Payments Pros – The Payments Law Podcast

In this episode of Payments Pros, Josh McBeain and Chris Willis discuss the Consumer Financial Protection Bureau's (CFPB) proposed rule on overdraft fees. The rule, which only applies to large financial institutions with assets over $10 billion, aims to regulate overdraft services by altering the definition of 'finance charge,' effectively subjecting these institutions to Regulation Z's disclosure and substantive provisions. Chris and Josh delve into the complexities of the proposed rule, considering its potential implications and the likelihood of litigation challenges from the industry. They also discuss the role of the Truth in Lending Act (TILA) and the concept of Chevron deference in this context.

In the final episode of the Payments Pros special two-part series, Jordan Bennett, Nacha's senior director of network risk management, joins Keith and Carlin to discuss the new rules regarding fraud monitoring. Fraud Monitoring Phase 1 will become effective on March 20, 2026, and Phase 2 on June 19, 2026. These rules require all nonconsumer originators, ODFIs, third-party service providers, and third-party senders to establish and implement risk-based procedures to identify potential fraudulent transactions. The aim is to reduce the incidence of successful fraud attempts. The group discusses that the rules do not prescribe a specific method for monitoring, allowing each party to adapt according to their needs. However, inaction is not an option. Parties should conduct a risk assessment and adjust their policies accordingly. Jordan advises leveraging existing resources and ensuring contacts are prepared to respond to fraud incidents. He clarifies that these changes don't reallocate liability or establish new duties, but aim to foster teamwork in fraud prevention.

In this episode of Payments Pros, Carlin and Keith welcome back Jordan Bennett, Nacha's senior director of network risk management, for a two-part series on the newly approved rules designed to combat credit push fraud. Credit push fraud has been on the rise, and Nacha released a risk management framework to increase awareness and mitigate such frauds. The new rules, approved by Nacha's members on March 18, aim to mitigate fraud incidents such as business email compromise and efforts to exploit credit push payments. Part one of this series explores the risk management package, discussing the comprehensive set of rules and multiple rule amendments effective from October of the current year. Jordan highlights that the effective dates for some rules extend into 2026, providing ample time for preparation. The rules package was carefully crafted to reduce incidents of credit push frauds and provide financial institutions with useful tools. In addition to the rules, Nacha is also focusing on education and has released risk management guidance. The guidance is designed to help financial institutions improve their risk controls. The new rules include amendments for fraud monitoring by all parties in the ACH network, new rules around fund recovery tools, standardization of certain data fields, and changes to the Written Statement of Unauthorized Debit (WSUD) process. The rules are designed to increase awareness of fraud schemes, reduce successful fraud attempts, and improve recovery after frauds have occurred. Part two of this series will focus on fraud monitoring and what ACH Network participants can start doing now to comply with the recently passed rules.

In this episode of Payments Pros, Carlin McCrory is joined by Nick St. John, director of regulatory compliance at America's Credit Unions, to discuss the Corporate Transparency Act (CTA) and related developments from the Financial Crimes Enforcement Network (FinCEN). Enacted in 2021, the CTA aims to combat the use of anonymous legal entities for money laundering. It mandates that legal entities report their beneficial ownership information to FinCEN, which maintains a database accessible to law enforcement, financial institutions, and other entities that meet specific criteria. Nick explains that the CTA applies to corporations and similar entities, with exceptions like banks and credit unions. Entities must report information about the company and its beneficial owners, defined as any person with a 25% or more ownership interest or who exercises substantial control. Reporting deadlines vary based on the company's creation date. He also clarifies the difference between beneficial ownership reporting to financial institutions and the new reporting to FinCEN. Under the CTA, there is no numerical limit to the number of control persons that must be reported. Financial institutions can request this information for customer due diligence compliance requirements. Carlin and Nick conclude by discussing future developments from FinCEN, including when the information will be made available to financial institutions and changes to existing rules to align with the CTA.

In this special crossover edition of Payments Pros and The Consumer Finance Podcast, Chris Willis is joined by Josh McBeain and Glen Trudel. They discuss the recent final credit card late fee rule issued by the Consumer Financial Protection Bureau (CFPB) and the industry's reaction to it. The rule lowers the safe harbor provision dollar amount for late fees to $8 for large credit card issuers and increases it for small issuers. The team also discusses the legal challenge filed against the rule by a collective of trade groups. They speculate on potential industry responses if the rule survives legal challenges, such as increasing APRs, creating new fees, raising minimum payments, and tightening credit.

In this episode of Payments Pros, co-hosts Keith Barnett and Carlin McCrory discuss the Consumer Financial Protection Bureau's (CFPB) latest proposed rule. This rule aims to prohibit covered financial institutions from charging consumers nonsufficient funds (NSF) fees on transactions that are declined instantaneously or near instantaneously. The CFPB believes this rule will benefit consumers who would otherwise incur NSF fees, potentially leading their accounts to drop to zero or below zero. However, it also acknowledges that financial institutions may become less willing to open depository accounts for these consumers, potentially increasing the number of unbanked and underbanked individuals. The rule, proposed on January 24, is open for comments until March 25, and is expected to be finalized 30 days after publication in the Federal Register.

In this special joint episode of Payments Pros and The Crypto Exchange, Ethan Ostroff, James Kim, and Carlin McCrory discuss the Consumer Financial Protection Bureau's (CFPB) proposed rule to supervise large tech companies and other providers of digital wallets and payment apps. The proposed rule asserts that digital assets are "funds" subject to the Dodd-Frank Act and other federal consumer financial laws and regulations, which would expand the CFPB's supervisory powers to examine companies facilitating crypto and other digital asset transactions. Our group discusses the legal basis for the CFPB's assertion of jurisdiction over digital assets, and observes that the CFPB's position lacks clear statutory authority and may violate the major questions doctrine. They also note that Congress is currently working on legislation related to digital assets, and that the CFPB should not preempt this process. Lastly, the group highlights practical questions that companies face when assessing the proposed rule, such as whether NFTs are covered and how companies can monitor anonymous, blockchain transactions. The final rule is anticipated to be released before year end, with examinations starting in 2025.

In the second and final installment of our two-part Payments Year in Review series, Keith Barnett, Carlin McCrory, and Josh McBeain continue their discussion around the payments landscape of 2023 and their predictions for 2024. In this episode, our co-hosts discuss the CFPB and FTC's attempts to regulate negative options, the Federal Reserve's FedNow, the adoption of Money Transmission Modernization Act in several states, Nacha's proposed risk management framework for credit push fraud, and state legislation concerning Earned Wage Access. More information about 2023 regulatory developments can be found in our 2023 Payments Year in Review.

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. Our co-hosts discuss the Consumer Financial Protection Bureau's (CFPB) proposed rule to supervise "larger participants" in the market for general-use digital consumer payment applications. They also examine the CFPB's report on complaints about payment app fraud, their statements on add-on fees and fees associated with requests for account information, as well as their efforts to reduce credit card late fees. Not to be left out of the party, they also discuss the Federal Trade Commission's (FTC) proposed new rule aimed at prohibiting "junk fees." This is a can't miss episode for anyone looking to catch up on federal payments issues in 2023. More information about 2023 regulatory developments can be found in our 2023 Payments Year in Review.

In this episode of Payments Pros, Keith Barnett is joined by James Stevens to discuss the Merchant Acquirer Limited Purpose Bank Charter (MALPB) in Georgia, a unique charter that allows companies to offer merchant payment processing services without a sponsoring partner bank. Despite being enacted 12 years ago, companies have been unable to utilize it due to card networks not allowing direct participation. This could change soon, especially with Fiserv's recent application. Keith and James note that MALPB is limited to merchant activities and has specific rules regarding merchant funds. The application process is rigorous, involving a detailed review of owners, officers, and directors. The charter also requires the company to employ at least 50 Georgia residents and to engage in merchant acquiring activities within a year of receiving the charter. The Georgia Department of Banking and Finance, which regulates traditional banks in Georgia and will regulate these MALPBs, has posted some guidance and an application form. The guidance is particularly helpful, providing robust capital requirements for these charters. The conversation wraps up with Keith and James emphasizing that the charter's value hinges on the card networks' access allowance. Troutman Pepper, having played a key role in drafting the MALPB law and having a wealth of experience in securing bank charters, is ideally positioned to guide applicants. Our team has been involved in the establishment of all banks formed in the state of Georgia since 2010. James underscores the importance for applicants to seek advice from attorneys and consultants with a proven track record of successfully filing and obtaining bank charters in Georgia.

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. Jordan highlights the importance of data portability in banking, comparing it the telecommunications industry's phone number portability. He suggests that the rule will increase competition, forcing banks to offer better services to retain customers. The proposed 1033 rule requires financial institutions, starting with the largest, to make consumer data, including bill pay data, accessible to third parties and consumers. This may necessitate significant architectural changes and costs, but ensures consumers' legal right to share their data without incurring unnecessary fees. The discussion concludes with Jordan forecasting that the proposed 1033 rule will enhance banking services by fostering competition and simplifying the process for customers to switch banks. He foresees the emergence of earned wage access products as a tool to assist individuals in better financial management. Additionally, Jordan supports the secondary use of data for personalized financial advice and advocates for the rule's extension to encompass payroll and merchant data.

In this episode of Payments Pros, Keith Barnett and Carlin McCrory discuss the Consumer Financial Protection Bureau's (CFPB) fall supervisory highlights, focusing on "junk fees." The report covers examinations in areas of deposits, auto servicing, and remittances completed between February and August 2023. The recent report reveals that their efforts have resulted in institutions refunding more than $140 million to consumers. The report primarily focuses on deposits as an area of supervisory observations. Keith and Carlin also note that the report discusses CFPB identifying unfair practices by financial institutions, which have been charging consumers representment nonsufficient funds (NSF) fees without providing an opportunity to prevent additional fees after the first failed attempt. According to the CFPB, some institutions have used incomplete data that failed to capture all instances of representment NSF fees charged to consumers. The CFPB is currently seeking comprehensive reporting on when consumers were charged multiple representment fees and ensuring proper reimbursement. As noted in the report, institutions are refunding more than $22 million to consumers in response to these directives. NSF fees have been a particular point of criticism for the CFPB, arguing that they are too high and are charged without providing a service to the consumer. Therefore, institutions have been urged by the CFPB to eliminate NSF fees. The report also addresses unanticipated overdraft fees and the CFPB's findings on pandemic relief benefits. The CFPB obtained data from several institutions related to the fees assessed over the course of 2022. Lastly, Keith and Carlin discuss that the CFPB has identified unfair practices related to auto servicers' handling of refunds and add-on products after loans terminate early. Some servicers failed to ensure consumers receive refunds, while others miscalculated refund amounts. The CFPB found that servicers engaged in unfair practices when they miscalculated add-on product refund amounts after loans terminated early.

In this special joint episode of Payments Pros and The Consumer Finance Podcast, Carlin McCrory, Keith Barnett, James Kim, and Chris Willis discuss the Consumer Financial Protection Bureau's (CFPB) proposed larger participant rule for consumer payments providers. The rule is designed to supervise general use digital consumer payment applications, defining a market for these applications and subjecting participants to CFPB supervision and examination under the Consumer Financial Protection Act. Proposed on November 7, the rule targets nonbanks that provide general use digital consumer payment applications with an annual volume of at least five million consumer payment transactions. The CFPB plans to aggregate transactions among affiliated companies, and any nonbank covered person will be considered a larger participant for two years from the first day of the tax year in which they last met the larger participant test. The group also discusses the implications of the rule, including the potential for increased enforcement activity and the broad scope of the rule. The rule is expected to be finalized and become effective around fall 2024, with examinations likely to begin in early 2025.

In this episode of Payments Pros, Keith Barnett and Carlin McCrory are joined by Pidgin's Senior Vice President of Innovation Kevin Olsen to discuss faster payments and the FedNow service. Faster payments, such as real-time payments (RTP) and FedNow, are transactions completed in seconds, available 24/7, and restricted to U.S. financial institutions. Since its launch in July 2023, FedNow has seen rapid adoption due to its public nature and industrywide development. Kevin highlights various use cases for FedNow, including person-to-person, account-to-account, and business transactions, as well as potential government and emergency uses. Kevin and the Payments Pros hosts also discuss how financial institutions and fintechs can access FedNow, the onboarding process, and the areas in which faster payments can be improved.

This episode of Payments Pros spotlights an episode from The Crypto Exchange, where Kalama Lui-Kwan joins Payments Pros hosts Keith Barnett and Carlin McCrory to discuss consumer protection under Regulation E. They delve into a July 2022 letter from Democratic senators, urging the CFPB to hold banks liable for consumer losses when the consumers provide alleged fraudsters with access to their own accounts through payment apps. Keith and Carlin examine the senators' concerns and the potential significant impact on financial institutions from any changes that the CFPB makes.

In the latest episode of Payments Pros, hosts Keith Barnett and Carlin McCrory are joined by Jean Gonnell and Agustin Rodriguez, co-leaders of Troutman Pepper’s Cannabis practice, to discuss the legal complexities that financial institutions face when dealing with the cannabis industry. Jean and Agustin give a high-level overview of the basics of cannabis, including federal and state regulations, and the specific expectations for financial institutions operating in this space. They also explain the rigorous state-level regulatory systems for marijuana, including seed-to-sale tracking, testing requirements, and security measures. Our guests examine the impact of cannabis regulation on financial institutions. They discuss the challenges posed by the Bank Secrecy Act, money transmitter laws, and the Money Laundering Control Act for financial institutions serving marijuana-related businesses. Our Cannabis Practice provides advice on issues related to applicable federal and state law. Marijuana remains an illegal controlled substance under federal law.

In the latest episode of Payments Pros, hosts Keith Barnett, Josh McBeain, and Carlin McCrory discuss Earned Wage Access (EWA), a system that allows employees to receive their earned wages before the employer's payroll cycle. Keith, Josh, and Carlin delve into the potentially applicable federal laws related to EWA, starting with the Truth in Lending Act (TILA). They discuss the Consumer Financial Protection Bureau's (CFPB) advisory opinion on EWA products and the confusion it caused in the industry. They also discuss other federal laws that may apply to EWA products, such as the Equal Credit Opportunity Act (ECOA), the Military Lending Act (MLA), Regulation E, and the Payday Lending Rule. In addition to the federal laws, Keith, Josh, and Carlin discuss state lending and licensing laws, and highlight recent state EWA laws and regulatory activity related to EWA, including laws passed in Missouri and Nevada, advisory opinions issued in Arizona and Maryland, and EWA activity in California. Finally, the group also discusses enforcement issues related to EWA, including the rescinding of a no-action letter by the CFPB and the potential for enforcement under state laws.

In the latest episode of Payments Pros, hosts Carlin McCrory and Keith Barnett are joined by James Rowe and Nanci McKenzie from Affirmative Technologies to discuss Automated Clearing House (ACH) originator risk. Affirmative Technologies is one of the nation's leading technology providers in ACH processing and risk management software. The company provides innovative electronic payment solutions to a wide variety of businesses, including financial institutions, third party payment processors, and business entities that seek an effective enterprise, ACH payment solution. James and Nanci highlight the importance of ACH risk monitoring in the payment processing industry, accounting for a significant portion of noncash payments. They discuss the need for a predictive model to assess the risk of a particular originator, which can help payment processors and Originating Depository Financial Institutions (ODFIs) decide whether to onboard an originator, or how to monitor them once onboarded. They also discuss Affirmative Technologies’ ACH risk scoring tool, which uses historical data to predict the likelihood of an originator submitting an unauthorized transaction. This tool, similar to a FICO score, can help financial institutions manage their risk more effectively. The group also touches on the regulatory expectations for and increasing focus on risk management.

In this episode of Payments Pros, Keith Barnett welcomes his colleagues Rich Zack and Christy Tuttle to discuss how U.S. government sanction programs impact payment processors, banks, and the payments industry in general. Keith, Rich, and Christy discuss the current atmosphere of sanctions in the payments industry and the recent joint guidance issued to banks by the OCC, the Fed, and FDIC. The guidance instructs banks on the regulators' expectations during bank examinations concerning third-party relationships, including payment processors, card issuers, blockchain, and anyone who has a form of bank partnership. The guidance covers initial due diligence, risk assessment, monitoring, ongoing due diligence, and termination of the relationship. Noncompliance with these requirements has led to sanctions against banks, payment processors, card issuers, and money transmitters. Keith, Rich, and Christy also discuss the role of the Office of Foreign Asset Control (OFAC) in enforcing sanctions, particularly in light of the war in Ukraine, as well as the other agencies that enforce sanctions. Lastly, they also discuss what companies in the payments space can do to avoid violating sanctions, and what they should do if a violation is discovered.

In this episode of Payments Pros, Carlin McCrory welcomes Stout’s Disputes, Compliance, and Investigations Managing Director Terri Sands to discuss the evolvement in payments and the launch of FedNow. Carlin and Terri discuss how FedNow will affect financial institutions, as well how they see businesses and consumers utilizing the service. Additionally, with this new evolvement in the payments space, financial institutions using FedNow need to be cautious of fraud. Terri discusses how Stout is working with their financial institution clients to implement FedNow, developing strategic planning documents for approaching next generation fraud, and getting management buy-in on the necessary fraud protections.