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volume 9 • spring 2016
with global operations, the issues interviewees are focused on in 2016 are overwhelmingly U.S.- centric. This suggests that most
of the signi cant regulatory developments in the payments industry are occurring in the U.S.
A few people mentioned data and privacy regulations in the European Union, but otherwise it appears that the U.S. is taking a dispropor- tionate share (relative to business volume) of companies’ legal and compliance resources.
innovation Outpacing Regulation
A common theme I heard is that the law is not keeping up with the pace of innovation in the payments industry. “Regulators are sticking new products into old categories, and they sometimes don’t t,” says Jeanette Blanco, senior product/ regulatory counsel at PayPal.
This is a frustration for lawyers and compliance personnel be- cause it means that it’s often
not clear how legal requirements will apply to new practices.
This makes it challenging to provide business teams with concrete advice about what is
and what is not permissible.
Several people I interviewed suggested that regulation also was potentially sti ing innovation by creating barriers to entry for startups. This is especially true with respect to money services business licensing laws (discussed further on page 75).
Consumer Financial Protection Bureau
The CFPB is a primary focus for almost all of the people I inter- viewed. The agency is certainly being watched by the industry. Probably the most immediate question with respect to the CFPB
is what it will do with its prepaid account rule. At the time this article was written, the CFPB was predict- ing a March 2016 release for the nal rule (which happens to be when this article is scheduled to
be published). The payments industry is eagerly awaiting this nal rule. Part of the high level of anticipation arises from the fact that there is a lot of uncertainty about what the nal rule will say.
“There are a lot of open issues with respect to the rule,” notes John Ricci, general counsel at Green Dot Corp. “We’re waiting to see how the CFPB resolves these issues, which will determine the overall impact of the rule on those in the prepaid card business.”
Beyond the prepaid account rule, many people are predicting that the CFPB will increase its general focus on the payments industry
in 2016. As many readers know, the CFPB has broad authority to bring enforcement actions against companies engaged in practices that the CFPB considers to be unfair, deceptive or abusive.
Such practices are commonly referred to as UDAAPs (for Un- fair, Deceptive or Abusive Acts
or Practices). Lawyers and compli- ance personnel for the industry are trying to gauge what kinds
of practices the CFPB might deem
This probably should not be a surprise. Anyone who operates
a payments business with global operations knows that the reg- ulatory hurdles to establishing
and operating a payments business are much higher in the U.S. than almost anywhere else in the world. I regularly advise foreign compa- nies seeking to replicate a business model in the U.S. that’s been successful elsewhere, and they’re often shocked when I explain all the hoops they’ll need to jump through to enter the U.S. market. Nevertheless, I was still struck by just how much legal and compli- ance personnel with global portfo- lios are focused on what is going to happen in the U.S.
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