top 10 tips for your effective advocacy at the state and local level
TRANSCRIPT
Top 10 Tips for YOUR Effective Advocacy at the State and Local LevelChuck CrossConference of State Bank Supervisors
Margo StrahlbergBryan Cave LLP
Thursday, June 27, 2013Track 2 - Government
Wendy Harp-LewisModeratorInteliSpend Prepaid Solutions
© 2013 Network Branded Prepaid Card Association
Don MosherSchulte Roth & Zabel LLP
Thank You To Our Sponsors
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Presenting Sponsors
Supporting Sponsor Welcoming Reception Sponsor
Associate Sponsors
Founding Sponsors
Program Description
• An update on key state legislative actions affecting Prepaid products, and how to prepare for and respond to increased state enforcement efforts
• Examine the latest developments in state money transmitter statutes and which Prepaid add-ons and features constitute money transmissions
• Resulting regulatory implications• 10 tips for effective advocacy
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Legal Background
• Relevant State Laws for Prepaid– The Big “3”
• Money Transmitter Licensing Laws
• Abandoned Property Laws
• Consumer Protection Laws
– Other Relevant Laws• Payroll, UDAAP, Privacy, Data Security/Protection, etc.
• Latest Trends
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State Perspective
• Overview of states view of prepaid/financial services
• How topics are surfaced and bills emerge• When a bill becomes law• What regulators are concerned with
– Unlicensed activity– Advertising and disclosures– “Deposit” insurance– Conversion to credit products
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General Legislative ActionsTracking and Reacting to a Bill with Negative Consequences
• Tips for Tracking Bills– Tip #1: Consider your organization’s internal resources– Tip #2: Get involved in industry associations
• Government relations working group activities, newsletters & alerts, specific task groups, in-person meetings, etc.
– Tip #3: Engage experienced legal counsel• Subscriber surveys, client alerts, blog posts, etc.
• Tips for Reacting to Bills– Tip #4: Figure out your organization’s priorities– Tip #5: Pool resources with industry associations
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General Legislative Actions, cont’dTracking and Reacting to a Bill with Negative Consequences
• Tips for working with states
– Tip #6: Meet with your regulator early and often
Be careful about unfunded mandates
Dedicated, non-appropriated funding when you can
Think long-term: How do you want the industry to look when it matures?
Think global: Don’t isolate your industry or regulators
Do not hamstring enforcement
Always raise the bar
Think of regulators as your ally not your foe
Consistent messaging across states7
General Legislative Actions, cont’dCase Study
• CA S 931– Introduced 2/18/2011 (not payroll/prepaid related) – Amended to address payroll 8/31/2011– Would have prohibited card issuers and employers
from charging a wide array of fees on payroll cards and would have imposed a number of onerous requirements and restrictions on payroll cards.
– Letter writing campaign by members of the NBPCA to stop the bill
– Bill presented to the Governor 9/16/2011– Governor vetoed the bill
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General Legislative Actions, cont’dCase Study
• PR S 1960– Introduced 1/30/2011 (limited to closed loop gift cards)– Amended in the House to cover all prepaid cards 6/18/2012– Version approved by both houses ~7/9/2012– Would have prohibited gift card activation, inactivity and
maintenance fees as well as expiration dates of less than 5 years. Cash back for gift card balances of less than $5. But, “gift card” was defined broadly and could have encompassed open loop cards as well as closed loop.
– Bill presented to the Governor 8/3/2012– Letter writing campaign by members of the NBPCA to stop the
bill; some in-person meetings – Governor pocket vetoed the bill
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State Money Transmitter Laws• What activities do the state money transmitter laws regulate?
– Receiving money for transmission . . . . ;– Sale or issuance of payment instruments (money orders) and stored value;
and– Some states also regulate check cashing and currency exchange as part of a
more comprehensive MSB regulatory regime.
• What is the purpose of the state money transmitter laws?– A combination of the integrity of the financial system, the safe and sound
operation of licensees, consumer protection, and the prevention of money laundering
• What do the laws require?– Generally, the laws require licensing; impose safety and soundness
requirements; provide consumer protection provisions; permit examination of licensees (and sometimes agents) for compliance with state law; and enforce compliance with state law and federal AML law.
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Is License Required If No Physical Presence?
Alabama
Arizona
Arkansas
CaliforniaColorado
Connecticut
Delaware
Florida
Georgia
Idaho
IllinoisIndiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
NebraskaNevada
NewHampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
WestVirginia
Wisconsin
Wyoming
Hawaii
Alaska
Washington, DC
License Required
Caution
License Not Required
Money Transmitter Laws & Stored Value
Rhode Island
Massachusetts
Alabama
Arizona
Arkansas
CaliforniaColorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Michigan
Minnesota
Mississippi
Missouri
Montana
NebraskaNevada
NewHampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
WestVirginia
Wisconsin
Wyoming
Hawaii
Alaska
Washington, DC
Express Stored Value
Provisions
Express Stored Value Provisions Only
in Application or Reporting Forms
Caution / Special
Considerations
Regulator Determines
Case-By-Case
Regulator Interprets
Law to Permit
Exemptions for Out-of-State State Banks
Alabama
Arizona
Arkansas
CaliforniaColorado
Connecticut
Delaware
Florida
Georgia
Illinois Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
NebraskaNevada
NewHampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
WestVirginia
Wisconsin
Hawaii
Alaska
Washington, DC
Exemption for Out-of-State
State Banks
Exemption for Out-of-State State Banks is
Subject to Limitation on Agent Network
Additional Requirements
for Exemption to Apply
Does Not Expressly
Exempt Out-of-State
State Banks
Idaho
Wyoming
Is a Retailer Seller Agent of anExempt Entity Exempt?
Alabama
Arizona
Arkansas
CaliforniaColorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
NebraskaNevada
NewHampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
WestVirginia
Wisconsin
Wyoming
Hawaii
Alaska
Washington, DC
Express Exemption Provision
for Agents of Exempt Entities
Express Exemption
Provision Subject to Agent
Network Limitation
State Money Transmitter Laws
• The regulator’s perspective– Tip #7: Learn and understand the following:
Licensing is a really big deal to the States
Single state exam
Multi-State exam
CFPB/State Coordination
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NMLS: A New Framework for
Financial Services Regulation
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Using NMLS for Money Transmitter/Prepaid Licensing in
2012
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Using NMLS for Money Transmitter/Prepaid Licensing in
2013
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Using NMLS for Money Transmitter/Prepaid Licensing in
2014
2012Nationwide Cooperative
Agreement for MSB Supervision&
The Protocol for Performing Multi-State Examinations
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CORNERSTONES OFMULTI-STATE SUPERVISION
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Alaska
Texas
Utah
Montana
California
Arizona
Idaho
Nevada
Oregon
Iowa
Colorado
Kansas
Wyoming
New Mexico
Missouri
Minnesota
Nebraska
Oklahoma
South Dakota
Washington
Arkansas
North Dakota
Louisiana
Hawaii
IllinoisOhio
Florida
GeorgiaAlabama
Wisconsin
Virginia
Indiana
Michigan
Mississippi
Kentucky
Tennessee
Pennsylvania
NorthCarolina
SouthCarolina
WestVirginia
New Jersey
Maine
New York
Vermont
Maryland
New Hampshire
Connecticut
Delaware
Massachusetts
Rhode Island
CSBS/MTRA NATIONWIDE COOPERATIVE AGREEMENT AND PROTOCOL FOR MSB SUPERVISION
As of April 29, 2012
Puerto Rico
District of Columbia
Signed – 42 States U.S.V.I.
DCA/BOFI
Do not have jurisdiction22
MMET Members
• North Carolina Office of Commissioner of Banks
• Virginia Bureau of Financial Institutions
• California Department of Financial Institutions
• Florida Office of Financial Regulation
• New York State Department of Financial Services
• Ohio Division of Financial Institutions
• Pennsylvania Department of Banking and Securities
• Texas Department of Banking
• Washington Department of Financial Institutions
• Wyoming Division of Banking
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MMET is the Multi-State MSB Exam Task Force
MMET Responsibilities
• Implement the Protocol for Supervision
• Coordinate supervisory efforts and assist State Regulators in fulfilling their own regulatory responsibilities
• Facilitate information sharing among the State Regulators
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MMSBs
Preliminary count of MMSBs eligible for examination under the Agreement & Protocol
2013
Total MSB State Licenses 3,326
Total MSB Companies 577
MSB Companies with 1 state license 347
MSB Companies with 2-9 state licenses 147
MSB Companies with 10-24 state licenses 36
MSB Companies with 25-51 state licenses 47
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MMSBs are Multi-State MSBs
Supervision Coordination
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2013 CFPB-State Supervisory Coordination Framework
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MT
WY
ID
WA
OR
NV
UT
CA
AZ
ND
SD
NE
CO
NM
TX
OK
KS
AR
LA
MO
IA
MN
WI
IL IN
KY
TN
MS AL GA
FL
SC
NC
VAWV
OH
MI
NY
PA
MD
DE
NJ
CTRI
MA
ME
VT
NH
AK HI
PR
VI
States that have signed the CFPB-CSBS MOUStates in GREEN represent signed MOU’s
State Regulatory Associations that have signed the MOUAARMR (American Assoc. of Residential Mortgage Regulators)NACCA (National Assoc. of consumer Credit Administrators)CSBS (Conference of State Bank Supervisors)NACARA (North American Collection Agency Regulatory AssociationMTRA (Money Transmitter Regulators Association)NASCUS (National Association of Credit Union Supervisors)
Texas Department of BankingTexas Office of Consumer Credit CommissionerTexas Department of Savings and Mortgage Lending
California Department ofFinancial Institutions
California Department
of Real Estate
Arkansas Banking DeptArkansas Securities Dept
California Department of CorporationsDepartment of Consumer
Affairs
Consumer Finance Division
of the Financial Institutions
Board
Colorado Uniform Consumer Credit Code Administrator
DC
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State Coordinating Committee (SCC)
SPC(e.g. MMC)
CSBS
cfpb RDs
cfpb
Non-Depository Supervision
State
EIC
cfpb
EIC 29
What Does “Coordination” Mean?
• Exams and supervisory plans
• Complaint processing and investigation
• Combined training and shared tools
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Other Federal/State Coordination
• FinCEN/State
• FFIEC/State
• Treasury Department/State
• IRS/State
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Working with Regulators
• Legal counsel’s perspective
– Tip #8: Step into the regulator’s shoes
– Tip #9: Talk to the regulators
• Respond quickly
• Show respect
• Ask thoughtful questions
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Specific Actions by Regulators
• Illinois
– Recent enforcement against unlicensed money
transmission
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Specific Actions by Regulators- continued -
• Licensing action – no other wrongdoing alleged
• Cease and Desist
• $1,000 per day PLUS
• $1,000 per transaction PLUS
• 4x the amount of money accepted for transmission PLUS
• Possible Class 3 felony
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How we look at these things
• Should have known the requirements
• Was notice provided of the requirements?
• Knew the requirements?
• Turned a blind eye
• Willful disregard
• Intentional violation
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You do the math!
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Seriously?
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Tip #10: Consider the trade off of not being licensed
10 TIPS for YOUR Effective Advocacy at the State and Local Level
Tip #1: Consider your organization’s internal resources
Tip #2: Get involved in industry associations
Tip #3: Engage experienced legal counsel
Tip #4: Figure out your organization’s priorities
Tip #5: Pool resources with industry associations
38
10 TIPS for YOUR Effective Advocacy at the State and Local Level
Tip #6: Meet with your regulator early and often
Tip #7: Learn and understand that licensing is a big deal to the states
Tip #8: Step into the regulator’s Shoes
Tip #9: Talk to the regulators
Tip #10: Consider the trade off of not being licensed
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Contact Information
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Chuck CrossConference of State Bank [email protected]
Margo StrahlbergBryan Cave [email protected]
Wendy Harp-LewisInteliSpend Prepaid [email protected]
Don MosherSchulte Roth & [email protected]
For a webinar on this topic contact the NBPCA at [email protected]