March 22, 2023

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].

Upcoming IPA/FBI Events
​Webinar: The Value of SARs -- In a Webinar on April 20th the FBI will present on how the information that industry provides in SARs helps law enforcement with their investigations. They will also discuss how the Internet Crime Complaint Center can be a resource for helping your customers affected by cyber-crimes.  Learn more and register here. 
 
2023 Innovative Payments Conference
The 2023 Innovative Payments Conference will be held on May 7-9th. The IPA’s IPC is the must-attend annual event for the payments community attracting the attention and support of the industry’s most influential players. Benefit from two days of cutting-edge content, discussions and enhanced networking as you engage directly with those leading the way in payments compliance, legislation, regulation and innovation.

Here are some highlights of the agenda:

• Andrew Moss, Director for Minority Outreach at the OCC will discuss Building a New Economy through Financial Inclusion;
• Stu Richards, CEO of Bredin, will present original research on the payments preferences of small businesses;
• Adam Drucker, PayPal’s Sr. Director, Global Law Enforcement Outreach and Response Global Investigations will discuss how PayPal Approaches High-Risk Investigations;
• Dan McCrum of the Financial Times will discuss how his reporting helped uncover the Wirecard Scandal;
• Industry Veterans John Hagy and Karen Garrett, will talk about where the industry has been and where it is going.

GAO Publishes Report on Fintech Products/EWA
The GAO published a report entitled “Financial Technology: Products Have Benefits and Risks to Underserved Consumers, and Regulatory Clarity is Needed.” In the report, the GAO studied fintech products such as digital deposit accounts, credit builder products, small-dollar fintech loans, and earned wage access. 
 
Notably, on the very first page of the report, the GAO recommended that “CFPB issue clarification on the application of the Truth in Lending Act’s definition of “credit” for earned wage access products not covered by its November 2020 advisory opinion. CFPB agreed with this recommendation.”
 
The full GAO report can be found here, and a one-pager can be found here.
 
FDIC Press Releases, Financial Institution Letters on Silicon Valley Bank and Signature Bank
With the failures and subsequent resolutions of Silicon Valley Bank and Signature Bank, the Federal Deposit Insurance Corporation (FDIC) has issued a number of press releases and Financial Institution Letters (FILs) that IPA members should take note of, regardless of their exposure to recent events. On the morning of Monday, March 13th, the first business day after the failure of Silicon Valley Bank, the FDIC released a press release announcing that all deposits of Silicon Valley Bank-both insured and uninsured- would be transferred to a “bridge bank,” and that depositors would have full access to their funds. This historic action is a departure from traditional federally-backed deposit insurance in which only deposits up to $250,000 would be insured. A similar press release was issued in regards to Signature Bank. 
 
The following day, Tuesday, March 14th, the FDIC issued a Financial Institution Letterinforming all vendors and counterparties with contracts with the bridge banks of both Silicon Valley Bank and Signature Bank that they are legally obligated to perform under those contracts, and that the bridge banks have the full ability to make timely payments to vendors and counterparties and otherwise to perform its obligations under the contracts.
 
Biden FY24 Budget Proposal- EWA
The Biden Administration released its FY24 Budget Proposal, and the Treasury released its General Explanations. Both documents contained the same proposal that was included in the FY23 Budget Proposal on “clarifying the tax treatment of on-demand pay arrangements.” The Treasury’s General Explanations, specifically, contained a word-for-word repetition of the FY23 explanation.
 
The IPA held a call with Treasury staff about this proposal last year and was told the proposal only applied to wholly-integrated providers (i.e. providers that do not work with a third party). Treasury stressed at the time that they would prefer legislation, but also said they could technically regulate on their own.
 
California DFPI Proposes EWA Regulation
The California Department of Financial Protection and Innovation (CA DFPI) filed a Notice of Proposed Rulemaking and invited public comments on an EWA registration proposal. We are still working through the proposal itself and encourage our members to do the same. Note that the press release includes three links for a Notice of Proposed Action, Text of Proposed Rulemaking, and Initial Statement of Reasons. The press release gives a deadline of May 2, 2023 (45 days) for public comments. The IPA will be submitting a comment, and we ask our members to review all three linked documents and send any feedback to Brian Tate ([email protected]) or Chris Stromberg ([email protected]). 
 
HFSC and SBC Announce First Hearings on Silicon Valley Bank and Signature Bank Failures
The House Financial Services Committee and Senate Banking Committee have announced their first hearings on the Silicon Valley Bank and Signature Bank failures. On Tuesday, March 28th, the Senate Banking Committee will hold its hearing, and on Wednesday, March 29th, the House Financial Services Committee will hold theirs. Both hearings will feature testimonies from FDIC Chairman Martin Gruenberg, Vice Chair for Supervision of the Federal Reserve Michael Barr, and Undersecretary for Domestic Finance, U.S. Treasury, Nellie Lang.
 
Joint Regulator Statement on Actions to Stabilize First Republic Bank.
The Department of the Treasury, Federal Reserve, FDIC, and OCC issued a press releaseon an influx of bank deposits to stabilize First Republic Bank. Other media sources are reporting that JPMorgan Chase, Bank of America, and Citigroup will each contribute $5 billion in deposits, along with smaller deposits from other institutions.
 
CFPB Issues Supervisory Highlight on Junk Fees
The CFPB released a Supervisory Highlight that reports on “unlawful junk fees uncovered in deposit accounts and in multiple loan servicing markets, including in mortgage, student, and payday lending.” More information can be found in this press release.

New Federal Bills
H.R. 1163, The Protecting Taxpayers and Victims of Unemployment Fraud Act
This bill, sponsored by Rep. Jason Smith (R-MO-08), would provide financial incentives for states to recover fraudulently paid Federal and State unemployment compensation. The bill was marked up and reported favorably from the House Ways and Means Committee on 2/28/23 by a vote of 20-17.
 
H.R. 1165, Data Privacy Act of 2023
This bill, sponsored by Rep. Patrick McHenry (R-NC-10) would create a federal data privacy standard, and would preempt preexisting state frameworks. This bill bway marked up and reported favorably by the House Financial Services Committee on 2/28/23 by a vote of 26-21.