Relevant 2019 Chaptered Laws for Financial Services Companies

2019 was a busy year for the California legislature. Governor Newsom signed quite a few bills on consumer financial products and privacy into law, including several amendments to the California Consumer Privacy Act (CCPA).

Paul Soter and I have compiled a chart of 2019’s relevant chaptered laws, which may impact clients who provide traditional and alternative financial services products and services.

2018 California Consumer Finance, Payments, and Financial Privacy Laws

The 2017 California legislative session was again unusually quiet in the areas of consumer finance, payments and financial privacy. Only a handful of bills were passed and signed; however, there have already been a number of potentially important bills introduced in 2018: so be alert!

For the full summary: Jun-Soter 2017 California Chapter Law Summary

This summary is provided as a joint effort of Paul Soter and Michelle Jun. We have recognized that our practices are highly complimentary and that our expertise overlaps but are not identical. We expect to continue to work together to provide a broad range of services to clients in the financial services industry.

Which is it: Money Transmission or MSB

MSB does not always mean money transmission.  This can be illustrated most simply by looking at the definitions provided in one state money transmitter law (California) and by FinCEN:

MSBs (as defined by FinCEN) are money service businesses, which include but are not limited to money transmission. MSBs include check cashers, issuers/sellers/redeemers of money orders and traveler’s checks, currency dealers, currency exchangers, and providers/sellers of prepaid access (includes prepaid cards). For more information, MSBs are defined at 31 CFR 1010.10

Money Transmission (as defined in California) includes selling or issuing payment instruments; selling or issuing stored value; or receiving money for transmission.  For more information, the California Money Transmission Act starts at Cal. Fin. Code 2000

** Please note that any information provided on this site is not legal advice, and does not create an attorney-client relationship.



Finally, Prepaid Rules are Finalized

plastic cardsThe CFPB’s Final Prepaid Card (Account) Rules are finally here after many years in the making. Rest assured there will be plenty of legal analysis and summaries provided on the 1,689 page rule the CFPB published October 5.

Here are a variety of reactions–from an industry news provider, leading prepaid provider, trade association and consumer group:

American Banker: “The bureau’s new rules are poised to disrupt, if not destroy, this industry and eliminate thousands of prepaid options from retail racks and online stores. Simultaneously, the rules will fundamentally transform the nature of the products themselves, making them function more like the heavily regulated banks they sought to replace.”

Green Dot‘s Steve Streit: “Green Dot embraces the new rule as recognition that the industry we started more than 15 years ago continues to serve an increasingly significant role in the everyday financial lives of a growing number of American families. We fully support the CFPB’s mission to ensure fairness, integrity and consumer protections for all participants in the financial system.”

NBPCA (Network Branded Prepaid Card Association): “While we are still analyzing the lengthy final rule to determine its full impact, it is already clear that the CFPB has dismissed many of our serious concerns and moved forward with a rule that will harm the very consumers it aims to protect. Instead of fostering financial innovation and inclusion, the CFPB’s rule will ultimately limit access to an essential mainstream consumer product that helps millions of Americans participate in the digital economy, affordably manage funds, and safely hold money.”

Pew Charitable Trusts: “By staying the course, the bureau has closed the door on practices that could have compromised consumers’ ability to use these products safely and stay out of debt.”

NY Bitlicense Finalized

DIGSOUTH_ShaneSnowQA_042913New York’s Department of Financial Services finalized its rules regarding the regulation of a person engaged in “any virtual currency business activity.”

Under these regulations, “virtual currency business activity” is defined to mean:

“the conduct of any one of the following types of activities involving New York or a New York Resident:

(1) receiving Virtual Currency for Transmission or Transmitting Virtual Currency, except where the transaction is undertaken for non-financial purposes and does not involve the transfer of more than a nominal amount of Virtual Currency;

(2) storing, holding, or maintaining custody or control of Virtual Currency on behalf of others;

(3) buying and selling Virtual Currency as a customer business;

(4) performing Exchange Services as a customer business; or

(5) controlling, administering, or issuing a Virtual Currency.

The development and dissemination of software in and of itself does not constitute Virtual Currency Business Activity.”

There are two categories of exemption:

“(1) Persons that are chartered under the New York Banking Law and are approved by the superintendent to engage in Virtual Currency Business Activity; and

(2) merchants and consumers that utilize Virtual Currency solely for the purchase or sale of goods or services or for investment purposes.”

These rules also include a detailed application, a $5000 application fee, a compliance officer, compliance policies and procedures on anti-money laundering and security, capital requirements, and consumer disclosures.