 15, at 2 p.m. eastern, with the Federal Bureau of Investigation's San Diego Elder Justice Task Force. They will discuss trends in financial crimes against seniors and talk about how the industry and law enforcement can work together to protect senior citizens.
On March 22, at 3 p.m. eastern, IPA member DataSeers will present a webinar on how to adopt a data driven approach to compliance. The presentation will cover what data elements can help manage the compliance burden and how managing data can aid in adjusting to changes in the regulatory landscape.
California DFPI Issues Ruling on EWA Licensing
The California Department of Financial Protection and Innovation has published a interpretive opinion in response to FlexWage’s request for an opinion relating to EWA licensing under the California Deferred Deposit Transaction Law (CDDTL) with respect to its EWA product. The CA DFPI found that FlexWage is not required to obtained a license under CDDTL. This conclusion was reached by determining that employers, not FlexWage, provide EWA funds that do not exceed what they already owe employee recipients, rather than FlexWage advancing funds and attempting to recoup those funds, plus a fee or charge, on a future date.
HFSC Chairwoman Waters Releases March Hearing Schedule
House Financial Services Committee Chairwoman Maxine Waters (D-CA) released the Committee’s March hearing schedule. The Committee will hold hearings on inflation, AI, overdraft fees, and stock market oversight, in additional to a monetary policy hearing with Federal Reserve Chairman Jerome Powell and a hearing on central bank digital currencies (CBDC).
The witness list for the CBDC hearing has not been released, but we expect the hearing to follow up on the topics discussed at the recent hearing examining the President’s Working Group on Financial Markets’ Report on Stablecoins.
Washington State Bill on Payroll Card Accounts
Washington Senate Bill 5531 recently passed the Senate unanimously and has been introduced in the House Finance Committee. The bill would make revisions and updates to the Uniform Unclaimed Property Act and would treat payroll card accounts in the same manner as wages or checks under unclaimed property regulations and would subject them to escheatment one year after issuance.
The IPA has drafted a comment letter to the Washington State Legislature with the suggestion that payroll card accounts be treated like checking, savings, and other similarly deposit accounts covered by Regulation E. More information on the bill can be found here.
Russia Removed from SWIFT Financial System
In response to Russia’s invasion of Ukraine, a joint statement was issued on Saturday by the United States, the European Union, the United Kingdom, and Canada that they would disconnect select Russian banks from SWIFT, the global system which allows financial institutions to send secure messages and payment orders. The move will essentially disconnect those banks from the international financial system.
The full effect of the action, long considered the “nuclear” economic sanction option, remains to be seen. When Iran was removed from SWIFT in 2012 after being sanctioned by the European Union over the country’s nuclear program, they lost almost half its oil export revenue and 30% of foreign trade following the disconnection. North Korea is the only other nation to be disconnected from SWIFT.
Federal Reserve Issues Request for Comment on Access to Accounts and Services
This week the Federal Reserve issued a supplemental notice and request for comment on updates to its proposed guidelines on Account Access Guidelines. Last May, the Board requested comments on proposed guidelines to be used by Reserve Banks when evaluating requests for accounts and services. Those guidelines established a two-tier system under which requests by federally-insured institutions would be straightforward, while requests from non-federally insured institutions would require more extensive due diligence. Under the new proposed guidelines, a three-tiered system is created. Tie 1 consists of federally-insured institutions, and their requests would continue to be subject to a more streamlined review. Tier 2 consists of institutions that are not federally-insured but are subject to prudential supervision by a federal banking agency. These institutions would generally receive an intermediate level of review. Tier 3 consists of institutions that are neither federally-insured nor subject to prudential supervision. They would generally receive the strictest level of review.
Republican Congressmen Raise Issues With Postal Banking Pilot Program
Nine Republican members of the House Financial Services Committee sent a letter to Michael Kubayanda, Chairman of the Postal Regulatory Commission, to express concern with the recent US Postal Service pilot program allowing customers to exchange a paycheck or business check for a gift card in value up to $500 at USPS offices. The members expressed concern that check cashing is far outside the traditional jurisdiction of the USPS, which by statute includes the acceptance, collections, sorting, and transportation of mail. The members also criticized the USPS for enacting the pilot program without informing the Postal Regulatory Commission or publishing notice in the Federal Register as required by the Postal Accountability & Enhancement Act.
The pilot program, which ran from September 12, 2021 to January 12, 2021, was used by only 6 customers and brought in only $35.70 in fees to the Postal Service.
Top Republicans Demand Regulators Protect Access to Financial System from Government Overreach
Top Republicans on the Financial Services Committee and the Subcommittee on Consumer Protection and Financial Institutions sent letters to the OCC, FDIC, Federal Reserve Board, and the Treasury Department seeking assurances that the federal cannot abuse its authority in their regulation of the financial system to block lawful business engaging in legal activities from accessing the financial system.
The letter specifically mentioned “Operation Choke Point,” in which the FDIC and Department of Justice used supervisory and law enforcement authority to prevent legal businesses from accessing the financial system, and Biden Administration acts to pause publication of a November 2020 notice of proposed rulemaking which would prohibit national banks and federal savings associations from categorically declining financial services to businesses engaged in lawful business activities.
New Federal Bills
Pending Federal Bills
The Stablecoin Innovation and Protection Act
Summary: This bill would require stablecoin issuers to either become a bank or to partner with a bank, and be subject to bank-like regulation. The bill also requires nonbank stablecoin issuers to maintain collateral in an amount equal to 100 percent of the value of outstanding stablecoin.
Status: Proposed, but not yet introduced.
Sponsor: Rep. Josh Gottheimer (D-NJ)
Summary: This bill amends the Federal Reserve Act to prohibit the Federal Reserve banks from offering banking products and services, including CBDC, directly to consumers.
Status: Introduced in the House on January 18, 2022
Sponsor: Rep. Tom Emmer (R-MN)
H.R. 4773 – Consumer Financial Protection Commission Act
Summary: This bill removes the CFPB from the Federal Reserve System, converts the Bureau into an independent commission, and modifies its leadership structure. Specifically, the bill eliminates the position of director and deputy director and establishes a five-person commission appointed by the President and confirmed by the Senate.
Status: Introduced in the House and referred to the House Financial Services Committee on July 28, 2021
Sponsor: Rep. Blaine Luetkemeyer (R-MO)
H.R.963 – Forced Arbitration Injustice Repeal (FAIR) Act
Summary: This bill prohibits a pre-dispute arbitration agreement from being valid or enforceable if it requires arbitration of an employment, consumer, antitrust, or civil rights dispute.
Status: The bill passed the House Judiciary Committee on November 3.
Sponsor: Rep. Hank Johnson (D-GA)
H.R. 1711 – To amend the Consumer Financial Protection Act of 2010 to direct the Office of Community Affairs to identify causes leading to, and solutions for, under-banked, un-banked, and underserved consumers, and for other purposes.
Summary: This bill would direct the CFPB to conduct research on barriers to financial inclusion and identify hurdles under- and un-banked consumers. It would also require the Bureau to identify best practices to increase participation in the financial system and included a reporting requirement.
Status: Passed/agreed to in House on 5/18/21. Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs on 5/19/21.
Sponsor: Rep. David Scott (D-GA)
H.R. 1996 – SAFE Banking Act
Summary: This bill would allow marijuana-related businesses in states with some form of legalized marijuana and established regulatory structures to access the banking and payments system.
Status: Passed/agreed to in House on 4/19/21. Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs on 4/20/21.
Sponsor: Rep. Ed Perlmutter (D-CO)
H.R. 3968 - Municipal IDs Acceptance Act
Summary: This bill would require that the banking regulators update their guidance on Customer Identification Programs to state that an identification card issued by a municipality may be used by a bank to verify the identity of a customer, if such identification card enables the bank to form a reasonable belief that the bank knows the true identity of the customer.
Status: 06/23/2021 Ordered to be Reported from the Financial Services Committee in the Nature of a Substitute (Amended) by the Yeas and Nays: 27 - 23.
Sponsor: Rep. Richie Torres (D-NY)
H.R. 4277 – Overdraft Protection Act of 2021
Summary: This bill would limit overdraft fees, both in frequency and amount, and would establish a set of practices for overdraft coverage programs.
Status: Introduced and referred to the House Financial Services Committee on 6/30/21.
Sponsor: Rep. Carolyn Maloney (D-NY)
IV. U.S. Congress Members Not Seeking Re-Election in 2022
The current structure of the U.S. Senate is 48 Democrats, 50 Republicans, and 2 Independents. Currently 1 Democrat and 5 Republican Senators have announced they will not be running for reelection in 2022. The current structure of the U.S. House is 222 Democrats and 211 Republicans. Currently 30 Democrat and 13 Republican House members have announced they will not be running for reelection in 2022. More information about Congressional retirements can be found here.
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