In the first installment of a two-part Payments Year in Review series, Keith Barnett, Carlin McCrory, and Josh McBeain delve into the payments landscape of 2023 and share their predictions for 2024.
A Closer Look at NCUA’s Consumer Financial Protection and Compliance Expectations
As discussed here, in a recent letter, the Chairman of the National Credit Union Administration (NCUA) outlined the agency’s supervisory priorities for 2024. In this post, we delve deeper into the area of consumer protection oversight.
Arizona, Kentucky, and Hawaii Become Latest States to Introduce Legislation to Regulate Earned Wage Access Products
Recently, Arizona, Kentucky, and Hawaii have jumped on the bandwagon to regulate earned wage access (EWA) products and services. Arizona’s proposed bill makes clear that EWA services are not considered to be loans or money transmissions, and voluntary tips or gratuities are not finance charges. It further requires EWA providers to be licensed, provide mandatory disclosures to consumers, and to submit an annual report detailing yearly revenue from EWA products. Kentucky’s legislation also makes clear that EWA services are not consumer loans or deferred deposit transactions, and regulates any consideration or gratuity requested as part of the transaction. Hawaii’s bill amends the interest and usury law by defining “debt,” “finance charge,” and “credit” to include EWA products, and requires “annual percentage rate” to be calculated pursuant to the Truth in Lending Act (TILA). Each proposal is discussed below.
NCUA Announces Supervisory Priorities for 2024
On January 23, the Chairman of the National Credit Union Administration (NCUA) released a letter outlining its supervisory priorities for the new year. While the organization acknowledged that the credit union system had remained largely stable during 2023, it observed growing signs of financial strain on balance sheets. Specifically, the “rise in interest rate and liquidity risks resulted in an increase in the number of composite CAMELS code 3, 4, and 5 credit unions. Inflation and interest rates are affecting household budgets, which could lead to an increase in credit risk in future quarters.”
Navigating the Future of Payments
As the financial landscape continues to evolve, financial institutions and fintech businesses, including payment processors and money transmitters, are facing increased regulatory scrutiny and heightened consumer expectations. Our dedicated Payments team is at the forefront of these changes, actively addressing the full spectrum of legal challenges in this intricate and ever-evolving sector.
New York Enacts Credit Card Surcharge Caps and Disclosure Requirements
Last month, New York Governor Kathy Hochul signed into law Assembly Bill 2672, which both prohibits sellers from charging a credit card surcharge greater than what they are charged by the credit card company and requires sellers to clearly post the price of the credit card surcharge. The law will take effect on February 11, 2024.
New Year Same Focus on Fees: CFPB Proposes to Amend Regulation Z to Raise New Barriers to Overdraft Charges
On January 17, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a proposed rule with request for public comment to amend exemptions to Regulation Z so the Truth in Lending Act (TILA)/Regulation Z would apply to certain overdraft “credit” provided by insured financial institutions with more than $10 billion in assets, in furtherance of the Bureau’s crusade on “junk fees.” At a highlevel, the CFPB’s proposed rule would provide covered financial institutions with two options for offering overdraft “credit”: (1) a “courtesy” overdraft service with “breakeven” fees exempt from TILA/Regulation Z; or (2) a “covered overdraft credit” line/loan in connection with debit card or routing/account number transactions with “above breakeven” fees subject to TILA/Reg. Z. Under the proposal, an institution subject to the rule would have to provide full TILA disclosures and comply with other substantive TILA requirements for overdraft fees if they exceed costs or a low CFPB safe harbor amount.
Redefining Banking: A Conversation on the CFPB’s Proposed 1033 Rule
In this episode of Payments Pros, Keith Barnett and Carlin McCrory are joined by Jordan Wright, CEO of Atomic Financial, to discuss the Consumer Financial Protection Bureau’s (CFPB) proposed 1033 rule. This rule aims to limit the misuse or sale of consumer data, and is expected to be finalized by summer 2024.
Florida Enters the Fray to Regulate Earned Wage Access Products
On January 9, SB 1146, entitled the Earned Wage Access Services Act, was introduced into the Florida Senate. The bill would require earned wage access (EWA) providers to register with the Florida Financial Services Commission. The bill also requires EWA providers to develop procedures for dealing with consumer questions and complaints, requires consumer notifications, and requires providers to offer at least one reasonable option for consumers to get EWA proceeds at no cost. Like Nevada, discussed here, the law specifies that EWA products are not loans (including not being subject to the Consumer Finance Act), nor is such activity considered money transmission under Florida law. SB 1146 has been referred to the banking and insurance committee for consideration. If passed, the law would take effect on October 1, 2024.
CA DFPI Reaches Settlement with Internet Platform Over Alleged Failure to Disclose Potential Convenience Fees
On January 9, the California Department of Financial Protection and Innovation (CA DFPI) announced a consent order with Credova Financial, LLC, (Credova) to resolve allegations that, in violation of the California Consumer Financial Protection Law, the company failed to disclose potential third-party fees to consumers. Pursuant to the settlement, Credova is required to pay a $50,000 penalty and disclose potential third-party convenience fees to consumers in the future.