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FIN Welcomes Regulatory Program for Modern Consumer Disclosures

October 10, 2018 – Financial Innovation Now today called on the Bureau of Consumer Financial Protection to promote better consumer disclosures through the latest technology.

In comments to the Bureau’s proposed changes to the Trial Disclosure Program, FIN states:

“FIN supports and is encouraged by the Bureau’s efforts to make the Trial Disclosure Program more clear and effective, simply because technological change can provide new methods of disclosure that enhance consumer protection … [w]hether it be via smartphone or voice-enabled digital assistants, consumers are taking advantage of many different technologies to more easily access their finances….”

A copy of FIN’s comment is available here: http://financialinnovationnow.org/wp-content/uploads/2018/10/fin-trial-disclosure-program-cfpb-10-10-18.pdf

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FIN Joins Industry Groups Urging Congress to Pass IRS Modernization Legislation this Session

October 2, 2018 – Financial Innovation Now this week joined a coalition of industry organizations calling on Congress to pass legislation to modernize the Internal Revenue Service (IRS) to improve small businesses’ access to capital.

The organizations, including the U.S. Chamber of Commerce, the Marketplace Lending Association, the Consumer Bankers Association, and Accion, sent the following letter to a bipartisan group of Congressional Members.

October 2, 2018

Re: IRS Modernization – Please Pass S. 1958 / H.R. 3860 / H.R. 5444 This Session To Aid Small Businesses

Dear Chairman Hatch, Ranking Member Wyden, Chairman Crapo, Senator Portman, Senator Cardin, Senator Booker, Chairman Brady, Ranking Member Neal, and Deputy Whip McHenry,

We are a diverse coalition of organizations writing in appreciation your strong support for technology modernization at the Internal Revenue Service. You have all been leaders on this issue, which has great potential ensure that taxpayer information is handled more securely and efficiently for the digital age.

We believe that one key area of IRS modernization, S. 1958 and H.R. 3860, the IRS Data Verification Modernization Act of 2017, can bring added security while also helping improve the economy. The IRS data modernization provisions of S. 1958 and H.R. 3860 are also now included in H.R. 5444, which passed by bipartisan a vote of 414-0 and is awaiting Senate action. If signed into law, this bill would help to deliver critically needed access to capital for small businesses and the Main Street economy, while making the IRS third-party income verification process more secure for American taxpayers. As you know, an upgrade to the IRS’s existing data verification program could have profound benefits. In short, replacing the IRS’s current data transfer delays with an up-to-date, real-time system, could provide the country with:

  • Increased access to capital and financial inclusion – By making it possible for tax return data to be accessed instantly as part of a loan application process, many more small businesses could be recognized as creditworthy. This would especially benefit the underserved borrowers overlooked because of their lower credit scores, but whose tax data and income would indicate creditworthiness.
  • Lower prices for borrowers – The addition of rich tax data, delivered securely in real time, would help credit models become more accurate, leading to lower prices.
  • Easier borrowing process – An instant process would reduce paperwork required of busy business owners. They would receive loan proceeds faster, eliminating the current system’s days or weeks of delay.
  • Safer financial system – Instant access to this data could significantly increase the rate of income verification, enable better informed and more responsible underwriting, and reduce the risk of document fraud, further contributing to safer loans and lower costs.

If the Senate can pass any IRS modernization package this Congress with sufficient time remaining before January, we believe a perfected form of the bill can be finalized in a conference with H.R. 5444. With such benefits to small businesses, and strong bipartisan, bicameral support, it would be a great loss if this issue were left aside for a future Congress to grapple with. We urge you to find a way to pass this legislation before this Congress ends.

We thank you again for your leadership.

Sincerely,

The United States Chamber of Commerce
The Marketplace Lending Association
The Consumer Bankers Association
California Association of Micro Enterprise Organizations
Opportunity Fund
Accion
Financial Innovation Now
Electronic Transactions Association
The Responsible Business Lending Coalition
The Innovative Lending Platform Association
Woodstock Institute
Greenlining Institute
California Reinvestment Coalition
The Equipment Leasing and Financing Association
Craft3
Small Business Majority

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FIN Welcomes OCC Fintech Charter Announcement

July 31, 2018 – The Office of the Comptroller of the Currency (OCC) today announced it will begin accepting applications for national bank charters from financial technology firms. FIN has supported the OCC’s two-year effort to foster a national approach to the regulation of financial services.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“As outlined by Treasury earlier today, the regulatory landscape must adapt and grow along with changes in technology and customer preferences. The OCC’s decision to issue special purpose bank charters to financial technology companies is a recognition that the current regulatory environment must evolve. FIN appreciates the OCC’s affirmation of a national regulatory approach to technology, and while any one FIN member may not seek a special purpose charter, FIN nonetheless supports the OCC’s leadership and vision in driving this regulatory discussion. We look forward to working with the administration and Congress on multiple national regulatory paths to market.”

The OCC’s announcement today was accompanied by a policy statement clarifying its chartering authority and a supplement to the OCC’s licensing manual. The announcement followed Treasury’s release of an extensive report on the regulation of financial technology, which is available here.

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FIN Statement on U.S. Treasury Report on Financial Technology; Leading Innovators Praise Policy Goals

July 31, 2018 – The U.S. Department of the Treasury today released a report outlining a number of policy proposals to modernize federal financial services regulations. The Treasury report aligns with many of the policy recommendations of Financial Innovation Now, such as streamlined federal rules, open data, payment innovation, and tech-neutral security.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“Financial Innovation Now advocates for smart federal policies that promote technological innovation in financial services, and we believe the Treasury Department’s report is a strong step towards modernizing antiquated financial regulations. From secure mobile payments to fast and accessible credit, FIN member companies are empowering consumers and small businesses with helpful financial tools. We look forward to working with Congress and federal financial regulators on these necessary policy updates.”

The Treasury report is available here.  Today’s report was in response to Executive Order 13772, issued by the President on February 3, 2017, which calls on Treasury to identify laws and regulations that are inconsistent with the administration’s Core Principles for financial regulation.

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U.S. Report on Financial Technology – Key Takeaways

The U.S. Government Accountability Office (GAO) recently released a report on the regulation of financial technology. The report, “Financial Technology: Additional Steps by Regulators Could Better Protect Consumers and Aid Regulatory Oversight,” fulfills a request from Congress to provide details and recommendations on how to modernize the financial regulatory environment for technology in the United States. The GAO’s findings focus on four areas of financial technology: payments, lending, wealth management and financial advice, and distributed ledger technology. The report discussed several key findings, including that the U.S. regulatory structure poses some challenges to financial technology firms. It also found that financial technologies provide benefits to consumers, leaving them more satisfied than services offered by traditional providers. Below are three key takeaways:  

Security

Fintech payment services provide increased security for users. Mobile devices contain additional security features, like fingerprint readers, facial recognition, and additional password requirements. These features make it increasingly difficult for bad actors to obtain consumers’ financial information. If nefarious actors do gain access to a device, there is the option to remotely disable that device and prevent personal information from being manipulated. Furthermore, as noted in the report, while credit and debit transactions have traditionally “transmitted sensitive information that can be hacked and used to make fraudulent transfers, fintech providers’ mobile wallets generally replace this sensitive information with randomly generated numbers that mitigate the risk that transaction information can be used fraudulently (tokenization)” (pages 14 and 15).   

Convenience and Consumer Satisfaction

While improved security may be the largest incentive for using digital payments, the convenience factor cannot be ignored. Non-bank digital payments allow users to easily and quickly transfer money, make payments, obtain loans, and access information from all of their financial accounts on one dashboard. Traditional banking systems tend to operate within a limited time frame, but digital options operate 24/7 in real-time making them more accessible to users (page 13).

Payment innovations not only provide convenience for consumers, but also save them money. The report details several ways in which fintech providers are lowering costs for consumers, including that many providers are not charging fees for payments (page 13).

Users’ overall satisfaction with new payment technologies is demonstrated by the available regulatory data. Compared to traditional providers, consumer complaints against fintech firms is modest. The GAO’s analysis of the CFPB’s consumer complaint database showed that “the number of published complaints submitted against several prominent fintech firms from April 2012 through September 2017 included in this database was generally low, when compared to select large financial institutions” (page 39).

Regulatory Environment

The state-by-state regulatory approach for money transmission is harming innovation and slowing access to new payment services. As the report notes, “complying with fragmented state licensing and reporting requirements can be expensive and time-consuming for mobile payment providers and fintech lenders” (page 45). Due to this regulatory barrier, fintech innovators are avoiding the U.S. and taking their business elsewhere. GAO cites one example of a fintech startup that “spent half of the venture capital funds it had raised obtaining state licenses,” and “that some firms may choose not to operate in the United States.” Furthermore, firms have commented that “identifying the applicable laws and how their activities will be regulated can be difficult” (page 45).

Meanwhile, as the report explains, “regulators abroad have taken various approaches to encourage fintech innovation….establishing innovation offices to help fintech firms understand applicable regulations and foster regulatory interactions. Some use “regulatory sandboxes” that allow fintech firms to offer products on a limited scale and provide valuable knowledge about products and risks to both firms and regulators” (page 50). The report demonstrates that the U.S. needs more proactive leadership from policymakers to encourage and attract innovation.    

Notably, the report does suggest that “specialized operating charters offered by federal and state banking regulators may help fintech firms more easily operate nationwide…” but state regulators are blocking these pathways to the market (page 47).

As the GAO report concludes, the emergence of financial technologies has provided numerous benefits to consumers, including the convenience of reliable financial services.

 

Industry Group Releases Faster Payments Governance Framework Draft, FIN Urges Inclusive Approach

April 24, 2018 – Under leadership of the Federal Reserve, an industry group today called for public input on a draft proposal for a new payments governance organization that aims to facilitate faster payments in the United States. FIN is a member of the Fed’s formation team that developed today’s draft.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“For the American family trying to pay bills on time, or the entrepreneur trying to purchase inventory, it should be a given that payments happen in real-time, especially in our increasingly digital economy. If industry is to achieve real-time payments on its own, it will require a modern payments governance organization, one with equal representation of all affected stakeholders and a meaningful capacity for governance. FIN is hopeful that many non-bank innovators engage the Fed’s comment process to push for an inclusive organization. FIN commends the Fed’s leadership and looks forward to ongoing collaboration through the GFFT process.”

Stakeholders can review the draft governance proposal and submit feedback via an online survey now through June 22 at FedPaymentsImprovement.org.

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House Passes Bill to Modernize IRS, Enable Digital Financial Tools; FIN Priority Moves to the Senate

April 19, 2018 – The U.S. House of Representatives today passed legislation to automate income verification through a modern digital interface at the Internal Revenue Service. FIN has advocated for this legislation and looks forward to working with the Senate towards final passage into law. The House today passed a larger tax modernization package, H.R. 4554, which included legislation authored by Rep. Patrick McHenry (R-NC) and U.S. Sen. Cory Booker (D-NJ), the IRS Data Verification Modernization Act of 2017, H.R. 3860.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“Today’s House action helps bring the federal government one step closer to better enabling digital financial tools. Paper-based verification has no place in a 21st century economy, and FIN looks forward to working with Congress and the U.S. Treasury to ensure the Internal Revenue Service can build a robust and secure interface for digital income verification. FIN thanks Congressmen McHenry and Blumenauer for their leadership on this important effort.”

Background: As part of the loan and mortgage processes for consumers and small businesses, applicants often must complete an IRS form called a “4506-T,” which gives the lender the right to access a summarized version of their tax transcript. This manual process at the IRS takes days, whereas technology companies and financial institutions are using APIs and other ways to leverage data for nearly instantaneous verification and underwriting. The IRS Data Verification Modernization Act of 2017 was introduced in the House by Reps. Patrick McHenry (R-NC) and Earl Blumenauer (D-OR), along with companion legislation in the Senate by Senator Cory Booker (D-NJ) and Mike Crapo (R-ID).

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House Passes Lending Fix Legislation; FIN Urges Senate Consideration

February 14, 2018 – Tonight the House of Representatives passed, on a bipartisan basis, the Protecting Consumers’ Access to Credit Act of 2017, H.R. 3299, which restores consistency in lending laws across state lines.

The following statement is attributed to Brian Peters, Executive Director of Financial Innovation Now:

“America’s small businesses should have easy access to safe forms of credit. Tonight’s bipartisan House vote is a strong signal that Congress supports tech and bank partnerships, and FIN applauds the leadership of Congressmen McHenry and Meeks and their colleagues in the House for their support of H.R. 3299. This legislation will restore the valid-when-made principle and maintain a well regulated option for bringing innovative capital access to underserved borrowers. FIN urges the Senate to take up this important legislation and looks forward to working with Senators Warner and Toomey towards that important goal.”

FIN Executive Director Brian Peters Testifies Before Congress; Technology Can Help Financial Inclusion

January 30, 2018 – FIN’s Executive Director, Brian Peters, today testified before the House Financial Services Committee at a hearing about the opportunities and challenges of financial technology. FIN’s written testimony can be found here, and Peters’ oral statement follows the hearing video below.

 

“Thank you Chairman Luetkemeyer, Ranking Member Clay, and members of the Committee for the opportunity to testify. My name is Brian Peters, and I am the Executive Director of Financial Innovation Now (“FIN”), an alliance of tech companies working on policies to make financial services more accessible, safe and affordable. The members of FIN are Amazon, Apple, Google, Intuit, and PayPal.

“These companies are at the forefront of America’s economic growth. They collectively employ over 700,000 people and spend more on R&D ($40 billion annually) than any other companies in the United States.

“They are innovating many new financial tools, such as digital wallets, secure online payments, personal finance apps, and access to capital for small businesses. Many of these tools work in partnership with traditional financial institutions.

“We believe that one of the best opportunities of technology is the potential to improve financial inclusion, and increase access. Twenty five percent of Americans remain unbanked or underbanked, but there is growing evidence that the mobile internet is helping to reduce some of the traditional barriers to financial services.

“The speed of money also matters. In our era of instant messaging, it does not make sense that it can still take days for a payment to clear. For those on a tight budget, like the half of Americans living paycheck to paycheck, this delay could cause undue hardship in the form of high-cost alternative financial services, sometimes costing ten percent of income just to access money when it is needed.

“Fortunately, the Federal Reserve is shepherding a commendable industry-led effort to achieve faster payments by 2020. FIN is part of this effort and supports the Fed’s leadership because we want real-time payment clearing to be a 24-7 reality – as soon as possible.

“Financial management apps also offer another area of promise. These tools have helped millions of consumers and businesses create budgets, set savings goals, avoid fees, and find better offers … it’s like having your own personal accountant.

“Small businesses also have new options. FIN members already offer a broad set of small business technology tools, including payment processing, payroll, inventory management, sales and data analytics, and shipping logistics… all of which make basic elements of running a business faster and less expensive – both online, and on Main Street.

“We are now expanding this technology toolbox with the addition of capital, and it is our broader integration of these tools that enables small businesses to utilize their own sales and accounting data to qualify for capital quickly and conveniently. Importantly, early research shows that these sources of capital are filling gaps for underserved small businesses.

“All of these tools mean more competition and broader economic growth. These benefits could be enhanced through policies that keep pace with innovation and meet the needs of today’s consumers and commerce. My written testimony contains a number of common sense policy proposals for the Committee’s consideration. I will briefly mention several:

  1. Create an optional national money transmission license. Payment innovators currently are regulated under a fractured regime in nearly every state. An optional national license would offer consistent safeguards, and it would enhance innovation and consumer access to new payment options – evenly across the country.
  2. Update the Card Act to include oversight of card network rules and their impact on consumer choice and access to
  3. Restore the “valid when made” principle. FIN thanks the Committee for passing the Protecting Consumers’ Access to Credit Act, introduced by Congressman McHenry and Meeks.
  4. Support the good institutional work of financial regulators to better address technology, such as the OCC’s Office of Innovation and the CFPB’s Project Catalyst.

 

“Financial Innovation Now thanks the Committee for the opportunity to testify and we look forward to working with you towards a better financial services system. Thank you.”

FIN Supports ACH Payment Expansion, Weekend and Holiday Processing

January 26, 2018 – Financial Innovation Now today supported a NACHA proposal to expand same day payments and payment processing on weekends and holidays. FIN’s comment letter states:

“FIN member companies are enabling a wide array of economic activity to occur, on a second-by-second basis, among consumers, businesses, and workers. The trend towards flexible on-demand services and products needs an efficient, real-time payment system. This modern infrastructure is particularly important for those individuals and businesses seeking to avoid higher-cost credit alternatives. While the proposed rule changes could be more aggressive, they are a step in the right direction and help ensure that ACH remains a viable and robust payment rail in the rapidly changing modern economy.”

The full comment letter can be found at: http://financialinnovationnow.org/wp-content/uploads/2018/01/fin-nacha-same-day-ach-comment-1.26.18.pdf

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