Top 10 Tips for YOUREffective Advocacy at theState and Local LevelChuck CrossConference of State Bank SupervisorsMargo Str...
Thank You To Our Sponsors2Presenting SponsorsSupporting Sponsor Welcoming Reception SponsorAssociate SponsorsFounding Spon...
Program Description• An update on key state legislative actionsaffecting Prepaid products, and how to preparefor and respo...
Legal Background• Relevant State Laws for Prepaid– The Big “3”• Money Transmitter Licensing Laws• Abandoned Property Laws•...
State Perspective• Overview of states view of prepaid/financialservices• How topics are surfaced and bills emerge• When a ...
General Legislative ActionsTracking and Reacting to a Bill with Negative Consequences• Tips for Tracking Bills– Tip #1: Co...
General Legislative Actions, cont’dTracking and Reacting to a Bill with Negative Consequences• Tips for working with state...
General Legislative Actions, cont’dCase Study• CA S 931– Introduced 2/18/2011 (not payroll/prepaid related)– Amended to ad...
General Legislative Actions, cont’dCase Study• PR S 1960– Introduced 1/30/2011 (limited to closed loop gift cards)– Amende...
State Money Transmitter Laws• What activities do the state money transmitter laws regulate?– Receiving money for transmiss...
Is License Required If No Physical Presence?AlabamaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaIdaho...
Money Transmitter Laws &Stored ValueRhode IslandMassachusettsAlabamaArizonaArkansasCaliforniaColoradoConnecticutDelawareFl...
Exemptions for Out-of-State State BanksAlabamaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaIllinois I...
Is a Retailer Seller Agent of anExempt Entity Exempt?AlabamaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeo...
State Money Transmitter Laws• The regulator’s perspective– Tip #7: Learn and understand the following: Licensing is a rea...
NMLS: A NewFramework forFinancial ServicesRegulation16
17Using NMLS for MoneyTransmitter/Prepaid Licensing in2012
18Using NMLS for MoneyTransmitter/Prepaid Licensing in2013
19Using NMLS for MoneyTransmitter/Prepaid Licensing in2014
2012Nationwide CooperativeAgreement for MSB Supervision&The Protocol for PerformingMulti-State Examinations20
CORNERSTONES OFMULTI-STATE SUPERVISION21
AlaskaTexasUtahMontanaCaliforniaArizonaIdahoNevadaOregonIowaColoradoKansasWyomingNew MexicoMissouriMinnesotaNebraskaOklaho...
MMET Members• North Carolina Office of Commissioner of Banks• Virginia Bureau of Financial Institutions• California Depart...
MMET Responsibilities• Implement the Protocol for Supervision• Coordinate supervisory efforts and assist StateRegulators i...
MMSBsPreliminary count of MMSBs eligible forexamination under the Agreement & Protocol2013Total MSB State Licenses 3,326To...
Supervision Coordination26
2013 CFPB-State SupervisoryCoordination Framework27
MTWYIDWAORNVUTCAAZNDSDNECONMTXOKKSARLAMOIAMNWIIL INKYTNMS AL GAFLSCNCVAWVOHMINYPAMDDENJCTRIMAMEVTNHAK HIPRVIStates that ha...
State CoordinatingCommittee (SCC)SPC(e.g. MMC)CSBScfpb RDscfpbNon-Depository SupervisionStateEICcfpbEIC 29
What Does “Coordination” Mean?• Exams and supervisory plans• Complaint processing and investigation• Combined training and...
Other Federal/State Coordination• FinCEN/State• FFIEC/State• Treasury Department/State• IRS/State31
Working with Regulators• Legal counsel’s perspective– Tip #8: Step into the regulator’s shoes– Tip #9: Talk to the regulat...
Specific Actions by Regulators• Illinois– Recent enforcement against unlicensed moneytransmission33
Specific Actions by Regulators- continued -• Licensing action – no other wrongdoing alleged• Cease and Desist• $1,000 per ...
How we look at these things• Should have known the requirements• Was notice provided of the requirements?• Knew the requir...
You do the math!36
Seriously?37Tip #10: Consider the trade off of notbeing licensed
10 TIPS for YOUR Effective Advocacyat the State and Local LevelTip #1: Consider your organization’s internalresourcesTip #...
10 TIPS for YOUR Effective Advocacyat the State and Local LevelTip #6: Meet with your regulator early andoftenTip #7: Lear...
Contact Information40Chuck CrossConference of State Bank SupervisorsCCross@csbs.org202-728-5745Margo StrahlbergBryan Cave ...
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Top 10 Tips for YOUR Effective Advocacy at the State and Local Level

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Top 10 Tips for YOUR Effective Advocacy at the State and Local Level

  1. 1. Top 10 Tips for YOUREffective Advocacy at theState and Local LevelChuck CrossConference of State Bank SupervisorsMargo StrahlbergBryan Cave LLPThursday, June 27, 2013Track 2 - GovernmentWendy Harp-LewisModeratorInteliSpend Prepaid Solutions© 2013 Network Branded Prepaid Card AssociationDon MosherSchulte Roth & Zabel LLP
  2. 2. Thank You To Our Sponsors2Presenting SponsorsSupporting Sponsor Welcoming Reception SponsorAssociate SponsorsFounding Sponsors
  3. 3. Program Description• An update on key state legislative actionsaffecting Prepaid products, and how to preparefor and respond to increased state enforcementefforts• Examine the latest developments in state moneytransmitter statutes and which Prepaid add-onsand features constitute money transmissions• Resulting regulatory implications• 10 tips for effective advocacy3
  4. 4. 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 Trends4
  5. 5. State Perspective• Overview of states view of prepaid/financialservices• 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 products5
  6. 6. 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 associations6
  7. 7. 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 lookwhen 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
  8. 8. 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 employersfrom charging a wide array of fees on payroll cards andwould have imposed a number of onerousrequirements and restrictions on payroll cards.– Letter writing campaign by members of the NBPCA tostop the bill– Bill presented to the Governor 9/16/2011– Governor vetoed the bill8
  9. 9. 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 andmaintenance 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 loopcards as well as closed loop.– Bill presented to the Governor 8/3/2012– Letter writing campaign by members of the NBPCA to stop thebill; some in-person meetings– Governor pocket vetoed the bill9
  10. 10. 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 amore 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 soundoperation of licensees, consumer protection, and the prevention of moneylaundering• What do the laws require?– Generally, the laws require licensing; impose safety and soundnessrequirements; provide consumer protection provisions; permit examination oflicensees (and sometimes agents) for compliance with state law; and enforcecompliance with state law and federal AML law.10
  11. 11. Is License Required If No Physical Presence?AlabamaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaIdahoIllinoisIndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNewHampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWestVirginiaWisconsinWyomingHawaiiAlaskaWashington, DCLicense RequiredCautionLicense Not Required
  12. 12. Money Transmitter Laws &Stored ValueRhode IslandMassachusettsAlabamaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaIdahoIllinois IndianaIowaKansasKentuckyLouisianaMaineMarylandMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNewHampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWestVirginiaWisconsinWyomingHawaiiAlaskaWashington, DCExpress Stored ValueProvisionsExpress Stored Value Provisions Onlyin Application or Reporting FormsCaution / SpecialConsiderationsRegulator DeterminesCase-By-CaseRegulator InterpretsLaw to Permit
  13. 13. Exemptions for Out-of-State State BanksAlabamaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaIllinois IndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNewHampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWestVirginiaWisconsinHawaiiAlaskaWashington, DCExemption for Out-of-StateState BanksExemption for Out-of-State State Banks isSubject to Limitation on Agent NetworkAdditional Requirementsfor Exemption to ApplyDoes Not ExpresslyExempt Out-of-StateState BanksIdahoWyoming
  14. 14. Is a Retailer Seller Agent of anExempt Entity Exempt?AlabamaArizonaArkansasCaliforniaColoradoConnecticutDelawareFloridaGeorgiaIdahoIllinois IndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNewHampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWestVirginiaWisconsinWyomingHawaiiAlaskaWashington, DCExpress Exemption Provisionfor Agents of Exempt EntitiesExpress ExemptionProvision Subject to AgentNetwork Limitation
  15. 15. 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 Coordination15
  16. 16. NMLS: A NewFramework forFinancial ServicesRegulation16
  17. 17. 17Using NMLS for MoneyTransmitter/Prepaid Licensing in2012
  18. 18. 18Using NMLS for MoneyTransmitter/Prepaid Licensing in2013
  19. 19. 19Using NMLS for MoneyTransmitter/Prepaid Licensing in2014
  20. 20. 2012Nationwide CooperativeAgreement for MSB Supervision&The Protocol for PerformingMulti-State Examinations20
  21. 21. CORNERSTONES OFMULTI-STATE SUPERVISION21
  22. 22. AlaskaTexasUtahMontanaCaliforniaArizonaIdahoNevadaOregonIowaColoradoKansasWyomingNew MexicoMissouriMinnesotaNebraskaOklahomaSouth DakotaWashingtonArkansasNorth DakotaLouisianaHawaiiIllinoisOhioFloridaGeorgiaAlabamaWisconsinVirginiaIndianaMichiganMississippiKentuckyTennesseePennsylvaniaNorthCarolinaSouthCarolinaWestVirginiaNew JerseyMaineNew YorkVermontMarylandNew HampshireConnecticutDelawareMassachusettsRhode IslandCSBS/MTRA NATIONWIDE COOPERATIVEAGREEMENT AND PROTOCOL FOR MSB SUPERVISIONAs of April 29, 2012Puerto RicoDistrict of ColumbiaSigned – 42 StatesU.S.V.I.DCA/BOFIDo not have jurisdiction22
  23. 23. 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 Banking23MMET is the Multi-State MSB Exam Task Force
  24. 24. MMET Responsibilities• Implement the Protocol for Supervision• Coordinate supervisory efforts and assist StateRegulators in fulfilling their own regulatoryresponsibilities• Facilitate information sharing among the StateRegulators24
  25. 25. MMSBsPreliminary count of MMSBs eligible forexamination under the Agreement & Protocol2013Total MSB State Licenses 3,326Total MSB Companies 577MSB Companies with 1 state license 347MSB Companies with 2-9 state licenses 147MSB Companies with 10-24 state licenses 36MSB Companies with 25-51 state licenses 4725MMSBs are Multi-State MSBs
  26. 26. Supervision Coordination26
  27. 27. 2013 CFPB-State SupervisoryCoordination Framework27
  28. 28. MTWYIDWAORNVUTCAAZNDSDNECONMTXOKKSARLAMOIAMNWIIL INKYTNMS AL GAFLSCNCVAWVOHMINYPAMDDENJCTRIMAMEVTNHAK HIPRVIStates that have signed the CFPB-CSBS MOUStates in GREEN represent signed MOU’sState 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 LendingCalifornia Department ofFinancial InstitutionsCalifornia Departmentof Real EstateArkansas Banking DeptArkansas Securities DeptCalifornia Department of CorporationsDepartment of ConsumerAffairsConsumer Finance Divisionof the Financial InstitutionsBoardColorado Uniform ConsumerCredit Code AdministratorDC28
  29. 29. State CoordinatingCommittee (SCC)SPC(e.g. MMC)CSBScfpb RDscfpbNon-Depository SupervisionStateEICcfpbEIC 29
  30. 30. What Does “Coordination” Mean?• Exams and supervisory plans• Complaint processing and investigation• Combined training and shared tools30
  31. 31. Other Federal/State Coordination• FinCEN/State• FFIEC/State• Treasury Department/State• IRS/State31
  32. 32. 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 questions32
  33. 33. Specific Actions by Regulators• Illinois– Recent enforcement against unlicensed moneytransmission33
  34. 34. 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 transmissionPLUS• Possible Class 3 felony34
  35. 35. 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 violation35
  36. 36. You do the math!36
  37. 37. Seriously?37Tip #10: Consider the trade off of notbeing licensed
  38. 38. 10 TIPS for YOUR Effective Advocacyat the State and Local LevelTip #1: Consider your organization’s internalresourcesTip #2: Get involved in industry associationsTip #3: Engage experienced legal counselTip #4: Figure out your organization’s prioritiesTip #5: Pool resources with industryassociations38
  39. 39. 10 TIPS for YOUR Effective Advocacyat the State and Local LevelTip #6: Meet with your regulator early andoftenTip #7: Learn and understand that licensing is abig deal to the statesTip #8: Step into the regulator’s ShoesTip #9: Talk to the regulatorsTip #10: Consider the trade off of not being licensed39
  40. 40. Contact Information40Chuck CrossConference of State Bank SupervisorsCCross@csbs.org202-728-5745Margo StrahlbergBryan Cave LLPmhstrahlberg@bryancave.com312-602-5094Wendy Harp-LewisInteliSpend Prepaid Solutionswendy.harp-lewis@intelispend.com636-226-2239Don MosherSchulte Roth & Zabeldonald.mosher@srz.com212-756-2187For a webinar on this topic contact theNBPCA at gr@nbpca.com

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