Payments

Subscribe to Payments via RSS
Skyscrapers from a low angle view

The proposal would make key changes to the definition of “deposit broker” with significant ramifications for banks, fintechs, bank-fintech partnerships, and other third parties in the financial services industry.

By Arthur S. Long, Parag Patel, Barrie VanBrackle, Pia Naib, and Deric Behar

The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) recently approved a Notice of Proposed Rulemaking (“Unsafe and Unsound Banking Practices: Brokered Deposits Restrictions”) (the Proposal) to amend the agency’s brokered deposit…

Abstract view of a skyscraper

Paycheck advance products that are deemed consumer loans under the CFPB’s new proposal would be subject to increased disclosure and regulatory protections.

By Parag Patel, Barrie VanBrackle, and Deric Behar

The Consumer Financial Protection Bureau (CFPB) recently proposed an interpretive rule titled “Consumer Credit Offered to Borrowers in Advance of Expected Receipt of Compensation for Work” (the Proposal). If finalized, the Proposal would designate “earned wage access” or “earned wage advance” products (EWAs) that require a fee as…

Abstract financial charts with upward arrow on a blue background. 3D Rendering

The UK’s consultation on deregulating commercial agents could have knock-on impacts on payment services and create regulatory divergence from the EU.

By Christian McDermott, Brett Carr, and Grace Erskine

On 16 May 2024, the UK government launched a consultation into the deregulation of the Commercial Agents (Council Directive) Regulations 1993 (the Commercial Agents Regulations). The Commercial Agents Regulations implemented Council Directive 86/653/EEC (the Commercial Agents Directive) and defined certain pro-agent terms of engagement between businesses and their self-employed commercial agents who are authorised to negotiate the sale or purchase of goods on their behalf.

The stated purpose of the consultation is to ensure that the Commercial Agents Regulations serve the needs of UK businesses post-Brexit, and to remove the legal complexities resulting from the interaction of the Commercial Agents Regulations with the English legal system’s rules on agency and contract law. The UK government’s current proposal is for existing contracts under the Commercial Agents Regulations to remain in force until termination or expiry, and to prevent new contracts from being subject to the Commercial Agents Regulations.

In addition to affecting relationships between UK agents and their principals, the proposals could also have knock-on effects for the payments sector, which we explore in this post.

Skyscrapers from a low angle view

The centralized repository would assist the CFPB and law enforcement in detecting patterns of misbehavior and recidivism adversely affecting consumers.

By Arthur S. Long, Barrie VanBrackle, and Deric Behar

On June 3, 2024, the Consumer Financial Protection Bureau (CFPB) finalized a rule (Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders) (the Rule) to track judicial and regulatory enforcement orders against nonbank financial firms, and to report on such orders in a publicly available registry.…

Credit card

The preliminary injunction was granted pursuant to Fifth Circuit precedent that the CFPB’s independent funding structure is unconstitutional.

By Barrie VanBrackle and Deric Behar

On May 10, 2024, the US District Court for the Northern District of Texas blocked the Consumer Financial Protection Bureau’s (CFPB) final rule (the Rule) amending Regulation Z to limit credit card late fees. The Rule was initially proposed in February 2023, finalized on March 5, 2024, and was set to go into effect on May 14, 2024.

The Rule aims to ensure that credit card late fees are “reasonable and proportional” to the costs that issuers incur in collecting late payments, as required by TILA. The Rule, however, faced immediate and intense criticism from market participants and trade groups representing banks and credit unions (for more information, see this Latham blog post).

Credit card

The rule targets a statutory loophole that the CFPB asserts large credit card issuers exploited to exact excessive late fees from consumers.

By Barrie VanBrackle and Deric Behar

On March 5, 2024, the Consumer Financial Protection Bureau (CFPB) finalized a rule (the Rule) to amend Regulation Z, which implements the Truth in Lending Act (TILA) to limit credit card late fees. The Rule was initially proposed in February 2023 and was intended to go into effect in October 2023 (for…

Online internet Shopping

The proposal would subject certain large non-bank companies offering wallet and payment services to federal regulatory oversight on par with banks and credit unions.

By Jenny Cieplak, Parag Patel, Barrie VanBrackle, and Deric Behar

On November 7, 2023, the Consumer Financial Protection Bureau (CFPB) proposed a rule, Defining Larger Participants of a Market for General-Use Digital Consumer Payment Applications (the Proposal), to supervise large providers of digital wallets and payment apps. The Proposal aims to ensure that US-based non-bank financial service companies providing digital wallets and payment apps will be subject to the same federal supervisory rules as banks, credit unions, and other financial institutions that the CFPB already supervises.

According to the CFPB, fintech companies and other firms offering novel products and services in the consumer finance space have “blur[ed] the traditional lines of banking and commerce.” The Proposal therefore aims to “enable the CFPB to monitor for new risks to both consumers and the market,” and to “promote fair competition” through consistent enforcement between depository and non-depository institutions.

The move becomes effective on October 1, 2023, with the Supreme Court soon to decide on the agency’s rule-writing authority.

By Barrie VanBrackle, Marifiel Gonzalez, and Deric Behar

On February 1, 2023, the Consumer Financial Protection Bureau (CFPB) proposed a rule (the Proposal) to amend Regulation Z, which implements the Truth in Lending Act (the Act) to limit credit card late fees. The CFPB received comments before its May 3, 2023 deadline, and it announced that the proposed rule will go into effect on October 1, 2023.

Absent further challenges as described below, credit card issuers should be ready to implement controls to comply with the Proposal.

The Act aims to modernize and streamline state regulation of money transmitters while promoting innovation and consumer protection.

By Parag Patel, Mik Bushinski, and Deric Behar

More than a dozen US states have enacted the Money Transmission Modernization Act (MTMA) in whole or in part, while several others have introduced bills to implement some or all of the model legislation that seeks to establish a uniform set of regulatory standards applicable to money transmitters at the state level.

The Conference of State Bank Supervisors (CSBS), a trade association of state financial services regulators that regulate money transmitters (among other providers of financial services), finalized the MTMA in August 2021 after receiving feedback from industry stakeholders.

The MTMA aims to reduce regulatory burden for money transmitters that operate in many states, streamline regulatory efforts and coordination among state regulators of money transmitters, encourage innovation by money transmitters, and protect small businesses and consumers that rely on money transmitters. The potential impact from more uniform and streamlined licensing across states is significant: in 2021, money transmitters handled $4.9 trillion, of which 99.8% was transmitted by companies licensed in multiple states, according to the CSBS.

New laws implement regulatory standards and licensing requirements for fintechs seeking to improve employee access to wages.

By Parag Patel, Mik Bushinski, and Deric Behar

On June 13, 2023, Nevada enacted a law that regulates earned wage access (EWA) services provided to state residents. Missouri followed by enacting an EWA law on July 7, 2023 that shares many similarities with Nevada’s. The new EWA laws make Nevada and Missouri the first two states in the US to establish statutory frameworks designed to regulate EWA services.

EWA services enable a consumer to receive earned employment income prior to a scheduled payday. They ideally provide an alternative to high-cost forms of credit, such as payday loans, although some consumer advocacy groups have warned of fees and other problematic aspects with certain EWA services.

To date, the principal providers of EWA services are fintechs, some of which are new entrants and some of which have been in the EWA business for several years.

Importantly, the EWA laws in both states exempt EWA services from their respective state laws that regulate loans and money transmission. EWA service providers in Nevada or Missouri would therefore not be regulated as a lender or money transmitter in connection with the EWA services they provide to residents of those states.