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  • Federal Reserve Task Force Shoots for Real-Time Payments Network by 2020

    FinTech

    On July 21, the Faster Payments Task Force, created by the Federal Reserve in 2015, announced the publication of its final report detailing strategic efforts to implement faster payment solutions (part one of the report was published in January of this year). The report outlines 16 proposed faster payments solutions and is the culmination of proposals and feedback from providers across the payments industry, including more than 300 representatives from financial institutions, consumer groups, payment service providers, financial technology firms, merchants, government agencies, and numerous other interested parties. The task force’s goal is to have a real-time payments network available to U.S. consumers and businesses by 2020. The report discusses various solutions and technologies for implementing faster payments and recommends a framework for ongoing collaboration, decision-making, and rule setting. The report also addresses security threats, advocates for infrastructure to support faster payments, recommends that the Fed collaborate with relevant regulators to evaluate current laws and make necessary rule changes.

    “Our goal is to ensure that anyone, anywhere is able to pay and be paid quickly and securely,” said Sean Rodriguez, the Fed's faster payments strategy leader and chair of the Faster Payments Task Force. “In real terms, that means people will not have to wait hours or days to deliver and access their money. Businesses will have enhanced cash management and better information associated with their payments.”

    Fintech Federal Reserve Consumer Finance Payments

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  • OCC Acting Comptroller Supports Fintech National Bank Charter

    FinTech

    On July 19, Acting Comptroller of the Currency, Keith A. Noreika, spoke before the Exchequer Club about the proposed concept of granting special purpose charters for financial technology (fintech) companies. In prepared remarks, Acting Comptroller Noreika said the OCC has the authority to grant national bank charters to nondepository fintech companies in “appropriate circumstances.” However, he reiterated that having the authority does not imply a determination has been made as to whether the OCC will accept or grant applications from nondepository fintech companies that rely solely on regulation 12 CFR 5.20(e)(1), which outlines eligibility requirements for receiving special purpose national bank charters. To date, no such applications have been received.

    The OCC continues to demonstrate its support for innovative developments and partnerships between banking and technology companies. As previously discussed in a Special Alert, the OCC issued a draft supplement in March to provide guidance for evaluating charter applications from fintech companies. “Providing a path for these companies to become national banks is pro-growth and in some ways can reduce regulatory burden for those companies,” Noreika remarked. However, the fintech special purpose national bank charter has recently met legal challenges from the New York Department of Financial Services (NYDFS) and the Conference of State Bank Supervisors (see Special Alerts here and here). Norieka stated that the OCC is developing its response to the NYDFS lawsuit “and plans to defend [its] authority vigorously.” He cautioned against defining banking too narrowly, and argued that fintech companies should be allowed to apply for national bank charters if they meet the criteria and are involved in the “business of banking.”

    Fintech OCC Licensing Agency Rule-Making & Guidance

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  • Noncash Payment Growth Highlighted in Sixth Federal Reserve Payments Study

    FinTech

    On June 30, the Board of Governors of the Federal Reserve issued its sixth payments study entitled The Federal Reserve Payments Study 2016: Recent Developments in Consumer and Business Payment Choices. The study includes data on business and consumer noncash payments made in the United States in 2015. Among other things, the study details the differences between business and consumer payments in 2015 compared to those from 2000, general-purpose payment card use in 2015, and increases in use of alternative payment methods.

    According to the report, the most popular noncash payment types among consumers were, in descending order: non-prepaid debit cards, general-purpose credit cards, checks, and finally, ACH debit transfers. For businesses, however, ACH credit transfers were the most popular, then checks, general-purpose credit cards, and non-prepaid debit cards. Consumers wrote fewer than half the number of checks in 2015 than they did in 2000 but almost doubled the number of noncash payments that they made. Businesses also cut check-writing by more than half but differed from consumers by more than doubling the number of ACH transfers that they initiated during the same period.

    General-purpose or “network-branded” cards accounted for more than 65 percent of noncash payments in 2015. The data showed that 60 percent of these card accounts carried revolving debt, while 40 percent of accounts were paid in full each month.

    Information on fraudulent payments also was collected and should be available in the third quarter of this year.

    Fintech Digital Commerce Federal Issues Federal Reserve Electronic Fund Transfer ACH Payments Credit Cards

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  • Florida Adds Virtual Currency to Anti-Money Laundering Law

    FinTech

    On June 23, Florida Governor Rick Scott signed H.B. 1379, which will incorporate virtual currency into the Florida Money Laundering Act. Specifically, the Bill adds virtual currency to the list of currency and negotiable instruments classified as “monetary instruments” under the Act. In addition, virtual currency will be included in the definitions section as a “medium of exchange in electronic or digital format that is not a coin or currency of the United States or any other country.” The law goes into effect on July 1.

    Fintech State Issues State Legislation Bitcoin Anti-Money Laundering Virtual Currency

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  • BAFT Announces 2017 Global Payments Symposium; Will Highlight Advances in Payments Innovation, Blockchain, and Artificial Intelligence

    FinTech

    On July 19 and 20, the Bankers Association for Finance and Trade (BAFT) will host its 2017 Global Payments Symposium in New York City. The symposium will help bankers and payments professionals understand the latest innovation trends affecting compliance, payments, blockchain, fintech, cybercrime, and artificial intelligence, among others. BAFT will also discuss methods to integrate innovations into the business lines and how global challenges and best practices impact the U.S.

    Fintech BAFT Blockchain Privacy/Cyber Risk & Data Security Payments

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  • Illinois Finalizes Digital Currency Regulatory Guidance

    FinTech

    On June 13, the Illinois Department of Financial and Professional Regulation (IDFPR) issued final guidance on the regulatory treatment of digital currencies with an emphasis on decentralized digital currencies. (See IDFPR news release here). As previously covered in InfoBytes, the IDFPR requested comments on its proposed guidance in December of last year in order to devise the proper regulatory approach to digital currency in compliance with money transmission definitions in the Illinois Transmitters of Money Act, 205 Ill. Comp. Stat. 657/1, et seq. (TOMA).

    The “Digital Currency Regulatory Guidance” clarifies that digital currencies are not money under TOMA, and therefore, those engaged in the transmission of digital currencies are not generally required to obtain a TOMA license. The IDFPR noted, however, that “should transmission of digital currencies involve money in a transaction, that transaction may be considered money transmission” and suggested persons engaging in such transactions request a determination regarding whether or not the activity will require a TOMA license.

    To provide additional clarity, the guidance includes examples of common types of digital currency transactions that qualify as money transmissions, as well as examples of activities that do not qualify as money transmission.

    Fintech State Issues Digital Commerce Virtual Currency Money Service / Money Transmitters

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  • FINRA Announces Fintech Outreach Initiative, Hosts Blockchain Symposium in July

    FinTech

    On June 13, the Financial Industry Regulatory Authority (FINRA) announced a new outreach initiative to improve its understanding of fintech innovations and how they impact the securities industry. The Innovation Outreach Initiative will consist of the following components:

    • the launch of FINRA’s new webpage dedicated to fintech topics such as RegTech (covering compliance monitoring, fraud prevention, data management, and the identification and interpretation of regulations affecting the securities industry), artificial intelligence, and social media sentiment investing; and
    • the creation of a cross-departmental team led by the Office of Emerging Regulatory Issues developed to, among other things, foster discussion on fintech developments, develop publications on fintech topics, and increase collaboration with domestic and international regulators.

    Additionally, FINRA announced it will host a Blockchain Symposium in New York City on July 13 to create an opportunity for regulators and industry leaders to join together and discuss opportunities and challenges related to the use of Distributed Ledger Technology, also known as blockchain.

    Fintech Securities FINRA SEC Blockchain

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  • Vermont Governor Enacts Law Including Blockchain Application

    FinTech

    On June 8, Vermont Governor Phil Scott signed into law legislation (S. 135), which would, among other things, allow for broader business and legal application of blockchain technology to promote economic development. Additionally, S. 135 requires the Center for Legal Innovation at Vermont Law School, the Commissioner of Financial Regulation, the Secretary of Commerce and Community Development, and the Vermont Attorney General to prepare a joint report for the General Assembly on “findings and recommendations,” as well as policy proposals and “measurable goals and outcomes” concerning “potential opportunities and risks presented by developments in financial technology.” The new law follows the passage of House Bill 868 last June, which defined blockchain as “a mathematically secured, chronological, and decentralized consensus ledger or database,” and formally recognized blockchain-notarized documents as having legal bearing in a court of law.

    As previously reported in InfoBytes, Arizona recently enacted a similar law (AZ H.B. 2417) recognizing blockchain signatures and smart contracts under state law.

    Fintech Privacy/Cyber Risk & Data Security State AG State Legislation Blockchain

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  • House Energy and Commerce Committee to Hold Hearing June 8 on Fintech Options for Consumers

    FinTech

    On June 8, the House Energy and Commerce Committee’s Digital Commerce and Consumer Protection Subcommittee will hold a hearing as part of its “Disrupter Series.” In a press release issued June 1, the hearing, Improving Consumer’s Financial Options with FinTech, will discuss consumer needs and whether the fintech industry is offering financial products and services that meet these needs. “The FinTech industry has allowed the average American to have more control over their financial well-being while simultaneously promoting greater financial literacy. Next week’s hearing is an important opportunity for us to hear from companies on barriers they face in the market and learn how Congress can continue investing in its potential,” stated Committee Chairman, Rep. Bob Latta (R-Ohio). The hearing will begin at 10 a.m. in Room 2123 of the Rayburn House Office Building. Witnesses have not yet been announced.

    Fintech House Energy and Commerce Committee Congress

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  • Fannie, Freddie to Allow Electronically Recorded Mortgage Copies

    FinTech

    On May 10, Fannie Mae announced it would begin accepting copies of electronically recorded mortgages rather than original wet-signed documents. This follows a prior September 2016 announcement from Freddie Mac, which changed its policy on the electronic recording of paper closing documents.

    Fannie Mae. As set forth in Section A2-5.2-01 of its Servicing Guide, Fannie Mae says that electronic records may be delivered and retained as part of an electronic transaction by the seller/servicer to the servicer, document custodian or Fannie Mae, or by a third party, as long as the methods are compatible with all involved parties. Additionally, the electronic records must be in compliance with the requirements and standards set forth in ESIGN and, when applicable, the Uniform Electronic Transactions Act, as “adopted by the state in which the subject property secures by the mortgage loan associated with the electronic record is located.”

    Freddie Mac. A bulletin released last September updated Sections 1401.14 and 15 of Freddie Mac’s Servicing Guide by removing the requirement that a seller/servicer retain the original paper security instrument signed by the borrower if an electronic copy of the original security instrument is electronically recorded at the recorder’s office, provided the following conditions are met:

    • The seller securely stores along with the other eMortgage documents either (i) “the electronically recorded copy of the original security instrument,” or (ii) “the recorder’s office other form of recording confirmation with the recording information thereon”; and
    • Storage of the original security instrument signed by the borrower is not required by applicable law.

    According to Freddie Mac, “Removing this requirement addresses one of the barriers for eMortgage adoption in the industry, permitting more [m]ortgage file documents to be [e]lectronic and reducing some storage costs for [s]eller/[s]ervicers.”

    Fintech Electronic Signatures Fannie Mae Freddie Mac ESIGN

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