Testimony of Brian Tate President and CEO of the Innovative Payments Association Before the House Financial Services Committee Task Force on Financial Technology
Chairman Lynch, Ranking Member Davidson, and members of the Task Force on Financial Technology, my name is Brian Tate, and I am the President and CEO of the Innovative Payments Association (IPA).
It is my privilege to appear before you today to share IPA’s views on emerging Fintech cash flow products with specific emphasis on the use of earned wage access services.
IPA is a non-profit trade association that serves as the leading voice of the electronic payments sector, including prepaid products, mobile wallets, and P2P payments. IPA’s mission is to encourage efficient use of electronic payments, cultivate financial inclusion, and empower consumers.
As we have learned throughout the pandemic, even the best laid plans cannot always protect families from unexpected financial disruptions.
The Federal Reserve’s 2018 Survey of Household Economics found that 40% of American households would struggle to come up with $400 to pay for an unexpected bill. Many consumers have few options should they face an unexpected expense between paydays, and the traditional options have proven to be expensive.
The U.S. Department of Labor reports nearly two-thirds of U.S. businesses pay their workers on a bi-weekly, semi-monthly, or monthly schedule, which means that workers are, in essence, giving their employers an interest-free loan. A study by the Financial Health Network found that 38% of respondents reported timing mismatches between wage income and expenses.
During the past ten years, the payment innovators have developed new services and products to help consumers meet these timing mismatches. One of the most practical and affordable options is Earned Wage Access, or EWA. Simply put, EWA programs allow consumers to access their own money prior to payday.
Getting paid daily is not a new concept. Many Americans, including wait staff, taxi drivers, and bartenders, can get paid at the close of their shifts.
The two former leaders of the CFPB – Directors Cordray & Kraninger – didn't agree on much, but both took concrete steps to support EWA. Director Cordray exempted employer-sponsored programs from his 2017 payday lending rule. And Director Kraninger issued an advisory opinion explaining that certain EWA programs are not credit. IPA agrees with both Cordray and Kraninger and maintains that EWA products are not loan or credit products, Therefore, they should not be subject to TILA.
The Financial Health Network’s report on EWA found consumers in financial distress may consider title, payday, or pawn loans as options. With the average cost per EWA transaction ranging between $2.59 - $6.27, the report makes it clear that EWA is far less costly than those other options.
EWA has grown in popularity because it is a safer, cheaper, and more efficient alternative to other short-term products on the market. EWA providers do not impact customers’ credit ratings and they do not share information to credit reporting agencies. EWA is offered with no recourse and providers have no rights
against the user in the event of nonpayment, loss of employment, closed accounts, or blocked payments. These are non-recourse transactions, which means the risk of loss is on the provider.
As someone who has been working since the age of 14, I can easily relate to a retail worker, single parent, or young adult facing a financial emergency and lacking easy access to short-term liquidity. At different points in my life, I have walked in the same shoes as millions of Americans who find themselves unable to pay for a utility bill, childcare, or an unexpected medical expense.
Treating EWA as credit would be a mistake and would remove a valuable tool from consumers’ financial toolkit.
Thank you for the opportunity to present the views of the IPA and I welcome any questions the Task Force may have.
The IPA has signed a letter alongside 98 other trade association and companies opposing the proposed new tax information reporting regime from the Biden Administration as part of the proposed Reconciliation package pending in Congress. As a reminder, the proposal would require providers of financial services to track and submit to the IRS information regarding every account above a de minimis threshold of $600 during the year. Similar to the previous coalition letter addressed to Congress, this current letter is addressed directly to President Biden and urges him to withdrawal the proposal. The letter was sent to the White House this morning.
Washington, D.C. (October 27, 2021) — The Innovative Payments Association (IPA) President & CEO, Brian Tate, has released the following statement on President Joe Biden’s nomination of Professor Saule Omarova to be the next Comptroller of the Currency (OCC).
The IPA encourages the U.S. Senate Banking Committee to thoughtfully review Professor Omarova’s qualifications to be the next Comptroller of the Currency. Moreover, we urge Members to thoroughly explore her stated views on the private banking system, which appear on their face to be inconsistent with previous banking agency precedent and leadership who served in this critically important role, regardless of party affiliation.
Americans’ lives have been disrupted at all levels by the pandemic. The payments community has worked hard to make it easier for Americans to receive government benefits, adapt to the demands of a remote-based economy, and protect against fraud. Regulators need to help maintain certainty for all Americans and businesses as the country transitions to normalcy.
Members of the payments community have raised concerns about Professor Omarova’s nomination because she has expressed very strong views in favor of disrupting the nation’s banking system. Professor Omarova has proposed, amongst other things:
It is critically important that the next Comptroller of the Currency have a fundamental understanding of the challenges the financial system faces and a sense of what viable solutions can developed to improving consumers’ financial lives.
Washington, D.C. (September 9, 2020) – The Innovative Payments Association (IPA) today released the following statement announcing Invest Sou Sou and Frizzmo as the winners of its inaugural Fintech Elevator competition.
“The IPA is excited to announce Invest Sou Sou and Frizzmo as the winners of our first Fintech Elevator Competition,” said IPA President and CEO Brian Tate. “Both of these companies impressed the audience and our judges, and we are pleased to welcome them as our newest members of the Innovative Payments Association.”
IPA COO Ben Jackson continued, “While we heard from a strong field, Invest Sou Sou’s social banking APIs takes a new approach to customer acquisition through social networking, and Frizzmo’s platform helps children and young people become financially responsible, while offering a way to support their local schools. These showed the judges and our voting audience innovation that stood out.”
IPA’s Fintech Elevator competition offered applicants from across the country the opportunity to pitch IPA members, payments investors and partner companies in the hopes of earning a membership into the IPA. As members, Invest Sou Sou and Frizzmo will be able to leverage the IPA’s resources and network to advance their business models and boost their growth moving forward. Six submissions were selected from the applicant pool and given the opportunity to make their pitch. Invest Sou Sou and Frizzmo were crowned the winners following the presentations based on voting by both judges and the audience.
About the IPA
The Innovative Payments Association (“IPA”) is a trade organization that serves as the leading voice of the electronic payments sector, including prepaid products, mobile wallets, and person-to-person (P2P) technology for consumers, businesses and governments at all levels. The IPA’s goal is to encourage efficient use of electronic payments, cultivate financial inclusion through educating and empowering consumers, represent the industry before legislative and regulatory bodies and provide thought leadership. For additional information, visit www.ipa.org, or follow us on Twitter @IPAUpdates.
Prepaid accounts are one option the federal government has at its disposal to give U.S. citizens financial assistance due to the coronavirus pandemic, allowing consumers to maintain access to the financial services system, avoid check-cashing fees, and pay bills online or by phone, Brian Tate, president of the Innovative Payments Association writes. These products give Americans access to the digital economy through online shopping and effective budgeting tools.
Over the next several weeks, prepaid accounts will be a central tool the federal government uses to help Americans who are bravely enduring the twin health and financial crises gripping our country.
The truth is, prepaid accounts have been assisting governments at all levels to help their citizens in good times and bad for over a decade.
Congress and the Trump administration reached agreement last week on a $2 trillion “Phase 3” coronavirus relief package. We hope the initial, bold steps taken by our nation’s leaders will help our country weather this crisis and recover quickly once it is finally over.
Thanks to an influx of technological advancements, individuals now have more choices than ever to save and manage their money. But ensuring that financial tools are best serving consumers takes cooperation among regulators, policymakers, and the private sector.
Recently, Federal Deposit Insurance Corp. Chairman Jelena McWilliams said the agency will be releasing its proposal on updating the definition of brokered deposits for the 21st Century by the end of the year. This is a positive sign that the FDIC is working to understand how yesterday’s regulations should keep up with today’s technology.
Revolutionary payments technologies have changed the way money flows into the banking system. Branches are no longer the only way that banks receive deposits. Now, funds flow into banks through mobile wallets, ATMs, and a variety of apps.
Smart financial choices are tough, even for the savviest consumers. With more choices than ever before on how best to manage money, getting honest information is critical for success.
Unfortunately, that information can be hard to find. Outdated facts, product misperceptions, and outright bias threaten the consumer’s ability to find the knowledge they need to make smart choices.
Critics of prepaid accounts have been left behind by the rapid transformation taking place in payments. Like all industries, the payments sector had its growing pains, but the community kept innovating, learning, and working with policymakers to bring innovative, accessible, and lower-cost products to market. This evolution has been noticed, with prepaid and fintech products becoming a staple in recommendations by experts like the Financial Health Network (formerly CFSI).
The following statement can be attributed to Brian Tate, President and CEO of the Innovative Payments Association (IPA), on inaccurate and misleading consumer advice in The Motley Fool regarding prepaid accounts:
“The Motley Fool’s readers deserve accurate and timely advice regarding their financial options. Unfortunately, The Motley Fool, who markets itself as an unbiased observer, has run with a poorly researched and inaccurate ‘article’ that cherry picks the highest fee prepaid cards and compares them with credit cards to promote its advertisers’ products. This is a disservice to readers. Attacking the use of prepaid accounts – utilized by all segments of the American population – fundamentally ignores the realities of our financial landscape. Prepaid bank accounts, regulated by the CFPB, are mainstream products encompassing everything from mobile wallets to P2P payments apps. They are used by individuals, businesses, and federal and state government agencies to save money and control finances.
“It appears the Motley Fool wants its readers to believe prepaid accounts are high cost products. The motivations for this apples-to-oranges comparison are clear: to steer consumers away from these emerging innovative products and push them toward products advertised on the Motley Fools website. The IPA believes empowering individuals to make smart financial choices means providing accurate information to give them the full scope of their options. But misleading consumers in such a deliberate fashion is unacceptable.”
April 18, 2019
WASHINGTON (April 18, 2019) – Last week, leaders from across the payments industry gathered at the Hilton Washington DC National Mall for the Innovative Payments Association’s (IPA) 8th Annual Power of Prepaid® Conference. For three days, attendees heard from experts pushing the innovative payments community forward. A key takeaway from the conference: the industry is taking proactive action to make financial security a top priority.
“The prepaid, fintech and broader innovative payments community has emerged as a dynamic force in our digital economy. Unfortunately, with growth, comes added threats from bad actors looking to do harm to consumers,” said Brian Tate, president and CEO of IPA. “Our members understand that as we develop new avenues for payments, we must also constantly update and adapt to the ever-changing realities of data and financial security.”
You may not have known it, but April 1 was a pivotal day for the payments community. The Consumer Financial Protection Bureau’s final rule for prepaid accounts officially extended existing consumer protections to mobile wallets and P2P products. It also placed requirements on traditional prepaid products, which have for years been regulated by banking agencies.
It is important to keep in mind that the prepaid community was providing consumer protections disclosures, as well as Federal Deposit Insurance Corp. insurance, years before the CFPB’s rules were finalized, but this deadline formalized revamped thinking from regulators on what constitutes a prepaid account.
The industry is ready for this evolution.