2. Thank You To Our Sponsors
2
Presenting Sponsors
Supporting Sponsor Welcoming Reception Sponsor
Associate Sponsors
Founding Sponsors
3. 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
3
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 Trends
4
5. 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
5
6. General Legislative Actions
Tracking 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
6
7. General Legislative Actions, cont’d
Tracking 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 states
7
8. General Legislative Actions, cont’d
Case 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
8
9. General Legislative Actions, cont’d
Case 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
9
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 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.
10
11. Is License Required If No Physical Presence?
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New
Hampshire
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
West
Virginia
Wisconsin
Wyoming
Hawaii
Alaska
Washington, DC
License Required
Caution
License Not Required
12. Money Transmitter Laws &
Stored Value
Rhode Island
Massachusetts
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New
Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West
Virginia
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
13. Exemptions for Out-of-State State Banks
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Illinois Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New
Hampshire
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
West
Virginia
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
14. Is a Retailer Seller Agent of an
Exempt Entity Exempt?
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New
Hampshire
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
West
Virginia
Wisconsin
Wyoming
Hawaii
Alaska
Washington, DC
Express Exemption Provision
for Agents of Exempt Entities
Express Exemption
Provision Subject to Agent
Network Limitation
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 Coordination
15
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 Banking
23
MMET is the Multi-State MSB Exam Task Force
24. 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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25. 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
25
MMSBs are Multi-State MSBs
28. 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
VA
WV
OH
MI
NY
PA
MD
DE
NJ
CT
RI
MA
ME
VT
NH
AK HI
PR
VI
States that have signed the CFPB-CSBS MOU
States in GREEN represent signed MOU’s
State Regulatory Associations that have signed the MOU
AARMR (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 Association
MTRA (Money Transmitter Regulators Association)
NASCUS (National Association of Credit Union Supervisors)
Texas Department of Banking
Texas Office of Consumer Credit Commissioner
Texas Department of Savings and Mortgage Lending
California Department of
Financial Institutions
California Department
of Real Estate
Arkansas Banking Dept
Arkansas Securities Dept
California Department of Corporations
Department of Consumer
Affairs
Consumer Finance Division
of the Financial Institutions
Board
Colorado Uniform Consumer
Credit Code Administrator
DC
28
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 questions
32
33. Specific Actions by Regulators
• Illinois
– Recent enforcement against unlicensed money
transmission
33
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 transmission
PLUS
• Possible Class 3 felony
34
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 violation
35
38. 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
39. 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
39
40. Contact Information
40
Chuck Cross
Conference of State Bank Supervisors
CCross@csbs.org
202-728-5745
Margo Strahlberg
Bryan Cave LLP
mhstrahlberg@bryancave.com
312-602-5094
Wendy Harp-Lewis
InteliSpend Prepaid Solutions
wendy.harp-lewis@intelispend.com
636-226-2239
Don Mosher
Schulte Roth & Zabel
donald.mosher@srz.com
212-756-2187
For a webinar on this topic contact the
NBPCA at gr@nbpca.com
