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January 19, 2023

On the web

CFPB Issues Guidance to Root Out Tactics Which Charge People Fees for Subscriptions They Don’t Want

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) issued a new circular affirming that companies offering “negative option” subscription services must comply with federal consumer financial protection law. Negative option programs include subscription services that automatically renew unless the consumer affirmatively cancels, and trial marketing programs that charge a reduced fee for an initial period and then automatically begin charging a higher fee.

January 17, 2023

On the web

US Lawmakers Create 'Congress' First Ever' Digital Assets Subcommittee

Bitcoin News

U.S. Congress’ “first ever” subcommittee on digital assets has been created as part of the House Financial Services Committee. “We want to create a regulatory legal framework for digital assets … that makes America a leader from an innovation point of view but also protects consumers and investors,” explained Congressman French Hill, who will lead the digital asset subcommittee.

January 5, 2023

On the web

Why the FTC Isolated Mastercard With Its Pre-Christmas Consent Order

Digital Transactions

“When the Federal Trade Commission announced two days before Christmas it had leveled a preliminary consent order against Mastercard Inc. to correct what the agency saw as roadblocks the card company had erected against routing online debit transactions to competing networks, the move may have surprised at least some observers. The surprise lay not in what the FTC had to say, but in what it omitted: the order left out Visa Inc., Mastercard’s main rival and a company the Commission had identified only two months earlier as a fellow actor in blocking debit routing to other networks.”

January 3, 2023

On the web

Agencies Issue Joint Statement on Crypto-Asset Risks to Banking Organizations

Board of Governors of the Federal Reserve System

“Federal bank regulatory agencies today issued a statement highlighting key risks for banking organizations associated with crypto-assets and the crypto-asset sector and describing the agencies’ approaches to supervision in this area. In particular, the statement describes several key risks associated with crypto-assets and the crypto-asset sector, as demonstrated by the significant volatility and vulnerabilities over the past year. Given these risks, the agencies continue to take a careful and cautious approach related to current and proposed crypto-asset-related activities and exposures at banking organizations.”

December 23, 2022

On the web

FTC Orders an End to Illegal Mastercard Business Tactics and Requires it to Stop Blocking Competing Debit Card Payment Networks

Federal Trade Commission

“The Federal Trade Commission is ordering an end to illegal business tactics that Mastercard has been using to force merchants to route debit card payments through its payment network, and is requiring Mastercard to stop blocking the use of competing debit payment networks. Under a proposed FTC order, Mastercard will have to start providing competing networks with customer account information they need to process debit payments, reversing a practice the company allegedly had been using to keep them out of the ecommerce debit payment business and, according to the FTC, that violated provisions of the 2010 Dodd-Frank Act known as the Durbin Amendment and its implementing rule, Regulation II.”

FTC Orders Mastercard to Open Tokens to Rival Debit Networks

American Banker

“Mastercard must provide competing debit networks with the keys needed to convert tokenized card account information — which has been encoded for security purposes — back to the original account number for online transactions, the Federal Trade Commission announced on Friday. The FTC voted 4-0 to issue an administrative complaint and approve a proposed consent order alleging that Mastercard’s practices for e-commerce transactions violate provisions of the 2010 Dodd-Frank Act known as the Durbin amendment, the agency said in a press release. (Subscription required)”

December 21, 2022

On the web

CFPB Orders Wells Fargo to Pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts

Consumer Financial Protection Bureau

“The Consumer Financial Protection Bureau (CFPB) is ordering Wells Fargo Bank to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank.”

December 15, 2022

On the web

FinCEN Issues Notice of Proposed Rulemaking Regarding Access to Beneficial Ownership Information and Related Safeguards


“The Financial Crimes Enforcement Network (FinCEN) today issued a Notice of Proposed Rulemaking (NPRM) that would implement provisions of the Corporate Transparency Act (CTA) that govern the access to and protection of beneficial ownership information. This NPRM proposes regulations that would govern the circumstances under which such information may be disclosed to Federal agencies; state, local, tribal, and foreign governments; and financial institutions, and how it must be protected. The proposed regulations specify how government officials would access beneficial ownership information in order to support law enforcement, national security, and intelligence activities. They also describe how certain financial institutions and their regulators would access such information in order to fulfill customer due diligence requirements and conduct supervision. The proposed rule also sets forth high standards for protecting this sensitive information consistent with the goals and requirements of the CTA. The NPRM also proposes amendments to the final reporting rule to specify when reporting companies may report FinCEN identifiers associated with entities.”

December 6, 2022

On the web

Sanctions Compliance Guidance for Instant Payment Systems

Treasury | Office of Foreign Assets Control

“In recent years, the financial sector has introduced payment systems that allow users to send and receivefunds almost instantly, at any time of the day, on any day of the year. These systems—which allow a payment’s transmission and the availability of funds to payees to occur almost in real-time (referred to herein as “instant payment systems”)1 —are being developed both in the United States and abroad. The high velocity of instant payments, along with increasing values and volumes of such payments, have led to questions across the financial sector, particularly from participating banks, about how best to implement sanctions compliance measures in this context. Each instant payment system has its own unique characteristics; for example, some allow for domestic payments only, while others permit cross-border payments. Accordingly, as the financial system innovates to improve efficiency, OFAC continues to encourage financial institutions to adopt a risk-based approach to ensure their sanctions compliance controls and related technology solutions remain commensurate with the sanctions risks presented by instant payment systems. To that end, in the context of instant payment systems, OFAC is issuing this guidance to: (i) reaffirm that financial institutions should take a risk-based approach to managing sanctions risks; (ii) highlight key factors that may be relevant in determining that risk-based approach;(iii) encourage the development and deployment of innovative sanctions compliance approaches and technologies to address identified risks; and (iv) encourage developers of instant payment systems to incorporate sanctions compliance considerations as they develop new payment technologies. This guidance should aid financial institutions in determining how best to allocate their compliance resources consistent with their particular sanctions risks.”

November 30, 2022

On the wires

Fraud, Transaction Problems Highlight US Consumer Complaints Over Crypto


“Fraud and transaction problems were leading factors in a surge of US consumer complaints related to cryptocurrencies & other digital assets. The report from the US Consumer Financial Protection Bureau (CFPB) comes as the high-profile failure of the FTX crypto exchange has seized the attention of regulators and shaken the crypto industry. “Our analysis of consumer complaints suggests that bad actors are leveraging crypto-assets to perpetrate fraud on the public,” said CFPB Director Rohit Chopra.  Even before the collapse of FTX, complaints from consumers who were hit by other types of digital currency losses have been rising at an alarming rate, the CFPB reported. The CFPB report said the crypto market has become a magnet for fraudsters who see little chance that their schemes will be detected due to the absence of investor protection and the opaque nature of the market.”

November 29, 2022

On the wires

Brazil to Allow Credit Fintechs to Initiate Payment Transactions


“Brazil’s National Monetary Council on Friday decided to allow credit fintechs to initiate payment transactions, the central bank said, a move that will in practice clear them to provide payment services to consumers and business establishments. To operate as payment initiators, fintechs currently need to open another company specifically for this purpose. With the change, they will be able to offer this service within their routine operation, said the central bank. Payment initiators, according to the central bank, “initiate a transaction ordered by the final user but never manage the payment account, nor hold the funds of the transactions.” The central bank stressed that the change should promote innovations in the financial system and increase competition between companies authorized to provide this service.”

November 23, 2022

On the wires

NY Gov Signs Novel Law That Limits Cryptomining, For Now


“New York is taking a first-in-the-nation step to tap the brakes on the spread of cryptocurrency mining, under legislation that Gov. Kathy Hochul signed Tuesday. The measure comes amid growing scrutiny of the cryptocurrency industry following this month’s collapse of the FTX exchange. But New York’s measure, which passed the state Legislature in June, is specifically concerned with the environmental aspects of crypto. “I will ensure that New York continues to be the center of financial innovation, while also taking important steps to prioritize the protection of our environment,” Hochul, a Democrat, said in a message explaining her approval. The new law sets a two-year moratorium on new and renewed air permits for fossil fuel power plants used for energy-intensive “proof-of-work” cryptocurrency mining — a term for the computational process that records and secures transactions in bitcoin and similar forms of digital money. Proof-of-work is the blockchain-based algorithm used by bitcoin and some other cryptocurrencies.”

November 22, 2022

On the web

Afterpay, Zip, React To Proposed Buy Now Pay Later Regulations

Channel News

“Afterpay and Zip have shared differing opinions on new regulatory options put forward by the Treasury will impact the buy now, pay later sector. In the Treasury’s paper, three options are offered. The first would amend the Credit Act to require that BNPL providers check that a certain product is affordable for a customer before it is offered. The second option requires BNPL providers to gain a credit licence and operate within responsible lending regulations. The third, and more strict option, would see BNPL loans enforced under the same laws as home loans, with the tighter checks this brings. Treasury is seeking consultation by December 23, with plans to legislate in 2023. Not surprisingly, Afterpay favours the first, least restrictive, option.”

November 10, 2022

On the web

FCA Threatens BNPL Bosses With Jail Time and Fines As Laybuy Nears Profitability


“The Financial Conduct Authority ( FCA) has written to ‘buy now, pay later’ (BNPL) execs warning they could face jail time if they fail to comply with financial promotion rules. Although not all BNPL ‘agreements’ are required to be authorised by the FCA, it said that financial promotions do fall within its jurisdiction, and therefore must still comply with “certain regulatory requirements”, in a letter seen by AltFi. As first reported by City AM , the FCA has warned that communication or explainers about products constitute “financial promotions” and so fall under its remit. The letter outlined that financial promotions must be “clear, fair and not misleading”, with the offence for non-compliance carrying a maximum sentence of two years imprisonment, a fine, or both.”

November 8, 2022

On the web

CFPB Seeks Further Public Input on Big Tech Payment Platforms

Consumer Financial Protection Bureau

“In October 2021, the CFPB ordered six large technology and peer-to-peer platforms that operate payment services (Amazon, Apple, Facebook, Google, PayPal and Square) to provide information about their business practices, including their data collection and use, their policies for removing individuals or businesses from their platforms, and their policies and practices for adhering to key consumer protections like addressing disputes and errors. Today, the CFPB is announcing that it will re-open the public comment period for 30 days and add additional questions. Faster payment systems are increasingly popular and offer many benefits to consumers, like sending money directly to other consumers or engaging in quicker transactions. But the scale and market power of large technology companies raise concerns about potential new risks to consumers and to broader competition in the marketplace. The CFPB continues to analyze the responses to the October 2021 orders and public comments and to share our insights with the public. For example, in August, the CFPB released a report , The Convergence of Payments and Commerce, that outlined consumer risks stemming from financial services companies’ ability to aggregate and monetize consumer financial data.”

November 1, 2022

On the web

FinCEN Analysis Reveals Ransomware Reporting in BSA Filings Increased Significantly During the Second Half of 2021


“The Financial Crimes Enforcement Network (FinCEN) today issued its most recent Financial Trend Analysis of ransomware-related Bank Secrecy Act (BSA) filings for 2021, indicating that ransomware continued to pose a significant threat to U.S. critical infrastructure sectors, businesses, and the public. The report focuses on ransomware trends in BSA filings from July-December 2021, and addresses the extent to which a substantial number of ransomware attacks appear to be connected to actors in Russia… FinCEN issued today’s report pursuant to the Anti-Money Laundering Act of 2020 and in response to an increase in the number and severity of ransomware attacks against U.S. critical infrastructure since late 2020. Analysis covers pertinent ransomware activities for calendar year 2021, focuses on the second half of 2021, and builds on the BSA data underlying FinCEN’s October 2021 report. Among the most notable findings in the report: Reported ransomware-related incidents have substantially increased from 2020; Ransomware-related BSA filings in 2021 approached $1.2 billion; Roughly 75 percent of the ransomware-related incidents reported to FinCEN during the second half of 2021 pertained to Russia-related ransomware variants.”

October 28, 2022

On the web

Britain Proposes Regulation of All Cryptoassets


“Britain would have the power to regulate all cryptoassets under a proposal the UK financial services minister has added to a draft law before parliament that will almost certainly pass. Andrew Griffith, re-appointed as City Minister on Thursday by Britain’s new Prime Minister Rishi Sunak, put forth the amendment to the financial services and markets bill, which parliament has begun approving. The bill, as originally drafted, gives the Financial Conduct Authority powers to regulate stablecoins only, but the amendment broadens the remit to cover promotions for all cryptoassets.”

October 26, 2022

On the web

Despite COVID-19 Pandemic, Record 96% of U.S. Households Were Banked in 2021


“Despite unprecedented economic challenges posed by the COVID-19 pandemic, nearly 96 percent of U.S. households were banked in 2021, according to the latest national survey released today by the Federal Deposit Insurance Corporation (FDIC). The FDIC’s 2021 National Survey of Unbanked and Underbanked Households also found an estimated 4.5 percent of U.S. households (representing 5.9 million households), lacked a bank or credit union account, the lowest national unbanked rate since the FDIC survey began in 2009. According to FDIC’s latest biennial survey, approximately 1.2 million more households were banked since 2019. Nearly half of newly banked households that received government payments said these payments contributed to their decision to open an insured bank or credit union account. Meanwhile, 14.1 percent of households (representing 18.7 million households), were underbanked in 2021, meaning they had a bank or credit union account and used nonbank financial products and services.”

October 25, 2022

On the web

U.S. Consumer Agency to Move Ahead With ‘Open Banking’ Rule This Week


“The U.S. Consumer Financial Protection Bureau (CFPB) will move forward this week with an “open banking” rule that could dramatically boost competition in the consumer finance industry and increase Americans’ access to financial services. In a speech on Tuesday, CFPB Director Rohit Chopra said the agency expects to propose requiring financial institutions that offer transaction accounts to set up secure methods for data sharing, and will develop requirements to limit the misuse and abuse of personal financial data.”

New ‘Buy Now, Pay Later’ Code of Conduct: Customers Cannot Have Over $2k in Outstanding Payments (Singapore)

The Straits Times

“A code of conduct outlining best practices for “buy now, pay later” (BNPL) providers was introduced on Thursday following seven months of discussions among industry players, and will take effect on Nov 1. The code was developed by the Singapore FinTech Association (SFA) and eight industry players including Atome, Grab Financial Group and Shopback, with Monetary Authority of Singapore (MAS) guidance. It was initiated following concerns that the emerging payment option was luring people into debt, given that BNPL allows consumers to defer payment on goods or services without having to pay interest. They either repay the purchase price in one lump sum or in three to four equal instalments, usually over two to three months.”

October 21, 2022

On the web

FDIC Chair Wants Payment Stablecoins on Permissioned Blockchains

Ledger Insights

“Acting FDIC Chairman Martin Gruenberg regards payment stablecoins as those used for mainstream real–time payments as opposed to the existing stablecoins, which are primarily used within the crypto ecosystem. At a Brookings Institute event today, he said payment stablecoins should be issued on permissioned blockchains only.  His rationale is the ability to know all the participants, including nodes and validators, to enforce sanctions and anti-money laundering compliance.  Responding to a question after his speech, he said, “A public unpermissioned blockchain poses enormous challenges in terms of basic supervisory responsibility for safety and soundness, consumer protection and anti-money laundering. The(re is) potential for a permissioned blockchain where you can address those issues. If you’re going to consider the utilization of the technology within the banking system (it) seems to us to have much greater potential.””

October 17, 2022

On the web

Directors Face Jail for Fraud Failings

The Times (London)

“Company directors could be jailed for not taking appropriate measures to prevent fraud at their organisations under proposals expected to be set out this week. MPs are due to propose an amendment to the economic crime and transparency bill which would include corporate and director-level liability for ‘failure to prevent’ criminal activity. Two all-party parliamentary groups — on fair business banking and anti-corruption and responsible tax — are supporting the amendment, which they say is necessary to put an end to the UK being a “jurisdiction of choice for dirty money”. The bill, introduced in the Commons last month, includes reforms such as changes to Companies House, the corporate registry, and greater powers for law enforcement agencies to tackle organised crime.”

October 14, 2022

On the web

OFAC Sanctions Compliance Guidance for Instant Payment Systems

U.S. Department of the Treasury

“The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is publishing “Sanctions Compliance Guidance for Instant Payment Systems” which emphasizes the importance of taking a risk-based approach to managing sanctions risks in the context of new payment technologies such as instant payment systems and to highlight considerations relevant to managing those risks. This guidance also encourages developers of instant payment systems to incorporate sanctions compliance considerations and features as they develop these systems.”

October 12, 2022

On the web

PSR Directs 400 Firms to Introduce the Payment Protection Measure, Confirmation of Payee

Payment Systems Regulator

“Today, the Payment Systems Regulator (PSR) has confirmed its plans that will see around 400 more financial firms provide the name checking service, Confirmation of Payee (CoP).   CoP is an essential fraud protection measure. Today’s direction will see nearly all transactions made via Faster Payments (FPS) and CHAPS covered by CoP by October 2024. The CoP service is designed to prevent accidentally misdirected payments and APP scams by checking the name of the account holder with the account number and sort code. There are currently one million payments which benefit from the checking service every day. This latest requirement from the PSR follows a direction the regulator gave in 2019 which saw the UK’s six biggest banking groups implement the system. Since then, additional non-directed firms have voluntarily implemented the service and there are now 59 financial organisations offering CoP.”

Retailers Wage Last-Ditch Battle Against Credit Giants Over Swipe Fees

The Hill

“Retailers are mounting a last-ditch push for a bipartisan bill to crack down on credit card swipe fees paid by businesses.   Their aim is to slip the legislation into the National Defense Authorization Act (NDAA), which senators briefly discussed Tuesday, prompting alarm from financial services giants that say the bill would upend Americans’ credit card rewards.  The Credit Card Competition Act would empower merchants to choose alternative credit card networks to process payments that aren’t run by industry titans such as Visa or Mastercard — which together control around 80 percent of the U.S. market — as a way to boost competition and bring fees down.”

October 11, 2022

On the web

What’s Next if ‘Durbin 2.0’ Becomes Law?


“U.S. senators Richard Durbin (D-Illinois) and Roger Marshall (R-Kansas) have proposed a bill known as the Credit Card Competition Act of 2022 that would force financial institutions with more than $100 billion in assets to offer merchants much more say in how credit card transactions are routed. The bill, commonly called Durbin 2.0, requires that at least two unaffiliated networks must be available, but not Visa and Mastercard together. Instead, it could be one of those networks in conjunction with either Discover or American Express. With Visa and Mastercard processing more than 80% of U.S. credit card charges, the bill’s stated intent is to promote competition in the space.”

Banks Step Up Opposition to Credit Card Competition Act

Banking Exchange

“Banking trade groups have hit out at a plan to attach the controversial Credit Card Competition Act to the National Defense Authorization Act (NDAA). In a joint statement addressed to senior policymakers in the House of Representatives and the Senate, 10 financial services trade bodies argued that “slipping the controversial Credit Card Competition Act into the NDAA would compromise our service members’ financial safety and security just to allow big box retailers to further pad their record-breaking profits”.”

October 4, 2022

On the web

Why The US Wants To Regulate The Buy Now, Pay Later (BNPL) Industry


“The US Consumer Financial Protection Bureau (CFPB) on September 15 published a report detailing the consumer harms that it observed with the “rapidly growing” Buy Now, Pay Later (BNPL) industry arising from practices like data harvesting, inconsistent consumer protection, and debt overextension.  The agency noted that it will identify potential guidelines or rules to issue to ensure that BNPL lenders adhere to many of the baseline protections that already exist for other forms of credit. The report comes after CFBP in December 2021 announced a market monitoring inquiry to gain more insight into the industry.”

September 29, 2022

On the web

FinCEN Issues Final Rule for Beneficial Ownership Reporting to Support Law Enforcement Efforts, Counter Illicit Finance, and Increase Transparency


“Today, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) took a historic step in support of U.S. government efforts to crack down on illicit finance and enhance transparency by issuing a final rule establishing a beneficial ownership information reporting requirement, pursuant to the bipartisan Corporate Transparency Act (CTA). The rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States to report information about their beneficial owners—the persons who ultimately own or control the company, to FinCEN. Designed to protect U.S. national security and strengthen the integrity and transparency of the U.S. financial system, the rule will help to stop criminal actors, including oligarchs, kleptocrats, drug traffickers, human traffickers, and those who would use anonymous shell companies to hide their illicit proceeds.”

September 28, 2022

On the web

Regulator Homes In On ‘Loan Stacking’ Across Buy Now, Pay Later Firms


“Buy now, pay later services (BNPL) are growing by leaps and bounds, but the lightly regulated industry could end up causing more harm than good for consumers, according to a new U.S. government report. The BNPL lenders offer consumers the option to pay for purchases in interest-free installments over a relatively short period; four payments in six weeks is common. That kind of financing is popular with people who don’t have access to traditional forms of credit, and the lenders will offer increasingly larger borrowing limits if borrowers exhibit solid repayment behavior. The services are designed to be easy to use and are often seamlessly integrated with online checkouts, making it almost too easy for consumers to sign on for a new loan. Unlike banks and credit-card companies, however, the BNPL lenders run only limited credit checks, and they don’t know if new users already have loans on rival services. A report by the U.S. Consumer Financial Protection Bureau released last week warned of the risk of “loan stacking,” where individuals risk getting in over their heads by taking out loans from multiple BNPL companies.”